Corporate Average Fuel Economy Standards for Passenger Cars and Light Trucks for Model Years 2027 and Beyond and Fuel Efficiency Standards for Heavy-Duty Pickup Trucks and Vans for Model Years 2030 and Beyond, 52540-52954 [2024-12864]

Agencies

• National Highway Traffic Safety Administration
• DEPARTMENT OF TRANSPORTATION

[Federal Register Volume 89, Number 121 (Monday, June 24, 2024)]
[Rules and Regulations]
[Pages 52540-52954]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-12864]



[[Page 52539]]

Vol. 89

Monday,

No. 121

June 24, 2024

Part II





Department of Transportation





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 National Highway Traffic Safety Administration





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49 CFR Parts 523, 531 et al.





Corporate Average Fuel Economy Standards for Passenger Cars and Light 
Trucks for Model Years 2027 and Beyond and Fuel Efficiency Standards 
for Heavy-Duty Pickup Trucks and Vans for Model Years 2030 and Beyond; 
Final Rule

Federal Register / Vol. 89, No. 121 / Monday, June 24, 2024 / Rules 
and Regulations

[[Page 52540]]


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DEPARTMENT OF TRANSPORTATION

National Highway Traffic Safety Administration

49 CFR Parts 523, 531, 533, 535, 536, and 537

[NHTSA-2023-0022]
RIN 2127-AM55


Corporate Average Fuel Economy Standards for Passenger Cars and 
Light Trucks for Model Years 2027 and Beyond and Fuel Efficiency 
Standards for Heavy-Duty Pickup Trucks and Vans for Model Years 2030 
and Beyond

AGENCY: National Highway Traffic Safety Administration (NHTSA).

ACTION: Final rule.

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SUMMARY: NHTSA, on behalf of the Department of Transportation (DOT), is 
finalizing Corporate Average Fuel Economy (CAFE) standards for 
passenger cars and light trucks that increase at a rate of 2 percent 
per year for passenger cars in model years (MYs) 2027-31, 0 percent per 
year for light trucks in model years 2027-28, and 2 percent per year 
for light trucks in model years 2029-31. NHTSA is also finalizing fuel 
efficiency standards for heavy-duty pickup trucks and vans (HDPUVs) for 
model years 2030-32 that increase at a rate of 10 percent per year and 
model years 2033-35 that increase at a rate of 8 percent per year.

DATES: This rule is effective August 23, 2024.

ADDRESSES: For access to the dockets or to read background documents or 
comments received, please visit https://www.regulations.gov, and/or 
Docket Management Facility, M-30, U.S. Department of Transportation, 
West Building, Ground Floor, Rm. W12-140, 1200 New Jersey Avenue SE, 
Washington, DC 20590. The Docket Management Facility is open between 9 
a.m. and 4 p.m. Eastern time, Monday through Friday, except Federal 
holidays.

FOR FURTHER INFORMATION CONTACT: For technical and policy issues, 
Joseph Bayer, CAFE Program Division Chief, Office of Rulemaking, 
National Highway Traffic Safety Administration, 1200 New Jersey Avenue 
SE, Washington, DC 20590; email: [email protected]. For legal 
issues, Rebecca Schade, NHTSA Office of Chief Counsel, National Highway 
Traffic Safety Administration, 1200 New Jersey Avenue SE, Washington, 
DC 20590; email: [email protected].

SUPPLEMENTARY INFORMATION: 

Table of Acronyms and Abbreviations

------------------------------------------------------------------------
           Abbreviation                             Term
------------------------------------------------------------------------
AAA...............................  American Automobile Association.
AALA..............................  American Automotive Labeling Act.
AAPC..............................  The American Automotive Policy
                                     Council.
ABT...............................  Average, Banking, and Trading.
AC................................  Air conditioning.
ACC...............................  Advanced Clean Cars.
ACEEE.............................  American Council for an Energy
                                     Efficient Economy.
ACF...............................  Advanced Clean Fleets.
ACME..............................  Adaptive Cylinder Management Engine.
ACT...............................  Advanced Clean Trucks.
ADEAC.............................  advanced cylinder deactivation.
ADEACD............................  advanced cylinder deactivation on a
                                     dual overhead camshaft engine.
ADEACS............................  advanced cylinder deactivation on a
                                     single overhead camshaft engine.
ADSL..............................  Advanced diesel engine.
AEO...............................  Annual Energy Outlook.
AER...............................  All-Electric Range.
AERO..............................  Aerodynamic improvements.
AFV...............................  Alternative fuel vehicle.
AHSS..............................  advanced high strength steel.
AIS...............................  Abbreviated Injury Scale.
AMPC..............................  Advanced Manufacturing Production
                                     Tax Credit.
AMTL..............................  Advanced Mobility Technology
                                     Laboratory.
ANL...............................  Argonne National Laboratory.
ANSI..............................  American National Standards
                                     Institute.
APA...............................  Administrative Procedure Act.
AT................................  traditional automatic transmissions.
AVE...............................  Alliance for Vehicle Efficiency.
AWD...............................  All-Wheel Drive.
BEA...............................  Bureau of Economic Analysis.
BEV...............................  Battery electric vehicle.
BGEPA.............................  Bald and Golden Eagle Protection
                                     Act.
BIL...............................  Bipartisan Infrastructure Law.
BISG..............................  Belt Mounted integrated starter/
                                     generator.
BMEP..............................  Brake Mean Effective Pressure.
BNEF..............................  Bloomberg New Energy Finance.
BPT...............................  Benefit-Per-Ton.
BSFC..............................  Brake-Specific Fuel Consumption.
BTW...............................  Brake and Tire Wear.
CAA...............................  Clean Air Act.
CAFE..............................  Corporate Average Fuel Economy.
CARB..............................  California Air Resources Board.
CBD...............................  Center for Biological Diversity.
CBI...............................  Confidential Business Information.
CEA...............................  Center for Environmental
                                     Accountability.
CEGR..............................  Cooled Exhaust Gas Recirculation.
CEQ...............................  Council on Environmental Quality.
CFR...............................  Code of Federal Regulations.
CH4...............................  Methane.

[[Page 52541]]

 
CI................................  Compression Ignition.
CNG...............................  Compressed Natural Gas.
CO................................  Carbon Monoxide.
CO2...............................  Carbon Dioxide.
COVID.............................  Coronavirus disease of 2019.
CPM...............................  Cost Per Mile.
CR................................  Compression Ratio.
CRSS..............................  Crash Report Sampling System.
CUV...............................  Crossover Utility Vehicle.
CVC...............................  Clean Vehicle Credit.
CVT...............................  Continuously Variable Transmissions.
CY................................  Calendar year.
CZMA..............................  Coastal Zone Management Act.
DCT...............................  Dual Clutch Transmissions.
DD................................  Direct Drive.
DEAC..............................  Cylinder Deactivation.
DEIS..............................  Draft Environmental Impact
                                     Statement.
DFS...............................  Dynamic Fleet Share.
DMC...............................  Direct Manufacturing Cost.
DOE...............................  Department of Energy.
DOHC..............................  Dual Overhead Camshaft.
DOI...............................  Department of the Interior.
DOT...............................  Department of Transportation.
DPM...............................  Diesel Particulate Matter.
DR................................  Discount Rate.
DSLI..............................  Advanced diesel engine with
                                     improvements.
DSLIAD............................  Advanced diesel engine with
                                     improvements and advanced cylinder
                                     deactivation.
E.O...............................  Executive Order.
EFR...............................  Engine Friction Reduction.
EIA...............................  U.S. Energy Information
                                     Administration.
EIS...............................  Environmental Impact Statement.
EISA..............................  Energy Independence and Security
                                     Act.
EJ................................  Environmental Justice.
EPA...............................  U.S. Environmental Protection
                                     Agency.
EPCA..............................  Energy Policy and Conservation Act.
EPS...............................  Electric Power Steering.
ERF...............................  effective radiative forcing.
ESA...............................  Endangered Species Act.
ESS...............................  Energy Storage System.
ETDS..............................  Electric Traction Drive System.
EV................................  Electric Vehicle.
FCC...............................  Fuel Consumption Credits.
FCEV..............................  Fuel Cell Electric Vehicle.
FCIV..............................  Fuel Consumption Improvement Value.
FCV...............................  Fuel Cell Vehicle.
FE................................  Fuel Efficiency.
FEOC..............................  Foreign Entity of Concern.
FHWA..............................  Federal Highway Administration.
FIP...............................  Federal Implementation Plan.
FMVSS.............................  Federal Motor Vehicle Safety
                                     Standards.
FMY...............................  Final Model Year.
FRIA..............................  Final Regulatory Impact Analysis.
FTA...............................  Free Trade Agreement.
FTP...............................  Federal Test Procedure.
FWCA..............................  Fish and Wildlife Conservation Act.
FWD...............................  Front-Wheel Drive.
FWS...............................  U.S. Fish and Wildlife Service.
GCWR..............................  Gross Combined Weight Rating.
GDP...............................  Gross Domestic Product.
GES...............................  General Estimates System.
GGE...............................  Gasoline Gallon Equivalents.
GHG...............................  Greenhouse Gas.
GM................................  General Motors.
gpm...............................  gallons per mile.
GREET.............................  Greenhouse gases, Regulated
                                     Emissions, and Energy use in
                                     Transportation.
GVWR..............................  Gross Vehicle Weight Rating.
HATCI.............................  Hyundai America Technical Center,
                                     Inc.
HCR...............................  High-Compression Ratio.
HD................................  Heavy-Duty.
HDPUV.............................  Heavy-Duty Pickups and Vans.
HEG...............................  High Efficiency Gearbox.
HEV...............................  Hybrid Electric Vehicle.
HFET..............................  Highway Fuel Economy Test.
HVAC..............................  Heating, Ventilation, and Air
                                     Conditioning.

[[Page 52542]]

 
IACC..............................  improved accessories.
IAV...............................  IAV Automotive Engineering, Inc.
ICCT..............................  The International Council on Clean
                                     Transportation.
ICE...............................  Internal Combustion Engine.
IIHS..............................  Insurance Institute for Highway
                                     Safety.
IPCC..............................  Intergovernmental Panel on Climate
                                     Change.
IQR...............................  Interquartile Range.
IRA...............................  Inflation Reduction Act.
IWG...............................  Interagency Working Group.
LD................................  Light-Duty.
LDB...............................  Low Drag Brakes.
LDV...............................  Light-Duty Vehicle.
LE................................  Learning Effects.
LEV...............................  Low-Emission Vehicle.
LFP...............................  Lithium Iron Phosphate.
LIB...............................  Lithium-Ion Batteries.
LIVC..............................  Late Intake Valve Closing.
LT................................  Light truck.
MAX...............................  maximum values.
MBTA..............................  Migratory Bird Treaty Act.
MD................................  Medium-Duty.
MDHD..............................  Medium-Duty Heavy-Duty.
MDPCS.............................  Minimum Domestic Passenger Car
                                     Standard.
MDPV..............................  Medium-Duty Passenger Vehicle.
MEMA..............................  Motor & Equipment Manufacturer's
                                     Association.
MIN...............................  minimum values.
MMTCO2............................  Million Metric Tons of Carbon
                                     Dioxide.
MMY...............................  Mid-Model Year.
MOU...............................  Memorandum of Understanding.
MOVES.............................  Motor Vehicle Emission Simulator
                                     (including versions 3 and 4).
MPG...............................  Miles Per Gallon.
mph...............................  Miles Per Hour.
MR................................  Mass Reduction.
MSRP..............................  Manufacturer Suggested Retail Price.
MY................................  Model Year.
NAAQS.............................  National Ambient Air Quality
                                     Standards.
NACFE.............................  North American Council for Freight
                                     Efficiency.
NADA..............................  National Automotive Dealers
                                     Association.
NAICS.............................  North American Industry
                                     Classification System.
NAS...............................  National Academy of Sciences.
NCA...............................  Nickel Cobalt Aluminum.
NEMS..............................  National Energy Modeling System.
NEPA..............................  National Environmental Policy Act.
NESCCAF...........................  Northeast States Center for a Clean
                                     Air Future.
NEVI..............................  National Electric Vehicle
                                     Infrastructure.
NHPA..............................  National Historic Preservation Act.
NHTSA.............................  National Highway Traffic Safety
                                     Administration.
NMC...............................  Nickel Manganese Cobalt.
NOX...............................  Nitrogen Oxide.
NPRM..............................  Notice of Proposed Rulemaking.
NRC...............................  National Research Council.
NRDC..............................  Natural Resource Defense Council.
NREL..............................  National Renewable Energy
                                     Laboratory.
NTTAA.............................  National Technology Transfer and
                                     Advancement Act.
NVH...............................  Noise-Vibration-Harshness.
NVO...............................  Negative Valve Overlap.
NVPP..............................  National Vehicle Population Profile.
OEM...............................  Original Equipment Manufacturer.
OHV...............................  Overhead Valve.
OMB...............................  Office of Management and Budget.
OPEC..............................  Organization of the Petroleum
                                     Exporting Countries.
ORNL..............................  Oak Ridge National Laboratories.
PC................................  Passenger Car.
PEF...............................  Petroleum Equivalency Factor.
PHEV..............................  Plug-in Hybrid Electric Vehicle.
PM................................  Particulate Matter.
PM2.5.............................  fine particulate matter.
PMY...............................  Pre-Model Year.
PPC...............................  Passive Prechamber Combustion.
PRA...............................  Paperwork Reduction Act of 1995.
PRIA..............................  Preliminary Regulatory Impact
                                     Analysis.
PS................................  Power Split.
REMI..............................  Regional Economic Models, Inc.
RFS...............................  Renewable Fuel Standard.

[[Page 52543]]

 
RIN...............................  Regulation identifier number.
ROD...............................  Record of Decision.
ROLL..............................  Tire rolling resistance.
RPE...............................  Retail Price Equivalent.
RPM...............................  Rotations Per Minute.
RRC...............................  Rolling Resistance Coefficient.
RWD...............................  Rear Wheel Drive.
SAE...............................  Society of Automotive Engineers.
SAFE..............................  Safer Affordable Fuel-Efficient.
SBREFA............................  Small Business Regulatory
                                     Enforcement Fairness Act.
SC................................  Social Cost.
SCC...............................  Social Cost of Carbon.
SEC...............................  Securities and Exchange Commission.
SGDI..............................  Stoichiometric Gasoline Direct
                                     Injection.
SHEV..............................  Strong Hybrid Electric Vehicle.
SI................................  Spark Ignition.
SIP...............................  State Implementation Plan.
SKIP..............................  refers to skip input in market data
                                     input file.
SO2...............................  Sulfur Dioxide.
SOC...............................  State of Charge.
SOHC..............................  Single Overhead Camshaft.
SOX...............................  Sulfur Oxide.
SPR...............................  Strategic Petroleum Reserve.
SUV...............................  Sport Utility Vehicle.
SwRI..............................  Southwest Research Institute.
TAR...............................  Technical Assessment Report.
TSD...............................  Technical Support Document.
UAW...............................  United Automobile, Aerospace &
                                     Agricultural Implement Workers of
                                     America.
UF................................  Utility Factor.
UMRA..............................  Unfunded Mandates Reform Act of
                                     1995.
VCR...............................  Variable Compression Ratio.
VMT...............................  Vehicle Miles Traveled.
VOC...............................  Volatile Organic Compounds.
VSL...............................  Value of a Statistical Life.
VTG...............................  Variable Turbo Geometry.
VTGE..............................  Variable Turbo Geometry (Electric).
VVL...............................  Variable Valve Lift.
VVT...............................  Variable Valve Timing.
WF................................  Work Factor.
ZEV...............................  Zero Emission Vehicle.
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Does this action apply to me?

    This final rule affects companies that manufacture or sell new 
passenger automobiles (passenger cars), non-passenger automobiles 
(light trucks), and heavy-duty pickup trucks and vans (HDPUVs), as 
defined under NHTSA's Corporate Average Fuel Economy (CAFE) and medium 
and heavy duty (MD/HD) fuel efficiency (FE) regulations.\1\ Regulated 
categories and entities include:
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    \1\ ``Passenger car,'' ``light truck,'' and ``heavy-duty pickup 
trucks and vans'' are defined in 49 CFR part 523.

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                                   NAICS codes   Examples of potentially
            Category                   \a\          regulated entities
------------------------------------------------------------------------
Industry.......................          335111  Motor Vehicle
                                         336112   Manufacturers.
Industry.......................          811111  Commercial Importers of
                                         811112   Vehicles and Vehicle
                                         811198   Components.
                                         423110
Industry.......................          335312  Alternative Fuel
                                         336312   Vehicle Converters.
                                         336399
                                         811198
------------------------------------------------------------------------
\a\ North American Industry Classification System (NAICS).

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

Table of Contents

I. Executive Summary
II. Overview of the Final Rule
    A. Summary of the NPRM

[[Page 52544]]

    B. Public Participation Opportunities and Summary of Comments
    C. Changes to the CAFE Model in Light of Public Comments and New 
Information
    D. Final Standards--Stringency
    E. Final Standards--Impacts
    1. Light Duty Effects
    2. Heavy Duty Pickup Trucks and Vans Effects
    F. Final Standards Are Maximum Feasible
    G. Final Standards Are Feasible in the Context of EPA's Final 
Standards and California's Standards
III. Technical Foundation for Final Rule Analysis
    A. Why is NHTSA conducting this analysis?
    1. What are the key components of NHTSA's analysis?
    2. How do requirements under EPCA/EISA shape NHTSA's analysis?
    3. What updated assumptions does the current model reflect as 
compared to the 2022 final rule and the 2023 NPRM?
    B. What is NHTSA analyzing?
    C. What inputs does the compliance analysis require?
    1. Technology Options and Pathways
    2. Defining Manufacturers' Current Technology Positions in the 
Analysis Fleet
    3. Technology Effectiveness Values
    4. Technology Costs
    5. Simulating Existing Incentives, Other Government Programs, 
and Manufacturer ZEV Deployment Plans
    a. Simulating ZEV Deployment Unrelated to NHTSA's Standards
    b. IRA Tax Credits
    6. Technology Applicability Equations and Rules
    D. Technology Pathways, Effectiveness, and Cost
    1. Engine Paths
    2. Transmission Paths
    3. Electrification Paths
    4. Road Load Reduction Paths
    a. Mass Reduction
    b. Aerodynamic Improvements
    c. Low Rolling Resistance Tires
    5. Simulating Air Conditioning Efficiency and Off-Cycle 
Technologies
    E. Consumer Responses to Manufacturer Compliance Strategies
    1. Macroeconomic and Consumer Behavior Assumptions
    2. Fleet Composition
    a. Sales
    b. Scrappage
    3. Changes in Vehicle Miles Traveled (VMT)
    4. Changes to Fuel Consumption
    F. Simulating Emissions Impacts of Regulatory Alternatives
    G. Simulating Economic Impacts of Regulatory Alternatives
    1. Private Costs and Benefits
    a. Costs to Consumers
    (1) Technology Costs
    (2) Consumer Sales Surplus
    (3) Ancillary Costs of Higher Vehicle Prices
    b. Benefits to Consumers
    (1) Fuel Savings
    (2) Refueling Benefit
    (3) Additional Mobility
    2. External Costs and Benefits
    a. Costs
    (1) Congestion and Noise
    (2) Fuel Tax Revenue
    b. Benefits
    (1) Climate Benefits
    (a) Social Cost of Greenhouse Gases Estimates
    (b) Discount Rates for Climate Related Benefits
    (c) Comments and Responses About the Agency's Choice of Social 
Cost of Carbon Estimates and Discount Rates
    (2) Reduced Health Damages
    (3) Reduction in Petroleum Market Externalities
    (4) Changes in Labor Use and Employment
    3. Costs and Benefits Not Quantified
    H. Simulating Safety Effects of Regulatory Alternatives
    1. Mass Reduction Impacts
    2. Sales/Scrappage Impacts
    3. Rebound Effect Impacts
    4. Value of Safety Impacts
IV. Regulatory Alternatives Considered in This Final Rule
    A. General Basis for Alternatives Considered
    B. Regulatory Alternatives Considered
    1. Reference Baseline/No-Action Alternative
    2. Alternative Baseline/No-Action Alternative
    3. Action Alternatives for Model Years 2027-2032 Passenger Cars 
and Light Trucks
    a. Alternative PC1LT3
    b. Alternative PC2LT002--Final Standards
    c. Alternative PC2LT4
    d. Alternative PC3LT5
    e. Alternative PC6LT8
    f. Other Alternatives Suggested by Commenters for Passenger Car 
and LT CAFE Standards
    4. Action Alternatives for Model Years 2030-2035 Heavy-Duty 
Pickups and Vans
    a. Alternative HDPUV4
    b. Alternative HDPUV108--Final Standards
    c. Alternative HDPUV10
    d. Alternative HDPUV14
V. Effects of the Regulatory Alternatives
    A. Effects on Vehicle Manufacturers
    1. Passenger Cars and Light Trucks
    2. Heavy-Duty Pickups and Vans
    B. Effects on Society
    1. Passenger Cars and Light Trucks
    2. Heavy-Duty Pickups and Vans
    C. Physical and Environmental Effects
    1. Passenger Cars and Light Trucks
    2. Heavy-Duty Pickups and Vans
    D. Sensitivity Analysis, Including Alternative Baseline
    1. Passenger Cars and Light Trucks
    2. Heavy-Duty Pickups and Vans
VI. Basis for NHTSA's Conclusion That the Standards Are Maximum 
Feasible
    A. EPCA, as Amended by EISA
    1. Lead Time
    a. Passenger Cars and Light Trucks
    b. Heavy-Duty Pickups and Vans
    2. Separate Standards for Passenger Cars, Light Trucks, and 
Heavy-Duty Pickups and Vans, and Minimum Standards for Domestic 
Passenger Cars
    3. Attribute-Based and Defined by a Mathematical Function
    4. Number of Model Years for Which Standards May Be Set at a 
Time
    5. Maximum Feasible Standards
    a. Passenger Cars and Light Trucks
    (1) Technological Feasibility
    (2) Economic Practicability
    (3) The Effect of Other Motor Vehicle Standards of the 
Government on Fuel Economy
    (4) The Need of the U.S. To Conserve Energy
    (a) Consumer Costs and Fuel Prices
    (b) National Balance of Payments
    (c) Environmental Implications
    (d) Foreign Policy Implications
    (5) Factors That NHTSA Is Prohibited From Considering
    (6) Other Considerations in Determining Maximum Feasible CAFE 
Standards
    b. Heavy-Duty Pickups and Vans
    (1) Appropriate
    (2) Cost-Effective
    (3) Technologically Feasible
    B. Comments Regarding the Administrative Procedure Act (APA) and 
Related Legal Concerns
    C. National Environmental Policy Act
    1. Environmental Consequences
    a. Energy
    (1) Direct and Indirect Impacts
    (2) Cumulative Impacts
    b. Air Quality
    (1) Direct and Indirect Impacts
    (a) Criteria Pollutants
    (b) Toxic Air Pollutants
    (c) Health Impacts
    (2) Cumulative Impacts
    (a) Criteria Pollutants
    (b) Toxic Air Pollutants
    (c) Health Impacts
    c. Greenhouse Gas Emissions and Climate Change
    (1) Direct and Indirect Impacts
    (a) Greenhouse Gas Emissions
    (b) Climate Change Indicators (Carbon Dioxide Concentration, 
Global Mean Surface Temperature, Sea Level, Precipitation, and Ocean 
pH)
    (2) Cumulative Impacts
    (a) Greenhouse Gas Emissions
    (b) Climate Change Indicators (Carbon Dioxide Concentration, 
Global Mean Surface Temperature, Sea Level, Precipitation, and Ocean 
pH)
    (c) Health, Societal, and Environmental Impacts of Climate 
Change
    (d) Qualitative Impacts Assessment
    2. Conclusion
    D. Evaluating the EPCA/EISA Factors and Other Considerations To 
Arrive at the Final Standards
    1. Passenger Cars and Light Trucks
    2. Heavy-Duty Pickups and Vans
    3. Severability
VII. Compliance and Enforcement
    A. Background
    B. Overview of Enforcement
    1. Light Duty CAFE Program
    a. Determining Compliance
    b. Flexibilities
    c. Civil Penalties
    2. Heavy-Duty Pickup Trucks and Vans
    a. Determining Compliance
    b. Flexibilities
    c. Civil Penalties
    C. Changes Made by This Final Rule

[[Page 52545]]

    1. Elimination of OC and AC Efficiency FCIVs for BEVs in the 
CAFE Program
    2. Addition of a Utility Factor for Calculating FCIVs for PHEVs
    3. Phasing Out OC FCIVs by MY 2033
    4. Elimination of the 5-Cycle and Alternative Approval Pathways 
for CAFE
    5. Requirement To Respond To Requests for Information Regarding 
Off-Cycle Requests Within 60 Days for LDVs for MYs 2025 and 2026
    6. Elimination of OC Technology Credits for Heavy-Duty Pickup 
Trucks and Vans Starting in Model Year 2030
    7. Technical Amendments for Advanced Technology Credits
    8. Technical Amendments to Part 523
    a. 49 CFR 523.2 Definitions
    b. 49 CFR 523.3 Automobile
    c. 49 CFR 523.4 Passenger Automobile
    d. 49 CFR 523.5 Non-Passenger Automobile
    e. 49 CFR 523.6 Heavy-Duty Vehicle
    f. 49 CFR 523.8 Heavy-Duty Vocational Vehicle
    9. Technical Amendments to Part 531
    a. 49 CFR 531.1 Scope
    b. 49 CFR 531.4 Definitions
    c. 49 CFR 531.5 Fuel Economy Standards
    10. Technical Amendments to Part 533
    a. 49 CFR 533.1 Scope
    b. 49 CFR 533.4 Definitions
    11. Technical Amendments to Part 535
    a. 49 CFR 535.4 Definitions
    b. 49 CFR 535.7 Average, Banking, and Trading (ABT) Credit 
Program
    12. Technical Amendments to Part 536
    13. Technical Amendments to Part 537
    a. 49 CFR 537.2 Scope
    b. 49 CFR 537.3 Applicability
    c. 49 CFR 537.4 Definitions
    d. 49 CFR 537.7 Pre-Model Year and Mid-Model Year Reports
    D. Non-Fuel Saving Credits or Flexibilities
    E. Additional Comments
    1. AC FCIVs
    2. Credit Transfer Cap AC
    3. Credit Trading Between HDPUV and Light Truck Fleets
    4. Adjustment for Carry Forward and Carryback Credits
    5. Increasing Carryback Period
    6. Flex Fuel Vehicle Incentives
    7. Reporting
    8. Petroleum Equivalency Factor for HDPUVs
    9. Incentives for Fuel Cell Electric Vehicles
    10. EV Development
    11. PHEV in HDPUV
VIII. Regulatory Notices and Analyses
    A. Executive Order 12866, Executive Order 13563, and Executive 
Order 14094
    B. DOT Regulatory Policies and Procedures
    C. Executive Order 14037
    D. Environmental Considerations
    1. National Environmental Policy Act (NEPA)
    2. Clean Air Act (CAA) as Applied to NHTSA's Final Rule
    3. National Historic Preservation Act (NHPA)
    4. Fish and Wildlife Conservation Act (FWCA)
    5. Coastal Zone Management Act (CZMA)
    6. Endangered Species Act (ESA)
    7. Floodplain Management (Executive Order 11988 and DOT Order 
5650.2)
    8. Preservation of the Nation's Wetlands (Executive Order 11990 
and DOT Order 5660.1a)
    9. Migratory Bird Treaty Act (MBTA), Bald and Golden Eagle 
Protection Act (BGEPA), Executive Order 13186
    10. Department of Transportation Act (Section 4(f))
    11. Executive Order 12898: ``Federal Actions To Address 
Environmental Justice in Minority Populations and Low-Income 
Populations''; Executive Order 14096: ``Revitalizing Our Nation's 
Commitment to Environmental Justice for All''
    12. Executive Order 13045: ``Protection of Children From 
Environmental Health Risks and Safety Risks''
    E. Regulatory Flexibility Act
    F. Executive Order 13132 (Federalism)
    G. Executive Order 12988 (Civil Justice Reform)
    H. Executive Order 13175 (Consultation and Coordination With 
Indian Tribal Governments)
    I. Unfunded Mandates Reform Act
    J. Regulation Identifier Number
    K. National Technology Transfer and Advancement Act
    L. Department of Energy Review
    M. Paperwork Reduction Act
    N. Congressional Review Act

I. Executive Summary

    NHTSA, on behalf of the Department of Transportation, is finalizing 
new corporate average fuel economy (CAFE) standards for passenger cars 
and light trucks for model years 2027-2031,\2\ setting forth augural 
standards for MY 2032,\3\ and finalizing new fuel efficiency standards 
for heavy-duty pickup trucks and vans \4\ (HDPUVs) for model years 
2030-2035. This final rule responds to NHTSA's statutory obligation to 
set CAFE and HDPUV standards at the maximum feasible level that the 
agency determines vehicle manufacturers can achieve in each MY, in 
order to improve energy conservation.\5\ Improving energy conservation 
by raising CAFE and HDPUV standard stringency not only helps consumers 
save money on fuel, but also improves national energy security and 
reduces harmful emissions.
---------------------------------------------------------------------------

    \2\ Passenger cars are generally sedans, station wagons, and 
two-wheel drive crossovers and sport utility vehicles (CUVs and 
SUVs), while light trucks are generally four-wheel drive sport 
utility vehicles, pickups, minivans, and passenger/cargo vans. 
``Passenger car'' and ``light truck'' are defined more precisely at 
49 CFR part 523.
    \3\ MY 2032, is ``augural,'' as in the 2012 final rule that 
established CAFE standards for MYs 2017 and beyond. The 2012 final 
rule citation is 77 FR 62624 (Oct. 15, 2012).
    \4\ HDPUVs are generally Class 2b/3 work trucks, fleet SUVs, 
work vans, and cutaway chassis-cab vehicles. ``Heavy-duty pickup 
trucks and vans'' are more precisely defined at 49 CFR part 523.
    \5\ See 49 U.S.C. 32902.
---------------------------------------------------------------------------

    Based on the information currently before us, NHTSA estimates that 
relative to the reference baseline \6\ this final rule will reduce 
gasoline consumption by 64 billion gallons relative to reference 
baseline levels for passenger cars and light trucks and will reduce 
fuel consumption by approximately 5.6 billion gallons relative to 
reference baseline levels for HDPUVs through calendar year 2050. If 
compared to the alternative baseline, which has lower levels of 
electric vehicle penetration than the reference baseline, fuel savings 
will be greater at approximately 115 billion gallons.\7\ Reducing 
gasoline consumption has multiple benefits--it improves our nation's 
energy security, it saves consumers money, and reduces harmful 
pollutant emissions that lead to adverse human and environmental health 
outcomes and climate change. NHTSA estimates that relative to the 
reference baseline, this final rule will reduce carbon dioxide 
(CO2) emissions by 659 million metric tons for passenger 
cars and light trucks, and by 55 million metric tons for HDPUVs through 
calendar year 2050. Again, these relative reductions are greater if the 
rule is compared to the alternative baseline, but demonstrating a 
similar level of absolute carbon dioxide emissions.\8\ While consumers 
could pay more for new vehicles upfront, we estimate that they would 
save money on fuel costs over the lifetimes of those new vehicles--in 
the reference baseline analysis lifetime fuel savings exceed modeled 
regulatory costs by roughly $247, on average, for passenger car and 
light truck buyers of MY 2031 vehicles, and roughly $491, on average, 
for HDPUV buyers of MY 2038 vehicles. By comparison, in the No ZEV 
alternative baseline analysis, lifetime fuel savings exceed modeled 
regulatory costs by roughly $400, on average, for passenger car and 
light truck buyers of MY 2031 vehicles. Net benefits for the preferred

[[Page 52546]]

alternative for passenger cars and light trucks are estimated to be 
$35.2 billion at a 3 percent discount rate (DR),\9\ and $30.8 billion 
at a 7 percent DR, and for HDPUVs, net benefits are estimated to be 
$13.6 billion at a 3 percent DR, and $11.8 billion at a 7 percent DR. 
Net benefits are higher if the final rules are assessed relative to the 
alternative baseline, estimated to be $44.9 billion at a 3 percent DR 
and $39.8 billion at 7 percent DR.\10\ (For simplicity, however, all 
projections presented in this document use the reference baseline 
unless otherwise stated.)
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    \6\ NHTSA performed an analysis considering an alternative 
baseline, referenced herein as the ``No ZEV alternative baseline.'' 
The alternative baseline does not assume manufacturers will 
consider, or preemptively react to, or voluntarily deploy electric 
vehicles consistent with any of the California light-duty vehicle 
Zero Emission Vehicle programs (specifically, ACC I and ACC II) 
during any of the model years simulated in the analysis, regardless 
of the fact that ACC I is a legally binding program, and regardless 
of manufacturer commitments to deploy electric vehicles consistent 
with ACC II. See TSD Chapter 1.4.2, RIA 3.2, and Section IV.B.2 of 
this document for further discussion.
    \7\ Under the CAFE standards finalized in this rule, the 
absolute amount of fuel use predicted through CY 2050 only differs 
by 1.4 percent between the reference and alternative baseline 
analysis.
    \8\ There is a 1 percent difference between the absolute volume 
of carbon dioxide (measured in million metric tons, or mmt) produced 
through CY 2050 in the reference baseline analysis and alternative 
baseline analysis under the final standards.
    \9\ The Social Cost of Greenhouse Gases (SC-GHG) assumed a 2 
percent discount rate for the net benefit values discussed here.
    \10\ While the absolute fuel consumption and carbon dioxide 
emissions are similar when the final standards are applied over both 
baselines considered, the higher net benefits for the alternative 
baseline are a result of a larger portion of the reduced fuel use 
and reduced carbon dioxide being attributed to the CAFE standards 
rather than to the baseline.
---------------------------------------------------------------------------

    The record for this action is comprised of the notice of proposed 
rulemaking (NPRM) and this final rule, a Technical Support Document 
(TSD), a Final Regulatory Impact Assessment (FRIA), and a Draft and 
Final EIS, along with extensive analytical documentation, supporting 
references, and many other resources. Most of these resources are 
available on NHTSA's website,\11\ and other references not available on 
NHTSA's website can be found in the rulemaking docket, the docket 
number of which is listed at the beginning of this preamble.
---------------------------------------------------------------------------

    \11\ See NHTSA. 2023. Corporate Average Fuel Economy. Available 
at: https://www.nhtsa.gov/laws-regulations/corporate-average-fuel-economy. (Accessed: Feb. 23, 2024).
---------------------------------------------------------------------------

    The final rule considers a range of regulatory alternatives for 
each fleet, consistent with NHTSA's obligations under the 
Administrative Procedure Act (APA), National Environmental Policy Act 
(NEPA), and E.O. 12866. Specifically, NHTSA considered five regulatory 
alternatives for passenger cars and light trucks, as well as the No-
Action Alternative. Each alternative is labeled for the type of vehicle 
and the rate of increase in fuel economy stringency based on changes 
for each model year, for example, PC1LT3 represents a 1 percent 
increase in Passenger Car standards and a 3 percent increase in Light 
Truck standards. We include four regulatory alternatives for HDPUVs, 
each representing different possible rates of year-over-year increase 
in the stringency of new fuel economy and fuel efficiency standards, as 
well as the No-Action Alternative. For example, HDPUV4 represents a 4 
percent increase in fuel efficiency standards applicable to HDPUVs. The 
regulatory alternatives are as follows: \12\
---------------------------------------------------------------------------

    \12\ In a departure from recent CAFE rulemaking trends, we have 
applied different rates of stringency increase to the passenger car 
and the light truck fleets in different model years, because the 
record indicated that different rates of fuel economy were possible. 
Rather than have both fleets increase their respective standards at 
the same rate, light truck standards increase at a different rate 
than passenger car standards in the first two years of the program. 
This is consistent with NHTSA's obligation to set maximum feasible 
CAFE standards separately for passenger cars and light trucks (see 
49 U.S.C. 32902), which gives NHTSA discretion, by law, to set CAFE 
standards that increase at different rates for cars and trucks. 
Section VI of this preamble also discusses in greater detail how 
this approach carries out NHTSA's responsibility under the Energy 
Policy and Conservation Act (EPCA) to set maximum feasible standards 
for both passenger cars and light trucks.
    \13\ Percentages in the table represent the year over year 
reduction in gal/mile applied to the mpg values on the target 
curves. The reduction in gal/mile results in an increased mpg.
[GRAPHIC] [TIFF OMITTED] TR24JN24.000


[[Page 52547]]


[GRAPHIC] [TIFF OMITTED] TR24JN24.001

    After assessing these alternatives against the reference baseline 
and the alternative baseline, and evaluating numerous sensitivity 
cases, NHTSA is finalizing stringency increases at 2 percent per year 
for passenger cars for MYs 2027 through 2031, and at 0 percent per year 
for light trucks for MYs 2027 and 2028, and 2 percent per year for MYs 
2029-2031. NHTSA is also setting forth an augural MY 2032 standard that 
increases at a rate of 2 percent for both passenger cars and light 
trucks. NHTSA is finalizing stringency increases at 10 percent per year 
for HDPUVs for MYs 2030-2032, and 8 percent per year for MYs 2033-2035. 
The regulatory alternatives representing these final stringency 
increases are called ``PC2LT002'' for passenger cars and light trucks, 
and ``HDPUV108'' for HDPUVs. These standards are also referred to 
throughout the rulemaking documents as the ``preferred alternative'' or 
``final standards.'' NHTSA concludes that these levels are the maximum 
feasible for these model years as discussed in more detail in Section 
VI of this preamble, and in particular given the statutory constraints 
that prevent NHTSA from considering the fuel economy of battery 
electric vehicles (BEVs) in determining maximum feasible CAFE 
standards.\15\
---------------------------------------------------------------------------

    \14\ For HDPUVs, the different regulatory alternatives are also 
defined in terms of percent-increases in stringency from year to 
year, but in terms of fuel consumption reductions rather than fuel 
economy increases, so that increasing stringency appears to result 
in standards going down (representing a direct reduction in fuel 
consumed) over time rather than up. Also, unlike for the passenger 
car and light truck standards, because HDPUV standards are measured 
using a fuel consumption metric, year-over-year percent changes do 
actually represent gallon/mile differences across the work-factor 
range.
    \15\ 49 U.S.C. 32902(h) states that when determining what levels 
of CAFE standards are maximum feasible, NHTSA ``(1) may not consider 
the fuel economy of dedicated automobiles [including battery-
electric vehicles]; (2) shall consider dual fueled automobiles to be 
operated only on gasoline or diesel fuel; and (3) may not consider, 
when prescribing a fuel economy standard, the trading, transferring, 
or availability of credits under section 32903.''
---------------------------------------------------------------------------

    NHTSA notes that due to the statutory constraints that prevent 
NHTSA from considering the fuel economy of dedicated alternative fueled 
vehicles, the full (including electric-only operation) fuel economy of 
dual-fueled alternative fueled vehicles, and the availability of over-
compliance credits when determining what standards are maximum 
feasible, many aspects of our analysis are different from what they 
would otherwise be without the statutory restrictions--in particular, 
the technologies chosen to model possible compliance options, the 
estimated costs, benefits, and achieved levels of fuel economy, as well 
as the current and projected adoption of alternative fueled vehicles. 
NHTSA evaluates the results of that constrained analysis by weighing 
the four enumerated statutory factors to determine which standards are 
maximum feasible, as discussed in Section VI.A.5.
    For passenger cars and light trucks, NHTSA notes that the final 
year of standards, MY 2032, is ``augural,'' as in the 2012 final rule 
which established CAFE standards for model years 2017 and beyond. 
Augural standards mean that they are NHTSA's best estimate of what the 
agency would propose, based on the information currently before it, if 
the agency had authority to set CAFE standards for more than five model 
years in one action. The augural standards do not, and will not, have 
any effect in themselves and are not binding unless adopted in a 
subsequent rulemaking. Consistent with past practice, NHTSA is 
including augural standards for MY 2032 to give its best estimate of 
what those standards would be to provide as much predictability as 
possible to manufacturers and to be consistent with the time frame of 
the Environmental Protection Agency (EPA) standards for greenhouse gas 
(GHG) emissions from motor vehicles. Due to statutory lead time 
constraints for HDPUV standards, NHTSA's final rule for HDPUV standards 
must begin with MY 2030. There is no restriction on the number of model 
years for which NHTSA may set HDPUV standards, so none of the HDPUV 
standards are augural.
    The CAFE standards remain vehicle-footprint-based, like the current 
CAFE standards in effect since MY 2011, and the HDPUV standards remain 
work-factor-based, like the HDPUV standards established in the 2011 
``Phase 1'' rulemaking used in the 2016 ``Phase 2'' rulemaking. The 
footprint of a vehicle is the area calculated by multiplying the 
wheelbase times the track width, essentially the rectangular area of a 
vehicle measured from tire to tire where the tires hit the ground. The 
work factor (WF) of a vehicle is a unit established to measure payload, 
towing capability, and whether or not a vehicle has four-wheel drive. 
This means that the standards are defined by mathematical equations 
that represent linear functions relating vehicle footprint to fuel 
economy targets for passenger cars and light trucks,\16\ and relating 
WF to fuel consumption targets for HDPUVs.
---------------------------------------------------------------------------

    \16\ Generally, passenger cars have more stringent targets than 
light trucks regardless of footprint, and smaller vehicles will have 
more stringent targets than larger vehicles, because smaller 
vehicles are generally more fuel efficient. No individual vehicle or 
vehicle model need meet its target exactly, but a manufacturer's 
compliance is determined by how its average fleet fuel economy 
compares to the average fuel economy of the targets of the vehicles 
it manufactures.
---------------------------------------------------------------------------

    The target curves for passenger cars, light trucks, and 
compression-ignition and spark-ignition HDPUVs are set forth in 
Sections II and IV; curves for model years prior to the years of the 
rulemaking time frame are included in the figures for context. NHTSA

[[Page 52548]]

underscores that the equations and coefficients defining the curves are 
the CAFE and HDPUV standards, and not the mpg and gallon/100-mile 
estimates that the agency currently estimates could result from 
manufacturers complying with the curves. We provide mpg and gallon/100-
mile estimates for ease of understanding after we illustrate the 
footprint curves, but the equations and coefficients are the actual 
standards. NHTSA is also finalizing new minimum domestic passenger car 
CAFE standards (MDPCS) for model years 2027-2031 as required by the 
Energy Policy and Conservation Act of 1975 (EPCA), as amended by the 
EISA, and applied to vehicles defined as manufactured in the United 
States. Section 32902(b)(4) of 49 U.S.C. requires NHTSA to project the 
minimum domestic standard when it promulgates passenger car standards 
for a MY; these standards are shown in Table I-3 below. NHTSA retains 
the 1.9 percent offset first used in the 2020 final rule, reflecting 
prior differences between passenger car footprints originally forecast 
by the agency and passenger car footprints as they occurred in the real 
world, such that the minimum domestic passenger car standard is as 
shown in the table below.
[GRAPHIC] [TIFF OMITTED] TR24JN24.002

    Recognizing that many readers think about CAFE standards in terms 
of the mpg values that the standards are projected to eventually 
require, NHTSA currently estimates that the standards would require 
roughly 50.4 mpg in MY 2031, on an average industry fleet-wide basis, 
for passenger cars and light trucks. NHTSA notes both that real-world 
fuel economy is generally 20-30 percent lower than the estimated 
required CAFE level stated above,\17\ and also that the actual CAFE 
standards are the footprint target curves for passenger cars and light 
trucks. This last note is important, because it means that the ultimate 
fleet-wide levels will vary depending on the mix of vehicles that 
industry produces for sale in those model years. NHTSA also calculates 
and presents ``estimated achieved'' fuel economy levels, which differ 
somewhat from the estimated required levels for each fleet, for each 
year.\18\ NHTSA estimates that the industry-wide average fuel economy 
achieved in MY 2031 for passenger cars and light trucks combined could 
increase from about 52.1 mpg under the No-Action Alternative to 52.5 
mpg under the standards.
---------------------------------------------------------------------------

    \17\ CAFE compliance is evaluated per 49 U.S.C. 32904(c) Testing 
and Calculation Procedures, which states that the EPA Administrator 
(responsible under EPCA/EISA for measuring vehicle fuel economy) 
shall use the same procedures used for model year 1975 (weighted 55 
percent urban cycle and 45 percent highway cycle) or comparable 
procedures. Colloquially, this is known as the 2-cycle test. The 
``real-world'' or 5-cycle evaluation includes the 2-cycle tests, and 
three additional tests that are used to adjust the city and highway 
estimates to account for higher speeds, air conditioning use, and 
colder temperatures. In addition to calculating vehicle fuel 
economy, EPA is responsible for providing the fuel economy data that 
is used on the fuel economy label on all new cars and light trucks, 
which uses the ``real-world'' values. In 2006, EPA revised the test 
methods used to determine fuel economy estimates (city and highway) 
appearing on the fuel economy label of all new cars and light trucks 
sold in the U.S., effective with 2008 model year vehicles.
    \18\ NHTSA's analysis reflects that manufacturers nearly 
universally make the technological improvements prompted by CAFE 
standards at times that coincide with existing product ``refresh'' 
and ``redesign'' cycles, rather than applying new technology every 
year regardless of those cycles. It is significantly more cost-
effective to make fuel economy-improving technology updates when a 
vehicle is being updated. See TSD 2.2.1.7 for additional discussion 
about manfacturer refresh and redesign cycles.

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[[Page 52549]]

[GRAPHIC] [TIFF OMITTED] TR24JN24.003

    To the extent that manufacturers appear to be over-complying in our 
analysis with required fuel economy levels in the passenger car fleet, 
NHTSA notes that this is due to the inclusion of several all-electric 
manufacturers in the reference baseline analysis, which affects the 
overall average achieved levels. Manufacturers with more traditional 
fleets do not over-comply at such high levels in our analysis, and our 
analysis considers the compliance paths for both manufacturer groups. 
In contrast, while it looks like some manufacturers are falling short 
of required fuel economy levels in the light truck fleet (and choosing 
instead to pay civil penalties), NHTSA notes that this appears to be an 
economic decision by a relatively small number of companies. In 
response to comments from vehicle manufacturers, in particular 
manufacturers that commented that they cannot stop manufacturing large 
fuel inefficient light trucks while also transitioning to manufacturing 
electric vehicles, NHTSA has reconsidered light truck stringency levels 
and notes that manufacturers no longer face CAFE civil penalties as 
modeled in the NPRM. Please see Section VI.D of this preamble for more 
discussion on these topics and how the agency has considered them in 
determining maximum feasible standards for this final rule.
---------------------------------------------------------------------------

    \19\ There is no actual legal requirement for combined passenger 
car and light truck fleets, but NHTSA presents information this way 
in recognition of the fact that many readers will be accustomed to 
seeing such a value.
    \20\ The MY 2022 baseline fleet that was used from 2022 NHTSA 
Pre-Model Year (PMY) data consists of 38% passenger car and 62% 
light truck.
---------------------------------------------------------------------------

    For HDPUVs, NHTSA currently projects that the standards would 
require, on an average industry fleet-wide basis for the HDPUV fleet, 
roughly 2.851 gallons per 100 miles in MY 2035.\21\ HDPUV standards are 
attribute-based like passenger car and light truck standards, so here, 
too, ultimate fleet-wide levels will vary depending on what industry 
produces for sale.
---------------------------------------------------------------------------

    \21\ The HDPUV standards measure compliance in direct fuel 
consumption and uses gallons consumed per 100 miles of operation as 
a metric. See 49 CFR 535.6.
[GRAPHIC] [TIFF OMITTED] TR24JN24.004

    For all fleets, average requirements and average achieved CAFE and 
HDPUV fuel efficiency levels would ultimately depend on manufacturers' 
and consumers' responses to standards, technology developments, 
economic conditions, fuel prices, and other factors.

[[Page 52550]]

    Our technical analysis for this final rule keeps the same general 
framework as past CAFE and HDPUV rules, but as applied to the most up-
to-date fleet available at the time of the analysis. NHTSA has updated 
technologies considered in our analysis (removing technologies which 
are already universal or nearly so and technologies which are exiting 
the fleet, adding certain advanced engine technologies); \22\ updated 
macroeconomic input assumptions, as with each round of rulemaking 
analysis; improved user control of various input parameters; updated 
our approach to modeling manufacturers' expected compliance with 
states' Zero Emission Vehicle (ZEV) programs and deployment of 
additional electric vehicles consistent with manufacturer commitments; 
accounted for changes to DOE's Petroleum Equivalency Factor (PEF),\23\ 
for the reference baseline assumptions; expanded accounting for Federal 
incentives such as Inflation Reduction Act programs; expanded 
procedures for estimating new vehicle sales and fleet shares; updated 
inputs for projecting aggregate light-duty Vehicle Miles Traveled 
(VMT); and added various output values and options.\24\
---------------------------------------------------------------------------

    \22\ See TSD Chapter 1.1 for a complete list of technologies 
added or removed from the analysis.
    \23\ For more information on DOE's final rule, see 89 FR 22041 
(Mar. 29, 2024). For more information on how DOE's revised PEF 
affects NHTSA's results in this final rule, please see Chapter 9 of 
the FRIA.
    \24\ See TSD Chapter 1.1 for a detailed discussion of analysis 
updates.
---------------------------------------------------------------------------

    NHTSA concludes, as we explain in more detail below, that 
Alternative PC2LT002 is the maximum feasible alternative that 
manufacturers can achieve for model years 2027-2031 passenger cars and 
light trucks, based on a variety of reasons. Energy conservation is 
still paramount, for the consumer benefits, energy security benefits, 
and environmental benefits that it provides. Moreover, although the 
vehicle fleet is undergoing a significant transformation now and in the 
coming years, for reasons other than the CAFE standards, NHTSA believes 
that a significant percentage of the on-road (and new) vehicle fleet 
may remain propelled by internal combustion engines (ICEs) through 
2031. NHTSA believes that the final standards will encourage 
manufacturers producing those ICE vehicles during the standard-setting 
time frame to achieve significant fuel economy, improve energy 
security, and reduce harmful pollution by a large amount. At the same 
time, NHTSA is finalizing standards that our estimates project will 
continue to save consumers money and fuel over the lifetime of their 
vehicles while being economically practicable and technologically 
feasible for manufacturers to achieve.
    Although all of the other alternatives, except for the no-action 
alternative, would conserve more energy and provide greater fuel 
savings benefits and certain pollutant emissions reductions, NHTSA's 
statutorily-constrained analysis currently estimates that those 
alternatives may not be achievable for many manufacturers in the 
rulemaking time frame.\25\ Additionally, the analysis indicates 
compliance with those more stringent alternatives would impose 
significant costs (under the constrained analysis) on individual 
consumers without corresponding fuel savings benefits large enough to, 
on average, offset those costs. Within that framework, NHTSA's analysis 
suggests that the more stringent alternatives could push more 
technology application than would be economically practicable, given 
anticipated reference baseline activity that will already be consuming 
manufacturer resources and capital and the constraints of planned 
manufacturer redesign cycles. In contrast to all other action 
alternatives, except for the no-action alternative, Alternative 
PC2LT002 comes at a cost we believe the market can bear without 
creating consumer acceptance or sales issues, appears to be much more 
achievable, and will still result in consumer net benefits on average. 
The alternative also achieves large fuel savings benefits and 
significant reductions in emissions compared to the no-action 
alternative. NHTSA concludes Alternative PC2LT002 is the appropriate 
choice given this record.
---------------------------------------------------------------------------

    \25\ See Section VI for a complete discussion.
---------------------------------------------------------------------------

    For HDPUVs, NHTSA concludes, as explained in more detail below, 
that Alternative HDPUV108 is the maximum feasible alternative that 
manufacturers can achieve for model years 2030-2035 HDPUVs. It has been 
seven years since NHTSA revisited HDPUV standards, and our analysis 
suggests that there is much opportunity for cost-effective improvements 
in this segment, broadly speaking. At the same time, we recognize that 
these vehicles are primarily used to conduct work for a large number of 
businesses. Although Alternatives HDPUV10 and HDPUV14 would conserve 
more energy and provide greater fuel savings benefits and 
CO2 emissions reductions, they are more costly than 
HDPUV108, and NHTSA currently estimates that Alternative HDPUV108 is 
the most cost-effective under a variety of metrics and at either a 3 
percent or a 7 percent DR, while still being appropriate and 
technologically feasible. NHTSA is allowed to consider electrification 
in determining maximum feasible standards for HDPUVs. As a result, 
NHTSA concludes that HDPUV108 is the appropriate choice given the 
record discussed in more detail below, and we believe it balances 
EPCA's overarching objective of energy conservation while remaining 
cost-effective and technologically feasible.
    For passenger cars and light trucks, NHTSA estimates that this 
final rule would reduce average fuel outlays over the lifetimes of MY 
2031 vehicles by about $639 per vehicle relative to the reference 
baseline, while increasing the average cost of those vehicles by about 
$392 over the reference baseline, at a 3 percent discount rate; this 
represents a difference of $247. With climate benefits discounted at 2 
percent and all other benefits and costs discounted at 3 percent, when 
considering the entire CAFE fleet for model years 1983-2031, NHTSA 
estimates $24.5 billion in monetized costs and $59.7 billion in 
monetized benefits attributable to the standards, such that the present 
value of aggregate net monetized benefits to society would be $35.2 
billion.\26\ Again, the net benefits are larger if the final rule is 
assessed relative to the alternative baseline.
---------------------------------------------------------------------------

    \26\ These values are from our ``model year'' analysis, 
reflecting the entire fleet from MYs 1983-2031, consistent with past 
practice. Model year and calendar year perspectives are discussed in 
more detail below in this section.
---------------------------------------------------------------------------

    For HDPUVs, NHTSA estimates that this final rule could reduce 
average fuel outlays over the lifetimes of MY 2038 vehicles by about 
$717 per vehicle, while increasing the average cost of those vehicles 
by about $226 over the reference baseline, at a 3 percent discount 
rate; this represents a difference of $491. With climate benefits 
discounted at 2 percent and all other benefits and costs discounted at 
3 percent, when considering the entire on-road HDPUV fleet for calendar 
years 2022-2050, NHTSA estimates $3.4 billion in monetized costs and 
$17 billion in monetized benefits attributable to the standards, such 
that the present value of aggregate net monetized benefits to society 
would be $13.6 billion.\27\
---------------------------------------------------------------------------

    \27\ These values are from our ``calender year'' analysis, 
reflecting the on-the-road fleet from CYs 2022-2050. Model year and 
calendar year perspectives are discussed in more detail below in 
this section.
---------------------------------------------------------------------------

    These assessments do not include important unquantified effects, 
such as energy security benefits, equity and distributional effects, 
and certain air quality benefits from the reduction of

[[Page 52551]]

toxic air pollutants and other emissions, among other things, so the 
net benefit estimate is a conservative one.\28\ In addition, the power 
sector emissions modeling reflected in this analysis is subject to 
uncertainty and may be conservative to the extent that other components 
that influence energy markets, such as recently finalized Federal rules 
and additional modeled policies like Federal tax credits, are 
incorporated in those estimates. That said, NHTSA performed additional 
modeling to test the sensitivity of those estimates and found that in 
the context of total emissions, any changes from using different power 
sector forecasts are extremely small. This is discussed in more detail 
in FRIA Chapter 9.
---------------------------------------------------------------------------

    \28\ These cost and benefit estimates are based on many 
different and uncertain inputs, and NHTSA has conducted several 
dozen sensitivity analyses varying individual inputs to evaluate the 
effect of that uncertainty. For example, while NHTSA's reference 
baseline analysis constrains the application of high compression 
ratio engines to some vehicles based on performance and other 
considerations, we also conducted a sensitivity analysis that 
removed all of those constraints. Results of this and other 
sensitivity analyses are discussed in Section V of this preamble, in 
Chapter 9 of the FRIA, and (if large or otherwise significant) in 
Section VI.D of this preamble.
---------------------------------------------------------------------------

    Table I-6 presents aggregate benefits and costs for new vehicle 
buyers and for the average individual new vehicle buyer.
[GRAPHIC] [TIFF OMITTED] TR24JN24.005

    NHTSA recognizes that EPA has recently issued a final rule to set 
new multi-pollutant emissions standards for model years 2027 and later 
light-duty (LD) and medium-duty vehicles (MDV).\29\ EPA describes its 
final rule as building upon EPA's final standards for Federal GHG 
emissions standards for passenger cars and light trucks for model years 
2023 through 2026 and leverages advances in clean car technology to 
unlock benefits to Americans ranging from reducing pollution, to 
improving public health, to saving drivers money through reduced fuel 
and maintenance costs.\30\ EPA's standards phase in over model years 
2027 through 2032.\31\
---------------------------------------------------------------------------

    \29\ Multi-Pollutant Emissions Standards for Model Years 2027 
and Later Light-Duty and Medium-Duty Vehicles; Final Rule, 89 FR 
27842 (Apr. 18, 2024).
    \30\ Id.
    \31\ Id.
---------------------------------------------------------------------------

    NHTSA coordinated with EPA in developing our final rule to avoid 
inconsistencies and produce requirements that are consistent with 
NHTSA's statutory authority. The final rules nevertheless differ in 
important ways. First, NHTSA's final rule, consistent with its 
statutory authority and mandate under EPCA/EISA, focuses on improving 
vehicle fuel economy and not directly on reducing vehicle emissions--
though reduced emissions are a follow-on effect of improved fuel 
economy. Second, the biggest difference between the two final rules is 
due to EPCA/EISA's statutory prohibition against NHTSA considering the 
fuel economy of dedicated alternative fueled vehicles, including BEVs, 
and including the full fuel economy of dual-fueled alternative fueled 
vehicles in determining the maximum feasible fuel economy level that 
manufacturers can achieve for passenger cars and light trucks, even 
though manufacturers may use BEVs and dual-fueled alternative fuel 
vehicles (AFV) like PHEVs to comply with CAFE standards. EPA is not 
prohibited from considering BEVs or PHEVs as a compliance option. EPA's 
final rule is informed by, among other considerations, trends in the 
automotive industry (including the proliferation of announced 
investments by automakers in electrifying their fleets), tax incentives 
under the Inflation Reduction Act (IRA), and other factors in the 
rulemaking record that are leading to a rapid transition in the 
automotive industry toward less-pollutant-emitting vehicle 
technologies. NHTSA, in contrast, may not consider BEVs as a compliance 
option for the passenger car and light truck fleets even though 
manufacturers may, in fact, use BEVs to comply with CAFE standards. 
This constraint means that not only are NHTSA's stringency rates of 
increase

[[Page 52552]]

different from EPA's but also the shapes of our standards are different 
based upon the different scopes.
    Recognizing these statutory restrictions and their effects on 
NHTSA's analysis (and that EPA's analysis and decisions are not subject 
to such constraints) NHTSA sought to optimize the effectiveness of the 
final CAFE standards consistent with our statutory factors. Our 
statutorily constrained simulated industry response shows a reasonable 
path forward to compliance with CAFE standards, but we want to stress 
that our analysis simply shows feasibility and does not dictate a 
required path to compliance. Because the standards are performance-
based, manufacturers are always free to apply their expertise to find 
the appropriate technology path that best meets all desired outcomes. 
Indeed, as explained in greater detail later on in this final rule, it 
is entirely possible and reasonable that a vehicle manufacturer will 
use technology options to meet NHTSA's standards that are significantly 
different from what NHTSA's analysis for this final rule suggests given 
the statutory constraints under which it operates. NHTSA has ensured 
that these final standards take account of statutory objectives and 
constraints while minimizing compliance costs.
    As discussed before, NHTSA does not face the same statutory 
limitations in setting standards for HDPUVs as it does in setting 
standards for passenger cars and light trucks. This allows NHTSA to 
consider a broader array of technologies in setting maximum feasible 
standards for HDPUVs. However, we are still considerate of factors that 
allow these vehicles to maintain utility and do work for the consumer 
when we set the standards.
    Additionally, NHTSA has considered and accounted for the electric 
vehicles that manufacturers' have indicated they intend to deploy in 
our analysis, as part of the analytical reference baseline.\32\ Some of 
this deployment would be consistent with manufacturer compliance with 
California's Advanced Clean Cars (ACC) I and Advanced Clean Trucks 
(ACT). We find that manufacturers will comply with ZEV requirements in 
California and a number of other states in the absence of CAFE 
standards, and accounting for that expected compliance allows us to 
present a more realistic picture of the state of fuel economy even in 
the absence of changes to the CAFE standards. In the proposal, we also 
included the main provisions of California's Advanced Clean Cars II 
program (ACC II), which California has adopted but which has not been 
granted a Clean Air Act preemption waiver by EPA. Because ACC II has 
not been granted a waiver, we have not included it in our analysis as a 
legal requirement applying to manufacturers. However, manufacturers 
have indicated that they intend to deploy additional electric vehicles 
regardless of whether the waiver is granted, and our analysis reflects 
these vehicles. Reflecting this expected deployment of electric 
vehicles for non-CAFE compliance reasons in the analysis improves the 
accuracy of this reference baseline in reflecting the state of the 
world without the revised CAFE standards, and thus the information 
available to decision-makers in their decision as to what standards are 
maximum feasible, and to the public. However, in order to ensure that 
the analysis is robust to other possible futures, NHTSA also prepared 
an alternative baseline--one that reflected none of these electric 
vehicles (No ZEV Alternative Baseline). The net benefits of the 
standards are larger under this alternative baseline than they are 
under the reference baseline, and the technology deployment scenario is 
reasonable under the alternative baseline, further reinforcing NHTSA's 
conclusion that the final standards are reasonable, appropriate, and 
maximum feasible regardless of the deployment of electric vehicles that 
occurs independent of the standards.
---------------------------------------------------------------------------

    \32\ Specifically, we include the main provisions of the ACC I 
and ACT programs, and additional electric vehicles automakers have 
indicated to NHTSA that they intend to deploy, as discussed further 
below in Section III.
---------------------------------------------------------------------------

    NHTSA notes that while the current estimates of costs and benefits 
are important considerations and are directed by E.O. 12866, cost-
benefit analysis provides only one informative data point in addition 
to the host of considerations that NHTSA must balance by statute when 
determining maximum feasible standards. Specifically, for passenger 
cars and light trucks, NHTSA is required to consider four statutory 
factors--technological feasibility, economic practicability, the effect 
of other motor vehicle standards of the Government on fuel economy, and 
the need of the United States to conserve energy. For HDPUVs, NHTSA is 
required to consider three statutory factors--whether standards are 
appropriate, cost-effective, and technologically reasonable--to 
determine whether the standards it adopts are maximum feasible.\33\ As 
will be discussed further below, NHTSA concludes that Alternatives 
PC2LT002 and HDPUV108 are maximum feasible on the basis of these 
respective factors, and the cost-benefit analysis, while informative, 
is not one of the statutorily-required factors. NHTSA also considered 
several dozen sensitivity cases varying different inputs and concluded 
that even when varying inputs resulted in changes to net benefits or 
(on rare occasions) changed the relative order of regulatory 
alternatives in terms of their net benefits, those changes were not 
significant enough to outweigh our conclusion that Alternatives 
PC2LT002 and HDPUV108 are maximum feasible.
---------------------------------------------------------------------------

    \33\ 49 U.S.C. 32902(k).
---------------------------------------------------------------------------

    NHTSA further notes that CAFE and HDPUV standards apply only to new 
vehicles, meaning that the costs attributable to new standards are 
``front-loaded'' because they result primarily from the application of 
fuel-saving technology to new vehicles. By contrast, the impact of new 
CAFE and HDPUV standards on fuel consumption and energy savings, air 
pollution, and GHGs--and the associated benefits to society--occur over 
an extended time, as drivers buy, use, and eventually scrap these new 
vehicles. By accounting for many model years and extending well into 
the future to 2050, our analysis accounts for these differing patterns 
in impacts, benefits, and costs. Given the front-loaded costs versus 
longer-term benefits, it is likely that an analysis extending even 
further into the future would find additional net present benefits.
    The bulk of our analysis for passenger cars and light trucks 
presents a ``model year'' (MY) perspective rather than a ``calendar 
year'' (CY) perspective. The MY perspective considers the lifetime 
impacts attributable to all passenger cars and light trucks produced 
prior to MY 2032, accounting for the operation of these vehicles over 
their entire lives (with some MY 2031 vehicles estimated to be in 
service as late as 2050). This approach emphasizes the role of the 
model years for which new standards are being finalized, while 
accounting for the potential that the standards could induce some 
changes in the operation of vehicles produced prior to MY 2027 (for 
passenger cars and light trucks), and that, for example, some 
individuals might choose to keep older vehicles in operation, rather 
than purchase new ones.
    The calendar year perspective we present includes the annual 
impacts attributable to all vehicles estimated to be in service in each 
calendar year for which our analysis includes a representation of the 
entire registered passenger car, light truck, and HDPUV fleet. For this 
final rule, this calendar

[[Page 52553]]

year perspective covers each of calendar years 2022-2050, with 
differential impacts accruing as early as MY 2022.\34\ Compared to the 
MY perspective, the calendar year perspective includes model years of 
vehicles produced in the longer term, beyond those model years for 
which standards are being finalized.
---------------------------------------------------------------------------

    \34\ For a presentation of effects by calendar year, please see 
Chapter 8.2.4.6 of the FRIA.
---------------------------------------------------------------------------

    The tables below summarize estimates of selected impacts viewed 
from each of these two perspectives, for each of the regulatory 
alternatives considered in this final rule, relative to the reference 
baseline.
---------------------------------------------------------------------------

    \35\ FRIA Chapter 1, Figure 1-1 provides a graphical comparison 
of energy sources and their relative change over the standard 
setting years.
    \36\ The additional electricity use during regulatory years is 
attributed to an increase in the number of PHEVs; PHEV fuel economy 
is only considered in charge-sustaining (i.e., gasoline-only) mode 
in the compliance analysis, but electricity consumption is computed 
for the effects analysis.
[GRAPHIC] [TIFF OMITTED] TR24JN24.006

[GRAPHIC] [TIFF OMITTED] TR24JN24.007


[[Page 52554]]


[GRAPHIC] [TIFF OMITTED] TR24JN24.008

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

    \37\ Climate benefits are based on changes (reductions) in 
CO2, CH4, and N2O emissions and are 
calculated using three different estimates of the SCC, SC-
CH4, and SC-N2O. Each estimate assumes a 
different discount rate (1.5 percent, 2 percent, and 2.5 percent). 
For the presentational purposes of this table and other similar 
summary tables, we show the benefits associated with the SC-GHG at a 
2 percent discount rate. See Section III.G of this preamble for more 
information.
    \38\ For this and similar tables in this section, net benefits 
may differ from benefits minus costs due to rounding.
    \39\ Climate benefits are based on changes (reductions) in 
CO2, CH4, and N2O emissions and are 
calculated using three different estimates of the SCC, SC-
CH4, and SC-N2O. Each estimate assumes a 
different discount rate (1.5 percent, 2 percent, and 2.5 percent). 
For the presentational purposes of this table and other similar 
summary tables, we show the benefits associated with the SC-GHG at a 
2 percent discount rate. See Section III.G of this preamble for more 
information.
    \40\ See https://www.whitehouse.gov/omb/information-regulatory-affairs/reports/ for examples of how this reporting is used by the 
Federal Government.

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

[[Page 52555]]

[GRAPHIC] [TIFF OMITTED] TR24JN24.009

    Our net benefit estimates are likely to be conservative both 
because (as discussed above) our analysis only extends to MY 2031 and 
calendar year 2050 (LD) and calendar year 2050 (HDPUV), and because 
there are additional important health, environmental, and energy 
security benefits that could not be fully quantified or monetized. 
Finally, for purposes of comparing the benefits and costs of CAFE and 
HDPUV standards to the benefits and costs of other Federal regulations, 
policies, and programs under the Regulatory Right-to-Know Act,\40\ we 
have computed ``annualized'' benefits and costs relative to the 
reference baseline, as follows:
---------------------------------------------------------------------------

    \41\ Climate benefits are based on changes (reductions) in 
CO2, CH4, and N2O emissions and are 
calculated using three different estimates of the SCC, SC-
CH4, and SC-N2O. Each estimate assumes a 
different discount rate (1.5 percent, 2 percent, and 2.5 percent). 
For the presentational purposes of this table and other similar 
summary tables, we show the benefits associated with the SC-GHG at a 
2 percent discount rate. See Section III.G of this preamble for more 
information.
    \42\ For this and similar tables in this section, net benefits 
may differ from benefits minus costs due to rounding.

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

[[Page 52556]]

[GRAPHIC] [TIFF OMITTED] TR24JN24.010

[GRAPHIC] [TIFF OMITTED] TR24JN24.011


[[Page 52557]]


    It is also worth emphasizing that, although NHTSA is prohibited 
from considering the availability of certain flexibilities in making 
our determination about the levels of CAFE standards that would be 
maximum feasible, manufacturers have a variety of flexibilities 
available to aid their compliance. Section VII of this preamble 
summarizes these flexibilities and what NHTSA has finalized for this 
final rule. NHTSA is finalizing changes to these flexibilities as shown 
in Table I-13 and Table I-14.
---------------------------------------------------------------------------

    \43\ Climate benefits are based on changes (reductions) in 
CO2, CH4, and N2O emissions and are 
calculated using three different estimates of the SCC, SC-
CH4, and SC-N2O. Each estimate assumes a 
different discount rate (1.5 percent, 2 percent, and 2.5 percent). 
For the presentational purposes of this table and other similar 
summary tables, we show the benefits associated with the SC-GHG at a 
2 percent discount rate. See Section III.G of this preamble for more 
information.
---------------------------------------------------------------------------

BILLING CODE 4910-59-P

[[Page 52558]]

[GRAPHIC] [TIFF OMITTED] TR24JN24.012


[[Page 52559]]


[GRAPHIC] [TIFF OMITTED] TR24JN24.013

BILLING CODE 4910-59-C
    The following sections of this preamble discuss the technical 
foundation for the agency's analysis, the regulatory alternatives 
considered in this final rule, the estimated effects of the regulatory 
alternatives, the basis for NHTSA's conclusion that the standards are 
maximum feasible, and NHTSA's approach to compliance and enforcement. 
The extensive record supporting NHTSA's conclusion is documented in 
this preamble, in the TSD, the FRIA, the Final EIS, and the additional 
materials on NHTSA's website and in the rulemaking docket.

II. Overview of the Final Rule

A. Summary of the NPRM

    In the NPRM, NHTSA proposed new fuel economy standards for LDVs for

[[Page 52560]]

model years 2027-2031 and new fuel efficiency standards for HDPUVs for 
model years 2030-2035. NHTSA also set forth proposed augural standards 
for LDVs for model year 2032. NHTSA explained that it was proposing the 
standards in response to the agency's statutory mandate to improve 
energy conservation and reduce the nation's energy dependence on 
foreign sources. NHTSA also explained that the proposal was also 
consistent with Executive Order (E.O.) 14037, ``Strengthening American 
Leadership in Clean Cars and Trucks,'' (August 5, 2021),\44\ which 
directed the Secretary of Transportation (by delegation, NHTSA) to 
consider beginning work on rulemakings under the Energy Independence 
and Security Act of 2007 (EISA) to establish new fuel economy standards 
for LDVs beginning with model year 2027 and extending through at least 
model year 2030, and to establish new fuel efficiency standards for 
HDPUVs beginning with model year 2028 and extending through at least 
model year 2030,\45\ consistent with applicable law.\46\
---------------------------------------------------------------------------

    \44\ E.O. 14037 of Aug 5, 2021 (86 FR 43583).
    \45\ Due to statutory lead time constraints for HDPUV standards, 
NHTSA's proposal for HDPUV standards must begin with model year 
2030.
    \46\ See 49 U.S.C. Chapter 329, generally.
---------------------------------------------------------------------------

    NHTSA discussed the fact that EPA issued a proposal to set new 
multi-pollutant emissions standards for model years 2027 and later for 
light-duty and medium-duty vehicles. NHTSA explained that we 
coordinated with EPA in developing our proposal to avoid 
inconsistencies and produce requirements that are consistent with 
NHTSA's statutory authority. The proposals nevertheless differed in 
important ways, described in detail in the NPRM. EPA has since issued a 
final rule associated with its proposal,\47\ and the interaction 
between EPA's final standards and NHTSA's final standards is discussed 
in more detail below.
---------------------------------------------------------------------------

    \47\ 89 FR 27842 (Apr. 18, 2024).
---------------------------------------------------------------------------

    NHTSA also explained that it had considered and accounted for 
manufacturers' expected compliance with California's Advanced Clean 
Cars (ACC I) program and Advanced Clean Trucks (ACT) regulations in our 
analysis, as part of the analytical reference baseline.\48\ We stated 
that manufacturers will comply with current ZEV requirements in 
California and a number of other states in the absence of CAFE 
standards, and accounting for that expected compliance allows us to 
present a more realistic picture of the state of fuel economy even in 
the absence of changes to the CAFE standards. NHTSA also incorporated 
deployment of electric vehicles that would be consistent with 
California's ACC II program, which has not received a preemption waiver 
from EPA. However, automakers have indicated their intent to deploy 
electric vehicles consistent with the levels that would be required 
under ACCII if a waiver were to be granted, and as such its inclusion 
similarly makes the reference baseline more accurate. Reflecting 
expected compliance with the current ZEV programs and manufacturer 
deployment of EVs consistent with levels that would be required under 
the ACC II program in the analysis helps to improve the accuracy of the 
reference baseline in reflecting the state of the world without the 
revised CAFE standards, and thus the information available to 
policymakers in their decision as to what standards are maximum 
feasible and to the public in commenting on those standards. NHTSA also 
described several other improvements and updates it made to the 
analysis since the 2022 final rule based on NHTSA analysis, new data, 
and stakeholder meetings for the NPRM.
---------------------------------------------------------------------------

    \48\ Specifically, we include the main provisions of the ACC I, 
ACC II, (as currently submitted to EPA), and ACT programs, as 
discussed further below in Section III.C.5.a.
---------------------------------------------------------------------------

    NHTSA proposed fuel economy standards for model years 2027-2032 
(model year 2032 being proposed augural standards) that increased at a 
rate of 2 percent per year for both passenger cars and 4 percent per 
year for light trucks, and fuel efficiency standards for model years 
2030-2035 that increased at a rate of 10 percent per year for HDPUVs. 
NHTSA also took comment on a wide range of alternatives, including no-
action alternatives for both light duty vehicles and HDPUVs (retaining 
the 2022 passenger car and light truck standards and the 2016 final 
rule for HDPUV standards) and updates to the compliance flexibilities. 
The proposal was accompanied by a Preliminary Regulatory Impact 
Analysis (PRIA), a Draft Environmental Impact Statement (Draft EIS), 
Technical Support Document (TSD) and the CAFE Model software source 
code and documentation, all of which were also subject to comment in 
their entirety and all of which received significant comments.
    NHTSA tentatively concluded that Alternative PC2LT4 was maximum 
feasible for LDVs for model years 2027-2031 and Alternative HDPUV10 was 
maximum feasible for HDPUVs for model years 2030-2035. NHTSA explained 
that average requirements and achieved CAFE levels would ultimately 
depend on manufacturers' and consumers' responses to standards, 
technology developments, economic conditions, fuel prices, and other 
factors. NHTSA estimated that the proposal would reduce gasoline 
consumption by 88 billion gallons relative to reference baseline levels 
for LDVs, and by approximately 2.6 billion gallons relative to 
reference baseline levels for HDPUVs through calendar year 2050. NHTSA 
also estimated that the proposal would reduce carbon dioxide 
(CO2) emissions by 885 million metric tons for LDVs, and by 
22 million metric tons for HDPUVs through calendar year 2050.
    In terms of economic effects, NHTSA estimated that while consumers 
would pay more for new vehicles upfront, they would save money on fuel 
costs over the lifetimes of those new vehicles--lifetime fuel savings 
exceed modeled regulatory costs by roughly $100, on average, for model 
year 2032 LDVs, and by roughly $300, on average, for buyers of model 
year 2038 HDPUVs. NHTSA estimated that net benefits for the preferred 
alternative for LDVs would be $16.8 billion at a 3 percent discount 
rate, and $8.4 billion at a 7 percent discount rate, and for the 
preferred alternative for HDPUVs would be $2.2 billion at a 3 percent 
discount rate, and $1.4 billion at a 7 percent discount rate.
    NHTSA also addressed the question of harmonization with other motor 
vehicle standards of the Government that affect fuel economy. Even 
though NHTSA and EPA issued separate rather than joint notices, NHTSA 
explained that it had worked closely with EPA in developing the 
respective proposals, and that the agencies had sought to minimize 
inconsistency between the programs where doing so was consistent with 
the agencies' respective statutory mandates. NHTSA emphasized that 
differences between the proposals, especially as regards programmatic 
flexibilities, were not new in the proposal, and that differences were 
often a result of the different statutory frameworks. NHTSA reminded 
readers that since the agencies had begun regulating concurrently in 
2010, these differences have meant that manufacturers have had (and 
will have) to plan their compliance strategies considering both the 
CAFE standards and the GHG standards and assure that they are in 
compliance with both. NHTSA was also confident that industry would 
still be able to build a single fleet of vehicles to meet both the 
NHTSA and EPA standards. NHTSA sought comment broadly on all aspects of 
the proposal.

[[Page 52561]]

B. Public Participation Opportunities and Summary of Comments

    The NPRM was published on NHTSA's website on July 28, 2023, and 
published in the Federal Register on August 17, 2023,\49\ beginning a 
60-day comment period. The agency left the docket open for considering 
late comments to the extent practicable. A separate Federal Register 
notice, published on August 25, 2023,\50\ announced a virtual public 
hearing taking place on September 28 and 29, 2023. Approximately 155 
individuals and organizations signed up to participate in the hearing. 
The hearing started at 9:30 a.m. EDT on September 28th and ended at 
approximately 5:00 p.m., completing the entire list of participants 
within a single day,\51\ resulting in a 141-page transcript.\52\ The 
hearing also collected many pages of comments from participants, in 
addition to the hearing transcript, all of which were submitted to the 
docket for the rule.
---------------------------------------------------------------------------

    \49\ 88 FR 56128 (Aug. 17, 2023).
    \50\ 88 FR 58232 (Aug. 25, 2023).
    \51\ A recording of the hearing is provided on NHTSA's website. 
Avilable at: https://www.nhtsa.gov/events/cafe-standards-public-hearing-september-2023. (Acccessed: Jan. 29, 2024).
    \52\ The transcript, as captured by the stenographer or 
captioning folks to their best of abilities, is available in the 
docket for this rule.
---------------------------------------------------------------------------

    Including the 2,269 comments submitted as part of the public 
hearings, NHTSA's docket received a total of 63,098 comments, with tens 
of thousands of comments submitted by individuals and over 100 deeply 
substantive comments that included many attachments submitted by 
stakeholder organizations. NHTSA also received five comments on its 
Draft EIS to the separate EIS docket NHTSA-2022-0075, in addition to 17 
comments on the EIS scoping notice that informed NHTSA's preparation of 
the Draft EIS.
    Many commenters supported the proposal. Commenters supporting the 
proposal emphasized the importance of increased fuel economy for 
consumers, as well as cited concerns about climate change, which are 
relevant to the need of the United States to conserve energy. 
Commenters also expressed the need for harmonization and close 
coordination between NHTSA, EPA, and DOE for their respective programs. 
Many citizens, environmental groups, some States and localities, and 
some vehicle manufacturers stated strong support for NHTSA finalizing 
the most stringent alternative.
    Many manufacturers urged NHTSA to consider the impact of EPA's 
standards as well as the impact of DOE's Petroleum Equivalency Factor 
(PEF) rule on fleet compliance (discussed in more detail below). Many 
manufacturers supported alignment with EPA's and DOE's standards. 
Manufacturers were also supportive of keeping the footprint-based 
standards for LD vehicles and work factor-based standards for HDPUVs. 
Manufacturers and others were also supportive of continuing the HD 
Phase 2 approach for HDPUVs by having separate standards for 
compression ignition (CI) and spark ignition (SI) vehicles, as well as 
continuing to use a zero fuel consumption value for alternative fuel 
vehicles such as battery electric vehicles.
    In other areas, commenters expressed mixed views on the compliance 
and flexibilities proposed in the notice. Manufacturers were supportive 
of maintaining the Minimum Domestic Passenger Car Standard (MDPCS) 
offset relative to the standards. Most manufacturers and suppliers did 
not support phasing out off-cycle and AC efficiency fuel consumption 
improvement values (FCIVs), whereas NGOs and electric vehicle 
manufacturers supported removing all flexibilities. Many fuel and 
alternative fuel associations opposed the regulation due to lack of 
consideration for other types of fuels in NHTSA's analysis.
    NHTSA also received several comments on subjects adjacent to the 
rule but beyond the agency's authority to influence. NHTSA has reviewed 
all comments and accounted for them where legally possible in the 
modeling and qualitatively, as discussed below and throughout the rest 
of the preamble and in the TSD.
    NHTSA received a range of comments about the interaction between 
DOE's Petroleum Equivalency Factor (PEF) proposal and NHTSA's CAFE 
proposal, mainly from vehicle manufacturers. Several stakeholders 
commented in support of the proposed PEF,\53\ while others commented 
that the PEF should remain at the pre-proposal level, or even 
increase.\54\ The American Automotive Policy Council (AAPC), the policy 
organization that represents the ``Detroit Three'' or D3--Ford, General 
Motors, and Stellantis--commented that DOE's proposed PEF reduction 
inappropriately devalues electrification, and accordingly ``a devalued 
PEF yields a dramatic deficiency in light-duty trucks, that make up 83% 
of the D3's product portfolio.'' \55\ The AAPC also commented that 
``NHTSA's inclusion of the existing PEF for EVs in 2026 creates an 
artificially high CAFE compliance baseline, and the proposed PEF post-
2027 removes the only high-leverage compliance tool available to auto 
manufacturers.'' \56\ Relatedly, as part of their comments generally 
opposing DOE's proposed PEF level, other automakers provided 
alternative values for the PEF,\57\ or supported a phase-in of the PEF 
to better allow manufacturers to restructure their product mix.\58\ 
Other stakeholders urged NHTSA to delay the CAFE rule until DOE adopts 
a revised PEF,\59\ or stated that NHTSA should reopen comments on its 
proposal following final DOE action on the PEF.\60\ Finally, some 
commenters recommended that NHTSA apply a PEF to the HDPUV segment.\61\
---------------------------------------------------------------------------

    \53\ Toyota, Docket No. NHTSA-2023-0022-61131, at 9-12; Arconic, 
Docket No. NHTSA-2023-0022-48374, at 2.
    \54\ HATCI, Docket No. NHTSA-2023-0022-48991-A1, at 2.
    \55\ AAPC, Docket No. NHTSA-2023-0022-60610, at 3-5.
    \56\ Id.
    \57\ HATCI, Docket No. NHTSA-2023-0022-48991-A1, at 2.
    \58\ HATCI, Docket No. NHTSA-2023-0022-48991-A1, at 2; 
Volkswagen, Docket No. NHTSA-2023-0022-58702, at 7; Porsche, Docket 
No. NHTSA-2023-0022-59240, at 7; GM, Docket No. NHTSA-2023-0022-
60686, at 6. (e.g., ``In the event that the proposed lower PEF is 
adopted with a 3-year delay (i.e., lower PEF starts in the 2030 
model year), GM could support the NHTSA CAFE Preferred Alternative; 
however, we note that there are likely to be substantial CAFE/GHG 
alignment issues starting in 2030.'').
    \59\ NAM, Docket No. NHTSA-2023-0022-59289, at 2.
    \60\ The Alliance, Docket No. NHTSA-2023-0022-60652, at 5-6.
    \61\ MECA Clean Mobility, Docket No. NHTSA-2023-0022-63053, at 
4-5; The Aluminum Association, Docket No. NHTSA-2023-0022-58486, at 
3; Arconic Corporation, Docket No. NHTSA-2023-0022-48374, at 2.
---------------------------------------------------------------------------

    Regarding comments that were supportive of or opposing the new PEF, 
those comments are beyond the scope of this rulemaking. By statute, DOE 
is required to determine the PEF value and EPA is required to use DOE's 
value for calculation of a vehicle's CAFE value.\62\ NHTSA has no 
control over the selection of the PEF value or fuel economy calculation 
procedures; accordingly, the PEF value is just one input among many 
inputs used in NHTSA's analysis. While NHTSA was in close coordination 
with DOE during the pendency of the PEF update process, stakeholder 
comments about the PEF value and whether the value should be phased in 
were addressed in DOE's final rule.\63\
---------------------------------------------------------------------------

    \62\ 49 U.S.C. 32904.
    \63\ 89 FR 22041 (March 29, 2024).
---------------------------------------------------------------------------

    As NHTSA does not take a position on the PEF value, the agency 
believes it was appropriate to use the most up-to-date input assumption 
at each stage of

[[Page 52562]]

the analysis to provide stakeholders the best information about the 
effects of different levels of CAFE standards. NHTSA also included 
sensitivity analyses in the NPRM with DOE's pre-proposal PEF value so 
that all stakeholders had notice of and the opportunity to comment on a 
scenario where the PEF did not change.\64\ NHTSA accordingly disagrees 
that the agency needed to reopen comments on the proposal following 
final DOE action on the PEF.
---------------------------------------------------------------------------

    \64\ PRIA, Chapter 9.
---------------------------------------------------------------------------

    NHTSA agrees with AAPC that when a manufacturer's portfolio 
consists predominantly of lower fuel economy light trucks, as in the 
particular case of the D3, averaging the fuel economy of those vehicles 
with high fuel economy BEVs would help them comply with fuel economy 
standards more so than if BEVs had a lower fuel economy due to a lower 
PEF. However, this concern is somewhat ameliorated by the changes in 
DOE's final PEF rule, including a gradual reduction of the fuel content 
factor.\65\ Furthermore NHTSA has determined that the final standards 
are the maximum feasible fuel economy level that manufacturers can 
achieve even without producing additional electric vehicles. And, NHTSA 
disagrees that including in the modeling the old PEF in 2026 and prior 
and the new PEF in 2027 and beyond ``removes the only high-leverage 
compliance tool available to auto manufacturers'' (emphasis added), as 
there are several compliance tools available to manufacturers, 
including increasing the fuel economy of their ICE vehicles. As 
discussed further in Section VI, NHTSA believes that the standards 
finalized in this rule explicitly contemplate the concerns expressed by 
and the capability of all manufacturers.
---------------------------------------------------------------------------

    \65\ 89 FR 22041, at 22050 (March 29, 2024) (``After careful 
consideration of the comments, DOE concludes that removing the fuel 
content factor will, over the long term, further the statutory goals 
of conserving all forms of energy while considering the relative 
scarcity and value to the United States of all fuels used to 
generate electricity. This is because, as explained in the 2023 NOPR 
and in more detail below, by significantly overvaluing the fuel 
savings effects of EVs in a mature EV market with CAFE standards in 
place, the fuel content factor will disincentivize both increased 
production of EVs and increased deployment of more efficient ICE 
vehicles. Hence, the fuel content factor results in higher petroleum 
use than would otherwise occur.'').
---------------------------------------------------------------------------

    NHTSA will not use a PEF for HDPUV compliance at this time. NHTSA 
will continue to use the framework that was put in place by the HD 
Phase 2 rule, and in coordination with EPA's final rule, by using zero 
upstream energy consumption for compliance calculations (note that 
NHTSA does consider upstream effects of electricity use in its effects 
modeling). Any potential future action on developing PEF for HDPUV 
compliance would most likely occur in a standalone future rulemaking 
after NHTSA has a more thorough opportunity to consider the costs and 
benefits of such an approach and all stakeholders can present feedback 
on the issue.
    NHTSA also received a range of comments about BEV infrastructure. 
Comments covered both the amount and quality of BEV charging 
infrastructure and the state of electric grid infrastructure. Some 
stakeholders, including groups representing charging station providers 
and electricity providers, commented that although additional 
investments will be required to support future demand for public 
chargers and the electricity required for BEV charging, their 
preparation and planning for the BEV transition is already 
underway.\66\ Many stakeholders emphasized the role of a robust public 
charging network to facilitate the BEV transition,\67\ and broadly 
urged the Administration to work amongst the agencies and with 
automakers, utilities, and other interested parties to ensure that BEV 
charging infrastructure buildout, including developing minimum 
standards for public charging efficiency, and BEV deployment happen 
hand in hand.\68\
---------------------------------------------------------------------------

    \66\ ZETA, Docket No. NHTSA-2023-0022-60508, at 29-70.
    \67\ Climate Hawks Civic Action, Docket No. NHTSA-2023-0022-
61094, at 2059; U.S. Chamber of Commerce, Docket No. NHTSA-2023-
0022-61069, at 5-6.
    \68\ ZETA, Docket No. NHTSA-2023-0022-60508, at 29-70; MEMA, 
Docket No. NHTSA-2023-0022-59204, at 10; NAM, Docket No. NHTSA-2023-
0022-59203-A1, at 1.
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    In contrast, some stakeholders emphasized the current lack of 
public BEV charging infrastructure as a barrier to EV adoption.\69\ 
Stakeholders also highlighted mechanical problems with existing 
charging stations,\70\ which they stated contributes to dissatisfaction 
with public charging stations among electric vehicle owners.\71\ Other 
stakeholders commented that the country's electricity transmission 
infrastructure is not currently in a position to support the expected 
electricity demand from the BEV transition and may not be in the future 
for several reasons,\72\ such as the lack of materials needed to expand 
and upgrade the grid.\73\ To combat those concerns, other stakeholders 
recommended that administration officials and congressional leaders 
prioritize policies that would strengthen transmission systems and 
infrastructure and speed up their growth.\74\ Stakeholders also 
recommended that NHTSA capture some elements of charging and grid 
infrastructure issues in its analysis,\75\ and outside of the analysis 
and this rulemaking, identify ways to assist in the realization of 
adequate BEV infrastructure.\76\
---------------------------------------------------------------------------

    \69\ U.S. Chamber of Commerce, Docket No. NHTSA-2023-0022-61069, 
at 5; NATSO et al., Docket No. NHTSA-2023-0022-61070, at 5-7.
    \70\ ACI, Docket No. NHTSA-2023-0022-50765, at 4; CFDC et al, 
Docket No. NHTSA-2023-0022-62242, at 16; NADA, NHTSA-2023-0022-
58200, at 10.
    \71\ CFDC et al, Docket No. NHTSA-2023-0022-62242, at 16.
    \72\ NAM, Docket No. NHTSA-2023-0022-59289, at 3; ACI, Docket 
No. NHTSA-2023-0022-50765, at 4; Missouri Corn Growers Association, 
Docket No. NHTSA-2023-0022-58413, at 2; NCB, Docket No. NHTSA-2023-
0022-53876, at 1; AFPM, Docket No. NHTSA-2023-0022-61911-A2, at 41; 
NATSO et al., Docket No. NHTSA-2023-0022-61070, at 8; West Virginia 
Attorney General's Office, Docket No. NHTSA-2023-0022-63056, at 12-
13; MOFB, Docket No. NHTSA-2023-0022-61601, at 2.
    \73\ AFPM, Docket No. NHTSA-2023-0022-61911-A2, at 41.
    \74\ NAM, Docket No. NHTSA-2023-0022-59203, at 3.
    \75\ For example, some stakeholders stated that technologies 
like direct current fast chargers (DCFCs) should be prioritized in 
publicly funded projects and infrastructure decisions, and should be 
considered to varying extents in NHTSA's analysis. See, e.g., MEMA, 
Docket No. NHTSA-2023-0022-59204, at 6-7; Alliance for Vehicle 
Efficiency (AVE), Docket No. NHTSA-2023-0022-60213, at 7; AFPM, 
Docket No. NHTSA-2023-0022-61911, at 47. Stakeholders also 
recommended, as an example, NHTSA account for the long lead time for 
critical grid infrastructure upgrades. MEMA, Docket No. NHTSA-2023-
0022-59204-A1, at 3.
    \76\ MEMA, Docket No. NHTSA-2023-0022-59204-A1, at 3-5.
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    NHTSA acknowledges and appreciates all the comments received on 
charging infrastructure, which include both broad comments on future 
grid infrastructure needs, as well as increased deployment of reliable 
and convenient charging stations. NHTSA agrees with commenters in that 
infrastructure is an important aspect of a successful transition to 
BEVs in the future. We also agree that infrastructure improvements are 
necessary and directly related to keeping pace with projected levels of 
BEV supply and demand as projected by other agencies and independent 
forecasters.
    With that said, NHTSA projects that manufacturers will deploy a 
wide variety of technologies to meet the final CAFE standards that 
specifically are not BEVs, considering NHTSA's statutory limitations. 
As discussed further throughout this preamble, NHTSA does not consider 
adoption of BEVs in the LD fleet beyond what is already in the 
reference baseline. Results in Chapter 8 of the FRIA show increased 
technology penetrations of more efficient

[[Page 52563]]

conventional ICEs, increased penetration of advanced transmissions, 
increased mass reduction technologies, and other types of 
electrification such as mild and strong hybrids.
    In addition, as discussed further below, NHTSA has coordinated with 
DOE and EPA while developing this final rule, as requested by 
commenters. Experts at NHTSA's partner agencies have found that the 
grid and associated charging infrastructure could handle the increase 
in BEVs related to both EPA's light- and medium-duty vehicle multi-
pollutant rule and the HD Phase 3 GHG rule \77\--significantly more 
BEVs than NHTSA projects in the LD and HDPUV reference baselines 
examined in this rule. Thus, infrastructure beyond what is planned for 
buildout in the rulemaking timeframe, accounting not only for 
electricity generation and distribution, but considering load-balancing 
management measures, as well, to improve grid operations, would not be 
required. It should also be noted that expert projections show an order 
of magnitude increase in available (domestic) public charging ports 
between the release of the final rule and the rulemaking timeframe,\78\ 
not accounting for the additional availability of numerous residential 
and depot chargers. Battery energy storage integration with DC fast 
chargers can further expedite deployment of necessary infrastructure, 
reducing lead time for distribution upgrades while increasing the 
likelihood of meeting public charging needs in the next decade.\79\ The 
National Electric Vehicle Infrastructure (NEVI) program is also 
investing $5 billion in federal funding to deploy a national network of 
public EV chargers.\80\ Additionally, federally funded charging 
stations are required to adhere to a set of nationally recognized 
standards, such as a minimum of 97% annual-uptime,\81\ which is 
anticipated to greatly improve charging reliability concerns of today.
---------------------------------------------------------------------------

    \77\ National Renewable Energy Laboratory, Lawrence Berkeley 
National Laboratory, Kevala Inc., and U.S. Department of Energy. 
2024. Multi-State Transportation Electrification Impact Study: 
Preparing the Grid for Light-, Medium-, and Heavy-Duty Electric 
Vehicles. DOE/EE-2818, U.S. Department of Energy, (Accessed: May 1, 
2024); EPA GHG final rule. RIA Chapter 5.3.
    \78\ Rho Motion. EV Charging Quarterly Outlook--Quarter 1 2024. 
Proprietary data. Subscription information available at: https://rhomotion.com/.
    \79\ Poudel, S., et al. Innovative Charging Solutions for 
Deploying the National Charging Network: Technoeconomic Analysis. 
United States.
    \80\ U.S Department of Transportation, Federal Highway 
Administration. March 5, 2024. National Electric Vehicle 
Infrastructure (NEVI) Program. Available at: https://www.fhwa.dot.gov/environment/nevi/. (Accessed: May 9, 2024).
    \81\ U.S. Department of Transportation, Federal Highway 
Administration. Feb. 28, 2023. National Electric Vehicle 
Infrastructure Standards and Requirements. Available at: https://www.federalregister.gov/documents/2023/02/28/2023-03500/national-electric-vehicle-infrastructure-standards-and-requirements. 
(Accessed: May 1, 2024).
---------------------------------------------------------------------------

    For the HDPUV analysis, NHTSA does consider adoption of BEVs in the 
standard setting years, and we do see an uptake of BEVs; however, the 
population of the HDPUV fleet is extremely small, consisting of fewer 
than 1 million vehicles, compared to the LD fleet that consists of over 
14 million vehicles. This means that any potential impact of HDPUV BEV 
adoption on the electric grid would be similarly small. We also want to 
note that the adoption of these HDPUV BEVs is driven primarily by 
factors other than NHTSA's standards, including the market demand for 
increased fuel efficiency and state ZEV programs, as shown in detail in 
Section V of this preamble and FRIA Chapter 8.3.2. However, as with LD 
standards examined in this rule, most manufacturers could choose to 
meet the preferred standards with limited BEVs. There are still 
opportunities in the advanced engines, advanced transmissions, and 
strong hybrid technologies that could be used to meet the HDPUV 
preferred standards starting in model year 2030.
    Although NHTSA does not consider BEVs in its analysis of CAFE 
stringency, and there is minimal BEV adoption driven by the HDPUV FE 
standards, NHTSA coordinated with both DOE and EPA on many of the 
challenges raised by commenters to understand how the infrastructure 
will be developing and improving in the future. Our review of efforts 
taking place under the NEVI Program and consultation with DOE and EPA 
leads us to conclude that (1) there will be sufficient EV 
infrastructure to support the vehicles included in the light-duty 
reference baseline and in the HDPUV analysis; and (2) it is reasonable 
to anticipate that the power sector can continue to manage and improve 
the electricity distribution system to support the increase in BEVs. 
DOE and EPA conducted analyses that evaluate potential grid impacts of 
LD and HD fleet that contain significantly more BEVs than NHTSA's 
light-duty reference baseline and HDPUV fleets. Their analyses conclude 
that the implementation of EPA's LD and HD rules can be achieved. DOE 
and EPA found that sufficient electric grid charging and infrastructure 
\82\ can be deployed, numerous federal programs are providing funding 
to upgraded charging and grid infrastructure, and managed charging and 
innovative charging solutions can reduce needed grid updates.\83\ The 
analyses conducted for this assessment of the power sector section 
covered multiple inputs and assumptions across EPA and DOE tools, such 
as PEV adoption and EVSE access and utilization, to make sure that all 
aspects of the grid scenarios modeled are analyzed through 2050 between 
the no action and action alternative in EPA's rule.
---------------------------------------------------------------------------

    \82\ See discussion at EPA, Regulatory Impact Analysis, Multi-
Pollutant Emissions Standards for Model Years 2027 and Later Light-
Duty and Medium-Duty Vehicles, Chapter 5.4.5. Available at https://www.epa.gov/system/files/documents/2024-03/420r24004.pdf (last 
accessed May 22, 2024).
    \83\ See id.
---------------------------------------------------------------------------

    NHTSA also received several comments regarding critical materials 
used to make EV batteries. In support of its comments that the EV 
supply chain is committed to supporting full electrification, ZETA 
provided a thorough recitation of policy drivers supporting critical 
minerals development, projected demand for critical minerals, and 
ongoing investments and support from its members for critical mineral 
production, refining, and processing.\84\ Similarly, stakeholders 
commented about different federal and industry programs, incentives, 
and investments to promote the production and adoption of electric 
vehicles.\85\ Similar to comments on EV infrastructure, many 
stakeholders commented that federal agencies should work together to 
ensure a reliable supply chain for critical minerals.\86\
---------------------------------------------------------------------------

    \84\ ZETA, Docket No. NHTSA-2023-0022-60508, at 29-39.
    \85\ States and Cities, Docket No. NHTSA-2023-0022-61904, 
Appendix at 36-39; ICCT, Docket No. NHTSA-2023-0022-54064, at 2, 7.
    \86\ NAM, Docket No. NHTSA-2023-0022-59203, at 1.
---------------------------------------------------------------------------

    Other stakeholders commented about several critical minerals issues 
they perceived to be barriers to a largescale transition to EVs.\87\ 
Stakeholders commented generally on a limited or unavailable supply of 
certain critical minerals,\88\ and more specifically the

[[Page 52564]]

lack of mineral extraction and production in the United States, stating 
that domestic production of critical minerals is insufficient to meet 
projected demands.\89\ Stakeholders also commented on the potential 
environmental impact of mining critical minerals,\90\ particularly as 
vehicle manufacturers produce EVs with increasing battery pack 
sizes.\91\ Other stakeholders commented that all of these factors 
(including costs and environmental impact) should be considered in 
NHTSA's analysis.\92\ Finally, several stakeholders commented on how 
critical minerals' energy security issues interact with NHTSA's 
balancing factors to set maximum feasible standards and those comments 
are addressed in Section VI.5; other stakeholders commented on how 
critical minerals sourcing interacts with NHTSA's assumptions about tax 
credits and those comments are addressed in Section III.C.
---------------------------------------------------------------------------

    \87\ ACI, Docket No. NHTSA-2023-0022-50765, at 4-7; RFAet al, 
Docket No. NHTSA-2023-0022-57625, at 2; NAM, Docket No. NHTSA-2023-
0022-59203, at 3; AHUA, Docket No. NHTSA-2023-0022-58180, at 6-7; 
CFDC et al, Docket No. NHTSA-2023-0022-62242, at 22-23; West 
Virginia Attorney General's Office et al., Docket No. NHTSA-2023-
0022-63056, at 13-14.; Valero, Docket No. NHTSA-2023-0022-58547; 
Mario Loyola and Steven G. Bradbury, Docket No. NHTSA-2023-0022-
61952, at 10; MCGA, Docket No. NHTSA-2023-0022-60208; The Alliance, 
Docket No. NHTSA-2023-0022-60652.
    \88\ Nissan, Docket No. NHTSA-2023-0022-60696, at 7; AVE, Docket 
No. NHTSA-2023-0022-60213, at 3-4.
    \89\ ACI, Docket No. NHTSA-2023-0022-50765, at 5; API, Docket 
No. NHTSA-2023-0022-60234, at 4; AFPM, Docket No. NHTSA-2023-0022-
61911, at 2-11.
    \90\ ACE, Docket No. NHTSA-2023-0022-60683, at 2-3.
    \91\ ACI, Docket No. NHTSA-2023-0022-50765.
    \92\ ACE, Docket No. NHTSA-2023-0022-60683, at 3; MECA, Docket 
No. NHTSA-2023-0022-63053, at 8.
---------------------------------------------------------------------------

    We appreciate the commenters' feedback in this area and believe 
that the comments are important to note. However, as we have discussed 
earlier in this section, the CAFE standards final rulemaking analysis 
does not include adoption of BEVs beyond what is represented in the 
reference baseline. We do allow adoption of BEVs in the HDPUV fleet, as 
EPCA/EISA does not limit consideration of HDPUV technologies in the 
same way as LD technologies; however, as discussed above, BEV adoption 
is driven primarily by reasons other than NHTSA's fuel efficiency 
standards and the number of vehicles that adopt BEV technology in our 
analysis is relatively (compared to the LD fleet) small. That said, 
NHTSA believes that commenters' concerns are either currently addressed 
or are being actively addressed by several public and private 
endeavors.
    NHTSA, in coordination with DOE and EPA, reviewed current supply 
chain and updated analyses on critical materials. In particular, the 
DOE, through Argonne National Laboratory, conducted an updated 
assessment of developing and securing mineral supply for the U.S. 
electric vehicle industry, the Securing Critical Minerals report.\93\ 
The Argonne study focuses on five materials identified in a previous 
assessment,\94\ including lithium, nickel, cobalt, graphite, and 
manganese.\95\ The study collects and examines potential domestic 
sources of materials, as well as sources outside the U.S. including 
Free Trade Agreement (FTA) partners, members of the Mineral Security 
Partnership (MSP), economic allies without FTAs (referred to as ``Non-
FTA countries'' in the Argonne study), and Foreign Entity of Concern 
(FEOC) sources associated with covered nations, to support domestic 
critical material demand from anticipated electric vehicle penetration. 
The assessment considers geological resources and current international 
development activities that contribute to the understanding of mineral 
supply security as jurisdictions around the world seek to reduce 
emissions. The study also highlights current activities that are 
intended to expand a secure supply chain for critical minerals both 
domestically and among U.S. allies and partner nations; and considers 
the potential to meet U.S. demand with domestic and other secure 
sources. The DOE Securing Critical Minerals report concluded that the 
U.S. is ``well-positioned to meet its lithium demand through domestic 
production.'' In the near- and medium-term there is sufficient capacity 
in FTA and MSP countries to meet demand for nickel and cobalt; however, 
the U.S. will likely need to rely at least partly on non-FTA counties 
given expected competition for these minerals from other countries' 
decarbonization goals. In the near-term, meeting U.S. demand with 
natural graphite supply from domestic FTA and MSP sources is unlikely. 
In the medium-term, there is potential for new capacity in both FTA and 
non-FTA countries, and for synthetic graphite production to scale. The 
U.S. can rely on FTA and MSP partners, as well as other economic and 
defense partners, to fill supply gaps; countries with which the U.S. 
has good trade relations are anticipated to have the ability to assist 
the U.S. in securing the minerals needed to meet EV and ESS (energy 
storage system) deployment targets set by the Biden Administration.\96\ 
NHTSA considers Argonne's assessment to be thorough and up to date. In 
addition, it should be noted that DOE's assessments consider critical 
minerals and battery components to support more than ten million EVs by 
2035 97 98--significantly more than we project in our 
reference baseline.
---------------------------------------------------------------------------

    \93\ Barlock, T. et al. Securing Critical Materials for the U.S. 
Electric Vehicle Industry: A Landscape Assessment of Domestic and 
International Supply Chains for Five Key Battery Materials. United 
States. Available at: https://doi.org/10.2172/2319240. (Accessed: 
May 1, 2024).
    \94\ Department of Energy, July 2023. Critical Materials 
Assessment. Available at: https://www.energy.gov/sites/default/files/2023-07/doe-critical-material-assessment_07312023.pdf. 
(Accessed: May 1, 2024).
    \95\ The 2023 DOE Critical Minerals Assessment classifies 
manganese as ``non critical'', as reflected in the Securing Critical 
Minerals report referenced.
    \96\ Associated with the implementation of the BIL and IRA.
    \97\ See Figure 14 in Barlock, T.A. et al. February 2024. 
Securing Critical Materials for the U.S. Electric Vehicle Industry. 
ANL-24/06. Final Report. Available at: https://publications.anl.gov/anlpubs/2024/03/187907.pdf. (Accessed: Apr. 5, 2024).
    \98\ See in Gohlke, D. et al. March 2024. Quantification of 
Commercially Planned Battery Component Supply in North America 
through 2035. ANL-24/14. Final Report. Available at: https://publications.anl.gov/anlpubs/2024/03/187735.pdf (Accessed: June 3, 
2024).
---------------------------------------------------------------------------

    NHTSA also received a wide variety of comments on alternative fuels 
including ethanol and biofuels. A group of commenters representing 
ethanol and biofuel producers objected to NHTSA's handling of BEVs in 
the analysis, in part because of their views on NHTSA's ability to 
consider those vehicles under 49 U.S.C. 32902(h), raised energy 
security concerns with reduced demand for and reliance on U.S.-produced 
alternative fuels as a result of these regulations, and commented that 
BEVs would increase reliance on foreign supply chains.\99\ Other 
commenters shared similar sentiments regarding alternative fuels. These 
commenters stated that NHTSA failed to consider other fuels like 
ethanol and biofuels as a way to improve fuel economy in the analysis 
as part of a holistic approach to reducing the U.S.'s gasoline 
consumption, and therefore the proposed rule was arbitrary.\100\ 
Commenters also stated that NHTSA did not consider the Renewable Fuel 
Standard (RFS) regulation in this rulemaking, and argued that NHTSA's 
failure to do so was arbitrary.\101\ Finally, commenters recommended 
that NHTSA consider high octane renewable fuels as a way to improve 
fuel economy for conventional ICEs.\102\
---------------------------------------------------------------------------

    \99\ BSC, Docket No. NHTSA-2023-0022-50824 at 1; MME, Docket No. 
NHTSA-2023-0022-50861 at 2; WPE, Docket No. NHTSA-2023-0022-52616 at 
2; POET, Docket No. NHTSA-2023-0022-61561 at 6; SIRE, Docket No. 
NHTSA-2023-0022-57940 at 2.
    \100\ Growth Energy, Docket No. NHTSA-2023-0022-61555 at 1; 
KCGA, Docket No. NHTSA-2023-0022-59007 at 5; POET, Docket No. NHTSA-
2023-0022-61561 at 5; Toyota, Docket No. NHTSA-2023-0022-61131 at 2; 
Commenwealth Agri Energy LLC, Docket No. NHTSA-2023-0022-61599 at 3; 
MEMA, Docket No. NHTSA-2023-0022-59204 at 3; AFPM, Docket No. NHTSA-
2023-0022-61911 at 25.
    \101\ Growth Energy, Docket No. NHTSA-2023-0022-61555 at 2.
    \102\ NCB, Docket No. NHTSA-2023-0022-53876 at 2; CFDC et al., 
Docket No. NHTSA-2023-0022-62242 at 17-20; NATSO et al., Docket No. 
NHTSA-2023-0022-61070 at 9.

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

[[Page 52565]]

    NHTSA believes that fuel producers' comments about NHTSA's 
purported inability to consider BEVs under 49 U.S.C. 32902(h) are 
somewhat misguided, considering that EPCA's definition of ``alternative 
fuel'' in 49 U.S.C. 32901 also includes ethanol, other alcohols, and 
fuels derived from biological materials, among other fuels.\103\ This 
means that if NHTSA were to adopt the fuel producers' interpretation of 
49 U.S.C. 32902(h) to restrict BEV adoption in the reference baseline, 
NHTSA would have to take an analogous approach to limit the agency's 
consideration of vehicles fueled by other alternative fuels, for 
example, ethanol, in the reference baseline. This is because 49 U.S.C. 
32902(h) does not just place guardrails on NHTSA's consideration of 
manufacturers producing BEVs in response to CAFE standards, but all 
dedicated alternative fueled automobiles, and fuels produced by the 
commenters here are, as listed above, considered alternative fuels. 
NHTSA does consider some alternative-fueled vehicle adoption in the 
reference baseline where that adoption is driven for reasons other than 
NHTSA's standards (see Section IV), and the commenters do mention the 
RFS as a driver of the increased use of renewable alternative fuels 
like ethanol and biofuels. However, the RFS is a regulation that 
increases the use of renewable fuels to replace petroleum derived fuels 
in motor gasoline, and to the extent that EPA has approved the use of 
E15 in all model year 2001 and newer gasoline vehicles produced for the 
U.S. market, we account for that in our analysis. NHTSA also considers 
flexible fuel vehicles (FFVs) that exist in the reference baseline 
fleet in the analysis, however FFVs are also subject to the 
restrictions in 49 U.S.C. 32902(h)(2).\104\ NHTSA applies the same CAFE 
Model restrictions in the standard-setting analysis to FFVs that apply 
to PHEVs to ensure that the agency is not improperly considering the 
alternative-fueled operation of dual-fueled vehicles when setting CAFE 
standards.\105\
---------------------------------------------------------------------------

    \103\ 49 U.S.C. 32901(a)(1).
    \104\ 49 U.S.C. 32901(a)(9); 49 U.S.C. 32902(h)(2).
    \105\ CAFE Model Documentation, S5.
---------------------------------------------------------------------------

    There is also a practical consideration that while blending ethanol 
or biofuels with gasoline has the potential to reduce U.S. reliance on 
petroleum, renewable fuels like ethanol and biofuels decrease fuel 
economy.\106\ The fuel economy of FFVs operating on high-ethanol blends 
are worse than when operating on conventional gasoline, because 
although ethanol has a higher octane rating than petroleum gasoline, it 
is less energy dense. For example, a model year 2022 Ford F150 4WD 
achieves a real world combined 20 mpg rating on conventional gas versus 
15 mpg on alternative E85 fuel.\107\ FFVs do see a compliance boost in 
the CAFE program with a 0.15 multiplier,\108\ however, again NHTSA's 
consideration of those vehicles' fuel economy values to set higher fuel 
economy standards is limited by 49 U.S.C. 32902(h)(2).
---------------------------------------------------------------------------

    \106\ Fueleconomy.gov. New Flex-fuel Vehicles for model year 
2012 to model year 2025. Available at: https://www.fueleconomy.gov/feg/flextech.shtml. (Accessed: Apr. 12, 2024).
    \107\ DOE Alternative Fuels Data Center. Ethanol E85 Vehicles 
for model year 2022-2024. Available at: https://afdc.energy.gov/vehicles/search/data. (Accessed: Apr. 12, 2024).
    \108\ 40 CFR 600.510-12(c)(2)(v).
---------------------------------------------------------------------------

    Regarding comments about energy security, we discuss this further 
in preamble Section VI. As mentioned above, commenters suggested that 
consideration of BEVs also impacts NHTSA's statutory considerations of 
energy security. However, NHTSA does not consider BEVs in its standard-
setting, and notes that this final rule is not a BEV mandate, as 
claimed by some commenters. Results in preamble Section V and FRIA 
Chapter 8 show that manufacturers have a wide variety of technology 
options to meet both LD and HDPUV standards, and the paths to 
compliance modeled in this analysis represent only a possible path, and 
not a required path. NHTSA does not mandate any one technology that 
manufacturers must use, hence why we have evaluated an array of 
technologies for manufacturers to use for meeting the standards. As 
with other technologies in the analysis, nothing prevents manufacturers 
from using FFVs or other dedicated alternative fueled vehicles to 
comply with CAFE standards.
    Finally, NHTSA received a wide variety of comments on compliance 
aspects of the CAFE program. Although most of them have been summarized 
and discussed in Section VII of this preamble, we received comments 
regarding the fuel economy utility factor (UF) compliance calculation 
for plug-in hybrids. Mitsubishi commented that NHTSA failed to account 
for EPA's proposal to update the UF calculation for the combined fuel 
economy for PHEVs, stating that ``[t]he result is that NHTSA 
overestimated the value of PHEV CAFE compliance and underestimated the 
costs of achieving compliance.'' \109\ On the other hand, ICCT and the 
Strong PHEV Coalition supported NHTSA using EPA's new proposed UF 
approach for the rulemaking analysis.\110\ MECA supported NHTSA's 
continued use of SAE J2841 and recommended that, at a minimum, we 
should not reduce the UF from the current levels.\111\
---------------------------------------------------------------------------

    \109\ Mitsubishi, Docket No. NHTSA-2023-0022-61637 at 4.
    \110\ ICCT, Docket No. NHTSA-2023-0022-54064 at 25; Strong PHEV 
Colaition, Docket No. NHTSA-2023-0022-60193 at 6.
    \111\ MECA, Docket No. NHTSA-2023-0022-63053, at 6.
---------------------------------------------------------------------------

    We appreciate stakeholders providing comments to NHTSA on PHEV fuel 
economy calculations. While in the CAFE modeling NHTSA uses SAE J2841 
to calculate PHEV fuel economy, for CAFE compliance, NHTSA must use 
EPA's test procedures.\112\ This means that EPA will report fuel 
economy values to NHTSA beginning in model year 2031 consistent with 
the new PHEV UF finalized in EPA's final rule. NHTSA chose to use SAE 
J841 as a simplifying assumption in the model for this analysis to 
reduce analytical complexity and based on a lack of readily available 
data from manufacturers; however, choosing to use SAE J2841 versus 
another PHEV UF results in functionally no difference in NHTSA's 
standard setting analysis because for the purpose of setting fuel 
economy standards, NHTSA cannot consider the electric portion of PHEV 
operation, per statute.\113\ For more detailed discussion of modeled 
PHEV fuel economy values, see TSD Chapter 3.3.
---------------------------------------------------------------------------

    \112\ 40 CFR 600.116-12: Special procedures related to electric 
vehicles and hybrid electric vehicles.
    \113\ U.S.C 32902(h)(2).
---------------------------------------------------------------------------

    Discussion and responses to other comments can be found throughout 
this preamble in areas applicable to the comment received.
    Nearly every aspect of the NPRM analysis and discussion received 
some level of comment by at least one commenter. Overall, the comments 
received included both broad assessments and pointed analyses, and the 
agency appreciates the level of engagement of commenters in the public 
comment process and the information and opinions provided.

C. Changes to the CAFE Model in Light of Public Comments and New 
Information

    Comments received to the NPRM were considered carefully within the 
statutory authority provided by the law, because they are critical for

[[Page 52566]]

understanding stakeholders' positions, as well as for gathering 
additional information that can help to inform the agency about aspects 
or effects of the proposal that the agency may not have considered at 
the time of the proposal was issued. The views, data, requests, and 
suggestions contained in the comments help us to form solutions and 
make appropriate adjustments to our proposals so that we may be better 
assured that the final standards we set are reasonable for the 
rulemaking time frame. For this final rule, the agency made substantive 
changes resulting directly from the suggestions and recommendations 
from commenters, as well as new information obtained since the time the 
proposal was developed, and corrections both highlighted by commenters 
and discovered internally. These changes reflect DOT's long-standing 
commitment to ongoing refinement and improvement of its approach to 
estimating the potential impacts of new CAFE standards. Through further 
consideration and deliberation, and also in response to many public 
comments received since then, NHTSA has made a number of changes to the 
CAFE Model since the 2023 NPRM, including those that are listed below 
and detailed in Section II and III, as well as in the TSD and FRIA that 
accompany this final rule.

D. Final Standards--Stringency

    NHTSA is establishing new CAFE standards for passenger cars (PCs) 
and light trucks (LTs) produced for model years 2027-2031, setting 
forth augural CAFE standards for PCs and LTs for model year 2032, and 
establishing fuel efficiency standards for HDPUVs for model years 2030-
2035. Passenger cars are generally sedans, station wagons, and two-
wheel drive crossovers and sport utility vehicles (CUVs and SUVs), 
while light trucks are generally 4WD sport utility vehicles, pickups, 
minivans, and passenger/cargo vans.\114\ NHTSA is establishing 
standards (represented by alternative PC2LT002, which is the preferred 
alternative in our analysis) that increase in stringency at 2 percent 
per year for PCs produced for model years 2027-2031 (and setting forth 
augural standards that would increase by another 2 percent for PCs 
produced in model year 2032), at 0 percent per year for LTs produced in 
model years 2027-2028 and 2 percent per year for LTs produced in model 
years 2029-2031 (and setting forth augural standards that would 
increase by another 2 percent for LTs produced in model year 2032). 
Passenger car and light truck standards are all attribute-based. NHTSA 
is setting CAFE standards defined by a mathematical function of vehicle 
footprint,\115\ which has an observable correlation with fuel economy. 
The final standards, and regulatory alternatives, take the form of fuel 
economy targets expressed as functions of vehicle footprint, which are 
separate for PCs and LTs. Section IV below discusses NHTSA's continued 
reliance on footprint as the relevant attribute for PCs and LTs in this 
final rule.
---------------------------------------------------------------------------

    \114\ ``Passenger car'' and ``light truck'' are defined at 49 
CFR part 523.
    \115\ Vehicle footprint is roughly measured as the rectangle 
that is made by the four points where the vehicle's tires touch the 
ground. Generally, passenger cars have more stringent targets than 
light trucks regardless of footprint, and smaller vehicles will have 
more stringent targets than larger vehicles. No individual vehicle 
or vehicle model need meet its target exactly, but a manufacturer's 
compliance is determined by how its average fleet fuel economy 
compares to the average fuel economy of the targets of the vehicles 
it manufactures.
---------------------------------------------------------------------------

    The target curves for the final passenger car and light truck 
standards are as follows; curves for model years 2024-2026 are included 
in the figures for context. NHTSA underscores that the equations and 
coefficients defining the curves are, in fact, the CAFE standards, and 
not the mpg numbers that the agency estimates could result from 
manufacturers complying with the curves. Because the estimated mpg 
numbers are an effect of the final standards, they are presented in 
Section II.E. To give context to what the passenger car footprint curve 
is showing in Figure II-1, for model year 2024, the target for the 
smallest footprint passenger cars is 55.4 mpg, and the target for the 
largest footprint passenger cars is 41.5 mpg. For model year 2031, the 
smallest footprint passenger cars have a target of 74.1 mpg and the 
largest passenger cars have a target of 55.4 mpg.

[[Page 52567]]

[GRAPHIC] [TIFF OMITTED] TR24JN24.014

    To give context to what the light truck footprint curve is showing 
in Figure II-2, the smallest footprint truck fuel economy target is 
44.5 mpg, and the largest truck fuel economy target is 26.7 mpg. And in 
model year 2031, the smallest truck footprint target is 57.1 mpg, and 
the largest truck footprint target is 34.3 mpg.

[[Page 52568]]

[GRAPHIC] [TIFF OMITTED] TR24JN24.015

    NHTSA has also amended the minimum domestic passenger car standard 
(MDPCS) for model years 2027-2031 and set forth an augural MDPCS for 
model year 2032. Section 32902(b)(4) of 49 U.S.C. requires NHTSA to 
project the MDPCS when it promulgates passenger car standards for a 
model year, as a result the MDPCSs are established as specific mpg 
values. NHTSA retains the 1.9-percent offset to the MDPCS, first used 
in the 2020 final rule, to account for recent projection errors as part 
of estimating the total passenger car fleet fuel economy.\116\ The 
final MDPCS for model years 2027-2031 and the augural MDPCS for model 
year 2032 for the preferred alternative are presented in Table II-1.
---------------------------------------------------------------------------

    \116\ Section VI.A.2 (titled ``Separate Standards for Passenger 
Cars, Light Trucks, and Heavy-Duty Pickups and Vans, and Minimum 
Standards for Domestic Passenger Cars'') discusses the basis for the 
offset.
[GRAPHIC] [TIFF OMITTED] TR24JN24.016

    Heavy-duty pickup trucks and vans are work vehicles that have GVWR 
between 8,501 pounds to 14,000 pounds (known as Class 2b through 3 
vehicles) manufactured as complete vehicles by a single or final stage 
manufacturer or manufactured as incomplete vehicles as designated by a 
manufacturer.\117\ The majority of these HDPUVs are \3/4\-ton and 1-ton 
pickup trucks, 12- and 15-passenger vans, and large work vans that are 
sold by vehicle manufacturers as complete vehicles, with no secondary 
manufacturer making substantial modifications prior to registration and 
use. The final standards, represented by alternative HDPUV108 in 
NHTSA's analysis, increases at a rate of 10 percent per year for model 
years 2030-2032 and 8 percent per year for model years 2033-2035. The 
final standards, like the proposed standards, are defined by a linear 
work factor target function with two sets of sub-configurations with 
one for spark ignition (SI) that represents gasoline, CNG, strong 
hybrids, and PHEVs and the other for compression ignition (CI) that 
represents diesels, BEVs and FCEVs. The target linear curves for HDPUV 
are still in the same units as in Phase 2 final rule in gallons per 100 
miles and for context both the

[[Page 52569]]

SI and CI curves are shown for model years 2026-2035.
---------------------------------------------------------------------------

    \117\ See 49 CFR 523.7, 40 CFR 86.1801-12, 40 CFR 86.1819-17, 40 
CFR 1037.150.
    \118\ The passenger car, light truck, and HDPUV target curve 
function coefficients are defined in Equation IV-1, Equation IV-2, 
and Equation IV-3, respectively. See Final TSD Chapter 1.2.1 for a 
complete discussion about the footprint and work factor curve 
functions and how they are calculated.
    \119\ The passenger car, light truck, and HDPUV target curve 
function coefficients are defined in Equation IV-1, Equation IV-2, 
and Equation IV-3, respectively. See Final TSD Chapter 1.2.1 for a 
complete discussion about the footprint and work factor curve 
functions and how they are calculated.
[GRAPHIC] [TIFF OMITTED] TR24JN24.017

[GRAPHIC] [TIFF OMITTED] TR24JN24.018

[GRAPHIC] [TIFF OMITTED] TR24JN24.019


[[Page 52570]]


[GRAPHIC] [TIFF OMITTED] TR24JN24.020

E. Final Standards--Impacts

    As for past CAFE rulemakings, NHTSA has used the CAFE Model to 
estimate the effects of this final rule's light duty CAFE and HDPUV 
fuel efficiency standards and of other regulatory alternatives under 
consideration. Some inputs to the CAFE Model are derived from other 
models, such as Argonne National Laboratory's Autonomie vehicle 
simulation tool and Argonne's GREET fuel-cycle emissions analysis 
model, the U.S. Energy Information Administration's (EIA's) National 
Energy Modeling System (NEMS), and EPA's Motor Vehicle Emissions 
Simulator (MOVES) vehicle emissions model. Especially given the scope 
of NHTSA's analysis, these inputs involve a number of uncertainties. 
NHTSA underscores that all results of today's analysis simply represent 
the agency's best estimates based on the information currently before 
us and on the agency's reasonable judgment.
1. Light Duty Effects
    NHTSA estimates that this final rule would increase the eventual 
average of manufacturers' CAFE requirements to about 50.4 mpg by 2031 
rather than, under the No-Action Alternative (i.e., the baseline 
standards issued in 2023 ending with model year 2026 standards carried 
forward indefinitely), about 46.9 mpg. For passenger cars, the 
standards in 2031 are estimated to require 65.1 mpg, and for light 
trucks, 45.2 mpg. This compares with 58.8 mpg and 42.6 mpg for cars and 
trucks, respectively, under the No-Action Alternative.
[GRAPHIC] [TIFF OMITTED] TR24JN24.021

    The model year 2032 augural CAFE standard is estimated to require a 
fleet average fuel economy of 51.4 mpg rather than, under the No-Action 
Alternative, about 46.9 mpg. For passenger cars, the average in 2032 is 
estimated to require 66.4 mpg, and for the light trucks, 46.2 mpg.

[[Page 52571]]

[GRAPHIC] [TIFF OMITTED] TR24JN24.022

    Because manufacturers do not comply exactly with each standard in 
each model year, but rather focus their compliance efforts when and 
where it is most cost-effective to do so, ``estimated achieved'' fuel 
economy levels differ somewhat from ``estimated required'' levels for 
each fleet, for each year. NHTSA estimates that the industry-wide 
average fuel economy achieved in model year 2031 could increase from 
about 52.1 mpg under the No-Action Alternative to 52.5 mpg under the 
final rule's standards.
[GRAPHIC] [TIFF OMITTED] TR24JN24.023

    The augural achieved CAFE level in model year 2032 is estimated to 
be 53.5 mpg rather than, under the No-Action Alternative, about 53 mpg. 
For passenger cars, the fleet average in 2032 is estimated to achieve 
72.3 mpg, and for light trucks 47.3 mpg.
[GRAPHIC] [TIFF OMITTED] TR24JN24.024

    NHTSA's analysis estimates manufacturers' potential responses to 
the combined effect of CAFE standards and separate (reference baseline, 
model years 2024-2026) CO2 standards, ZEV programs, and fuel 
prices. Together, the regulatory programs are more binding (i.e., 
require more of manufacturers) than any single program considered in 
isolation, and today's analysis, like past analyses, shows some 
estimated overcompliance with the final CAFE standards for both the 
passenger car and light truck fleets.
    NHTSA measures and reports benefits and costs from increasing fuel 
economy and efficiency standards from two different perspectives. 
First, the agency's ``model year'' perspective focuses on benefits and 
costs of establishing alternative CAFE standards for model years 2027 
through 2031 (and fuel efficiency standards for HDPUVs for model years 
2030 through 2035), and measures these over each separate model year's 
entire lifetime. The calendar year perspective we present includes the 
annual impacts attributable to all vehicles estimated to be in service 
in each calendar year for which our analysis includes a representation 
of the entire registered passenger car, light truck, and HDPUV fleet. 
For this final rule, this calendar year perspective covers each of 
calendar years 2022-2050, with differential impacts accruing as early 
as MY 2022.\120\ Compared to the model year perspective, the calendar 
year perspective includes model years of vehicles produced in the 
longer term, beyond those model years for which standards are being 
finalized. The strengths and limitations of each accounting perspective 
is discussed in detail in FRIA Chapter 5.
---------------------------------------------------------------------------

    \120\ For a presentation of effects by calendar year, please see 
Chapter 8.2.4.6 of the FRIA.
---------------------------------------------------------------------------

    The table below summarizes estimates of selected impacts viewed 
from each of these two perspectives, for each of the regulatory 
alternatives considered in this final rule, relative to the reference 
baseline.

[[Page 52572]]

[GRAPHIC] [TIFF OMITTED] TR24JN24.025

    NHTSA estimates for the final standards are compared to levels of 
gasoline and electricity consumption NHTSA projects would occur under 
the No-Action Alternative (i.e., the reference baseline) as shown in 
Table II-8.\123\
---------------------------------------------------------------------------

    \121\ FRIA Chapter 1, Figure 1-1 provides a graphical comparison 
of energy sources and their relative change over the standard 
setting years.
    \122\ The additional electricity use during regulatory years is 
attributed to an increase in the number of PHEVs; PHEV fuel economy 
is only considered in charge-sustaining (i.e., gasoline-only) mode 
in the compliance analysis, but electricity consumption is computed 
for the effects analysis.
    \123\ While NHTSA does not condider electrification in its 
analysis during the rulemaking time frame, the analysis still 
reflects application of electric vehicles in the baseline fleet and 
during the model years, such that electrification (and thus, 
electricity consumption) increases in NHTSA's is not considering it 
in our decision-making.
---------------------------------------------------------------------------

    NHTSA's analysis also estimates total annual consumption of fuel by 
the entire on-road light-duty fleet from calendar year 2022 through 
calendar year 2050. On this basis, gasoline and electricity consumption 
by the U.S. light-duty vehicle fleet evolves as shown in Figure II-5 
and Figure II-6, each of which shows projections for the No-Action 
Alternative, PC2LT002 (the Preferred Alternative), PC1LT3, PC2LT4, 
PC3LT5, and PC6LT8.
[GRAPHIC] [TIFF OMITTED] TR24JN24.026


[[Page 52573]]


[GRAPHIC] [TIFF OMITTED] TR24JN24.027

    Accounting for emissions from both vehicles and upstream energy 
sector processes (e.g., petroleum refining and electricity generation), 
which are relevant to NHTSA's evaluation of the need of the United 
States to conserve energy, NHTSA estimates that the final rule would 
reduce greenhouse gas emissions by about 659 million metric tons of 
carbon dioxide (CO2), about 825 thousand metric tons of 
methane (CH4), and about 24 thousand metric tons of nitrous 
oxide (N2O).
[GRAPHIC] [TIFF OMITTED] TR24JN24.028

    Emissions reductions accrue over time, as the example for 
CO2 emissions shows in Figure II-7.

[[Page 52574]]

[GRAPHIC] [TIFF OMITTED] TR24JN24.029

    For the ``standard setting'' analysis, the FRIA accompanying 
today's notice provides additional detail regarding projected criteria 
pollutant emissions and health effects, as well as the inclusion of 
these impacts in today's benefit-cost analysis. For the 
``unconstrained'' or ``EIS'' analysis, the Final EIS accompanying 
today's notice presents much more information regarding projected 
criteria pollutant emissions, as well as model-based estimates of 
corresponding impacts on several measures of urban air quality and 
public health. As mentioned above, these estimates of criteria 
pollutant emissions are based on a complex analysis involving 
interacting simulation techniques and a myriad of input estimates and 
assumptions. Especially extending well past 2050, the analysis involves 
a multitude of uncertainties.
    To illustrate the effectiveness of the technology added in response 
to today's final rule, Table II-10 presents NHTSA's estimates for 
increased vehicle cost and lifetime fuel expenditures. For more 
detailed discussion of these and other results related to LD final 
standards, see Section V below.
[GRAPHIC] [TIFF OMITTED] TR24JN24.030

    With the SC-GHG discounted at 2.0 percent and other benefits and 
costs discounted at 3 percent, NHTSA estimates that monetized costs and 
benefits could be approximately $24.5 billion and $59.7 billion, 
respectively, such that the present value of aggregate monetized net 
benefits to society could be approximately $35.2 billion. With the SC-
GHG discounted at 2.0 percent and other benefits and costs discounted 
at 7 percent, NHTSA estimates approximately $16.2 billion in monetized 
costs and $47.0 billion in monetized benefits could be attributable to 
vehicles produced during and prior to model year 2031 over the course 
of their lives, such that the present value of aggregate net monetized 
benefits to society could be approximately $30.8 billion.

[[Page 52575]]

[GRAPHIC] [TIFF OMITTED] TR24JN24.031

[GRAPHIC] [TIFF OMITTED] TR24JN24.032

[GRAPHIC] [TIFF OMITTED] TR24JN24.033


[[Page 52576]]


2. Heavy Duty Pickup Trucks and Vans Effects
    NHTSA estimates that the final rule would increase HDPUV fuel 
efficiency standards to about 2.851 gals/100 mile by 2035 rather than, 
under the No-Action Alternative (i.e., the baseline standards issued in 
2016 final rule for Phase 2 ending with model year 2029 standards 
carried forward indefinitely), about 5.023 gals/100mile. Unlike the 
light-duty CAFE program, NHTSA may consider AFVs when setting maximum 
feasible standards for HDPUVs. Additionally, for purposes of 
calculating average fuel efficiency for HDPUVs, NHTSA considers EVs, 
fuel cell vehicles, and the proportion of electric operation of EVs and 
PHEVs that is derived from electricity that is generated from sources 
that are not onboard the vehicle to have a fuel efficiency value of 0 
gallons/mile. NHTSA estimates that the final rule would achieve an 
average fuel efficiency 2.565 gals/100 mile by 2035 rather than, under 
the No-Action Alternative, about 2.716 gals/100 mile.
[GRAPHIC] [TIFF OMITTED] TR24JN24.034

    NHTSA estimates that over the lives of vehicles subject to these 
final HDPUV standards, the final standards would save about 5.6 billion 
gallons of gasoline and increase electricity consumption (as the 
percentage of electric vehicles increases over time) by about 56 TWh (a 
5.4 percent increase), compared to levels of gasoline and electricity 
consumption NHTSA projects would occur under the reference baseline 
standards (i.e., the No-Action Alternative) as shown in Table II-15.
[GRAPHIC] [TIFF OMITTED] TR24JN24.035

    NHTSA's analysis also estimates total annual consumption of fuel by 
the entire on-road HDPUV fleet from calendar year 2022 through calendar 
year 2050. On this basis, gasoline and electricity consumption by the 
U.S. HDPUV fleet evolves as shown in Figure II-8 and Figure II-9, each 
of which shows projections for the No-Action Alternative, HDPUV4, 
HDPUV108 (the Preferred Alternative), HDPUV10, and HDPUV14.

[[Page 52577]]

[GRAPHIC] [TIFF OMITTED] TR24JN24.036

[GRAPHIC] [TIFF OMITTED] TR24JN24.037

    Accounting for emissions from both vehicles and upstream energy 
sector processes (e.g., petroleum refining and electricity generation), 
which are relevant to NHTSA's evaluation of the need of the United 
States to conserve energy, NHTSA estimates that the final HDPUV 
standards would reduce greenhouse gas emissions by about 55 million 
metric tons of carbon dioxide (CO2), about 65 thousand 
metric tons of methane (CH4), and about 3 thousand metric 
tons of nitrous oxide (N2O).

[[Page 52578]]

[GRAPHIC] [TIFF OMITTED] TR24JN24.038

    NHTSA's analysis also estimates annual emissions attributable to 
the entire on-road HDPUV fleet from calendar year 2022 through calendar 
year 2050. Also accounting for both vehicles and upstream processes, 
NHTSA estimates that CO2 emissions from the HDPUV standards 
could evolve over time as shown in Figure II-10.
[GRAPHIC] [TIFF OMITTED] TR24JN24.039

    To illustrate the effectiveness of the technology added to HDPUVs 
in response to today's final rule and the overall societal effects of 
the HDPUV standards, Table II-17 presents NHTSA's estimates for 
increased vehicle cost and lifetime fuel expenditures and Table II-18 
summarizes the benefit-cost analysis. For more detailed discussion of 
these and other results related to HDPUV final standards, see Preamble 
Section V and Section VI below.
[GRAPHIC] [TIFF OMITTED] TR24JN24.040


[[Page 52579]]


[GRAPHIC] [TIFF OMITTED] TR24JN24.041

F. Final Standards Are Maximum Feasible

    NHTSA's conclusion, after consideration of the factors described 
below and information in the administrative record for this action, is 
that 2 percent increases in stringency for passenger cars for model 
years 2027-2031, 0 percent increases in stringency for light trucks in 
model years 2027-2028, and 2 percent increases in stringency for model 
years 2029-2031 for light trucks (Alternative PC2LT002) are maximum 
feasible. The Department of Transportation is deeply committed to 
working aggressively to improve energy conservation and reduce 
environmental harms and economic and security risks associated with 
energy use. NHTSA has concluded that Alternative PC2LT002 is 
technologically feasible, is economically practicable (based on 
manageable average per-vehicle cost increases, minimal effects on 
sales, and estimated increases in employment, among other 
considerations), and is complementary to other motor vehicle standards 
of the Government on fuel economy that are simultaneously applicable 
during model years 2027-2031, as described in more detail below.
    After consideration of the technical capabilities, economic 
practicability, statutory requirements, and the Phase 2 final 
standards, NHTSA has concluded that a 10 percent increase in model 
years 2030-2032 and an 8 percent increase in model years 2033-2035 for 
the HDPUV fleet (HDPUV108) is maximum feasible. NHTSA's analysis shows 
that current Phase 2 standards do not require significant technological 
improvements through model year 2029, though we expect to see 
additional fuel efficient technology penetration in model years 2030 
through 2035, which can be viewed in more detail in FRIA Chapter 8. 
Considering our statutory requirements, we have reduced the stringency 
to 8 percent increases in model years 2033-2035.
    See preamble Section VI for more discussion on how we determined 
that the final CAFE and HDPUV standards are maximum feasible.

G. Final Standards Are Feasible in the Context of EPA's Final Standards 
and California's Standards

    The NHTSA and EPA final rules remain coordinated despite being 
issued as separate regulatory actions. NHTSA is finalizing CAFE 
standards that represent the maximum feasible under our program's 
statutory constraints, which differ to varying degrees by vehicle 
classification and model year from the GHG standards set forth by the 
EPA. Overall, EPA's GHG standards, developed under their program's 
authorities, place a higher degree of stringency on manufacturers in 
part because of their ability to consider all vehicle technologies, 
including alternative fueled vehicles, in setting standards. As with 
past rules, NHTSA's and EPA's programs also differ in other respects, 
such as programmatic flexibilities. Accordingly, NHTSA's coordination 
with EPA was limited to areas where each agency's statutory framework 
allowed some level of harmonization. These differences mean that 
manufacturers have had (and will continue to have) to plan their 
compliance strategies considering both the CAFE standards and the GHG 
standards to ensure that they maintain compliance with both. Because 
NHTSA and EPA are regulating the same vehicles and manufacturers will 
use many of the same technologies to meet each set of standards, NHTSA 
performed appropriate analyses to quantify the differences and their 
impacts. Auto manufacturers have shown a consistent historical ability 
to manage compliance strategies that account for the concurrent 
implementation of multiple regulatory programs. Past experience with 
these programs indicates that each manufacturer will optimize its 
compliance strategy around whichever standard is most binding for its 
fleet of vehicles. If different agencies' standards are more binding 
for some companies in certain years, this does not mean that 
manufacturers must build multiple fleets of vehicles, but rather that 
they will have to be more strategic about how they build their fleet. 
More detailed discussion of this issue can be found in Section VI.A of 
this preamble. Critically, NHTSA has concluded that it is feasible for 
manufacturers to meet the NHTSA standards in a regulatory framework 
that includes the EPA standards.
    NHTSA has also considered and accounted for manufacturers' expected 
compliance with California's ZEV program (ACC I and ACT) and its 
adoption by other states in developing the reference baseline for this 
final rule. We have also accounted for the Framework Agreements between 
manufacturers who have committed to meeting those Agreements. Finally, 
we accounted for additional ZEV deployment that manufacturers have

[[Page 52580]]

committed to undertake, which would be consistent with the requirements 
of ACC II. NHTSA's assessment regarding the inclusion of ZEVs in the 
reference baseline is detailed in Preamble Section III.C.5 and Section 
IV.B.1, and well as in Chapter 3.1 of the accompanying FRIA.
    NHTSA also conducted an analysis using an alternative baseline, 
under which NHTSA removed not only the electric vehicles that would be 
deployed to comply with ACC I, but also those that would be deployed 
consistent with manufacturer commitments to deploy additional electric 
vehicles regardless of legal requirements, consistent with the levels 
under ACC II. NHTSA describes this as the ``No ZEV alternative 
baseline.'' For further reading on this alternative baseline, see RIA 
Chapters 3 and 8 and Preamble Section IV.B for comparison of the 
baselines.

III. Technical Foundation for Final Rule Analysis

A. Why is NHTSA conducting this analysis?

    NHTSA is finalizing CAFE standards that will increase at 2 percent 
per year for passenger cars during MYs 2027 through 2031, and for light 
trucks, standards that will not increase beyond the MY 2026 standards 
in MYs 2027 through 2028, thereafter increasing at 2 percent per year 
for MYs 2029 through 2031. The final HDPUV standards will increase at 
10 percent per year during MYs 2030 through 2032, and then increase at 
8 percent for MYs 2033 through 2035. NHTSA estimates these stringency 
increases in the passenger car and light truck fleets will reduce 
gasoline consumption through calendar year 2050 by about 64 billion 
gallons and increase electricity consumption by about 333 terawatt-
hours (TWh). The stringency increases in the HDPUV fleet will reduce 
gasoline consumption by about 5.6 billion gallons and increase 
electricity consumption by about 56 TWh through calendar year 2050. 
Accounting for emissions from both vehicles and upstream energy sector 
processes (e.g., petroleum refining and electricity generation), NHTSA 
estimates that the CAFE standards will reduce greenhouse gas emissions 
by about 659 million metric tons of carbon dioxide (CO2), 
about 825 thousand metric tons of methane (CH4), and about 
23.5 thousand metric tons of nitrous oxide (N20). The HDPUV 
standards are estimated to further reduce greenhouse gas emissions by 
55 million metric tons of CO2, 65 thousand metric tons of 
CH4 and 3 thousand metric tons of N20.
    When NHTSA promulgates new regulations, it generally presents an 
analysis that estimates the impacts of those regulations, and the 
impacts of other regulatory alternatives. These analyses derive from 
statutes such as the Administrative Procedure Act (APA) and NEPA, from 
E.O.s (such as E.O. 12866 and 13563), and from other administrative 
guidance (e.g., Office of Management and Budget (OMB) Circular A-4). 
For CAFE and HDPUV standards, EPCA, as amended by EISA, contains a 
variety of provisions that NHTSA seeks to account for analytically. 
Capturing all of these requirements analytically means that NHTSA 
presents an analysis that spans a meaningful range of regulatory 
alternatives, that quantifies a range of technological, economic, and 
environmental impacts, and that does so in a manner that accounts for 
EPCA/EISA's various express requirements for the CAFE and HDPUV 
programs (e.g., passenger cars and light trucks must be regulated 
separately; the standard for each fleet must be set at the maximum 
feasible level in each MY; etc.).
    NHTSA's standards are thus supported by, although not dictated by, 
extensive analysis of potential impacts of the regulatory alternatives 
under consideration. Together with this preamble, a TSD, a FRIA, and a 
Final EIS, provide a detailed enumeration of related methods, 
estimates, assumptions, and results. These additional analyses can be 
found in the rulemaking docket for this final rule \124\ and on NHTSA's 
website.\125\
---------------------------------------------------------------------------

    \124\ Docket No. NHTSA-2023-0022, which can be accessed at 
https://www.regulations.gov.
    \125\ See NHTSA. 2023. Corporate Average Fuel Economy. Available 
at: https://www.nhtsa.gov/laws-regulations/corporate-average-fuel-economy. (Accessed: Feb. 23, 2024).
---------------------------------------------------------------------------

    This section provides further detail on the key features and 
components of NHTSA's analysis. It also describes how NHTSA's analysis 
has been constructed specifically to reflect governing law applicable 
to CAFE and HDPUV standards (which may vary between programs). Finally, 
the discussion reviews how NHTSA's analysis has been expanded and 
improved in response to comments received on the 2023 proposal,\126\ as 
well as additional work conducted over the last year. The analysis for 
this final rule aided NHTSA in implementing its statutory obligations, 
including the weighing of various considerations, by reasonably 
informing decision-makers about the estimated effects of choosing 
different regulatory alternatives.
---------------------------------------------------------------------------

    \126\ 88 FR 56128 (Aug. 17, 2023).
---------------------------------------------------------------------------

1. What are the key components of NHTSA's analysis?
    NHTSA's analysis makes use of a range of data (i.e., observations 
of things that have occurred), estimates (i.e., things that may occur 
in the future), and models (i.e., methods for making estimates). Two 
examples of data include (1) records of actual odometer readings used 
to estimate annual mileage accumulation at different vehicle ages and 
(2) CAFE compliance data used as the foundation for the ``analysis 
fleets'' containing, among other things, production volumes and fuel 
economy/fuel efficiency levels of specific configurations of specific 
vehicle models produced for sale in the U.S. Two examples of estimates 
include (1) forecasts of future Gross Domestic Product (GDP) growth 
used, with other estimates, to forecast future vehicle sales volumes 
and (2) technology cost estimates, which include estimates of the 
technologies' ``direct cost,'' marked up by a ``retail price 
equivalent'' (RPE) factor used to estimate the ultimate cost to 
consumers of a given fuel-saving technology, and an estimate of ``cost 
learning effects'' (i.e., the tendency that it will cost a manufacturer 
less to apply a technology as the manufacturer gains more experience 
doing so).
    NHTSA uses the CAFE Compliance and Effects Modeling System (usually 
shortened to the ``CAFE Model'') to estimate manufacturers' potential 
responses to new CAFE, HDPUV, and GHG standards and to estimate various 
impacts of those responses. DOT's Volpe National Transportation Systems 
Center (often simply referred to as the ``Volpe Center'') develops, 
maintains, and applies the model for NHTSA. NHTSA has used the CAFE 
Model to perform analyses supporting every CAFE rulemaking since 2001. 
The 2016 rulemaking regarding HDPUV fuel efficiency standards, NHTSA's 
most recent HDPUV rulemaking, also used the CAFE Model for analysis.
    The basic design of the CAFE Model is as follows: The system first 
estimates how vehicle manufacturers might respond to a given regulatory 
scenario, and from that potential compliance solution, the system 
estimates what impact that response will have on fuel consumption, 
emissions, safety impacts, and economic externalities. In a highly 
summarized form, TSD Figure 1-1 shows the basic categories of CAFE 
Model procedures and the sequential logical flow between different 
stages of the modeling.\127\ The diagram does not present specific 
model inputs or

[[Page 52581]]

outputs, as well as many specific procedures and model interactions. 
The model documentation accompanying this final rule presents these 
details.\128\
---------------------------------------------------------------------------

    \127\ TSD Chapter 1, see Figure 1-1: CAFE Model Procedures and 
Logical Flow.
    \128\ CAFE Model Documentation for 2024 FRM.
---------------------------------------------------------------------------

    More specifically, the model may be characterized as an integrated 
system of models. For example, one model estimates manufacturers' 
responses, another estimates resultant changes in total vehicle sales, 
and still another estimates resultant changes in fleet turnover (i.e., 
scrappage). Additionally, and importantly, the model does not determine 
the form or stringency of the standards. Instead, the model applies 
inputs specifying the form and stringency of standards to be analyzed 
and produces outputs showing the impacts of manufacturers working to 
meet those standards, which become part of the basis for comparing 
different potential stringencies. A regulatory scenario, meanwhile, 
involves specification of the form, or shape, of the standards (e.g., 
flat standards, or linear or logistic attribute-based standards), scope 
of passenger car, light truck, and HDPUV regulatory classes, and 
stringency of the CAFE or HDPUV standards for each MY to be analyzed. 
For example, a regulatory scenario may define CAFE or HDPUV standards 
for a particular class of vehicles that increase in stringency by a 
given percent per year for a given number of consecutive years.
    Manufacturer compliance simulation and the ensuing effects 
estimation, collectively referred to as compliance modeling, encompass 
numerous subsidiary elements. Compliance simulation begins with a 
detailed user-provided initial forecast of the vehicle models offered 
for sale during the simulation period.\129\ The compliance simulation 
then attempts to bring each manufacturer into compliance with the 
standards defined by the regulatory scenario contained within an input 
file developed by the user.\130\
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    \129\ Because the CAFE Model is publicly available, anyone can 
develop their own initial forecast (or other inputs) for the model 
to use. The DOT-developed Market Data Input file that contains the 
forecast for this final rule is available on NHTSA's website at 
https://www.nhtsa.gov/corporate-average-fuel-economy/cafe-compliance-and-effects-modeling-system.
    \130\ With appropriate inputs, the model can also be used to 
estimate impacts of manufacturers' potential responses to new 
CO2 standards and to California's ZEV program.
---------------------------------------------------------------------------

    Estimating impacts involves calculating resultant changes in new 
vehicle costs, estimating a variety of costs (e.g., for fuel) and 
effects (e.g., CO2 emissions from fuel combustion) occurring 
as vehicles are driven over their lifetimes before eventually being 
scrapped, and estimating the monetary value of these effects. 
Estimating impacts also involves consideration of consumer responses--
e.g., the impact of vehicle fuel economy/efficiency, operating costs, 
and vehicle price on consumer demand for passenger cars, light trucks, 
and HDPUVs. Both basic analytical elements involve the application of 
many analytical inputs. Many of these inputs are developed outside of 
the model and not by the model. For example, the model applies fuel 
prices; it does not estimate fuel prices.
    NHTSA also uses EPA's Motor Vehicle Emission Simulator (MOVES) 
model to estimate ``vehicle'' or ``downstream'' emission factors for 
criteria pollutants,\131\ and uses four Department of Energy (DOE) and 
DOE-sponsored models to develop inputs to the CAFE Model, including 
three developed and maintained by DOE's Argonne National Laboratory 
(Argonne). The agency uses the DOE Energy Information Administration's 
(EIA's) National Energy Modeling System (NEMS) to estimate fuel 
prices,\132\ and uses Argonne's Greenhouse gases, Regulated Emissions, 
and Energy use in Transportation (GREET) model to estimate emissions 
rates from fuel production and distribution processes.\133\ DOT also 
sponsored DOE/Argonne to use Argonne's Autonomie full-vehicle modeling 
and simulation system to estimate the fuel economy/efficiency impacts 
for over a million combinations of technologies and vehicle types.\134\ 
The TSD and FRIA describe details of our use of these models. In 
addition, as discussed in the Final EIS accompanying this final rule, 
DOT relied on a range of models to estimate impacts on climate, air 
quality, and public health. The Final EIS discusses and describes the 
use of these models.
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    \131\ See https://www.epa.gov/moves. This final rule uses 
version MOVES4 (the latest version at the time of analysis), 
available at https://www.epa.gov/moves/latest-version-motor-vehicle-emission-simulator-moves.
    \132\ See https://www.eia.gov/outlooks/aeo/. This final rule 
uses fuel prices estimated using the Annual Energy Outlook (AEO) 
2023 version of NEMS (see https://www.eia.gov/outlooks/aeo/tables_ref.php.).
    \133\ Information regarding GREET is available at https://greet.es.anl.gov/. This final rule uses the R&D GREET 2023 version.
    \134\ As part of the Argonne simulation effort, individual 
technology combinations simulated in Autonomie were paired with 
Argonne's BatPaC model to estimate the battery cost associated with 
each technology combination based on characteristics of the 
simulated vehicle and its level of electrification. Information 
regarding Argonne's BatPaC model is available at https://www.anl.gov/cse/batpac-model-software. In addition, the impact of 
engine technologies on fuel consumption, torque, and other metrics 
was characterized using GT-POWER simulation modeling in combination 
with other engine modeling that was conducted by IAV Automotive 
Engineering, Inc. (IAV). The engine characterization ``maps'' 
resulting from this analysis were used as inputs for the Autonomie 
full-vehicle simulation modeling. Information regarding GT-POWER is 
available at https://www.gtisoft.com/gt-power/.
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    To prepare for the analysis that supports this final rule, DOT has 
refined and expanded the CAFE Model through ongoing development. 
Examples of such changes, some informed by past external comment, made 
since 2022 include: \135\
---------------------------------------------------------------------------

    \135\ A more detailed list can be found in Chapter 1.1 of the 
TSD.

 Updated analysis fleet
 Addition of HDPUVs, and associated required updates across 
entire model
 Updated technologies considered in the analysis
[cir] Addition of HCRE, HCRD and updated diesel technology models \136\
---------------------------------------------------------------------------

    \136\ See technologies descriptions in TSD Chapter 3.
---------------------------------------------------------------------------

[cir] Removal of EFR, DSLIAD, manual transmissions, AT6L2, EPS, IACC, 
LDB, SAX, and some P2 combinations \137\
---------------------------------------------------------------------------

    \137\ See technologies description in 87 FR 25710 (May 2, 2022).
---------------------------------------------------------------------------

 User control of additional input parameters
 Updated modeling approach to manufacturers' expected 
compliance with states' ZEV programs
 Expanded accounting for Federal incentives, such as the IRA
 Expanded procedures for estimating new vehicle sales and fleet 
shares
 VMT coefficient updates

    In response to feedback, interagency meetings, comments from 
stakeholders, as well as continued development, DOT has made additional 
changes to the CAFE Model for the final rule. Since the 2023 NPRM, DOT 
has made the following changes to the CAFE Model and inputs, including: 
\138\
---------------------------------------------------------------------------

    \138\ A more detailed list of updates can be found in Chapter 
1.1 of the TSD.

 Updated battery costs for electrified technologies
 Updated different phase-in penetration for different BEV 
ranges
 Updated ZEV State shares, credit values and projected ZEV 
requirements to inform the reference baseline
 Reclassified Rivian and Ford vehicles from HDPUV to LD based 
on official certification data submission
 Allow the user to directly input AC efficiency, AC leakage and 
off cycle credit limits for each MY, separately for conventional ICE 
vehicles and electric vehicles
 Addressed issues with when road load technologies are applied 
to the fleet

[[Page 52582]]

 Updated and expanded model reporting capabilities
 Updated IRA Tax Credit implementation
 Updated input factors for economic models
 Updated input factors for the safety models
 Updated emission modeling

    These changes reflect DOT's long-standing commitment to ongoing 
refinement of its approach to estimating the potential impacts of new 
CAFE and HDPUV standards.\139\ The TSD elaborates on these changes to 
the CAFE Model, as well as changes to inputs to the model for this 
analysis.
---------------------------------------------------------------------------

    \139\ A list accounting of major updates since the CAFE Model 
was developed in 2001 can be found in Chapter 1.1 of the TSD.
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    NHTSA underscores that this analysis uses the CAFE Model in a 
manner that explicitly accounts for the fact that in producing a single 
fleet of vehicles for sale in the United States, manufacturers make 
decisions that consider the combination of CAFE/HDPUV standards, EPA 
GHG standards, and various policies set at sub-national levels (e.g., 
ZEV regulatory programs, set by California and adopted by many other 
states). These regulations have important structural and other 
differences that affect the strategy a manufacturer could pursue in 
designing a fleet that complies with each of the above. As explained, 
NHTSA's analysis reflects a number of statutory and regulatory 
requirements applicable to CAFE/HDPUV and EPA GHG standard-setting. As 
stated previously, NHTSA coordinated with EPA and DOE to optimize the 
effectiveness of NHTSA's standards while minimizing compliance costs, 
informed by public comments from all stakeholders and consistent with 
the statutory factors.
2. How do requirements under EPCA/EISA shape NHTSA's analysis?
    EPCA contains multiple requirements governing the scope and nature 
of CAFE standard setting. Some of these have been in place since EPCA 
was first signed into law in 1975, and some were added in 2007, when 
Congress passed EISA and amended EPCA. EISA also gave NHTSA authority 
to set standards for HDPUVs, and that authority was generally less 
constrained than for CAFE standards. NHTSA's modeling and analysis to 
inform standard setting is guided and shaped by these statutory 
requirements. EPCA/EISA requirements regarding the technical 
characteristics of CAFE and HDPUV standards and the analysis thereof 
include, but are not limited to, the following:
    Corporate Average Standards: Section 32902 of 49 U.S.C. requires 
standards for passenger cars, light trucks, and HDPUVs to be corporate 
average standards, applying to the average fuel economy/efficiency 
levels achieved by each corporation's fleets of vehicles produced for 
sale in the U.S.\140\ The CAFE Model calculates the CAFE and 
CO2 levels of each manufacturer's fleets based on estimated 
production volumes and characteristics, including fuel economy/
efficiency levels, of distinct vehicle models that could be produced 
for sale in the U.S.
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    \140\ This differs from certain other types of vehicle 
standards, such as safety standards. For example, every vehicle 
produced for sale in the U.S. must, on its own, meet all applicable 
Federal motor vehicle safety standards (FMVSS), but no vehicle 
produced for sale must, on its own, meet Federal fuel economy or 
efficiency standards. Rather, each manufacturer is required to 
produce a mix of vehicles that, taken together, achieve an average 
fuel economy/efficiency level no less than the applicable minimum 
level.
---------------------------------------------------------------------------

    Separate Standards for Passenger Cars, Light Trucks, and HDPUVs: 
Section 32902 of 49 U.S.C. requires the Secretary of Transportation to 
set CAFE standards separately for passenger cars and light trucks and 
allows the Secretary to prescribe separate standards for different 
classes of heavy-duty (HD) vehicles like HDPUVs. The CAFE Model 
accounts separately for differentiated standards and compliance 
pathways for passenger cars, light trucks, and HDPUVs when it analyzes 
CAFE/HDPUV or GHG standards.
    Attribute-Based Standards: Section 32902 of 49 U.S.C. requires the 
Secretary of Transportation to define CAFE standards as mathematical 
functions expressed in terms of one or more vehicle attributes related 
to fuel economy, and NHTSA has extended this approach to HDPUV 
standards as well through regulation. This means that for a given 
manufacturer's fleet of vehicles produced for sale in the U.S. in a 
given regulatory class and MY, the applicable minimum CAFE requirement 
(or maximum HDPUV fuel consumption requirement) is computed based on 
the applicable mathematical function, and the mix and attributes of 
vehicles in the manufacturer's fleet. The CAFE Model accounts for such 
functions and vehicle attributes explicitly.
    Separately Defined Standards for Each Model Year: Section 32902 of 
49 U.S.C. requires the Secretary of Transportation (by delegation, 
NHTSA) to set CAFE standards (separately for passenger cars and light 
trucks) \141\ at the maximum feasible levels in each MY. Fuel 
efficiency levels for HDPUVs must also be set at the maximum feasible 
level, in tranches of (at least) 3 MYs at a time. The CAFE Model 
represents each MY explicitly, and accounts for the production 
relationships between MYs.\142\
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    \141\ Chaper 329 of title 49 of the U.S. Code uses the term 
``non-passenger automobiles,'' while NHTSA uses the term ``light 
trucks'' in its CAFE regulations. The terms' meanings are identical.
    \142\ For example, a new engine first applied to a given mode/
configuration in MY 2027 will most likely persist in MY 2028 of that 
same vehicle model/configuration, in order to reflect the fact that 
manufacturers do not apply brand-new engines to a given vehicle 
model every single year. The CAFE Model is designed to account for 
these real-world factors.
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    Separate Compliance for Domestic and Imported Passenger Car Fleets: 
Section 32904 of 49 U.S.C. requires the EPA Administrator to determine 
CAFE compliance separately for each manufacturer's fleets of domestic 
passenger cars and imported passenger cars, which manufacturers must 
consider as they decide how to improve the fuel economy of their 
passenger car fleets.\143\ The CAFE Model accounts explicitly for this 
requirement when simulating manufacturers' potential responses to CAFE 
standards, and combines any given manufacturer's domestic and imported 
cars into a single fleet when simulating that manufacturer's potential 
response to GHG standards (because EPA does not have separate standards 
for domestic and imported passenger cars).
---------------------------------------------------------------------------

    \143\ There is no such requirement for light trucks or HDPUVs.
---------------------------------------------------------------------------

    Minimum CAFE Standards for Domestic Passenger Car Fleets: Section 
32902 of 49 U.S.C. requires that domestic passenger car fleets meet a 
minimum standard, which is calculated as 92 percent of the industry-
wide average level required under the applicable attribute-based CAFE 
standard, as projected by the Secretary at the time the standard is 
promulgated. The CAFE Model accounts explicitly for this requirement 
when simulating manufacturer compliance with CAFE standards and sets 
this requirement aside when simulating manufacturer compliance with GHG 
standards.
    Civil Penalties for Noncompliance: Section 32912 of 49 U.S.C. (and 
implementing regulations) prescribes a rate (in dollars per tenth of a 
mpg) at which the Secretary is to levy civil penalties if a 
manufacturer fails to comply with a passenger car or light truck CAFE 
standard for a given fleet in a given MY, after considering available 
credits. Some manufacturers have historically chosen to pay civil 
penalties rather than achieve full numerical compliance across all 
fleets.\144\ The

[[Page 52583]]

CAFE Model calculates civil penalties (adjusted for inflation) for CAFE 
shortfalls and provides means to estimate that a manufacturer might 
stop adding fuel-saving technologies once continuing to do so would 
effectively be more ``expensive'' (after accounting for fuel prices and 
buyers' willingness to pay for fuel economy) than paying civil 
penalties. The CAFE Model does not allow civil penalty payment as an 
option for EPA's GHG standards or NHTSA's HDPUV standards.\145\
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    \144\ NHTSA does not assume willingness to pay civil penalties 
for manufacturers who have commented publicly that they will not pay 
civil penalties in the rulemaking time frame, MY 2027 to MY 2031.
    \145\ While civil penalties are an option in the HDPUV fleet 
manufacturers have not exercised this option in the real world. 
Additionally, the penalties for noncompliance are significantly 
higher, and thus manufacturers will try to avoid paying them. 
Setting the model to disallow civil penalties acts to best simulate 
this behavior. If the model does find no option other than ``paying 
a civil penalty'' in the HDPUV fleet, this cost should be considered 
a proxy for credit purchase.
---------------------------------------------------------------------------

    Dual-Fueled and Dedicated Alternative Fuel Vehicles: For purposes 
of calculating passenger car and light truck CAFE levels used to 
determine compliance, 49 U.S.C. 32905 and 32906 specify methods for 
calculating the fuel economy levels of vehicles operating on 
alternative fuels to gasoline or diesel, such as electricity. In some 
cases, after MY 2020, methods for calculating AFV fuel economy are 
governed by regulation. The CAFE Model can account for these 
requirements explicitly for each vehicle model. However, 49 U.S.C. 
32902 prohibits consideration of the fuel economy of dedicated 
Alternative Fuel Vehicles (AFVs), and requires that the fuel economy of 
dual-fueled AFVs' fuel economy, such as plug-in electric vehicles 
(EVs), be calculated as though they ran only on gasoline or diesel, 
when NHTSA determines the maximum feasible fuel economy level that 
manufacturers can achieve, in a given year for which NHTSA is 
establishing CAFE standards. The CAFE Model therefore has an option to 
be run in a manner that excludes the additional application of 
dedicated AFVs and counts only the gasoline fuel economy of dual-fueled 
AFVs, in MYs for which maximum feasible standards are under 
consideration. As allowed under NEPA for analysis appearing in 
Environmental Impact Statements (EIS) that help inform decision makers 
about the environmental impacts of CAFE standards, the CAFE Model can 
also be run without this analytical constraint. The CAFE Model does 
account for dedicated and dual-fueled AFVs when simulating 
manufacturers' potential responses to EPA's GHG standards because the 
Clean Air Act (CAA), under which the EPA derives its authority to set 
GHG standards for motor vehicles, contains no restrictions in using 
AFVs for compliance. There are no specific statutory directions in EISA 
with regard to dedicated and dual-fueled AFV fuel efficiency for 
HDPUVs, so the CAFE Model reflects relevant regulatory provisions by 
calculating fuel consumption directly per 49 U.S.C. 32905 and 32906 
specified methods.
    ZEV Regulatory Programs: The CAFE Model can simulate manufacturers' 
compliance with state-level ZEV programs applicable in California and 
``Section 177'' \146\ states. This approach involves identifying 
specific vehicle model/configurations that could be replaced with BEVs 
and converting to BEVs only enough sales count of the vehicle models to 
meet the manufacturer's compliance obligations under state-level ZEV 
programs, before beginning to consider the potential that other 
technologies could be applied toward compliance with CAFE, HDPUV, or 
GHG standards.
---------------------------------------------------------------------------

    \146\ The term ``Section 177'' states refers to states which 
have elected to adopt California's standards in lieu of Federal 
requirements, as allowed under section 177 of the CAA.
---------------------------------------------------------------------------

    Creation and Use of Compliance Credits: Section 32903 of 49 U.S.C. 
provides that manufacturers may earn CAFE ``credits'' by achieving a 
CAFE level beyond that required of a given passenger car or light truck 
fleet in a given MY and specifies how these credits may be used to 
offset the amount by which a different fleet falls short of its 
corresponding requirement. These provisions allow credits to be 
``carried forward'' and ``carried back'' between MYs, transferred 
between regulated classes (domestic passenger cars, imported passenger 
cars, and light trucks), and traded between manufacturers. However, 
credit use for passenger car and light truck compliance is also subject 
to specific statutory limits. For example, CAFE compliance credits can 
be carried forward a maximum of five MYs and carried back a maximum of 
three MYs. Also, EPCA/EISA caps the amount of credits that can be 
transferred between passenger car and light truck fleets and prohibits 
manufacturers from applying traded or transferred credits to offset a 
failure to achieve the applicable minimum standard for domestic 
passenger cars. The CAFE Model can simulate manufacturers' potential 
use of CAFE credits carried forward from prior MYs or transferred from 
other fleets.\147\ Section 32902 of 49 U.S.C. prohibits consideration 
of manufacturers' potential application of CAFE compliance credits when 
determining the maximum feasible fuel economy level that manufacturers 
can achieve for their fleets of passenger cars and light trucks. The 
CAFE Model can be operated in a manner that excludes the application of 
CAFE credits for a given MY under consideration for standard setting, 
and NHTSA operated the model with that constraint for the purpose of 
determining the appropriate CAFE standard for passenger cars and light 
trucks. No such statutory restrictions exist for setting HDPUV 
standards. For modeling EPA's GHG standards, the CAFE Model does not 
limit transfers because the CAA does not limit them. Insofar as the 
CAFE Model can be exercised in a manner that simulates trading of GHG 
compliance credits, such simulations treat trading as unlimited.\148\
---------------------------------------------------------------------------

    \147\ The CAFE Model does not explicitly simulate the potential 
that manufacturers would carry CAFE or GHG credits back (i.e., 
borrow) from future model years, or acquire and use CAFE compliance 
credits from other manufacturers. At the same time, because EPA has 
elected not to limit credit trading, the CAFE Model can be exercised 
(for purposes of evaluating GHG standards) in a manner that 
simulates unlimited (a.k.a. ``perfect'') GHG compliance credit 
trading throughout the industry (or, potentially, within discrete 
trading ``blocs''). Given these dynamics, and given also the fact 
that the agency has yet to resolve some of the analytical challenges 
associated with simulating use of these flexibilities, the agency 
has decided to support this final rule with a conservative analysis 
that sets aside the potential that manufacturers would depend widely 
on borrowing and trading--not to mention that, for purposes of 
determining maximum feasible CAFE standards, statute prohibits NHTSA 
from considering the trading, transferring, or availability of 
credits (see 49 U.S.C. 32902(h)). While compliance costs in real 
life may be somewhat different from what is modeled in the 
rulemaking record as a result of this decision, that is broadly true 
no matter what, and the agency does not believe that the difference 
would be so great that it would change the policy outcome. 
Furthermore, a manufacturer employing a trading strategy would 
presumably do so because it represents a lower-cost compliance 
option. Thus, the estimates derived from this modeling approach are 
likely to be conservative in this respect, with real-world 
compliance costs likely being lower.
    \148\ To avoid making judgments about possible future trading 
activity, the model simulates trading by combining all manufacturers 
into a single entity, so that the most cost-effective choices are 
made for the fleet as a whole.
---------------------------------------------------------------------------

    Statutory Basis for Stringency: Section 32902 of 49 U.S.C. requires 
the Secretary of Transportation (by delegation, NHTSA) to set CAFE 
standards for passenger cars and light trucks at the maximum feasible 
levels that manufacturers can achieve in a given MY, considering 
technological feasibility, economic practicability, the need of the 
United States to conserve energy, and the impact of other motor vehicle 
standards of the Government on fuel economy. For HDPUV standards, which 
must also achieve the maximum

[[Page 52584]]

feasible improvement, the similar yet distinct factors of 
appropriateness, cost-effectiveness, and technological feasibility must 
be considered. EPCA/EISA authorizes the Secretary of Transportation (by 
delegation, NHTSA) to interpret these factors, and as the Department's 
interpretation has evolved, NHTSA has continued to expand and refine 
its qualitative and quantitative analysis to account for these 
statutory factors. For example, one of the ways that economic 
practicability considerations are incorporated into the analysis is 
through the technology effectiveness determinations: the Autonomie 
simulations reflect the agency's conservative assumption that it would 
not be economically practicable (nor, for HDPUVs, appropriate for 
vehicles with different use cases) for a manufacturer to ``split'' an 
engine shared among many vehicle model/configurations into myriad 
versions each optimized to a single vehicle model/configuration.
    National Environmental Policy Act: NEPA requires NHTSA to consider 
the environmental impacts of its actions in its decision-making 
processes, including for CAFE standards. The Final EIS accompanying 
this final rule documents changes in emission inventories as estimated 
using the CAFE Model, but also documents corresponding estimates--based 
on the application of other models documented in the Final EIS--of 
impacts on the global climate, on air quality, and on human health.
    Other Aspects of Compliance: Beyond these statutory requirements 
applicable to DOT, EPA, or both are a number of specific technical 
characteristics of CAFE, HDPUV, and/or GHG regulations that are also 
relevant to the construction of this analysis, like the ``off-cycle'' 
technology fuel economy/emissions improvements that apply for both CAFE 
and GHG compliance. Although too little information is available to 
account for these provisions explicitly in the same way that NHTSA has 
accounted for other technologies, the CAFE Model includes and makes use 
of inputs reflecting NHTSA's expectations regarding the extent to which 
manufacturers may earn such credits, along with estimates of 
corresponding costs. Similarly, the CAFE Model includes and makes use 
of inputs regarding credits EPA has elected to allow manufacturers to 
earn toward GHG levels (not CAFE or HDPUV) based on the use of air 
conditioner refrigerants with lower global warming potential, or on the 
application of technologies to reduce refrigerant leakage. In addition, 
the CAFE Model accounts for EPA ``multipliers'' for certain AFVs, based 
on current regulatory provisions or on alternative approaches. Although 
these are examples of regulatory provisions that arise from the 
exercise of discretion rather than specific statutory mandate, they can 
materially impact outcomes.
3. What updated assumptions does the current model reflect as compared 
to the 2022 final rule and the 2023 NPRM?
    Besides the updates to the CAFE Model described above, any analysis 
of regulatory actions that will be implemented several years in the 
future, and whose benefits and costs accrue over decades, requires a 
large number of assumptions. Over such time horizons, many, if not 
most, of the relevant assumptions in such an analysis are inevitably 
uncertain. Each successive CAFE and HDPUV analysis seeks to update 
assumptions to better reflect the current state of the world and the 
best current estimates of future conditions.
    A number of assumptions have been updated since the 2022 final rule 
and the 2023 NPRM. As discussed below, NHTSA continues to use a MY 2022 
reference fleet for passenger cars and light trucks and continues to 
use an updated HDPUV analysis fleet (the last HDPUV analysis fleet was 
built in 2016). NHTSA has also updated estimates of manufacturers' 
compliance credit ``holdings,'' updated fuel price projections to 
reflect the U.S. EIA's 2023 Annual Energy Outlook (AEO), updated 
projections of GDP and related macroeconomic measures, and updated 
projections of future highway travel. While NHTSA would have made these 
updates as a matter of course, we note that the ongoing global economic 
recovery and the ongoing war in Ukraine have impacted major analytical 
inputs such as fuel prices, GDP, vehicle production and sales, and 
highway travel. Many inputs remain uncertain, and NHTSA has conducted 
sensitivity analyses around many inputs to attempt to capture some of 
that uncertainty. These and other updated analytical inputs are 
discussed in detail in the TSD and FRIA.
    Additionally, as discussed in the TSD,\149\ NHTSA calculates the 
climate benefits resulting from anticipated reductions in emissions of 
each of three GHGs, CO2, CH4, and N2O, 
using estimates of the social costs of greenhouse gases (SC-GHG) values 
reported in a recent report from EPA (henceforward referred to as the 
``2023 EPA SC-GHG Report'').\150\ In the 2022 final rule and the 2023 
NPRM, NHTSA used SC-GHG values recommended by the federal Interagency 
Working Group (IWG) on the SC-GHG for interim use until updated 
estimates are available. In this final rule, NHTSA has elected to use 
the updated values in the 2023 EPA SC-GHG Report to reflect the most 
recent scientific evidence on the cost of climate damages resulting 
from emission of GHGs. Those estimates of costs per ton of emissions 
(or benefits per ton of emissions reductions) are greater than those 
applied in the analysis supporting the 2022 final rule or the 2023 
NPRM. Even still, the estimates NHTSA is now using are not able to 
fully quantify and monetize a number of important categories of climate 
damages; because of those omitted damages and other methodological 
limits, DOT believes its values for SC-GHG are conservative 
underestimates.
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    \149\ See TSD Chapter 6.2.1
    \150\ EPA 2023. EPA Report on the Social Cost of Greenhouse 
Gases: Estimates Incorporating Recent Scientific Advances. National 
Center for Environmental Economics, Office of Policy, Climate Change 
Division, Office of Air and Radiation. Washington, DC. Available at: 
https://www.epa.gov/environmental-economics/scghg. (Accessed: Mar. 
22, 2024) (hereinafter, ``2023 EPA SC-GHG Report'').
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B. What is NHTSA analyzing?

    NHTSA is analyzing the effects of different potential CAFE and 
HDPUV standards on industry, consumers, society, and the world at 
large. These different potential standards are identified as regulatory 
alternatives, and amongst the regulatory alternatives, NHTSA identifies 
which ones the agency is selecting. As in the past several CAFE 
rulemakings and in the Phase 2 HDPUV rulemaking, NHTSA is establishing 
attribute-based CAFE and HDPUV standards defined by either a 
mathematical function of vehicle footprint (which has an observable 
correlation with fuel economy) or a towing-and-hauling-based WF, 
respectively.\151\ EPCA, as amended by EISA, expressly requires that 
CAFE standards for passenger cars and light trucks be based on one or 
more vehicle attributes related to fuel economy, and be expressed in 
the form of a mathematical function.\152\ The statute gives NHTSA 
discretion as to how to structure standards for HDPUVs, and NHTSA 
continues to believe that attribute-based standards expressed as a 
mathematical function remain appropriate for those vehicles as well,

[[Page 52585]]

given their similarity in many ways to light trucks. Thus, the 
standards (and the regulatory alternatives) for passenger cars and 
light trucks take the form of fuel economy targets expressed as 
functions of vehicle footprint (the product of vehicle wheelbase and 
average track width) that are separate for passenger cars and light 
trucks, and the standards and alternatives for HDPUVs take the form of 
fuel consumption targets expressed as functions of vehicle WF (which is 
in turn a function of towing and hauling capabilities).
---------------------------------------------------------------------------

    \151\ Vehicle footprint is the vehicle's wheelbase times average 
track width (or more simply, the length and width beween the 
vehicle's four wheels). The HDPUV FE towing-and-hauling-based work 
factor (WF) metric is based on a vehicle's payload and towing 
capabilities, with an added adjustment for 4-wheel drive vehicles.
    \152\ 49 U.S.C. 32902(a)(3)(A).
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    For passenger cars and light trucks, under the footprint-based 
standards, the function defines a fuel economy performance target for 
each unique footprint combination within a car or truck model type. 
Using the functions, each manufacturer thus will have a CAFE average 
standard for each year that is almost certainly unique to each of its 
fleets,\153\ based upon the footprint and production volumes of the 
vehicle models produced by that manufacturer. A manufacturer will have 
separate footprint-based standards for cars and for trucks, consistent 
with 49 U.S.C. 32902(b)'s direction that NHTSA must set separate 
standards for cars and for trucks. The functions are mostly sloped, so 
that generally, larger vehicles (i.e., vehicles with larger footprints) 
will be subject to lower mpg targets than smaller vehicles. This is 
because smaller vehicles are generally more capable of achieving higher 
levels of fuel economy, mostly because they tend not to have to work as 
hard (and therefore to require as much energy) to perform their driving 
task. Although a manufacturer's fleet average standard could be 
estimated throughout the MY based on the projected production volume of 
its vehicle fleet (and are estimated as part of EPA's certification 
process), the standards with which the manufacturer must comply are 
determined by its final model year (FMY) production figures. A 
manufacturer's calculation of its fleet average standards, as well as 
its fleets' average performance at the end of the MY, will thus be 
based on the production-weighted average target and performance of each 
model in its fleet.\154\
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    \153\ EPCA/EISA requires NHTSA and EPA to separate passenger 
cars into domestic and import passenger car fleets for CAFE 
compliance purposes (49 U.S.C. 32904(b)), whereas EPA combines all 
passenger cars into one fleet for GHG compliance purposes.
    \154\ As discussed in prior rulemakings, a manufacturer may have 
some vehicle models that exceed their target and some that are below 
their target. Compliance with a fleet average standard is determined 
by comparing the fleet average standard (based on the production-
weighted average of the target levels for each model) with fleet 
average performance (based on the production-weighted average of the 
performance of each model). This is inherent in the statutory 
structure of CAFE, which requires NHTSA to set corporate average 
standards.
---------------------------------------------------------------------------

    For passenger cars, consistent with prior rulemakings, NHTSA is 
defining fuel economy targets as shown in Equation III-1.
[GRAPHIC] [TIFF OMITTED] TR24JN24.042

Where:

TARGETFE is the fuel economy target (in mpg) applicable to a 
specific vehicle model type with a unique footprint combination,
a is a minimum fuel economy target (in mpg),
b is a maximum fuel economy target (in mpg),
c is the slope (in gallons per mile (or gpm) per square foot) of a 
line relating fuel consumption (the inverse of fuel economy) to 
footprint, and
d is an intercept (in gpm) of the same line.

    Here, MIN and MAX are functions that take the minimum and maximum 
values, respectively, of the set of included values. For example, 
MIN[40, 35] = 35 and MAX(40, 25) = 40, such that MIN[MAX(40, 25), 35] = 
35.
    For the Preferred Alternative, this equation is represented 
graphically as the curves in Figure III-1.

[[Page 52586]]

[GRAPHIC] [TIFF OMITTED] TR24JN24.043

    For light trucks, also consistent with prior rulemakings, NHTSA is 
defining fuel economy targets as shown in Equation III-2.
[GRAPHIC] [TIFF OMITTED] TR24JN24.044

Where:

TARGETFE is the fuel economy target (in mpg) applicable to a 
specific vehicle model type with a unique footprint combination,
a, b, c, and d are as for passenger cars, but taking values specific 
to light trucks,
e is a second minimum fuel economy target (in mpg),
f is a second maximum fuel economy target (in mpg),
g is the slope (in gpm per square foot) of a second line relating 
fuel consumption (the inverse of fuel economy) to footprint, and
h is an intercept (in gpm) of the same second line.

    For the Preferred Alternative, this equation is represented 
graphically as the curves in Figure III-2.

[[Page 52587]]

[GRAPHIC] [TIFF OMITTED] TR24JN24.045

    Although the general model of the target function equation is the 
same for passenger cars and light trucks, and the same for each MY, the 
parameters of the function equation differ for cars and trucks. The 
actual parameters for both the Preferred Alternative and the other 
regulatory alternatives are presented in Section IV.
    The required CAFE level applicable to a passenger car (either 
domestic or import) or light truck fleet in a given MY is determined by 
calculating the production-weighted harmonic average of fuel economy 
targets applicable to specific vehicle model configurations in the 
fleet, as shown in Equation III-3.
[GRAPHIC] [TIFF OMITTED] TR24JN24.046

Where:

CAFErequired is the CAFE level the fleet is required to achieve,
i refers to specific vehicle model/configurations in the fleet,
PRODUCTIONi is the number of model configuration i produced for sale 
in the U.S., and
TARGETFE, i is the fuel economy target (as defined above) for model 
configuration i.

    For HDPUVs, NHTSA has previously set attribute-based standards, but 
used a work-based metric as the attribute rather than footprint. Work-
based measurements such as payload and towing capability are key among 
the parameters that characterize differences in the design of these 
vehicles, as well as differences in how the vehicles will be used. 
Since NHTSA has been regulating HDPUVs, these standards have been based 
on a work factor (WF) attribute that combines the vehicle's payload and 
towing capabilities, with an added adjustment for 4-wheel drive 
vehicles. Again, while NHTSA is not required by statute to set HDPUV 
standards that are attribute-based and that are described by a 
mathematical function, NHTSA continues to believe that doing so is 
reasonable and appropriate for this segment of vehicles, consistent 
with prior HDPUV standard-setting rulemakings. NHTSA is continuing the 
use of the work-based attribute and gradually increasing stringency 
(which for HDPUVs means that standards appear to decline, as compared 
to passenger car and light truck standards where increasing stringency 
means that standards appear to increase. This is because HDPUV 
standards are based on fuel consumption, which is the inverse of fuel 
economy,\155\ the metric that NHTSA

[[Page 52588]]

is statutorily required to use when setting standards for light-duty 
vehicle (LDV) fuel use). NHTSA defines HDPUV fuel efficiency targets as 
shown in Equation III-4.
---------------------------------------------------------------------------

    \155\ For additional information, see the National Academies of 
Sciences, Engineering, and Medicine. 2011. Assessment of Fuel 
Economy Technologies for Light-Duty Vehicles. The National Academies 
Press. Washington, DC. Available at: https://nap.nationalacademies.org/catalog/12924/assessment-of-fuel-economy-technologies-for-light-duty-vehicles. (Accessed: Feb. 23, 2024). 
Fuel economy is a measure of how far a vehicle will travel with a 
gallon (or unit) of fuel and is expressed in mpg. Fuel consumption 
is the inverse of fuel economy. It is the amount of fuel consumed in 
driving a given distance. Fuel consumption is a fundamental 
engineering measure that is directly related to fuel consumed per 
100 miles and is useful because it can be employed as a direct 
measure of volumetric fuel savings.
[GRAPHIC] [TIFF OMITTED] TR24JN24.047

---------------------------------------------------------------------------
Where:

c is the slope (in gal/100-miles/WF)
d is the y-intercept (in gal/100-miles)

WF = Work Factor = [0.75 x (Payload Capacity + Xwd)] + [0.25 x Towing 
Capacity]

Where:

Xwd = 4wd adjustment = 500 lbs. if the vehicle group is equipped 
with 4WD and all-wheel drive, otherwise equals 0 lbs. for 2wd
Payload Capacity = GVWR (lbs.)-Curb Weight (lbs.) (for each vehicle 
group)
Towing Capacity = GCWR \156\ (lbs.)-GVWR (lbs.) (for each vehicle 
group)
---------------------------------------------------------------------------

    \156\ Gross Combined Weight Rating.

    For the Preferred Alternative, this equation is represented 
graphically as the curves in Figure III-3 and Figure III-4.
[GRAPHIC] [TIFF OMITTED] TR24JN24.048


[[Page 52589]]


[GRAPHIC] [TIFF OMITTED] TR24JN24.049

    Similar to the standards for passenger cars and light trucks, NHTSA 
(and EPA) have historically set HDPUV standards such that each 
manufacturer's fleet average standard is based on production volume-
weighting of target standards for all vehicles, which are based on each 
vehicle's WF as explained above. Thus, for HDPUVs, the required fuel 
efficiency level applicable in a given MY is determined by calculating 
the production-weighted harmonic average of subconfiguration targets 
applicable to specific vehicle model configurations in the fleet, as 
shown in Equation III-5.
[GRAPHIC] [TIFF OMITTED] TR24JN24.050

Where:

Subconfiguration Target Standardi = fuel consumption standard for 
each group of vehicles with the same payload, towing capacity, and 
drive configuration (gallons per 100 miles), and
Volumei = production volume of each unique subconfiguration of a 
model type based upon payload, towing capacity, and drive 
configuration.

    Chapter 1 of the TSD contains a detailed description of the use of 
attribute-based standards, generally, for passenger cars, light trucks, 
and HDPUVs, and explains the specific decision, in past rules and for 
the current final rule, to continue to use vehicle footprint as the 
attribute over which to vary passenger car and light truck stringency, 
and WF as the attribute over which to vary HDPUV stringency. That 
chapter also discusses the policy and approach in selecting the 
specific mathematical functions.\157\
---------------------------------------------------------------------------

    \157\ See TSD Chapter 1.2.
---------------------------------------------------------------------------

    Commenters expressed several concerns regarding the implementation 
of the fuel economy footprint target curves used for passenger cars and 
light trucks in this rule. Most concerns fell into one of four 
categories: the use of alternate or additional factors in generating 
the curves, the shape of the attribute curve, consideration of how 
footprint changes may be expressed or used by manufacturers, and 
considerations of changes made by the EPA in its own rulemaking.
    Regarding the use of alternate or additional factors in generating 
the curves, Rivian commented that NHTSA should reconsider the National 
Academy of Sciences (NAS) recommendation for multi-attribute standards 
for CAFE and requested that the agency ``more fully describe why'' the 
alternative approach to including electrification as another attribute 
described in the MYs 2024-2026 proposal ``would be inconsistent with 
its current legal authority.'' \158\
---------------------------------------------------------------------------

    \158\ Rivian, Docket No. NHTSA-2023-0022-59765, at 3-4.
---------------------------------------------------------------------------

    In the 2021 NAS Report, the committee recommended that if Congress 
did not act to remove the prohibition at 49 U.S.C. 32902(h) on 
considering the fuel economy of dedicated AFVs (like BEVs) in 
determining maximum feasible CAFE standards, then the Secretary (by 
delegation, NHTSA) should consider accounting for the fuel economy

[[Page 52590]]

benefits of ZEVs by ``setting the standard as a function of a second 
attribute in addition to footprint--for example, the expected market 
share of ZEVs in the total U.S. fleet of new light-duty vehicles--such 
that the standards increase as the share of ZEVs in the total U.S. 
fleet increases.'' \159\ NHTSA remains concerned that adding 
electrification, specifically, as part of a multi-attribute approach to 
standards may be inconsistent with our current legal authority. The 49 
U.S.C. 32902(h) prohibition against considering the fuel economy of 
electric vehicles applies to the determination of maximum feasible 
standards. The attribute-based target curves are themselves the 
standards. NHTSA therefore does not see how the fuel economy of 
electric vehicles could be incorporated as an attribute forming the 
basis of the standards. Moreover, NHTSA further explored and received 
comments on this issue in the final rule setting standards for MYs 
2024-2026.\160\ While NHTSA considered this recommendation carefully as 
part of that rulemaking, NHTSA ultimately agreed with many commenters 
that including electrification as an attribute on which to base fuel 
economy standards for that rulemaking could introduce lead time 
concerns and uncertainty for industry needing to adjust their 
compliance strategies.
---------------------------------------------------------------------------

    \159\ National Academies of Sciences, Engineering, and Medicine. 
2021. Assessment of Technologies for Improving Fuel Economy of 
Light-Duty Vehicles--2025-2035. The National Academies Press. 
Washington, DC at 5. Available at: https://www.nationalacademies.org/our-work/assessment-of-technologies-for-improving-fuel-economy-of-light-duty-vehicles-phase-3. (Accessed 
Feb. 7, 2024) (hereinafter, ``2021 NAS Report''). Summary 
Recommendation 5, at 368.
    \160\ 87 FR 25753.
---------------------------------------------------------------------------

    The Center for Environmental Accountability (CEA) also commented on 
considering the use of acceleration as an additional attribute in the 
attribute based standard function.\161\ The CEA was concerned with 
capturing the potential trade off manufacturers may make between 
improved vehicle performance or improved fuel economy. NHTSA provides 
discussion and reasoning for the agency's approach to performance 
trade-offs in Section III.C.3 and believes the approach of maintaining 
performance neutrality is a reasonable method for accounting for the 
variety of possible manufacturer decisions. Furthermore, to date, every 
time NHTSA has considered options for which attribute(s) to select, the 
agency has concluded that a properly designed footprint-based approach 
provides the best means of achieving the basic policy goals (i.e., by 
increasing the likelihood of improved fuel economy across the entire 
fleet of vehicles) involved in applying an attribute-based 
standard.\162\
---------------------------------------------------------------------------

    \161\ CEA, Docket No. NHTSA-2023-0022-61918, at 22.
    \162\ See TSD Chapter 1.2.3.1; NHTSA. Mar. 2022. TSD Final 
Rulemaking for Model Years 2024-2026 Light-Duty Corporate Average 
Fuel Economy Standards. Chapter 1.2.3; 85 FR 24249-24257 (April 30, 
2020).
---------------------------------------------------------------------------

    Other commenters expressed concern about the possible influence of 
the shape, slope or cutpoints of the footprint curve on real-world 
vehicle footprint size. The Institute for Policy Integrity (IPI) and 
the Natural Resources Defense Council (NRDC) both argued that NHTSA 
should flatten the footprint curves to discourage upsizing, because 
larger vehicles consume more energy.\163\ NRDC also stated that ``NHTSA 
should further reduce the footprint of the cutpoint for light trucks 
based on pickup certification.'' \164\ Other commenters expressed 
similar concerns.\165\
---------------------------------------------------------------------------

    \163\ IPI, Docket No. NHTSA-2023-0022-60485, at 1; Joint NGOs, 
Docket No. NHTSA-2023-0022-61944-A2, at 30-34.
    \164\ Joint NGOs, Docket No. NHTSA-2023-0022-60485, at 34.
    \165\ SELC, Docket No NHTSA-2023-0022-60224, at 7; Climate Hawks 
Civic Action, Docket No NHTSA-2023-0022-61094, at 1042; MEMA, Docket 
No. NHTSA-2023-0022-59204, at 8-9; ACEEE, Docket No NHTSA-2023-0022-
60684, at 3; CBD et al., Docket No. NHTSA-2023-0022-61944-A2, at 41.
---------------------------------------------------------------------------

    NHTSA appreciates these comments but based on the detailed 
discussion presented in Chapter 1.2.3.1 of the TSD, NHTSA is retaining 
the same curve shapes for passenger car and light truck standards in 
this final rule that NHTSA has used over the past several rulemakings--
that is, at this time NHTSA is not changing the shape of the existing 
footprint curves. Based on the analysis of data presented by the EPA 
Trends Report discussed in the TSD,\166\ vehicle footprint size, by 
vehicle category, has in fact changed very little over the last decade. 
By sales-weighted average, the data examined showed that sedans and 
wagons increased their footprints the most, about 3.4% or a 2 ft\2\ 
increase, over 10 years. For context, a 1.5 ft\2\ increase in overall 
footprint increase would equate to about a 2 inch increase in the track 
width of a MY 2022 Toyota Corolla.\167\ NHTSA's assessment in the TSD 
shows that over the 10 years it took for manufacturers to increase 
sedan footprint by 3.4% on average, the fuel economy consequence was 
approximately a 3% reduction in the MY 2022 fuel economy target for a 
Toyota Corolla, compared to if it had retained its MY 2012 footprint 
size. Spread over each of those 10 years, the footprint increases for 
the example Corolla resulted in fuel economy targets that were lowered 
by approximately 0.3% per year. While NHTSA agrees that this number is 
greater than zero, for context, the fuel economy standard improvement 
from MY 2023 to MY 2024 will require approximately an 8% increase in 
fuel economy--in other words, the increases in CAFE stringency are 
decidedly outpacing manufacturers' current ability, or plans, to upsize 
individual vehicle footprints to obtain lower targets.
---------------------------------------------------------------------------

    \166\ 2023 EPA Technology Trends Report.
    \167\ The MY 2022 Corolla has a wheelbase of about 106 inches, 
adding 2 inches to the track width would add approximately 212 
square inches or 1.47 square feet to the footprint of the vehicle. 
See the Market Data Input File for data on the 2022 Corolla 
wheelbase.
---------------------------------------------------------------------------

    NHTSA notes, however, that while increases in footprint size by 
vehicle category are small, there is a separate phenomenon of aggregate 
footprint increase for the entire fleet, which NHTSA found to be about 
5.4% over the same time period. This is due not to changes in 
individual vehicle size or vehicle-class-level size, but to changes in 
fleet share. The fleet share of generally-smaller-footprint sedans and 
wagons decreased by nearly 28.4% over 10 years, while the fleet share 
of generally-larger-footprint trucks, SUVs, and pickups increased by 
29.5%. Simply put, manufacturers are selling more larger trucks and 
fewer smaller cars than they were 10 years ago--which is different from 
individual vehicle models (or vehicle classes) themselves increasing in 
size, as one might expect if the shape of the footprint curves or the 
use of footprint as an attribute were incentivizing upsizing. This 
evidence leads us to conclude that the use of footprint as an attribute 
and the current slopes and cutoff points for the existing curves for 
passenger car and light truck CAFE standards do not lead to 
manufacturers significantly altering the size of their vehicles, within 
vehicle classes.
    In contrast, Mitsubishi argued that the current shape of the 
curves, and particularly the passenger car curve, discouraged 
manufacture of smaller footprint vehicles. As Mitsubishi stated,

    Mitsubishi holds a unique position in the industry as the 
manufacturer with the smallest fleet-average vehicle footprint. As 
such, Mitsubishi also has the strictest GHG and CAFE standard among 
vehicle manufacturers. Despite having one of the highest fleet-
average fuel economy ratings and the lowest fleet GHG emissions of 
any mass-market vehicle manufacturer, Mitsubishi has accrued CAFE 
and GHG deficits in recent years, while other manufacturers with 
lower CAFE and higher GHG fleet emissions have accrued credits. 
While we understand the math that delivers this result, we question 
whether this outcome

[[Page 52591]]

is what the program set out to achieve. Mitsubishi supports the 
reevaluation of the shape and slope of the footprint curves to 
ensure fleetwide fuel economy increases and GHG reductions are done 
in a neutral manner.\168\
---------------------------------------------------------------------------

    \168\ Mitsubishi, Docket No. NHTSA-2023-0022-61637 at 7.

    NHTSA is aware of Mitsubishi's unique position in the industry as a 
manufacturer of smaller, highly fuel-efficient, affordably-priced 
vehicles and is sympathetic to these comments. Unfortunately, the 
standard is designed for the overall industry rather than for 
individual manufacturers. The format of NHTSA's standards, with target 
goals based on footprint, instead allows each manufacturer's compliance 
obligation to vary with their sales mix. This can cause difficulty for 
some manufacturers if their vehicles' average fuel economy does not 
meet the required average of their footprint targets. Mitsubishi is 
correct that the current curve shapes do not incentivize manufacturers 
to build smaller cars--but neither does NHTSA find, as discussed above, 
that they particularly incentivize manufacturers to build larger cars, 
perhaps contrary to expectation. Unfortunately, the overall structure 
of the target curves places Mitsubishi--like all other manufacturers--
in a position where it must balance its need to increase the fuel 
economy of its fleet with marketing increasing vehicle costs to its 
consumer base.
    IPI suggested that NHTSA add the use of increased footprint size as 
a potential compliance strategy used during the simulation of 
manufacturer behavior, stating that ``This upsizing could be modeled 
either directly as a vehicle-level change (i.e., a technology change) 
or approximated by applying a specific level of sales-weighted average 
increase to the vehicle class level. In the former case, NHTSA could 
include footprint technology options, such as increased footprint size 
by 0%, 5%, 7.5%, 10%, 15%, and 20%, much like NHTSA treats mass-
reduction technologies.'' \169\
---------------------------------------------------------------------------

    \169\ IPI, Docket No. NHTSA-2023-0022-60485, at 16-18.
---------------------------------------------------------------------------

    NHTSA disagrees that additional modeling approaches are required to 
capture the behavior of the manufacturers that appears to lead to 
increasing fleet footprint. The analysis of the EPA's Trends Data, 
discussed above and provided in detail in TSD Chapter 1.2.3.1, 
indicates that over the last 10 years vehicle footprint size has seen 
only small changes within vehicle classes. Sedans and wagons showed the 
greatest sales-weighted average increase between MY 2012 and MY 2022 at 
a 3.4% increase, minivans saw a 2.1% increase, car SUVs (or crossovers) 
saw a 1.6% increase, truck SUVs saw a 0.9% increase, and pickups saw 
the smallest increase at 0.5%. The increase in sales-weighted average 
footprint size for the aggregate fleet instead appears driven by a 
change in fleet shares between passenger cars and light trucks--a 
behavior that is captured by the CAFE model and is discussed in TSD 
Chapter 4.2.1.3, Modeling Changes in Fleet Mix.
    Several commenters expressed concern that NHTSA had not followed 
EPA's proposed approach to reconfiguring their attribute-based 
CO2 standard functions. Mitsubishi stated, ``Unlike the EPA, 
NHTSA did not propose any changes to the slope or cut-points for the 
passenger car or light truck curves.'' \170\ The Motor & Equipment 
Manufacturer's Association (MEMA) offered similar comments, stating, 
``NHTSA should follow EPA's lead in flattening the curves to further 
improve the fuel efficiency of the overall fleet and limit upsizing.'' 
\171\ Other commenters also expressed concern about the departure in 
target curve shape between EPA's proposed standards and NHTSA proposed 
standards, arguing that NHTSA should have considered the same factors 
EPA used in their determinations.\172\
---------------------------------------------------------------------------

    \170\ Mitsubishi, Docket No. NHTSA-2023-0022-61637, at 7.
    \171\ MEMA, Docket No. NHTSA-2023-0022-59204, at 8.
    \172\ CBD et al., Docket No. NHTSA-2023-0022-61944, at 41; IPI, 
Docket No. NHTSA-2023-0022-60485, at 16-18; ACEEE, Docket No. NHTSA-
2023-0022-60684, at 3.
---------------------------------------------------------------------------

    NHTSA has explained our position on changing curve shape based on 
addressing concerns about upsizing above. That said, NHTSA is aware 
that EPA recently issued a final rule changing the shapes of its 
CO2 standards curves for passenger cars and light-duty 
trucks, as compared to its prior set of standards. EPA explained that 
it chose to make the slopes of both curves, especially the car curves, 
flatter than those of prior rulemakings, stating that:

    When emissions reducing technology is applied, such as advanced 
ICE, or HEV or PHEV or BEV electrification technologies, the 
relationship between increased footprint and tailpipe emissions is 
reduced. From a physics perspective, a positive footprint slope for 
ICE vehicles makes sense because as a vehicle's size increases, its 
mass, road loads, and required power (and corresponding vehicle-
based CO2 emissions) will increase accordingly [and its 
fuel economy will correspondingly decrease accordingly]. Moreover, 
as the emissions control technology becomes increasingly more 
effective, the relationship between tailpipe emissions and footprint 
decreases proportionally; in the limiting case of vehicles with 0 g/
mile tailpipe emissions such as BEVs, there is no relationship at 
all between tailpipe emissions and footprint.\173\
---------------------------------------------------------------------------

    \173\ 2024 EPA Final Rule, section II.C.2.ii, 89 FR 27842.

    Since the Supreme Court's decision in Massachusetts v. EPA, NHTSA 
and EPA have both employed equivalent footprint-based CAFE and 
CO2 target curves for PCs and LTs. In this final rule, NHTSA 
cannot reasonably promulgate target curves that are flatter, like EPA's 
new curves based on EPA's rationale, for two main reasons. First, EPA 
altered their curves based on considering the effects of emission 
reduction technologies such as PHEVs and BEVs as viable solutions to 
meet their standards. Given that the target curves are the CAFE 
standards, and given that 49 U.S.C. 32902(h) prohibits consideration of 
BEVs or even the electric only operation of PHEVs in determining 
maximum feasible CAFE standards, NHTSA does not believe that the law 
permits us to base target curve shapes in CAFE-standard-driven 
increases on the presence (i.e., the fuel economy) of BEVs or the use 
of the electric operation of PHEVs in the vehicle fleets. Second, even 
if NHTSA could consider BEVs and full use of PHEV technology in 
developing target curve shapes, NHTSA would not consider them the same 
way as EPA does. BEV compliance values in the CAFE program are 
determined, per statute, using DOE's Petroleum Equivalency Factor. 
Moreover, the calculated equivalent fuel economies still vary with 
vehicle footprint and, in general, larger vehicles have lower 
calculated equivalent fuel economies. They are not the fuel-economy-
equivalent of 0 g/mi, which would be infinite fuel economy. NHTSA, 
therefore, cannot adopt EPA's rationale that curve slopes should become 
flatter in response to increasing numbers of BEVs because our statutory 
requirements for how BEV fuel economy is calculated necessarily differ 
from how EPA chooses to calculate CO2 emissions for BEVs. 
NHTSA understands that this divergence in curve shape creates 
inconsistency between the programs, but NHTSA does not agree that the 
agency currently has authority to harmonize with EPA's new approach to 
curve shape.
    Regarding the fuel consumption work factor target curves proposed 
for HDPUVs, stakeholders expressed two types of comments. First, a 
group of commenters expressed support for the continued use of the work 
factor attribute, and second, some stakeholders

[[Page 52592]]

expressed concern over NHTSA maintaining separate diesel and gasoline 
compliance curves.
    On the use of the work factor attribute, the Alliance stated, ``We 
agree with NHTSA's conclusion that work factor is a reasonable and 
appropriate attribute for setting fuel consumption standards. Work 
factor effectively captures the intent of these vehicles, which is to 
perform work, and has a strong correlation to fuel consumption.'' \174\ 
These sentiments were echoed by other commenters.\175\ NHTSA agrees 
with the stakeholders, and after considering these comments, the agency 
has once again concluded that the work factor approach established in 
the 2011 ``Phase 1'' rulemaking and continued in the 2016 ``Phase 2'' 
rulemaking is reasonable and appropriate.
---------------------------------------------------------------------------

    \174\ The Alliance, Docket No. NHTSA-2023-0022-60652, at 52-64.
    \175\ Stellantis, Docket No. NHTSA-2023-0022-61107, at 12; 
Cummins, Inc., Docket No. NHTSA-2023-0022-60204, at 2; GM, Docket 
No. NHTSA-2023-0022-60686, at 7.
---------------------------------------------------------------------------

    On the continued use of separate diesel and gasoline curves for the 
HDPUV standards, the American Council for an Energy-Efficient Economy 
(ACEEE) commented, ``In further alignment with EPA, NHTSA should 
eliminate the different standards for diesel and gasoline (i.e., 
compression-ignition and spark-ignition) HDPUVs.'' \176\ ACEEE argued 
further that ``Given NHTSA's acknowledgement of the emergence of van 
electrification and its history of alignment with EPA for HDPUVs, 
raising the stringency of the gasoline standards to match that of the 
diesel standards should be feasible.'' \177\
---------------------------------------------------------------------------

    \176\ ACEEE, Docket No. NHTSA-2023-022-60684-A1, at 8.
    \177\ ACEEE, Docket No. NHTSA-2023-022-60684-A1, at 8.
---------------------------------------------------------------------------

    ACEEE requested that NHTSA align with EPA by developing a single 
standard curve for both SI and CI HDPUVs for MYs 2027 through 2032. As 
mentioned in the NPRM, NHTSA is statutorily required to provide at 
least four full MYs of lead time and three full MYs of regulatory 
stability for its HDPUV fuel consumption standards. As such, we are 
unable to align with EPA's change to its standard due to an 
insufficient amount of lead time. However, we believe the regulatory 
stability of the current HDPUV fuel consumption standards provide 
enough stability for the industry to continue to develop technologies 
needed to meet our standards. In addition, we believe retaining 
separate CI and SI curves will better balance NHTSA's statutory 
factors.\178\
---------------------------------------------------------------------------

    \178\ U.S.C. 32920(k)(2).
---------------------------------------------------------------------------

C. What inputs does the compliance analysis require?

    The first step in our analysis of the effects of different levels 
of fuel economy standards is the compliance simulation. When we say, 
``compliance simulation'' throughout this rulemaking, we mean the CAFE 
Model's simulation of how vehicle manufacturers could comply with 
different levels of CAFE standards by adding fuel economy-improving 
technology to an existing fleet of vehicles.\179\ At the most basic 
level, a model is a set of equations, algorithms,\180\ or other 
calculations that are used to make predictions about a complex system, 
such as the environmental impact of a particular industry or activity. 
A model may consider various inputs, such as emissions data, technology 
costs, or other relevant factors, and use those inputs to generate 
output predictions.
---------------------------------------------------------------------------

    \179\ When we use the phrase ``the model'' throughout this 
section, we are referring to the CAFE Model. Any other model will be 
specifically named.
    \180\ See Merriam-Webster, ``algorithm.'' Broadly, an algorithm 
is a step-by-step procedure for solving a problem or accomplishing 
some end. More specifically, an algorithm is a procedure for solving 
a mathematical problem (as of finding the greatest common divisor) 
in a finite number of steps that frequently involves repetition of 
an operation.
---------------------------------------------------------------------------

    One important note about models is that a model is only as good as 
the data and assumptions that go into it. We attempt to ensure that the 
technology inputs and assumptions that go into the CAFE Model to 
project the effects of different levels of CAFE standards are based on 
sound science and reliable data, and that our reasons for using those 
inputs and assumptions are transparent and understandable to 
stakeholders. This section and the following section discuss at a high 
level how we generate the technology inputs and assumptions that the 
CAFE Model uses for the compliance simulation.\181\ The TSD, CAFE Model 
Documentation, CAFE Analysis Autonomie Model Documentation,\182\ and 
other technical reports supporting this final rule discuss our 
technology inputs and assumptions in more detail.
---------------------------------------------------------------------------

    \181\ As explained throughout this section, our inputs are a 
specific number or datapoint used by the model, and our assumptions 
are based on judgment after careful consideration of available 
evidence. An assumption can be an underlying reason for the use of a 
specific datapoint, function, or modeling process. For example, an 
input might be the fuel economy value of the Ford Mustang, whereas 
the assumption is that the Ford Mustang's fuel economy value 
reported in Ford's CAFE compliance data should be used in our 
modeling.
    \182\ The Argonne report is titled ``Vehicle Simulation Process 
to Support the Analysis for MY 2027 and Beyond CAFE and MY 2030 and 
Beyond HDPUV FE Standards;'' however, for ease of use and 
consistency with the TSD, it is referred to as ``CAFE Analysis 
Autonomie Documentation.''
---------------------------------------------------------------------------

    We incorporate technology inputs and assumptions either directly in 
the CAFE Model or in the CAFE Model's various input files. The heart of 
the CAFE Model's decisions about how to apply technologies to 
manufacturer's vehicles to project how the manufacturer could meet CAFE 
standards is the compliance simulation algorithm. The compliance 
simulation algorithm is several equations that direct the model to 
apply fuel economy-improving technologies to vehicles in a way that 
estimates how manufacturers might apply those technologies to their 
vehicles in the real world. The compliance simulation algorithm 
projects a cost-effective pathway for manufacturers to comply with 
different levels of CAFE standards, considering the technology present 
on manufacturer's vehicles now, and what technology could be applied to 
their vehicles in the future. Embedded directly in the CAFE Model is 
the universe of technology options that the model can consider and some 
rules about the order in which it can consider those options and 
estimates of how effective fuel economy improving-technology is on 
different types of vehicles, like on a sedan or a pickup truck.
    Technology inputs and assumptions are also located in all four of 
the CAFE Model Input Files. The Market Data Input File is a Microsoft 
Excel file that characterizes the analysis automotive fleet used as the 
starting point for CAFE modeling. There is one Excel row describing 
each vehicle model and model configuration manufactured in the United 
States in a MY (or years), and input and assumption data that links 
that vehicle to technology, economic, environmental, and safety 
effects. Next, the Technologies Input File identifies approximately six 
dozen technologies we use in the analysis, uses phase-in caps to 
identify when and how widely each technology can be applied to specific 
types of vehicles, provides most of the technology costs (only battery 
costs for electrified vehicles are provided in a separate file), and 
provides some of the inputs involved in estimating impacts on vehicle 
fuel consumption and weight. The Scenarios Input File provides the 
coefficient values defining the standards for each regulatory 
alternative,\183\ and other

[[Page 52593]]

relevant information applicable to modeling each regulatory scenario. 
This information includes, for example, the estimated value of select 
tax credits from the IRA, which provide Federal technology incentives 
for electrified vehicles, and the PEF, which is a value that the 
Secretary of Energy determines under EPCA that applies to EV fuel 
economy values.\184\ Finally, the Parameters Input File contains mainly 
economic and environmental data, as well as data about how fuel economy 
credits and California's Zero Emissions Vehicle program credits are 
simulated in the model.
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    \183\ The coefficient values are defined in TSD Chapter 1.2.1 
for both the CAFE and HDPUV FE standards.
    \184\ See 49 U.S.C. 32904(a)(2), 89 FR 22041 (March 29, 2024).
---------------------------------------------------------------------------

    We generate these technology inputs and assumptions in several 
ways, including by and through evaluating data submitted by vehicle 
manufacturers pursuant to their CAFE reporting obligations; 
consolidating public data on vehicle models from manufacturer websites, 
press materials, marketing brochures, and other publicly available 
information; collaborative research, testing, and modeling with other 
Federal agencies, like the DOE's Argonne National Laboratory; research, 
testing, and modeling with independent organizations, like IAV GmbH 
Ingenieurgesellschaft Auto und Verkehr (IAV), Southwest Research 
Institute (SwRI), NAS, and FEV North America; determining that work 
done for prior rules is still relevant and applicable; considering 
feedback from stakeholders on prior rules, in meetings conducted before 
the commencement of this rule, and feedback received during the comment 
period for this final rule; and using our own engineering judgment. 
When we say ``engineering judgment'' throughout this rulemaking, we are 
referring to decisions made by a team of engineers and analysts. This 
judgment is based on their experience working in the automotive 
industry and other relevant fields, and assessment of all the data 
sources described above. Most importantly, we use engineering judgment 
to assess how best to represent vehicle manufacturer's potential 
responses to different levels of CAFE standards within the boundaries 
of our modeling tools, as ``a model is meant to simplify reality in 
order to make it tractable.'' \185\ In other words, we use engineering 
judgment to concentrate potential technology inputs and assumptions 
from millions of discrete data points from hundreds of sources to three 
datasets integrated in the CAFE Model and four input files. How the 
CAFE Model decides to apply technology, i.e., the compliance simulation 
algorithm, has also been developed using engineering judgment, 
considering some of the same factors that manufacturers consider when 
they add technology to vehicles in the real world.
---------------------------------------------------------------------------

    \185\ Chem. Mfrs. Ass'n v. E.P.A., 28 F.3d 1259, 1264-65 (D.C. 
Cir. 1994) (citing Milton Friedman. 1953. The Methodology of 
Positive Economics. Essays in Positive Economics 3, at 14-15).
---------------------------------------------------------------------------

    While upon first read this discussion may seem oversimplified, we 
believe that there is value in all stakeholders being able to 
understand how the analysis uses different sets of technology inputs 
and assumptions and how those inputs and assumptions are based on real-
world factors. This is so that all stakeholders have the appropriate 
context to better understand the specific technology inputs and 
assumptions discussed later and in detail in all of the associated 
technical documentation.
1. Technology Options and Pathways
    We begin the compliance analysis by defining the range of fuel 
economy-improving technologies that the CAFE Model could add to a 
manufacturer's vehicles in the United States market.\186\ These are 
technologies that we believe are representative of what vehicle 
manufacturers currently use on their vehicles, and that vehicle 
manufacturers could use on their vehicles in the timeframe of the 
standards (MYs 2027 and beyond for the LD analysis and MYs 2030 and 
beyond for the HDPUV analysis). The technology options include basic 
and advanced engines, transmissions, electrification, and road load 
technologies, which include mass reduction (MR), aerodynamic 
improvement (AERO), and tire rolling resistance (ROLL) reduction 
technologies. Note that while EPCA/EISA constrains our ability to 
consider the possibility that manufacturers would comply with CAFE 
standards by implementing some electrification technologies when making 
decisions about the level of CAFE standards that is maximum feasible, 
there are several reasons why we must accurately model the range of 
available electrification technologies. These are discussed in more 
detail in Section III.D and in Section VI.
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    \186\ 40 CFR 86.1806-17--Onboard diagnostics; 40 CFR 86.1818-
12--Greenhouse gas emission standards for light-duty vehicles, 
light-duty trucks, and medium-duty passenger vehicles; Commission 
Directive 2001/116/EC--European Union emission regulations for new 
LDVs--including passenger cars and light commercial vehicles (LCV).
---------------------------------------------------------------------------

    We require several data elements to add a technology to the range 
of options that the CAFE Model can consider; those elements include a 
broadly applicable technology definition, estimates of how effective 
that technology is at improving a vehicle's fuel economy value on a 
range of vehicles (e.g., sedan through pickup truck, or HD pickup truck 
and HD van), and the cost to apply that technology on a range of 
vehicles. Each technology we select is designed to be representative of 
a wide range of specific technology applications used in the automotive 
industry. For example, in MY 2022, eleven vehicle brands under five 
vehicle manufacturers \187\ used what we call a ``downsized 
turbocharged engine with cylinder deactivation.'' While we might expect 
brands owned by the same manufacturer to use similar technology on 
their engines, among those five manufacturers, the engine systems will 
likely be very different. Some manufacturers may also have been making 
those engines longer than others, meaning that they have had more time 
to make the system more efficient while also making it cheaper, as they 
make gains learning the development improvement and production process. 
If we chose to model the best performing, cheapest engine and applied 
that technology across vehicles made by all automotive manufacturers, 
we would likely be underestimating the cost and underestimating the 
technology required for the entire automotive industry to achieve 
higher levels of CAFE standards. The reverse would be true if we 
selected a system that was less efficient and more expensive. So, in 
reality, some manufacturers' systems may perform better or worse than 
our modeled systems, and some may cost more or less than our modeled 
systems. However, selecting representative technology definitions for 
our analysis will ensure that, on balance, we capture a reasonable 
level of costs and benefits that would result from any manufacturer 
applying the technology.
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    \187\ Ford, General Motors (GM), Honda, Stellantis, and VWA 
represent the following 11 brands: Acura, Alfa Romeo, Audi, Bentley, 
Buick, Cadillac, Chevrolet, Ford, GMC, Lamborghini, and Porsche.
---------------------------------------------------------------------------

    We have been refining the LD technology options since first 
developing the CAFE Model in the early 2000s. ``Refining'' means both 
adding and removing technology options depending on technology 
availability now and projected future availability in the United States 
market, while balancing a reasonable amount of modeling and analytical 
complexity. Since the last analysis we have reduced the number of LD 
ICE technology options but have refined the options, so they better 
reflect the diversity of

[[Page 52594]]

engines in the current fleet. Our technology options also reflect an 
increase in diversity for hybridization and electrification options, 
though we utilize these options in a manner that is consistent with 
statutory constraints. In addition to better representing the current 
fleet, this reflects consistent feedback from vehicle manufacturers who 
have told us that they will reduce investment in ICEs while increasing 
investment in hybrid and plug-in BEV options.\188\
---------------------------------------------------------------------------

    \188\ 87 FR 25781 (May 2, 2022); Docket Submission of Ex Parte 
Meetings Prior to Publication of the Corporate Average Fuel Economy 
Standards for Passenger Cars and Light Trucks for Model Years 2027-
2032 and Fuel Efficiency Standards for Heavy-Duty Pickup Trucks and 
Vans for Model Years 2030-2035 Notice of Proposed Rulemaking 
memorandum, which can be found under References and Supporting 
Material in the rulemaking Docket No. NHTSA-2023-0022.
---------------------------------------------------------------------------

    Feedback on the past several CAFE rules has also centered 
thematically on the expected scope of future electrified vehicle 
technologies and how we should consider future developments in our 
analysis. We have received feedback that we cannot consider BEV options 
and even so, our costs underestimate BEV costs when we do consider them 
in, for example, the reference baseline. We have also received comments 
that we should consider more electrified vehicle options and our costs 
overestimate future costs. Consistent with our interpretation of EPCA/
EISA, discussed further in Section III.D and VI, we include several LD 
electrified technologies to appropriately represent the diversity of 
current and anticipated future technology options while ensuring our 
analysis remains consistent with statutory limitations. In addition, 
this ensures that our analysis can appropriately capture manufacturer 
decision making about their vehicle fleets for reasons other than CAFE 
standards (e.g., other regulatory programs and manufacturing 
decisions).
    The technology options also include our judgment about which 
technologies will not be available in the rulemaking timeframe. There 
are several reasons why we may have concluded that it was reasonable to 
exclude a technology from the options we consider. As with past 
analyses, we did not include technologies unlikely to be feasible in 
the rulemaking timeframe, engines technologies designed for markets 
other than the United States market that are required to use unique 
gasoline,\189\ or technologies where there were not appropriate data 
available for the range of vehicles that we model in the analysis (i.e. 
technologies that are still in the research and development phase but 
are not ready for mass market production). Each technology section 
below and Chapter 3 of the TSD discusses these decisions in detail.
---------------------------------------------------------------------------

    \189\ In general, most vehicles produced for sale in the United 
States have been designed to use ``Regular'' gasoline, or 87 octane. 
See EIA. 2022. Octane in Depth. Last revised: Nov. 17, 2022. 
Available at: https://www.eia.gov/energyexplained/gasoline/octane-in-depth.php. (Accessed: Feb. 23, 2024), for more information.
---------------------------------------------------------------------------

    The HDPUV technology options also represent a diverse range of both 
internal combustion and electrified powertrain technologies. We last 
used the CAFE Model for analyzing HDPUV standards in the Phase 2 Medium 
and Heavy-Duty Greenhouse Gas and Fuel Efficiency joint rules with EPA 
in 2016.\190\ Since issuing that rule, we refined the ICE technology 
options based on trends on vehicles in the fleet and updated technology 
cost and effectiveness data. The HDPUV options also reflect more 
electrification and hybridization options in that real-world fleet. 
However, the HDPUV technology options are also less diverse than the LD 
technology options, for several reasons. The HDPUV fleet is 
significantly smaller than the LD fleet, with five manufacturers 
building a little over 25 nameplates in one thousand vehicle model 
configurations,\191\ compared with the 20 LDV manufacturers building 
more than 250 nameplates in the range of over two thousand 
configurations. Also, by definition, the HDPUV fleet only includes two 
vehicle types: HD pickup trucks and work vans.\192\ These vehicle types 
have focused applications, which includes transporting people and 
moving equipment and supplies. As discussed in more detail below, these 
vehicles are built with specific technology application, reliability, 
and durability requirements in order to do work.\193\ We believe the 
range of HDPUV technology options appropriately and reasonably 
represents the smaller range of technology options available currently 
and for application in future MYs for the United States market.
---------------------------------------------------------------------------

    \190\ 81 FR 73478 (Oct. 25, 2016); NHTSA. 2023. CAFE Compliance 
and Effects Modeling System. Corporate Average Fuel Economy. 
Available at: https://www.nhtsa.gov/corporate-average-fuel-economy/cafe-compliance-and-effects-modeling-system. (Accessed: Feb. 27, 
2024).
    \191\ In this example, a HDPUV ``nameplate'' could be the 
``Sprinter 2500'', as in the Mercedes-Benz Sprinter 2500. The 
vehicle model configurations are each unique variants of the 
Sprinter 2500 that have an individual row in our Market Data Input 
File, which are divided generally based on compliance fuel 
consumption value and WF.
    \192\ For the proposal, vehicles were divided between the LD and 
HDPUV fleets solely on their gross vehicle weight rating (GVWR) 
being above or below 8,500 lbs. We revisited the distribution of 
vehicles in this final rule to include the distinction for MDPVs.
    \193\ ``Work'' includes hauling, towing, carrying cargo, or 
transporting people, animals, or equipment.
---------------------------------------------------------------------------

    Note, however, that for both the LD and HDPUV analyses, the CAFE 
Model does not dictate or predict the technologies manufacturers must 
use to comply; rather, the CAFE Model outlines a technology pathway 
that manufacturers could use to meet the standards cost-effectively. 
While we estimate the costs and benefits for different levels of CAFE 
standards estimating technology application that manufacturers could 
use in the rulemaking timeframe, it is entirely possible and reasonable 
that a vehicle manufacturer will use different technology options to 
meet our standards than the CAFE Model estimates and may even use 
technologies that we do not include in our analysis. This is because 
our standards do not mandate the application of any particular 
technology. Rather, our standards are performance-based: manufacturers 
can and do use a range of compliance solutions that include technology 
application, shifting sales from one vehicle model or trim level to 
another,\194\ and even paying civil penalties. That said, we are 
confident that the 75 LD technology options and 30 HDPUV technology 
options included in the analysis (in particular considering that for 
each technology option, the analysis includes distinct technology cost 
and effectiveness values for fourteen different types of vehicles, 
resulting in about a million different technology effectiveness and 
cost data points) strike a reasonable balance between the diversity of 
technology used by an entire industry and simplifying reality in order 
to make modeling tractable.
---------------------------------------------------------------------------

    \194\ Manufacturers could increase their production of one type 
of vehicle that has higher fuel economy level, like the hybrid 
version of a conventional vehicle model, to meet the standards. For 
example, Ford has conventional, hybrid, and electric versions of its 
F-150 pickup truck, and Toyota has conventional, hybrid, and plug-in 
hybrid versions of its RAV4 sport utility vehicle.
---------------------------------------------------------------------------

    Chapter 3 of the TSD and Section III.D below describe the 
technologies that we used for the LD and HDPUV analyses. Each 
technology has a name that loosely corresponds to its real-world 
technology equivalent. We abbreviate the name to a short easy signifier 
for the CAFE Model to read. We organize those technologies into groups 
based on technology type: basic and advanced engines, transmissions, 
electrification, and road load technologies, which include MR, 
aerodynamic improvement, and low rolling resistance tire technologies.

[[Page 52595]]

    We then organize the groups into pathways. The pathways instruct 
the CAFE Model how and in what order to apply technology. In other 
words, the pathways define technologies that are mutually exclusive 
(i.e., that cannot be applied at the same time), and define the 
direction in which vehicles can advance as the model evaluates which 
technologies to apply. The respective technology chapters in the TSD 
and Section 4 of the CAFE Model Documentation for the final rule 
include a visual of each technology pathway. In general, the paths are 
tied to ease of implementation of additional technology and how closely 
related the technologies are.
    As an example, our ``Turbo Engine Path'' consists of five different 
engine technologies that employ different levels of turbocharging 
technology. A turbocharger is essentially a small turbine that is 
driven by exhaust gases produced by the engine. As these gases flow 
through the turbocharger, they spin the turbine, which in turn spins a 
compressor that pushes more air into an engine's cylinder. Having more 
air in the engine's cylinder allows the engine to burn more fuel, which 
then creates more power, without needing a physically larger engine. In 
our analysis, an engine that uses a turbocharger ``downsizes,'' or 
becomes smaller. The smaller engine can use less fuel to do the same 
amount of work as the engine did before it used a turbocharger and was 
downsized. Allowing basic engines to be downsized and turbocharged 
instead of just turbocharged keeps the vehicle's utility and 
performance constant so that we can measure the costs and benefits of 
different levels of fuel economy improvements, rather than the change 
in different vehicle attributes. This concept is discussed further, 
below.
    Grouping technologies on pathways also tells the model how to 
evaluate technologies; continuing this example, a vehicle can only have 
one engine, so if a vehicle has one of the Turbo engines the model will 
evaluate which more advanced Turbo technology to apply. Or, if it is 
more cost-effective to go beyond the Turbo pathway, the model will 
evaluate whether to apply more advanced engine technologies and 
hybridization path technology.
    Then, the arrows between technologies instruct the model on the 
order in which to evaluate technologies on a pathway. This ensures that 
a vehicle that uses a more advanced technology cannot downgrade to a 
less advanced version of the technology, or that a vehicle would switch 
to technology that was significantly technically different. As an 
example, if a vehicle in the compliance simulation begins with a TURBOD 
engine--a turbocharged engine with cylinder deactivation--it cannot 
adopt a TURBO0 engine.\195\ Similarly, this vehicle with a TURBOD 
engine cannot adopt an ADEACD engine.\196\ As an example of our 
rationale for ordering technologies on the technology tree, an engine 
could potentially be changed from TURBO0 to TURBO2 without redesigning 
the engine block or requiring significantly different expertise to 
design and implement. A change to ADEACD would likely require a 
different engine block that might not be possible to fit in the engine 
bay of the vehicle without a complete redesign and different technical 
expertise requiring years of research and development. This change, 
which would strand capital and break parts sharing, is why the advanced 
engine paths restrict most movement between them. The concept of 
stranded capital is discussed further in Section III.C.6. The model 
follows instructions pursuant to the direction of arrows between 
technology groups and between technologies on the same pathway.
---------------------------------------------------------------------------

    \195\ TURBO0 is the baseline turbocharged engine and TURBOD is 
TURBO0 with the addition of cylinder deactivation (DEAC). See 
chapter 3 of the TSD for more discussion on engine technologies.
    \196\ ADEACD is a dual overhead camshaft engine with advanced 
cylindar deactivation. See chapter 3 of the TSD for more discussion 
on engine technologies.
---------------------------------------------------------------------------

    We also consider two categories of technology that we could not 
simulate as part of the CAFE Model's technology pathways. ``Off-cycle'' 
and air conditioning (AC) efficiency technologies improve vehicle fuel 
economy, but the benefit of those technologies cannot be captured using 
the fuel economy test methods that we must use under EPCA/EISA.\197\ As 
an example, manufacturers can claim a benefit for technology like 
active seat ventilation and solar reflective surface coatings that make 
the cabin of a vehicle more comfortable for the occupants, who then do 
not have to use other less efficient accessories like heat or AC. 
Instead of including off-cycle and AC efficiency technologies in the 
technology pathways, we include the improvement as a defined benefit 
that gets applied to a manufacturer's entire fleet instead of to 
individual vehicles. The defined benefit that each manufacturer 
receives in the analysis for using off-cycle and AC efficiency 
technology on their vehicles is located in the Market Data Input File. 
See Chapter 3.7 of the TSD for more discussion in how off-cycle and AC 
efficiency technologies are developed and modeled.
---------------------------------------------------------------------------

    \197\ See 49 U.S.C. 32904(c) (``Testing and calculation 
procedures. . . . the Administrator shall use the same procedures 
for passenger automobiles the Administrator used for model year 1975 
(weighted 55 percent urban cycle and 45 percent highway cycle), or 
procedures that give comparable results.'').
---------------------------------------------------------------------------

    To illustrate, throughout this section we will follow the 
hypothetical vehicle mentioned above that begins the compliance 
simulation with a TURBOD engine. Our hypothetical vehicle, Generic 
Motors' Ravine Runner F Series, is a roomy, top of the line sport 
utility vehicle (SUV). The Ravine Runner F Series starts the compliance 
simulation with technologies from most technology pathways; 
specifically, after looking at Generic Motors' website and marketing 
materials, we determined that it has technology that loosely fits 
within the following technologies that we consider in the CAFE Model: 
it has a turbocharged engine with cylinder deactivation, a fairly 
advanced 10-speed automatic transmission, a 12V start-stop system, the 
least advanced tire technology, a fairly aerodynamic vehicle body, and 
it employs a fairly advanced level of MR. We track the technologies on 
each vehicle using a ``technology key'', which is the string of 
technology abbreviations for each vehicle. Again, the vehicle 
technologies and their abbreviations that we consider in this analysis 
are shown in Table II-1 and Table II-2 above. The technology key for 
the Ravine Runner F Series is ``TURBOD; AT10L2; SS12V; ROLL0; AERO5; 
MR3.''
2. Defining Manufacturers' Current Technology Positions in the Analysis 
Fleet
    The Market Data Input File is one of four Excel input files that 
the CAFE Model uses for compliance and effects simulation. The Market 
Data Input File's ``Vehicles'' tab (or worksheet) houses one of the 
most significant compilations of technology inputs and assumptions in 
the analysis, which is a characterization of an analysis fleet of 
vehicles to which the CAFE Model adds fuel economy-improving 
technology. We call this fleet the ``analysis fleet.'' The analysis 
fleet includes a number of inputs necessary for the model to add fuel 
economy-improving technology to each vehicle for the compliance 
analysis and to calculate the resulting impacts for the effects 
analysis.
    The ``Vehicles'' tab contains a separate row for each vehicle 
model. For LD, vehicle models are vehicles that share the same 
certification fuel economy value and vehicle footprint, and for HDPUVs 
they are vehicles that

[[Page 52596]]

share the same certification fuel consumption and WF. This means that 
vehicle models with different configurations that affect the vehicle's 
certification fuel economy or fuel consumption value will be 
distinguished in separate rows in the Vehicles tab. For example, our 
Ravine Runner example vehicle comes in three different configurations--
the Ravine Runner FWD, Ravine Runner AWD, and Ravine Runner F Series--
which would result in three separate rows.
    In each row we also designate a vehicle's engine, transmission, and 
platform codes.\198\ Vehicles that have the same engine, transmission, 
or platform code are deemed to ``share'' that component in the CAFE 
Model. Parts sharing helps manufacturers achieve economies of scale, 
deploy capital efficiently, and make the most of shared research and 
development expenses, while still presenting a wide array of consumer 
choices to the market. The CAFE Model was developed to treat vehicles, 
platforms, engines, and transmissions as separate entities, which 
allows the modeling system to concurrently evaluate technology 
improvements on multiple vehicles that may share a common component. 
Sharing also enables realistic propagation, or ``inheriting,'' of 
previously applied technologies from an upgraded component down to the 
vehicle ``users'' of that component that have not yet realized the 
benefits of the upgrade. For additional information about the initial 
state of the fleet and technology evaluation and inheriting within the 
CAFE Model, please see Section 2.1 and Section 4.4 of the CAFE Model 
Documentation.
---------------------------------------------------------------------------

    \198\ Each numeric engine, transmission, or platform code 
designates important information about that vehicle's technology; 
for example, a vehicle's six-digit Transmission Code includes 
information about the manufacturer, the vehicle's drive 
configuration (i.e., front-wheel drive, all-wheel drive, four-wheel 
drive, or rear-wheel drive), transmission type, number of gears 
(e.g., a 6-speed transmission has six gears), and the transmission 
variant.
---------------------------------------------------------------------------

    Figure III-5 below shows how we separate the different 
configurations of the Ravine Runner. We can see by the Platform Codes 
that these Ravine Runners all share the same platform, but only the 
Ravine Runner FWD and Ravine Runner AWD share an engine. Even so, all 
three certification fuel economy values are different, which is common 
of vehicles that differ in drive type (drive type meaning whether the 
vehicle has all-wheel drive (AWD), four-wheel drive (4WD), front-wheel 
drive (FWD), or rear-wheel drive). While it would certainly be easier 
to aggregate vehicles by model, ensuring that we capture model variants 
with different fuel economy values improves the accuracy of our 
analysis and the potential that our estimated costs and benefits from 
different levels of standards are appropriate. We include information 
about other vehicle technologies at the farthest right side of the 
Vehicles tab, and in the ``Engines'', ``Transmissions'', and 
``Platforms'' worksheets, as discussed further below.
---------------------------------------------------------------------------

    \199\ Note that not all data columns are shown in this example 
for brevity.
[GRAPHIC] [TIFF OMITTED] TR24JN24.051


[[Page 52597]]


    Moving from left to right on the Vehicles tab, after including 
general information about vehicles and their compliance fuel economy 
value, we include sales and manufacturer's suggested retail price 
(MSRP) data, regulatory class information (i.e., domestic passenger 
car, import passenger car, light truck, MDPV, HD pickup truck, or HD 
van), and information about how we classify vehicles for the 
effectiveness and safety analyses. Each of these data points are 
important to different parts of the compliance and effects analysis, so 
that the CAFE Model can accurately average the technologies required 
across a manufacturer's regulatory classes for each class to meet its 
CAFE standard, or the impacts of higher fuel economy standards on 
vehicle sales.
    In addition, we include columns indicating if a vehicle is a ``ZEV 
Candidate,'' which means that the vehicle could be made into a zero 
emissions vehicle (ZEV) at its first redesign opportunity in order to 
simulate a manufacturer's compliance with California's ACC I or ACT 
program, or manufacturer deployment of electric vehicles on a voluntary 
basis consistent with ACC II, which is discussed further below.
    Next, we include vehicle information necessary for applying 
different types of technology; for example, designating a vehicle's 
body style means that we can appropriately apply aerodynamic 
technology, and designating starting curb weight values means that we 
can more accurately apply MR technology. Importantly, this section also 
includes vehicle footprint data (because we set footprint-based 
standards).
    We also set product design cycles, which are the years when the 
CAFE Model can apply different technologies to vehicles. Manufacturers 
often introduce fuel saving technologies at a ``redesign'' of their 
product or adopt technologies at ``refreshes'' in between product 
redesigns. As an example, the redesigned third generation Chevrolet 
Silverado was released for the 2019 MY, and featured a new platform, 
updated drivetrain, increased towing capacity, reduced weight, improved 
safety and expanded trim levels, to name a few improvements. For MY 
2022, the Chevrolet Silverado received a refresh (or facelift as it is 
commonly called), with an updated interior, infotainment, and front-end 
appearance.\200\ Setting these product design cycles ensures that the 
CAFE Model provides manufacturers with a realistic duration of product 
stability between refresh and redesign cycles, and during these 
stability windows we assume no new fuel saving technology introductions 
for a given model.
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    \200\ GM Authority. 2022 Chevy Silverado. Available at: https://gmauthority.com/blog/gm/chevrolet/silverado/2022-chevrolet-silverado/. (Accessed May 31, 2023).
---------------------------------------------------------------------------

    During modeling, all improvements from technology application are 
initially realized on a component and then propagated (or inherited) 
down to the vehicles that share that component. As such, new component-
level technologies are initially evaluated and applied to a platform, 
engine, or transmission during their respective redesign or refresh 
years. Any vehicles that share the same redesign and/or refresh 
schedule as the component apply these technology improvements during 
the same MY. The rest of the vehicles inherit technologies from the 
component during their refresh or redesign year (for engine- and 
transmission-level technologies), or during a redesign year only (for 
platform-level technologies). Please see Section 4.4 of the CAFE Model 
Documentation for additional information about technology evaluation 
and inheriting within the CAFE Model. We did receive comments on the 
refresh and redesign cycles employed in the CAFE Model, and those are 
discussed in detail below in Section III.C.6.
    The CAFE Model also considers the potential safety effect of MR 
technologies and crash compatibility of different vehicle types. MR 
technologies lower the vehicle's curb weight, which may change crash 
compatibility and safety, depending on the type of vehicle. We assign 
each vehicle in the Market Data Input File a ``safety class'' that best 
aligns with the CAFE Model's analysis of vehicle mass, size, and 
safety, and include the vehicle's starting curb weight.\201\
---------------------------------------------------------------------------

    \201\ Vehicle curb weight is the weight of the vehicle with all 
fluids and components but without the drivers, passengers, and 
cargo.
---------------------------------------------------------------------------

    The CAFE Model includes procedures to consider the direct labor 
impacts of manufacturers' response to CAFE regulations, considering the 
assembly location of vehicles, engines, and transmissions, the percent 
U.S. content (that reflects percent U.S. and Canada content), and the 
dealership employment associated with new vehicle sales. Estimated 
labor information, by vehicle, is included in the Market Data Input 
File. Sales volumes included in and adapted from the market data also 
influence total estimated direct labor projected in the analysis. See 
Chapter 6.2.5 of the TSD for further discussion of the labor 
utilization analysis.
    We then assign the CAFE Model's range of technologies to individual 
vehicles. This initial linkage of vehicle technologies is how the CAFE 
Model knows how to advance a vehicle down each technology pathway. 
Assigning CAFE Model technologies to individual vehicles is dependent 
on the mix of information we have about any particular vehicle and 
trends about how a manufacturer has added technology to that vehicle in 
the past, equations and models that translate real-world technologies 
to their counterparts in our analysis (e.g., drag coefficients and body 
styles can be used to determine a vehicle's AERO level), and our 
engineering judgment.
    As discussed further below, we use information directly from 
manufacturers to populate some fields in the Market Data Input File, 
like vehicle horsepower ratings and vehicle weight. We also use 
manufacturer data as an input to various other models that calculate 
how a manufacturer's real-world technology equates to a technology 
level in our model. For example, we calculate initial MR, aerodynamic 
drag reduction, and ROLL levels by looking at industry-wide trends and 
calculating--through models or equations--levels of improvement for 
each technology. The models and algorithms that we use are described 
further below and in detail in Chapter 3 of the TSD. Other fields, like 
vehicle refresh and redesign years, are projected forward based on 
historic trends.
    Let us return to the Ravine Runner F Series with the technology key 
``TURBOD; AT10L2, SS12V; ROLL0; AERO5; MR3.'' Generic Motor's publicly 
available spec sheet for the Ravine Runner F Series says that the 
Ravine Runner F Series uses Generic Motor's Turbo V6 engine with 
proprietary Adaptive Cylinder Management Engine (ACME) technology. ACME 
improves fuel economy and lowers emissions by operating the engine 
using only three of the engine's cylinders in most conditions and using 
all six engine cylinders when more power is required. Generic Motors 
uses this engine in several of their vehicles, and the specifications 
of the engine can be found in the Engines Tab of the Market Data Input 
File, under a six-digit engine code.\202\
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    \202\ Like the Transmission Codes discussed above, the Engine 
Codes include information identifying the manufacturer, engine 
displacement (i.e., how many liters the engine is), whether the 
engine is naturally aspirated or force inducted (e.g., 
turbocharged), and whether the engine has any other unique 
attributes.

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[[Page 52598]]

    This is a relatively easy engine to assign based on publicly 
available specification sheets, but some technologies are more 
difficult to assign. Manufacturers use different trade names or terms 
for different technology, and the way that we assign the technology in 
our analysis may not necessarily line up with how a manufacturer 
describes the technology. We must use some engineering judgment to 
determine how discrete technologies in the market best fit the 
technology options that we consider in our analysis. We discuss factors 
that we use to assign each vehicle technology in the individual 
technology subsections below.
    In addition to the Vehicles Tab that houses the analysis fleet, the 
Market Data Input File includes information that affects how the CAFE 
Model might apply technology to vehicles in the compliance simulation. 
Specifically, the Market Data Input File's ``Manufacturers'' tab 
includes a list of vehicle manufacturers considered in the analysis and 
several pieces of information about their economic and compliance 
behavior. First, we determine if a manufacturer ``prefers fines,'' 
meaning that historically in the LD fleet, we have observed this 
manufacturer paying civil penalties for failure to meet CAFE 
standards.\203\ We might designate a manufacturer as not preferring 
fines if, for example, they have told us that paying civil penalties 
would be a violation of provisions in their corporate charter. For the 
NPRM analysis, we assumed that all manufacturers were willing to pay 
fines in MYs 2022-2026, and that in MY 2027 and beyond, only the 
manufacturers that had historically paid fines would continue to pay 
fines. We sought comment on fine payment preference assumptions. Jaguar 
Land Rover NA commented that they do ``not view fine payment as an 
appropriate compliance route or as a flexibility in the regulation.'' 
\204\ In response to JLR's comment, NHTSA has changed their fine 
preference in the analysis from ``prefer fines'' to ``not prefer 
fines'' for MYs 2027 and beyond. Ford and the Alliance also commented 
on not using fines for HDPUV compliance.\205\ Both commenters agreed 
with NHTSA's approach of not including fines in the HDPUV analysis. 
NHTSA maintained the same approach from the NPRM for this final rule 
and intends to do so in the future.
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    \203\ See 49 U.S.C. 32912.
    \204\ Jaguar, Docket No. NHTSA-2023-0022-57296, at 5.
    \205\ Ford, Docket No. NHTSA-2023-0022-60837, at 8; The 
Alliance, Docket No. NHTSA-2023-0022-60652-A5, at 63-64.
---------------------------------------------------------------------------

    However, as further discussed below in regard to the CAFE Model's 
compliance simulation algorithm in Section III.C.6, note that the model 
will still apply technologies for these manufacturers if it is cost-
effective to do so, as defined by several variables.
    Next, we designate a ``payback period'' for each manufacturer. The 
payback period represents an assumption that consumers are willing to 
buy vehicles with more fuel economy technology because the fuel economy 
technology will save them money on gas in the long run. For the past 
several CAFE Model analyses we have assumed that in the absence of CAFE 
or other regulatory standards, manufacturers would apply technology 
that ``pays for itself''--by saving the consumer money on fuel--in 2.5 
years. While the amount of technology that consumers are willing to pay 
for is subject to much debate, we continue to assume a 2.5-year payback 
period based on what manufacturers have told us they do, and on 
estimates in the available literature. This is discussed in detail in 
Section III.E below, and in the TSD and FRIA.
    We also designate in the Market Data Input File the percentage of 
each manufacturer's sales that must meet Advanced Clean Car I 
requirements in certain states, and percentages of sales that 
manufacturers are expected to produce consistent with levels that would 
be required under the Advanced Clean Cars II program, if it were to be 
granted a Clean Air Action preemption waiver. Section 209(a) of the CAA 
generally preempts states from adopting emission control standards for 
new motor vehicles; however, Congress created an exemption program in 
section 209(b) that allows the State of California to seek a waiver of 
preemption. EPA must grant the waiver unless the Agency makes one of 
three statutory findings.\206\ Under CAA section 177, other States can 
adopt and enforce standards identical those approved under California's 
section 209(b) waiver.
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    \206\ See 87 FR 14332 (March 14, 2022). (``The CAA section 
209(b) waiver is limited ``to any State which has adopted standards 
. . . for the control of emissions from new motor vehicles or new 
motor vehicle engines prior to March 30, 1966,'' and California is 
the only State that had standards in place before that date.'').
---------------------------------------------------------------------------

    Finally, we include estimated CAFE compliance credit banks for each 
manufacturer in several years through 2021, which is the year before 
the compliance simulation begins. The CAFE Model does not explicitly 
simulate credit trading between and among vehicle manufacturers, but we 
estimate how manufacturers might use compliance credits in early MYs. 
This reflects manufacturers' tendency to use regulatory credits as an 
alternative to applying technology.\207\
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    \207\ Note, this is just an observation about manufacturers' 
tendency to use regulatory credits rather than to apply technology; 
in accordance with 49 U.S.C. 32902(h), the CAFE Model does not 
simulate a manufacturer's potential credit use during the years for 
which we are setting new CAFE standards.
---------------------------------------------------------------------------

    Before we begin building the Market Data Input File for any 
analysis, we must consider what MY vehicles will comprise the analysis 
fleet. There is an inherent time delay in the data we can use for any 
particular analysis because we must set LD CAFE standards at least 18 
months in advance of a MY if the CAFE standards increase,\208\ and 
HDPUV fuel efficiency standards at least 4 full MYs in advance if the 
standards increase.\209\ In addition to the requirement to set 
standards at least 18 months in advance of a MY, we must propose 
standards with enough time to allow the public to comment on the 
proposed standards and meaningfully evaluate that feedback and 
incorporate it into the final rule in accordance with the APA.\210\ 
This means that the most recent data we have available to generate the 
analysis fleet necessarily falls behind the MY fleets of vehicles for 
which we generate standards.
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    \208\ 49 U.S.C. 32902(a).
    \209\ 49 U.S.C. 32902(k)(3)(A).
    \210\ 5 U.S.C. 553.
---------------------------------------------------------------------------

    Using recent data for the analysis fleet is more likely to reflect 
the current vehicle fleet than older data. Recent data will inherently 
include manufacturer's realized decisions on what fuel economy-
improving technology to apply, mix shifts in response to consumer 
preferences (e.g., more recent data reflects manufacturer and consumer 
preference towards larger vehicles),\211\ and industry sales volumes 
that incorporate substantive macroeconomic events (e.g., the impact of 
the Coronavirus disease of 2019 (COVID) or microchip shortages). We 
considered that using an analysis fleet year that has been impacted by 
these transitory shocks may not represent trends in future years; 
however, on balance, we believe that updating to using the most 
complete set of available fleet data provides the most accurate 
analysis fleet for the CAFE Model to calculate compliance and effects 
of different levels of future fuel economy

[[Page 52599]]

standards. Also, using recent data decreases the likelihood that the 
CAFE Model selects compliance pathways for future standards that affect 
vehicles already built in previous MYs.\212\
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    \211\ See EPA. 2023. The 2023 EPA Automotive Trends Report, 
Greenhouse Gas Emissions, Fuel Economy, and Technology since 1975. 
EPA-420-R-23-033. at 14-19. hereinafter the 2023 EPA Automotive 
Trends Report.
    \212\ For example, in this analysis the CAFE Model must apply 
technology to the MY 2022 fleet from MYs 2023-2026 for the 
compliance simulation that begins in MY 2027 (for the light-duty 
fleet), and from MYs 2023-2029 for the compliance simulation that 
begins in MY 2030 (for the HDPUV fleet). While manufacturers have 
already built MY 2022 and later vehicles, the most current, complete 
dataset with regulatory fuel economy test results to build the 
analysis fleet at the time of writing remains MY 2022 data for the 
light-duty fleet, and a range of MYs between 2014 and 2022 for the 
HDPUV fleet.
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    At the time we start building the analysis fleet, data that we 
receive from vehicle manufacturers in accordance with EPCA/EISA,\213\ 
and our CAFE compliance regulations in advance of or during an ongoing 
MY,\214\ offers the best snapshot of vehicles for sale in the US in a 
MY. These pre-model year (PMY) and mid-model year (MMY) reports include 
information about individual vehicles at the vehicle configuration 
level. We use the vehicle configuration, certification fuel economy, 
sales, regulatory class, and some additional technology data from these 
reports as the starting point to build a ``row'' (i.e., a vehicle 
configuration, with all necessary information about the vehicle) in the 
Market Data Input File's Vehicle's Tab. Additional technology data come 
from publicly available information, including vehicle specification 
sheets, manufacturer press releases, owner's manuals, and websites. We 
also generate some assumptions in the Market Data Input File for data 
fields where there is limited data, like refresh and redesign cycles 
for future MYs, and technology levels for certain road load reduction 
technologies like MR and aerodynamic drag reduction.
---------------------------------------------------------------------------

    \213\ 49 U.S.C. 32907(a)(2).
    \214\ 49 CFR part 537.
---------------------------------------------------------------------------

    For this analysis, the LD analysis fleet consists of every vehicle 
model in MY 2022 in nearly every configuration that has a different 
compliance fuel economy value, which results in more than 2,000 
individual rows in the Vehicles Tab of the Market Data Input File. The 
HDPUV fleet consists of vehicles produced in between MYs 2014 and 2022, 
which results in a little over 1100 individual rows in the HDPUV Market 
Data Input File. We used a combination of MY data for that fleet 
because of data availability, but the resulting dataset is a robust 
amalgamation that provides a reasonable starting point for the much 
smaller fleet.
    Rivian and ZETA commented that some of Rivian's vehicles were mis-
classified between the light-duty and HDPUV analysis fleets.\215\ NHTSA 
was aware that some manufacturer's vehicles were erroneously included 
in the HDPUV fleet rather than the LD fleet. NHTSA stated in the TSD 
that ``for this NPRM, vehicles were divided between light-duty and 
HDPUV solely on GVWR being above or below 8,500 lbs.'' and that ``the 
following will be reassigned to the LD fleet in the final rule: all 
Rivian vehicles.'' Per Rivian's further clarification, NHTSA has 
reassigned all of Rivian's vehicles in accordance with their comments. 
NHTSA has also reassigned Ford F150 Lightnings and some Ford Transit 
Wagons to the LD fleet.
---------------------------------------------------------------------------

    \215\ Rivian, Docket No. NHTSA-2023-0022-59765, at 5-8; ZETA, 
Docket No. NHTSA-2023-0022-60508, at 28.
---------------------------------------------------------------------------

    The Ford vehicles moved represent 3,199 total sales out of 1.6 
million LD and 319.5 thousand HDPUV sales. The re-classification of 
Ford's and Rivian's vehicles does not materially affect the analysis 
results. Ford's vehicles moved represented a very small volume of 
either fleet, and each regulatory class is regulated based on average 
performance thus resulting in minor differences of manufacturer's 
compliance position in each analysis. Moving Rivian's vehicles does not 
materially affect the analysis results either because they always 
exceed the regulatory standards, in either fleet. Their vehicles are 
all electric and outperform the standards every year, regardless of 
which fleet they find themselves in. Their vehicles will have different 
technologies available to them in the LD fleet and thus the actual 
solution will vary. The average costs and pollutant levels of each 
regulatory class will have changed subtly as a result of moving the 
vehicles from one fleet to another, but their changes were also 
affected by the different preferred alternative. The only circumstance 
in which Rivian's inclusion in one fleet or another could materially 
sway the outcome is if we modeled credit trading between manufacturers, 
which is an analysis that EPCA/EISA restricts NHTSA from doing, as 
discussed further elsewhere in this preamble.
    Furthermore, Rivian, ZETA, and Tesla commented about the lack of 
inclusion of Rivian's Class 2b vans and Tesla's Cybertruck.\216\ Rivian 
stated that in the case of the HDPUV program, ``omitting Rivian's Class 
2b vans could have material implications for the agency's final'' 
regulation. Rivian also further explained these comments to the agency 
in a meeting on October 12, 2023.\217\ Tesla's Cybertruck is a 2023 or 
2024 MY vehicle and the compliance data for that vehicle--which is 
essential to accurately characterizing the vehicle in the analysis 
fleet--was not available to the agency at the time of analysis. 
Rivian's electric delivery van launched in MY 2022 but the compliance 
data was not available to NHTSA at the time of fleet development.
---------------------------------------------------------------------------

    \216\ ZETA, Docket No. NHTSA-2023-0022-60508, at 29; Rivian, 
Docket No. NHTSA-2023-0022-59765, at 7-8; Tesla, Docket No. NHTSA-
2023-0022-60093, at 6.
    \217\ Docket Memo of Ex Parte Meeting with Rivian.
---------------------------------------------------------------------------

    NHTSA does not believe that the HDPUV analysis would change 
materially with the inclusion of Rivian's Class 2b vans or Tesla's 
Cybertruck. Both manufacturers would be able to demonstrate compliance 
with any stringency in that analysis, and their inclusion would not 
affect other manufacturers' ability to comply with their standards. 
This is because, once again, the analysis does not perform any form of 
credit trading between manufacturers and thus would not have allowed 
for other manufacturers to comply with higher stringencies. While NHTSA 
does examine the industry average performance when setting standards, 
NHTSA also looks at individual manufacturer performance with the 
standards as well. NHTSA discusses the results of the final HDPUV 
analysis in Section V. NHTSA will be happy to include all available 
manufacturers in any future analysis fleets if compliance data is 
available at the time the fleet is being developed.
    The next section discusses how our analysis evaluates how adding 
additional fuel economy-improving technology to a vehicle in the 
analysis fleet will improve that vehicle's fuel economy value. Put 
another way, the next section answers the question, how do we estimate 
how effective any given technology is at improving a vehicle's fuel 
economy value?
3. Technology Effectiveness Values
    How does the CAFE Model know how effective any particular 
technology is at improving a vehicle's fuel economy value? Accurate 
technology effectiveness estimates require information about: (1) the 
vehicle type and size; (2) the other technologies on the vehicle and/or 
being added to the vehicle at the same time; and (3) and how the 
vehicle is driven. Any oversimplification of these complex factors 
could make the effectiveness estimates less accurate.
    To build a database of technology effectiveness estimates that 
includes these factors, we partner with the DOE's Argonne National 
Laboratory (Argonne).

[[Page 52600]]

Argonne has developed and maintains a physics-based full-vehicle 
modeling and simulation tool called Autonomie that generates technology 
effectiveness estimates for the CAFE Model.
    What is physics-based full-vehicle modeling and simulation? A model 
is a mathematical representation of a system, and simulation is the 
behavior of that mathematical representation over time. The Autonomie 
model is a mathematical representation of an entire vehicle, including 
its individual technologies such as the engine and transmission, 
overall vehicle characteristics such as mass and aerodynamic drag, and 
the environmental conditions, such as ambient temperature and 
barometric pressure.
    We simulate a vehicle model's behavior over the ``two-cycle'' tests 
that are used to measure vehicle fuel economy.\218\ For readers 
unfamiliar with this process, measuring a vehicle's fuel economy on the 
two-cycle tests is like running a car on a treadmill following a 
program--or more specifically, two programs. The ``programs'' are the 
``urban cycle,'' or Federal Test Procedure (abbreviated as ``FTP''), 
and the ``highway cycle,'' or Highway Fuel Economy Test (abbreviated as 
``HFET''). For the FTP drive cycle the vehicle meets certain speeds at 
certain times during the test, or in technical terms, the vehicle must 
follow the designated ``speed trace.'' \219\ The FTP is meant roughly 
to simulate stop and go city driving, and the HFET is meant roughly to 
simulate steady flowing highway driving at about 50 miles per hour 
(mph). We also use the Society of Automotive Engineers (SAE) 
recommended practices to simulate hybridized and EV drive cycles,\220\ 
which involves the test cycles mentioned above and additional test 
cycles to measure battery energy consumption and range.
---------------------------------------------------------------------------

    \218\ We are statutorily required to use the two-cycle tests to 
measure vehicle fuel economy in the CAFE program. See 49 U.S.C. 
32904(c) (``Testing and calculation procedures . . . . the 
Administrator shall use the same procedures for passenger 
automobiles the Administrator used for model year 1975 (weighted 55 
percent urban cycle and 45 percent highway cycle), or procedures 
that give comparable results.'').
    \219\ EPA. 2023. Emissions Standards Reference Guide. EPA 
Federal Test Procedure (FTP). Available at: https://www.epa.gov/emission-standards-reference-guide/epa-federal-test-procedure-ftp. 
(Accessed: Feb. 27, 2024).
    \220\ SAE. 2023. Recommended Practice for Measuring the Exhaust 
Emissions and Fuel Economy of Hybrid-Electric Vehicles, Including 
Plug-in Hybrid Vehicles. SAE Standard J1711. Rev. Feb 2023.; SAE. 
2021. Battery Electric Vehicle Energy Consumption and Range Test 
Procedure. SAE Standard J1634. Rev. April 2021.
---------------------------------------------------------------------------

    Measuring every vehicle's fuel economy values using the same test 
cycles ensures that the fuel economy certification results are 
repeatable for each vehicle model, and comparable across all of the 
different vehicle models. When performing physical vehicle cycle 
testing, sophisticated test and measurement equipment calibrated 
according to strict industry standards further ensures repeatability 
and comparability of the results. This can include dynamometers, 
environmental conditions, types and locations of measurement equipment, 
and precise testing procedures. These physical tests provide the 
benchmarking empirical data used to develop and verify Autonomie's 
vehicle control algorithms and simulation results. Autonomie's inputs 
are discussed in more detail later in this section.
    Finally, ``physics-based'' simply refers to the mathematical 
equations underlying the modeling and simulation--the simulated vehicle 
models and all of the sub-models that make up specific vehicle 
components and the calculated fuel used on simulated test cycles are 
calculated mathematical equations that conform to the laws of physics.
    Full-vehicle modeling and simulation was initially developed to 
avoid the costs of designing and testing prototype parts for every new 
type of technology. For example, Generic Motors can use physics-based 
computer modeling to determine the fuel economy penalty for adding a 
4WD, rugged off-road tire trim level of the Ravine Runner to its 
lineup. The Ravine Runner, modeled with its new drivetrain and off-road 
tires, can be simulated on a defined test route and under defined test 
conditions and compared against the initial Ravine Runner simulated 
without the change. Full-vehicle modeling and simulation allows Generic 
Motors to consider and evaluate different designs and concepts before 
building a single prototype for any potential technology change.
    Full vehicle modeling and simulation is also essential to measuring 
how all technologies on a vehicle interact. For example, if technology 
A improves a particular vehicle's fuel economy by 5% and technology B 
improves a particular vehicle's fuel economy by 10%, an analysis using 
single or limited point estimates may erroneously assume that applying 
both of these technologies together would achieve a simple additive 
fuel economy improvement of 15%. Single point estimates generally do 
not provide accurate effectiveness values because they do not capture 
complex relationships among technologies. Technology effectiveness 
often differs significantly depending on the vehicle type (e.g., sedan 
versus pickup truck) and the way in which the technology interacts with 
other technologies on the vehicle, as different technologies may 
provide different incremental levels of fuel economy improvement if 
implemented alone or in combination with other technologies. As stated 
above, any oversimplification of these complex factors could lead to 
less accurate technology effectiveness estimates.
    In addition, because manufacturers often add several fuel-saving 
technologies simultaneously when redesigning a vehicle, it is difficult 
to isolate the effect of adding any one individual technology to the 
full vehicle system. Modeling and simulation offer the opportunity to 
isolate the effects of individual technologies by using a single or 
small number of initial vehicle configurations and incrementally adding 
technologies to those configurations. This provides a consistent 
reference point for the incremental effectiveness estimates for each 
technology and for combinations of technologies for each vehicle type. 
Vehicle modeling also reduces the potential for overcounting or 
undercounting technology effectiveness.
    Argonne does not build an individual vehicle model for every single 
vehicle configuration in our LD and HDPUV Market Data Input Files. This 
would be nearly impossible, because Autonomie requires very detailed 
data on hundreds of different vehicle attributes (like the weight of 
the vehicle's fuel tank, the weight of the vehicle's transmission 
housing, the weight of the engine, the vehicle's 0-60 mph time, and so 
on) to build a vehicle model, and for practical reasons we cannot 
acquire 4000 vehicles and obtain these measurements every time we 
promulgate a new rule (and we cannot acquire vehicles that have not yet 
been built). Rather, Argonne builds a discrete number of vehicle models 
that are representative of large portions of vehicles in the real 
world. We refer to the vehicle model's type and performance level as 
the vehicle's ``technology class.'' By assigning each vehicle in the 
Market Data Input File a ``technology class,'' we can connect it to the 
Autonomie effectiveness estimate that best represents how effective the 
technology would be on the vehicle, taking into account vehicle 
characteristics like type and performance metrics. Because each vehicle 
technology class has unique characteristics, the effectiveness of 
technologies and combinations of technologies is different for each 
technology class.

[[Page 52601]]

    There are ten technology classes for the LD analysis: small car 
(SmallCar), small performance car (SmallCarPerf), medium car (MedCar), 
medium performance car (MedCarPerf), small SUV (SmallSUV), small 
performance SUV (SmallSUVPerf), medium SUV (MedSUV), medium performance 
SUV (MedSUVPerf), pickup truck (Pickup), and high towing pickup truck 
(PickupHT). There are four technology classes for the HDPUV analysis, 
based on the vehicle's ``weight class.'' An HDPUV that weighs between 
8,501 and 10,000 pounds is in ``Class 2b,'' and an HDPUV that weighs 
between 10,001 and 14,000 pounds is in ``Class 3.'' Our four HDPUV 
technology classes are Pickup2b, Pickup3, Van2b, and Van3.
    We use a two-step process that involves two algorithms to give 
vehicles a ``fit score'' that determines which vehicles best fit into 
each technology class. At the first step we determine the vehicle's 
size, and at the second step we determine the vehicle's performance 
level. Both algorithms consider several metrics about the individual 
vehicle and compare that vehicle to other vehicles in the analysis 
fleet. This process is discussed in detail in TSD Chapter 2.2.
    Consider our Ravine Runner F Series, which is a medium-sized 
performance SUV. The exact same combination of technologies on the 
Ravine Runner F Series will operate differently in a compact car or 
pickup truck because they are different vehicle sizes. Our Ravine 
Runner F Series also achieves slightly better performance metrics than 
other medium-sized SUVs in the analysis fleet. When we say, 
``performance metrics,'' we mean power, acceleration, handing, braking, 
and so on, but for the performance fit score algorithm, we consider the 
vehicle's estimated 0-60 mph time compared to an initial 0-60 mph time 
for the vehicle's technology class. Accordingly, the ``technology 
class'' for the Ravine Runner F Series in our analysis is 
``MedSUVPerf''.
    Table III-1 shows how vehicles in different technology classes that 
use the exact same fuel economy technology have very different absolute 
fuel economy values. Note that, as discussed further below, the 
Autonomie absolute fuel economy values are not used directly in the 
CAFE Model; we calculate the ratio between two Autonomie absolute fuel 
economy values (one for each technology key for a specific technology 
class) and apply that ratio to an analysis fleet vehicle's starting 
fuel economy value.
[GRAPHIC] [TIFF OMITTED] TR24JN24.052

    Let us also return to the concept of what we call technology 
synergies. Again, depending on the technology, when two technologies 
are added to the vehicle together, they may not result in an additive 
fuel economy improvement. This is an important concept to understand 
because in Section III.D, below, we present technology effectiveness 
estimates for every single combination of technology that could be 
applied to a vehicle. In some cases, technology effectiveness estimates 
show that a combined technology has a different effectiveness estimate 
than if the individual technologies were added together individually. 
However, this is expected and not an error. Continuing our example from 
above, turbocharging technology and DEAC technology both improve fuel 
economy by reducing the engine displacement, and accordingly burning 
less fuel. Turbocharging allows a larger naturally aspirated engine to 
be reduced in size or displacement while still doing the same amount of 
work, and its fuel efficiency improvements are, in part, due to the 
reduced displacement. DEAC effectively makes an engine with a 
particular displacement intermittently offer some of the fuel economy 
benefits of a smaller-displacement engine by deactivating cylinders 
when the work demand does not require the full engine displacement and 
reactivating them as-needed to meet higher work demands; the greater 
the displacement of the deactivated cylinders, the greater the fuel 
economy benefit. Therefore, a manufacturer upgrading to an engine that 
uses both a turbocharger and DEAC technology, like the TURBOD engine in 
our example above, would not see the full combined fuel economy 
improvement from that specific combination of technologies. Table III-2 
shows a vehicle's fuel economy value when using the first-level DEAC 
technology and when using the first-level turbocharging technology, 
compared to our vehicle that uses both of those technologies combined 
with a TURBOD engine.

[[Page 52602]]

[GRAPHIC] [TIFF OMITTED] TR24JN24.053

    As expected, the percent improvement in Table III-2 between the 
first and second rows is 1.7% and between the third and fourth rows is 
0.3%, even though the only difference within the two sets of technology 
keys is the DEAC technology (note that we only compare technology keys 
within the same technology class). This is because there are complex 
interactions between all fuel economy-improving technologies. We model 
these individual technologies and groups of technologies to reduce the 
uncertainty and improve the accuracy of the CAFE Model outputs.
    Some technology synergies that we discuss in Section III.D include 
advanced engine and hybrid powertrain technology synergies. As an 
example, we do not see a particularly high effectiveness improvement 
from applying advanced engines to existing parallel strong hybrid 
(i.e., P2) architectures.\221\ In this instance, the P2 powertrain 
improves fuel economy, in part, by allowing the engine to spend more 
time operating at efficient engine speed and load conditions. This 
reduces the advantage of adding advanced engine technologies, which 
also improve fuel economy, by broadening the range of speed and load 
conditions for the engine to operate at high efficiency. This 
redundancy in fuel savings mechanism results in a lower effectiveness 
when the technologies are added to each other. Again, we intend and 
expect that different combinations of technologies will provide 
different effectiveness improvements on different vehicle types. These 
examples all illustrate relationships that we can only observe using 
full vehicle modeling and simulation.
---------------------------------------------------------------------------

    \221\ A parallel strong hybrid powertrain is fundamentally 
similar to a conventional powertrain but adds one electric motor to 
improve efficiency. TSD Chapter 3 shows all of the parallel strong 
hybrid powertrain options we model in this analysis.
---------------------------------------------------------------------------

    Just as our CAFE Model analysis requires a large set of technology 
inputs and assumptions, the Autonomie modeling uses a large set of 
technology inputs and assumptions. Figure III-6 below shows the suite 
of fuel consumption input data used in the Autonomie modeling to 
generate the fuel consumption input data we use in the CAFE Model.
[GRAPHIC] [TIFF OMITTED] TR24JN24.054


[[Page 52603]]


    What are each of these inputs? For full vehicle benchmarking, 
vehicles are instrumented with sensors and tested both on the road and 
on chassis dynamometers (i.e., the car treadmills used to calculate 
vehicle's fuel economy values) under different conditions and duty 
cycles. Some examples of full vehicle benchmark testing we did in 
conjunction with our partners at Argonne in anticipation of this rule 
include a 2019 Chevrolet Silverado, a 2021 Toyota Rav4 Prime, a 2022 
Hyundai Sonata Hybrid, a 2020 Tesla Model 3, and a 2020 Chevrolet 
Bolt.\222\ We produced a report for each vehicle benchmarked which can 
be found in the docket. As discussed further below, that full vehicle 
benchmarking data are used as inputs to the engine modeling and 
Autonomie full vehicle simulation modeling. Component benchmarking is 
like full vehicle benchmarking, but instead of testing a full vehicle, 
we instrument a single production component or prototype component with 
sensors and test it on a similar duty cycle as a full vehicle. Examples 
of components we benchmark include engines, transmissions, axles, 
electric motors, and batteries. Component benchmarking data are used as 
an input to component modeling, where a production or prototype 
component is changed in fit, form and/or function and modeled in the 
same scenario. As an example, we might model a decrease in the size of 
holes in fuel injectors to see the fuel atomization impact or see how 
it affects the fuel spray angle.
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    \222\ For all Argonne National Labs full vehicle benchmarking 
reports, see Docket No. NHTSA-2023-0022-0010.
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    We use a range of models to do the component modeling for our 
analysis. As shown in Figure III-6, battery pack modeling using 
Argonne's BatPaC Model and engine modeling are two of the most 
significant component models used to generate data for the Autonomie 
modeling. We discuss BatPaC in detail in Section II.D, but briefly, 
BatPaC is the battery pack modeling tool we use to estimate the cost of 
vehicle battery packs based on the materials chemistry, battery design, 
and manufacturing design of the plants manufacturing the battery packs.
    Engine modeling is used to generate engine fuel map models that 
define the fuel consumption rate for an engine equipped with specific 
technologies when operating over a variety of engine load and engine 
speed conditions. Some performance metrics we capture in engine 
modeling include power, torque, airflow, volumetric efficiency, fuel 
consumption, turbocharger performance and matching, pumping losses, and 
more. Each engine map model has been developed ensuring the engine will 
still operate under real-world constraints using a suite of other 
models. Some examples of these models that ensure the engine map models 
capture real-world operating constraints include simulating heat 
release through a predictive combustion model, knock characteristics 
through a kinetic fit knock model,\223\ and using physics-based heat 
flow and friction models, among others. We simulate these constraints 
using data gathered from component benchmarking, and engineering and 
physics calculations.
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    \223\ Engine knock occurs when combustion of some of the air/
fuel mixture in the cylinder does not result from propagation of the 
flame front ignited by the spark plug, but one or more pockets of 
air/fuel mixture explodes outside of the envelope of the normal 
combustion front. Engine knock can result in unsteady operation and 
damage to the engine.
---------------------------------------------------------------------------

    The engine map models are developed by creating a base, or root, 
engine map and then modifying that root map, incrementally, to isolate 
the effects of the added technologies. The LD engine maps, developed by 
IAV using their GT-Power modeling tool and the HDPUV engine maps, 
developed by SwRI using their GT-Power modeling tool, are based on 
real-world engine designs. One important feature of both the LD and 
HDPUV engine maps is that they were both developed using a knock model. 
As noted above, a knock model ensures that any engine size or 
specification that we model in the analysis does not result in engine 
knock, which could damage engine components in a real-world vehicle. 
Although the same engine map models are used for all vehicle technology 
classes, the effectiveness varies based on the characteristics of each 
class. For example, as discussed above, a compact car with a 
turbocharged engine will have a different effectiveness value than a 
pickup truck with the same engine technology type. The engine map model 
development and specifications are discussed further in Chapter 3 of 
the TSD.
    Argonne also compiles a database of vehicle attributes and 
characteristics that are reasonably representative of the vehicles in 
that technology class to build the vehicle models. Relevant vehicle 
attributes may include a vehicle's fuel efficiency, emissions, 
horsepower, 0-60 mph acceleration time, and stopping distance, among 
others, while vehicle characteristics may include whether the vehicle 
has all-wheel-drive, 18-inch wheels, summer tires, and so on. Argonne 
identified representative vehicle attributes and characteristics for 
both the LD and HDPUV fleets from publicly available information and 
automotive benchmarking databases such as A2Mac1,\224\ Argonne's 
Downloadable Dynamometer Database (D\3\),\225\ EPA compliance and fuel 
economy data,\226\ EPA's guidance on the cold start penalty on 2-cycle 
tests,\227\ the 21st Century Truck Partnership,\228\ and industry 
partnerships.\229\ The resulting vehicle technology class baseline 
assumptions and characteristics database consists of over 100 different 
attributes like vehicle height and width and weights for individual 
vehicle parts.
---------------------------------------------------------------------------

    \224\ A2Mac1: Automotive Benchmarking. (Proprietary data). 
Available at: https://www.a2mac1.com. (Accessed: May 31, 2023). 
A2Mac1 is subscription-based benchmarking service that conducts 
vehicle and component teardown analyses. Annually, A2Mac1 removes 
individual components from production vehicles such as oil pans, 
electric machines, engines, transmissions, among the many other 
components. These components are weighed and documented for key 
specifications which is then available to their subscribers.
    \225\ Argonne National Laboratory. 2023. Downloadable 
Dynamometer Database (D\3\). Argonne National Laboratory, Energy 
Systems Division. Available at: https://www.anl.gov/es/downloadable-dynamometer-database. (Accessed: Feb. 27, 2024).
    \226\ EPA. 2023. Data on Cars Used for Testing Fuel Economy. EPA 
Compliance and Fuel Economy Data. Available at: https://www.epa.gov/compliance-and-fuel-economy-data/data-cars-used-testing-fuel-economy. (Accessed: Feb. 27, 2024).
    \227\ EPA PD TSD at 2-265-2-266.
    \228\ DOE. 2019. 21st Century Truck Partnership Research 
Blueprint. Available at: https://www.energy.gov/sites/default/files/2019/02/f59/21CTPResearchBlueprint2019_FINAL.pdf. (Accessed: Feb. 
27, 2024); DOE. 2023. 21st Century Truck Partnership. Available at: 
https://www.energy.gov/eere/vehicles/21st-century-truck-partnership. 
(Accessed: Feb. 23, 2024); National Academies of Sciences, 
Engineering, and Medicine. 2015. Review of the 21st Century Truck 
Partnership, Third Report. The National Academies Press. Washington, 
DC. Available at: https://nap.nationalacademies.org/catalog/21784/review-of-the-21st-century-truck-partnership-third-report. 
(Accessed: Feb. 23, 2024).
    \229\ North American Council for Freight Efficiency. Research 
and analysis. https://www.nacfe.org/research/overview/. (Accessed: 
Feb. 23, 2024).
---------------------------------------------------------------------------

    Argonne then assigns ``reference'' technologies to each vehicle 
model. The reference technologies are the technologies on the first 
step of each CAFE Model technology pathway, and they closely (but do 
not exactly) correlate to the technology abbreviations that we use in 
the CAFE Model. As an example, the first Autonomie vehicle model in the 
``MedSUVPerf'' technology class starts out with the least advanced 
engine, which is ``DOHC'' (a dual overhead cam engine) in the CAFE 
Model, or ``eng01'' in the Autonomie modeling. The vehicle has the 
least advanced transmission, AT5, the least

[[Page 52604]]

advanced MR level, MR0, the least advanced aerodynamic body style, 
AERO0, and the least advanced ROLL level, ROLL0. The first vehicle 
model is also defined by initial vehicle attributes and characteristics 
that consist of data from the suite of sources mentioned above. Again, 
these attributes are meant to reasonably represent the average of 
vehicle attributes found on vehicles in a certain technology class.
    Then, just as a vehicle manufacturer tests its vehicles to ensure 
they meet specific performance metrics, Autonomie ensures that the 
built vehicle model meets its performance metrics. We include 
quantitative performance metrics in our Autonomie modeling to ensure 
that the vehicle models can meet real-world performance metrics that 
consumers observe and that are important for vehicle utility and 
customer satisfaction. The four performance metrics that we use in the 
Autonomie modeling for light duty vehicles are low-speed acceleration 
(the time required to accelerate from 0-60 mph), high-speed passing 
acceleration (the time required to accelerate from 50-80 mph), 
gradeability (the ability of the vehicle to maintain constant 65 mph 
speed on a six percent upgrade), and towing capacity for light duty 
pickup trucks. We have been using these performance metrics for the 
last several CAFE Model analyses, and vehicle manufacturers have 
repeatedly agreed that these performance metrics are representative of 
the metrics considered in the automotive industry.\230\ Argonne 
simulates the vehicle model driving the two-cycle tests (i.e., running 
its treadmill ``programs'') to ensure that it meets its applicable 
performance metrics (e.g., our MedSUVPerf does not have to meet the 
towing capacity performance metric because it is not a pickup truck). 
For HDPUVs, Autonomie examines sustainable maximum speed at 6 percent 
grade, start/launch capability on grade, and maximum sustainable grade 
at highway cruising speed, before examining towing capability to look 
for the maximum possible vehicle weight over 40 mph in gradeability. 
This process ensures that the vehicle can satisfy the gradeability 
requirement (over 40 mph) with additional payload mass to the curb 
weight. These metrics are based on commonly used metrics in the 
automotive industry, including SAE J2807 tow requirements.\231\ 
Additional details about how we size light duty and HDPUV powertrains 
in Autonomie to meet defined performance metrics can be found in the 
CAFE Analysis Autonomie Documentation.
---------------------------------------------------------------------------

    \230\ See, e.g., NHTSA-2021-0053-1492, at 134 (``Vehicle design 
parameters are never static. With each new generation of a vehicle, 
manufacturers seek to improve vehicle utility, performance, and 
other characteristics based on research of customer expectations and 
desires, and to add innovative features that improve the customer 
experience. The Agencies have historically sought to maintain the 
performance characteristics of vehicles modeled with fuel economy-
improving technologies. Auto Innovators encourages the Agencies to 
maintain a performance-neutral approach to the analysis, to the 
extent possible. Auto Innovators appreciates that the Agencies 
continue to consider highspeed acceleration, gradeability, towing, 
range, traction, and interior room (including headroom) in the 
analysis when sizing powertrains and evaluating pathways for road-
load reductions. All of these parameters should be considered 
separately, not just in combination. (For example, we do not support 
an approach where various acceleration times are added together to 
create a single ``performance'' statistic. Manufacturers must 
provide all types of performance, not just one or two to the 
detriment of others.)'').
    \231\ See SAE. 2020. Performance Requirements for Determining 
Tow-Vehicle Gross Combination Weight Rating and Trailer Weight 
Rating. SAE J2807, Available at: https://www.sae.org/standards/content/j2807_202002/.
---------------------------------------------------------------------------

    If the vehicle model does not initially meet one of the performance 
metrics, then Autonomie's powertrain sizing algorithm increases the 
vehicle's engine power. The increase in power is achieved by increasing 
engine displacement (which is the measure of the volume of all 
cylinders in an engine), which might involve an increase in the number 
of engine cylinders, which may lead to an increase in the engine 
weight. This iterative process then determines if the baseline vehicle 
with increased engine power and corresponding updated engine weight 
meets the required performance metrics. The powertrain sizing algorithm 
stops once all the baseline vehicle's performance requirements are met.
    Some technologies require extra steps for performance optimization 
before the vehicle models are ready for simulation. Specifically, the 
sizing and optimization process is more complex for the electrified 
vehicles, which includes hybrid electric vehicle (HEVs) and plug-in 
hybrid electric vehicles (PHEVs), compared to vehicles with only ICEs, 
as discussed further in the TSD. As an example, a PHEV powertrain that 
can travel a certain number of miles on its battery energy alone 
(referred to as all-electric range (AER), or as performing in electric-
only mode) is also sized to ensure that it can meet the performance 
requirements of the SAE standardized drive cycles mentioned above in 
electric-only mode.
    Every time a vehicle model in Autonomie adopts a new technology, 
the vehicle weight is updated to reflect the weight of the new 
technology. For some technologies, the direct weight change is easy to 
assess. For example, when a vehicle is updated to a higher geared 
transmission, the weight of the original transmission is replaced with 
the corresponding transmission weight (e.g., the weight of a vehicle 
moving from a 6-speed automatic (AT6) to an 8-speed automatic (AT8) 
transmission is updated based on the 8-speed transmission weight). For 
other technologies, like engine technologies, calculating the updated 
vehicle weight is more complex. As discussed earlier, modeling a change 
in engine technology involves both the new technology adoption and a 
change in power (because the reduction in vehicle weight leads to lower 
engine loads, and a resized engine). When a vehicle adopts new engine 
technology, the associated weight change to the vehicle is accounted 
for based on a regression analysis of engine weight versus power.\232\
---------------------------------------------------------------------------

    \232\ See Merriam-Webster, ``regression analysis'' is the use of 
mathematical and statistical techniques to estimate one variable 
from another especially by the application of regression 
coefficients, regression curves, regression equations, or regression 
lines to empirical data. In this case, we are estimating engine 
weight by looking at the relationship between engine weight and 
engine power.
---------------------------------------------------------------------------

    In addition to using performance metrics that are commonly used by 
automotive manufacturers, we instruct Autonomie to mimic real-world 
manufacturer decisions by only resizing engines at specific intervals 
in the analysis and in specific ways. When a vehicle manufacturer is 
making decisions about how to change a vehicle model to add fuel 
economy-improving technology, the manufacturer could entirely 
``redesign'' the vehicle, or the manufacturer could ``refresh'' the 
vehicle with relatively more minor technology changes. We discuss how 
our modeling captures vehicle refreshes and redesigns in more detail 
below, but the details are easier to understand if we start by 
discussing some straightforward yet important concepts. First, most 
changes to a vehicle's engine happen when the vehicle is redesigned and 
not refreshed, as incorporating a new engine in a vehicle is a 10- to 
15-year endeavor at a cost of $750 million to $1 billion.\233\ But, 
manufacturers will use that same basic engine, with only minor changes, 
across multiple vehicle models. We

[[Page 52605]]

model engine ``inheriting'' from one vehicle to another in both the 
Autonomie modeling and the CAFE Model. During a vehicle ``refresh'', 
one vehicle may inherit an already redesigned engine from another 
vehicle that shares the same platform. In the Autonomie modeling, when 
a new vehicle adopts fuel saving technologies that are inherited, the 
engine is not resized (i.e., the properties from the reference vehicle 
are used directly). While this may result in a small change in vehicle 
performance, manufacturers have repeatedly and consistently told us 
that the high costs for redesign and the increased manufacturing 
complexity that would result from resizing engines for small technology 
changes preclude them from doing so. In addition, when a manufacturer 
applies MR technology (i.e., makes the vehicle lighter), the vehicle 
can use a less powerful engine because there is less weight to move. 
However, Autonomie will only use a resized engine at certain MR 
application levels, as a representation of how manufacturers update 
their engine technologies. Again, this is intended to reflect 
manufacturer's comments that it would be unreasonable and unaffordable 
to resize powertrains for every unique combination of technologies. We 
have determined that our rules about performance neutrality and 
technology inheritance result in a fleet that is essentially 
performance neutral.
---------------------------------------------------------------------------

    \233\ 2015 NAS Report, at 256. It's likely that manufacturers 
have made improvements in the product lifetime and development 
cycles for engines since this NAS report and the report that the NAS 
relied on, but we do not have data on how much. We believe that it 
is still reasonable to conclude that generating an all new engine or 
transmission design with little to no carryover from the previous 
generation would be a notable investment.
---------------------------------------------------------------------------

    Why is it important to ensure that the vehicle models in our 
analysis maintain consistent performance levels? The answer involves 
how we measure the costs and benefits of different levels of fuel 
economy standards. In our analysis, we want to capture the costs and 
benefits of vehicle manufacturers applying fuel economy-improving 
technologies to their vehicles. For example, say a manufacturer that 
adds a turbocharger to their engine without downsizing the engine, and 
then directs all of the additional engine work to additional vehicle 
horsepower instead of vehicle fuel economy improvements. If we modeled 
increases or decreases in performance because of fuel economy-improving 
technology, that increase in performance has a monetized benefit 
attached to it that is not specifically due to our fuel economy 
standards. By ensuring that our vehicle modeling remains performance 
neutral, we can better ensure that we are reasonably capturing the 
costs and benefits due only to potential changes in the fuel economy 
standards.
    For the NPRM, we analyzed the change in low speed acceleration (0-
60 mph) time for four scenarios: (1) MY 2022 under the no action 
scenario (i.e., No-Action Alternative), (2) MY 2022 under the Preferred 
Alternative, (3) MY 2032 under the no action scenario, and (4) MY 2032 
under the Preferred Alternative.\234\ Using the MY 2022 analysis fleet 
sales volumes as weights, we calculated the weighted average 0-60 mph 
acceleration time for the analysis fleet in each of the four above 
scenarios. We identified that the analysis fleet under no action 
standards in MY 2032 had a 0.5002 percent worse 0-60 mph acceleration 
time than under the Preferred Alternative, indicating there is minimal 
difference in performance between the alternatives. Although we did not 
conduct the same analysis for the final rule preferred standard, we are 
confident that the difference in performance time would be 
insignificant, similar to the NPRM analysis, because the preferred 
standard falls between the no action and the proposal.
---------------------------------------------------------------------------

    \234\ The baseline reference for both the No-Action Alternative 
and the Preferred Alternative is MY 2022 fleet performance.
---------------------------------------------------------------------------

    Autonomie then adopts one single fuel saving technology to the 
initial vehicle model, keeping everything else the same except for that 
one technology and the attributes associated with it. Once one 
technology is assigned to the vehicle model and the new vehicle model 
meets its performance metrics, the vehicle model is used as an input to 
the full vehicle simulation. This means that Autonomie simulates 
driving the optimized vehicle models for each technology class on the 
test cycles we described above. As an example, the Autonomie modeling 
could start with 14 initial vehicle models (one for each technology 
class in the LD and HDPUV analysis). Those 14 initial vehicle models 
use a 5-speed automatic transmission (AT5).\235\ Argonne then builds 14 
new vehicle models; the only difference between the 14 new vehicle 
models and the first set of vehicle models is that the new vehicle 
models have a 6-speed automatic transmission (AT6). Replacing the AT5 
with an AT6 would lead either to an increase or decrease in the total 
weight of the vehicle because each technology class includes different 
assumptions about transmission weight. Argonne then ensures that the 
new vehicle models with the 6-speed automatic transmission meet their 
performance metrics. Now we have 28 different vehicle models that can 
be simulated on the two-cycle tests. This process is repeated for each 
technology option and for each technology class. This results in 
fourteen separate datasets, each with over 100,000 results, that 
include information about a vehicle model made of specific fuel 
economy-improving technology and the fuel economy value that the 
vehicle model achieved driving its simulated test cycles.
---------------------------------------------------------------------------

    \235\ Note that although both the LD and HDPUV analyses include 
a 5-speed automatic transmission, the characteristics of those 
transmissions differ between the two analyses.
---------------------------------------------------------------------------

    We condense the million-or-so datapoints from Autonomie into three 
datasets used in the CAFE Model. These three datasets include (1) the 
fuel economy value that each modeled vehicle achieved while driving the 
test cycles, for every technology combination in every technology class 
(converted into ``fuel consumption'', which is the inverse of fuel 
economy; fuel economy is mpg and fuel consumption is gallons per mile); 
(2) the fuel economy value for PHEVs driving those test cycles, when 
those vehicles drive on gasoline-only in order to comply with statutory 
constraints; and (3) optimized battery costs for each vehicle that 
adopts some sort of electrified powertrain (this is discussed in more 
detail below).
    Now, how does this information translate into the technology 
effectiveness data that we use in the CAFE Model? An important feature 
of this analysis is that the fuel economy improvement from each 
technology and combinations of technologies should be accurate and 
relative to a consistent reference point. We use the absolute fuel 
economy values from the full vehicle simulations only to determine the 
relative fuel economy improvement from adding a set of technologies to 
a vehicle, but not to assign an absolute fuel economy value to any 
vehicle model or configuration. For this analysis, the absolute fuel 
economy value for each vehicle in the analysis fleet is based on CAFE 
compliance data. For subsequent technology changes, we apply the 
incremental fuel economy improvement values from one or more 
technologies to the analysis fleet vehicle's fuel economy value to 
determine the absolute fuel economy achieved for applying the 
technology change. Accordingly, when the CAFE Model is assessing how to 
cost-effectively add technology to a vehicle in order to improve the 
vehicle's fuel economy value, the CAFE Model calculates the difference 
in the fuel economy value from an Autonomie modeled vehicle with less 
technology and an Autonomie modeled vehicle with more technology. The 
relative difference between the two Autonomie modeled vehicles' fuel 
economy values is applied to the actual fuel economy

[[Page 52606]]

value of a vehicle in the CAFE Model's analysis fleet.
    Let's return to our Ravine Runner F Series, which has a starting 
fuel economy value of just over 26 mpg and a starting technology key 
``TURBOD; AT10L2; SS12V; ROLL0; AERO5; MR3.'' The equivalent Autonomie 
vehicle model has a starting fuel economy value of just over 30.8 mpg 
and is represented by the technology descriptors Midsize_SUV, Perfo, 
Micro Hybrid, eng38, AUp, 10, MR3, AERO1, ROLL0. In 2028, the CAFE 
Model determines that Generic Motors needs to redesign the Ravine 
Runner F Series to reach Generic Motors' new light truck CAFE standard. 
The Ravine Runner F Series now has lots of new fuel economy-improving 
technology--it is a parallel strong HEV with a TURBOE engine, an 
integrated 8-speed automatic transmission, 30% improvement in ROLL, 20% 
aerodynamic drag reduction, and 10% lighter glider (i.e., mass 
reduction). Its new technology key is now P2TRBE, ROLL30, AERO20, MR3. 
Table III-3 shows how the incremental fuel economy improvement from the 
Autonomie simulations is applied to the Ravine Runner F Series' 
starting fuel economy value.
[GRAPHIC] [TIFF OMITTED] TR24JN24.055

    Note that the fuel economy values we obtain from the Autonomie 
modeling are based on the city and highway test cycles (i.e., the two-
cycle test) described above. This is because we are statutorily 
required to measure vehicle fuel economy based on the two-cycle 
test.\236\ In 2008, EPA introduced three additional test cycles to 
bring fuel economy ``label'' values from two-cycle testing in line with 
the efficiency values consumers were experiencing in the real world, 
particularly for hybrids. This is known as 5-cycle testing. Generally, 
the revised 5-cycle testing values have proven to be a good 
approximation of what consumers will experience while driving, 
significantly better than the previous two-cycle test values. Although 
the compliance modeling uses two-cycle fuel economy values, we use the 
``on-road'' fuel economy values, which are the ratio of 5-cycle to 2-
cycle testing values (i.e., the CAFE compliance values to the ``label'' 
values) \237\ to calculate the value of fuel savings to the consumer in 
the effects analysis. This is because the 5-cycle test fuel economy 
values better represent fuel savings that consumers will experience 
from real-world driving. For more information about these calculations, 
please see Section 5.3.2 of the CAFE Model Documentation, and our 
discussion of the effects analysis later in this section.
---------------------------------------------------------------------------

    \236\ 49 U.S.C. 32904(c) (EPA ``shall measure fuel economy for 
each model and calculate average fuel economy for a manufacturer 
under testing and calculation procedures prescribed by the 
Administrator. However, except under section 32908 of this title, 
the Administrator shall use the same procedures for passenger 
automobiles the Administrator used for model year 1975 (weighted 55 
percent urban cycle and 45 percent highway cycle), or procedures 
that give comparable results.'').
    \237\ We apply a certain percent difference between the 2-cycle 
test value and 5-cycle test value to represent the gap in compliance 
fuel economy and real-world fuel economy.
---------------------------------------------------------------------------

    In sum, we use Autonomie to generate physics-based full vehicle 
modeling and simulation technology effectiveness estimates. These 
estimates ensure that our modeling captures differences in technology 
effectiveness due to (1) vehicle size and performance relative to other 
vehicles in the analysis fleet; (2) other technologies on the vehicle 
and/or being added to the vehicle at the same time; and (3) and how the 
vehicle is driven. This modeling approach also comports with the NAS 
2015 recommendation to use full vehicle modeling supported by the 
application of lumped improvements at the sub-model level.\238\ The 
approach allows the isolation of technology effects in the analysis 
supporting an accurate assessment.
---------------------------------------------------------------------------

    \238\ 2015 NAS report, at 292.
---------------------------------------------------------------------------

    In our analysis, ``technology effectiveness values'' are the 
relative difference between the fuel economy value for one Autonomie 
vehicle model driving the two-cycle tests, and a second Autonomie 
vehicle model that uses new technology driving the two-cycle tests. We 
add the difference between two Autonomie-generated fuel economy values 
to a vehicle in the Market Data Input File's CAFE compliance fuel 
economy value. We then calculate the costs and benefits of different 
levels of fuel economy standards using the incremental improvement 
required to bring an analysis fleet vehicle model's fuel economy value 
to a level that contributes to a manufacturer's fleet meeting its CAFE 
standard.
    In the next section, Technology Costs, we describe the process of 
generating costs for the Technologies Input File.
4. Technology Costs
    We estimate present and future costs for fuel-saving technologies 
based on a vehicle's technology class and engine size. In the 
Technologies Input File, there is a separate tab for each technology 
class that includes unique costs for that class (depending on the 
technology), and a separate tab for each engine size that also contains 
unique engine costs for each engine size. These

[[Page 52607]]

technology cost estimates are based on three main inputs. First, we 
estimate direct manufacturing costs (DMCs), or the component and labor 
costs of producing and assembling a vehicle's physical parts and 
systems. DMCs generally do not include the indirect costs of tools, 
capital equipment, financing costs, engineering, sales, administrative 
support or return on investment. We account for these indirect costs 
via a scalar markup of DMCs, which is termed the RPE. Finally, costs 
for technologies may change over time as industry streamlines design 
and manufacturing processes. We estimate potential cost improvements 
from improvements in the manufacturing process with learning effects 
(LEs). The retail cost of technology in any future year is estimated to 
be equal to the product of the DMC, RPE, and LE. Considering the retail 
cost of equipment, instead of merely DMCs, is important to account for 
the real-world price effects of a technology, as well as market 
realities. Each of these technology cost components is described 
briefly below and in the following individual technology sections, and 
in detail in Chapters 2 and 3 of the TSD.
    DMCs are the component and assembly costs of the physical parts and 
systems that make up a complete vehicle. We estimate DMCs for 
individual technologies in several ways. Broadly, we rely in large part 
on costs estimated by the NHTSA-sponsored 2015 NAS study on the Cost, 
Effectiveness, and Deployment of Fuel Economy Technologies for LDVs and 
other NAS studies on fuel economy technologies; BatPaC, a publicly 
available battery pack modeling software developed and maintained by 
Argonne, NHTSA-sponsored teardown studies, and our own analysis of how 
much advanced MR technology (i.e., carbon fiber) is available for 
vehicles now and in the future; confidential business information 
(CBI); and off-cycle and AC efficiency costs from the EPA Proposed 
Determination TSD.\239\ While DMCs for fuel-saving technologies reflect 
the best estimates available today, technology cost estimates will 
likely change in the future as technologies are deployed and as 
production is expanded. For emerging technologies, we use the best 
information available at the time of the analysis and will continue to 
update cost assumptions for any future analysis.
---------------------------------------------------------------------------

    \239\ EPA. 2016. Proposed Determination on the Appropriateness 
of the Model Year 2022-2025 Light-Duty Vehicle Greenhouse Gas 
Emissions Standards under the Midterm Evaluation: Technical Support 
Document. Assessment and Standards Division, Office of 
Transportation and Air Quality. Available at: https://nepis.epa.gov/Exe/ZyPDF.cgi?Dockey=P100Q3L4.pdf. (Accessed: Feb. 27, 2024).
---------------------------------------------------------------------------

    Our direct costs include materials, labor, and variable energy 
costs required to produce and assemble the vehicle; however, direct 
costs do not include production overhead, corporate overhead, selling 
costs, or dealer costs, which all contribute to the price consumers 
ultimately pay for the vehicle. These components of retail prices are 
illustrated in Table III-4 below.
[GRAPHIC] [TIFF OMITTED] TR24JN24.056

    To estimate total consumer costs (i.e., both direct and indirect 
costs), we multiply a technology's DMCs by an indirect cost factor to 
represent the average price for fuel-saving technologies at retail. The 
factor that we use is the RPE, and it is the most commonly used to 
estimate indirect costs of producing a motor vehicle. The RPE markup 
factor is based on an examination of historical financial data 
contained in 10-K reports filed by manufacturers with the Securities 
and Exchange Commission (SEC). It represents the ratio between the 
retail

[[Page 52608]]

price of motor vehicles and the direct costs of all activities that 
manufacturers engage in.
    For more than three decades, the retail price of motor vehicles has 
been, on average, roughly 50 percent above the direct cost expenditures 
of manufacturers.\240\ This ratio has been remarkably consistent, 
averaging roughly 1.5 with minor variations from year to year over this 
period. At no point has the RPE markup based on 10-K reports exceeded 
1.6 or fallen below 1.4.\241\ During this time frame, the average 
annual increase in real direct costs was 2.5 percent, and the average 
annual increase in real indirect costs was also 2.5 percent. The RPE 
averages 1.5 across the lifetime of technologies of all ages, with a 
lower average in earlier years of a technology's life, and, because of 
LEs on direct costs, a higher average in later years. Many automotive 
industry stakeholders have either endorsed the 1.5 markup,\242\ or have 
estimated alternative RPE values. As seen in Table III-5 all estimates 
range between 1.4 and 2.0, and most are in the 1.4 to 1.7 range.
---------------------------------------------------------------------------

    \240\ Rogozhin, A. et al. 2009. Automobile Industry Retail Price 
Equivalent and Indirect Cost Multipliers. EPA. RTI Project Number 
0211577.002.004. Triangle Park, N.C.; Spinney, B.C. et al. 1999. 
Advanced Air Bag Systems Cost, Weight, and Lead Time Analysis 
Summary Report. Contract NO. DTNH22-96-0-12003. Task Orders--001, 
003, and 005. Washington, DC.
    \241\ Based on data from 1972-1997 and 2007. Data were not 
available for intervening years but results for 2007 seem to 
indicate no significant change in the historical trend.
    \242\ Chris Nevers, Vice President, Energy & Environment, 
Alliance of Automobile Manufacturers via Regulations.gov. Docket No. 
EPA-HQ-OAR-2018-0283-6186, at 143.
    \243\ Duleep, K.G. 2008. Analysis of Technology Cost and Retail 
Price. Presentation to Committee on Assessment of Technologies for 
Improving LDV Fuel Economy. January 25, 2008, Detroit, MI.; Jack 
Faucett Associates. 1985. Update of EPA's Motor Vehicle Emission 
Control Equipment Retail Price Equivalent (RPE) Calculation Formula. 
September 4, 1985. Chevy Chase, MD.; McKinsey & Company. 2003. 
Preface to the Auto Sector Cases. New Horizons--Multinational 
Company Investment in Developing Economies. San Francisco, CA.; NRC. 
2002. Effectiveness and Impact of Corporate Average Fuel Economy 
Standards. The National Academies Press. Washington, DC Available 
at: https://nap.nationalacademies.org/catalog/10172/effectiveness-and-impact-of-corporate-average-fuel-economy-cafe-standards. 
(Accessed: Apr. 5, 2024).; NRC. 2011. Assessment of Fuel Economy 
Technologies for LDVs. The National Academies Press. Washington, DC; 
NRC. 2015. Cost, Effectiveness, and Deployment of Fuel Economy 
Technologies in LDVs. The National Academies Press. Washington, DC; 
Sierra Research, Inc. 2007. Study of Industry-Average Mark-Up 
Factors used to Estimate Changes in Retail Price Equivalent (RPE) 
for Automotive Fuel Economy and Emissions Control Systems. Sierra 
Research Inc. Sacramento, CA; Vyas, A. et al. 2000. Comparison of 
Indirect Cost Multipliers for Vehicle Manufacturing. Center for 
Transportation Research. ANL. Argonne, Ill.
[GRAPHIC] [TIFF OMITTED] TR24JN24.057

    An RPE of 1.5 does not imply that manufacturers automatically mark 
up each vehicle by exactly 50 percent. Rather, it means that, over 
time, the competitive marketplace has resulted in pricing structures 
that average out to this relationship across the entire industry. 
Prices for any individual model may be marked up at a higher or lower 
rate depending on market demand. The consumer who buys a popular 
vehicle may, in effect, subsidize the installation of a new technology 
in a less marketable vehicle. But, on average, over time and across the 
vehicle fleet, the retail price paid by consumers has risen by about 
$1.50 for each dollar of direct costs incurred by manufacturers. Based 
on our own evaluation and the widespread use and acceptance of the RPE 
by automotive industry stakeholders, we have determined that the RPE 
provides a reasonable indirect cost markup for use in our analysis. A 
detailed discussion of indirect cost methods and the basis for our use 
of the RPE to reflect these costs, rather than other indirect cost 
markup methods, is available in the FRIA for the 2020 final rule.\244\
---------------------------------------------------------------------------

    \244\ NHTSA and EPA. 2020. FRIA: The Safer Affordable Fuel-
Efficient (SAFE) Vehicles Rule for Model Year 2021-2026 Passenger 
Cars and Light Trucks. Available at: https://www.nhtsa.gov/sites/nhtsa.gov/files/documents/final_safe_fria_web_version_200701.pdf. 
(Accessed: Mar. 29, 2024).
---------------------------------------------------------------------------

    Finally, manufacturers make improvements to production processes 
over time, which often result in lower costs. ``Cost learning'' 
reflects the effect of experience and volume on the cost of production, 
which generally results in better utilization of resources, leading to 
higher and more efficient production. As manufacturers gain experience 
through production, they refine production techniques, raw material and 
component sources, and assembly methods to maximize efficiency and 
reduce production costs.
    We estimated cost learning by considering methods established by 
T.P. Wright and later expanded upon by J.R. Crawford. Wright, examining 
aircraft production, found that every doubling of cumulative production 
of airplanes resulted in decreasing labor hours at a fixed percentage. 
This fixed percentage is commonly referred to as the progress rate or 
progress ratio, where a lower rate implies faster learning as 
cumulative production increases. J.R. Crawford expanded upon Wright's 
learning curve theory to develop a single unit cost model, which 
estimates the cost of the nth unit produced given the following 
information is known: (1) cost to produce the first unit; (2) 
cumulative

[[Page 52609]]

production of n units; and (3) the progress ratio.
    Consistent with Wright's learning curve, most technologies in the 
CAFE Model use the basic approach by Wright, where we estimate 
technology cost reductions by applying a fixed percentage to the 
projected cumulative production of a given fuel economy technology in a 
given MY.\245\ We estimate the cost to produce the first unit of any 
given technology by identifying the DMC for a technology in a specific 
MY. As discussed above and in detail below and in Chapter 3 of the TSD, 
our technology DMCs come from studies, teardown reports, other publicly 
available data, and feedback from manufacturers and suppliers. Because 
different studies or cost estimates are based on costs in specific MYs, 
we identify the ``base'' MYs for each technology where the learning 
factor is equal to 1.00. Then, we apply a progress ratio to back-
calculate the cost of the first unit produced. The majority of 
technologies in the CAFE Model use a progress ratio (i.e., the slope of 
the learning curve, or the rate at which cost reductions occur with 
respect to cumulative production) of approximately 0.89, which is 
derived from average progress ratios researched in studies funded and/
or identified by NHTSA and EPA.\246\ Many fuel economy technologies 
that have existed in vehicles for some time will have a gradual sloping 
learning curve implying that cost reductions from learning is moderate 
and eventually becomes less steep toward MY2050. Conversely, newer 
technologies have an initial steep learning curve where cost reduction 
occurs at a high rate. Mature technologies will generally have a 
flatter curve and may not incur much cost reduction, if at all, from 
learning. For an illustration showing various slopes of learning 
curves, see TSD Chapter 2.4.4.
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    \245\ We use statically projected cumulative volume production 
estimates beause the CAFE Model does not support dynamic projections 
of cumulative volume at this time.
    \246\ Simons, J.F. 2017. Cost and Weight Added By the Federal 
Motor Vehicle Safety Standards for MY 1968-2012 Passenger Cars and 
LTVs. Report No. DOT HS 812 354. NHTSA. Washington DC at 30-33.; 
Argote, L. et al. 1997. The Acquisition and Depreciation of 
Knowledge in a Manufacturing Organization--Turnover and Plant 
Productivity. Working Paper. Graduate School of Industrial 
Administration, Carnegie Mellon University; Benkard, C.L. 2000. 
Learning and Forgetting--The Dynamics of Aircraft Production. The 
American Economic Review. Vol. 90(4): at 1034-54; Epple, D. et al. 
1991. Organizational Learning Curves--A Method for Investigating 
Intra-Plant Transfer of Knowledge Acquired through Learning by 
Doing. Organization Science. Vol. 2(1): at 58-70; Epple, D. et al. 
1996. An Empirical Investigation of the Microstructure of Knowledge 
Acquisition and Transfer through Learning by Doing. Operations 
Research. Vol. 44(1): at 77-86; Levitt, S.D. et al. 2013. Toward an 
Understanding of Learning by Doing--Evidence from an Automobile 
Assembly Plant. Journal of Political Economy. Vol. 121(4): at 643-
81.
---------------------------------------------------------------------------

    We assign groups of similar technologies or technologies of similar 
complexity to each learning curve. While the grouped technologies 
differ in operating characteristics and design, we chose to group them 
based on market availability, complexity of technology integration, and 
production volume of the technologies that can be implemented by 
manufacturers and suppliers. In general, we consider most base and 
basic engine and transmission technologies to be mature technologies 
that will not experience any additional improvements in design or 
manufacturing. Other basic engine technologies, like VVL, SGDI, and 
DEAC, do decrease in costs through around MY 2036, because those were 
introduced into the market more recently. All advanced engine 
technologies follow the same general pattern of a gradual reduction in 
costs until MY 2036, when they plateau and remain flat. We expect the 
cost to decrease as production volumes increase, manufacturing 
processes are improved, and economies of scale are achieved. We also 
assigned advanced engine technologies that are based on a singular 
preceding technology to the same learning curve as that preceding 
technology. Similarly, the more advanced transmission technologies 
experience a gradual reduction in costs through MY 2031, when they 
plateau and remain flat. Lastly, we estimate that the learning curves 
for road load technologies, with the exception of the most advanced MR 
level (which decreases at a fairly steep rate through MY 2040, as 
discussed further below and in Chapter 3.4 of the TSD), will decrease 
through MY 2036 and then remain flat.
    We use the same cost learning rates for both LD and HDPUV 
technologies. This approach was used in the HDPUV analysis in the Phase 
2 HD joint rule with EPA,\247\ and we believe that this is an 
appropriate assumption to continue to use for this analysis. While the 
powertrains in HDPUVs do have a higher power output than LD 
powertrains, the designs and technology used will be very similar. 
Although most HDPUV components will have higher operating loads and 
provide different effectiveness values than LD components, the overall 
designs are similar between the technologies. The individual technology 
design and effectiveness differences between LD and HDPUV technologies 
are discussed below and in Chapter 3 of the TSD.
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    \247\ See MDHD Phase 2 FRIA at 2-56, noting that gasoline 
engines used in Class 2b and Class 3 pickup trucks and vans include 
the engines offered in a manufacturer's light-duty truck 
counterparts, as well as engines specific to the Class 2b and Class 
3 segment, and describing that the the technology definitions are 
based on those described in the LD analysis, but the effectiveness 
values are different.
---------------------------------------------------------------------------

    For technologies that have been in production for many years, like 
some engine and transmission technologies, this approach produces 
reasonable estimates that we can compare against other studies and 
publicly available data. Generating the learning curve for battery 
packs for BEVs in future MYs is significantly more complicated, and we 
discuss how we generated those learning curves in Section III.D and in 
detail in Chapter 3.3 of the TSD. Our battery pack learning curves 
recognize that there are many factors that could potentially lower 
battery pack costs over time outside of the cost reductions due to 
improvements in manufacturing processes due to knowledge gained through 
experience in production.
    Table III-6 shows how some of the technologies on the MY 2022 
Ravine Runner Type F decrease in cost over several years. Note that 
these costs are specifically applicable to the MedSUVPerf class, and 
other technology classes may have different costs for the same 
technologies. These costs are pulled directly from the Technology Costs 
Input File, meaning that they include the DMC, RPE, and learning.

[[Page 52610]]

[GRAPHIC] [TIFF OMITTED] TR24JN24.058

    5. Simulating Existing Incentives, Other Government Programs, and 
Manufacturer ZEV Deployment Plans
    Similar to the regulations that we are enacting, other government 
actions have the ability to influence the technology manufacturers 
apply to their vehicles. For the purposes of this analysis, we 
incorporate manufacturers' expected response to two other government 
actions into our analysis: state ZEV requirements and Federal tax 
credits. We also include ZEV deployment that manufacturers have 
committed to execute even though it goes beyond any government's legal 
requirements.
a. Simulating ZEV Deployment Unrelated to NHTSA's Standards
    The California Air Resources Board (CARB) has developed various 
programs to control emissions of criteria pollutants and GHGs from 
vehicles sold in California. CARB does so in accordance with the 
federal CAA; CAA section 209(a) generally preempts states from adopting 
emission control standards for new motor vehicles; \248\ however, 
Congress created an exemption program in CAA section 209(b) that allows 
the State of California to seek a waiver of preemption related to 
adopting or enforcing motor vehicle emissions standards.\249\ EPA must 
grant the waiver unless the Agency makes one of three statutory 
findings.\250\ Under CAA section 177, other States can adopt and 
enforce standards identical to those approved under California's 
Section 209(b) waiver and other specified criteria in section 177 are 
met.\251\ States that do so are sometimes referred to as section 177 
states, in reference to section 177 of the CAA. Since 1990, CARB has 
included a version of a Zero-Emission Vehicle (ZEV) program as part of 
its package of standards that control smog-causing pollutants and GHG 
emissions from passenger vehicles sold in California,\252\ and several 
states have adopted those ZEV program requirements. This section 
focuses on the way we modeled manufacturers' expected compliance with 
these ZEV program requirements as well as additional electric vehicle 
deployment that manufacturers have indicated they will undertake. See 
Section IV.B.1 for a discussion of the role of these electric vehicles 
in the reference baseline and associated comments and responses.
---------------------------------------------------------------------------

    \248\ 42 U.S.C. 7543(a).
    \249\ 42 U.S.C. 7543(b).
    \250\ See 87 FR 14332 (March 14, 2022). (``The CAA section 
209(b) waiver is limited ``to any State which has adopted standards 
. . . for the control of emissions from new motor vehicles or new 
motor vehicle engines prior to March 30, 1966,'' and California is 
the only State that had standards in place before that date.''). 
NHTSA notes that EPA has not yet granted a waiver of preemption for 
the ACC II program, and NHTSA does not prejudge EPA's 
decisionmaking. Nonetheless, NHTSA believes it is reasonable to 
consider ZEV sales volumes that manufacturers will produce 
consistent with what would be required to comply with ACC II as part 
of our consideration of actions that occur in the absence of fuel 
economy standards, because manufacturers have indicated that they 
intend to deploy those vehicles regardless of whether a waiver is 
granted.
    \251\ 42 U.S.C. 7507.
    \252\ CARB. Zero-Emission Vehicle Program. Available at: https://ww2.arb.ca.gov/our-work/programs/zero-emission-vehicle-program/about. (Accessed: Mar. 19, 2024).
---------------------------------------------------------------------------

    There are currently two operative ZEV regulations that we consider 
in our analysis: ACC I (LD ZEV requirements through MY 2025) \253\ and 
Advanced Clean Trucks (ACT) (requirements for trucks in Classes 2b 
through 8, from MYs 2024-2035).\254\ California has adopted a third ZEV 
regulation, ACC II (LD ZEV requirements for MYs 2026-2035).\255\ EPA is 
evaluating a petition for a waiver of Clean Air Act preemption for ACC 
II,\256\ but has not granted it. While ACC II is currently 
unenforceable while the waiver request is under consideration by EPA--
in contrast to ACC I and ACT, which have already received waiver 
approvals--manufacturers have indicated that they intend to deploy 
additional electric vehicles consistent with (or beyond) what ACC II 
would require for compliance if a waiver were to be granted. We have 
therefore modeled compliance with ACC II as a proxy for these 
additional electric vehicles that manufacturers have committed to 
deploying in the reference baseline or No-Action Alternative. As 
discussed further below, we also developed a sensitivity case and an 
alternative baseline that included, respectively, some or none of the 
electric vehicles that would be expected to enter the fleet under ACC 
I, ACT, and manufacturer deployment commitments consistent with ACC II 
in order to ensure that our standards satisfy the statutory factors 
regardless of which baseline turns out to be the most accurate.
---------------------------------------------------------------------------

    \253\ 13 CCR 1962.2.
    \254\ CARB. 2019. Final Regulation Order: Advanced Clean Trucks 
Regulation. Available at: https://ww2.arb.ca.gov/sites/default/files/barcu/regact/2019/act2019/fro2.pdf. (Accessed: Mar. 29, 2024).
    \255\ CARB. Advanced Clean Cars II. https://ww2.arb.ca.gov/our-work/programs/advanced-clean-cars-program/advanced-clean-cars-ii.
    \256\ 88 FR 88908 (Dec. 26, 2023), Notice of opportunity for 
public hearing and comment on California Air Resources Board ACCII 
Waiver Request.
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    In the NPRM, we stated that we are confident that manufacturers 
will comply with the ZEV programs because they have previously complied 
with state ZEV programs, and they have made announcements of new ZEVs 
demonstrating an intent to comply with the requirements going forward. 
The American Fuel & Petrochemical Manufacturers (AFPM) objected to the 
use of the word ``confident'' given their concerns about manufacturers' 
ability to comply with ZEV standards.\257\ Valero and Kia commented 
that CARB historically has eased compliance for manufacturers by 
allowing for compliance via changing compliance dates, stringencies, 
and ZEV definitions.\258\ Valero also commented that our inclusion of 
ACT was premature given its 2024 start date and stated their doubts 
about its technological feasibility.\259\
---------------------------------------------------------------------------

    \257\ AFPM, Docket No. NHTSA-2023-0022-61911-A2, at 34.
    \258\ Valero, Docket No. NHTSA-2023-0022-58547-A4, at 2; Valero, 
Docket No. NHTSA-2023-0022-58547-A5, at 2. Kia, Docket No. NHTSA-
2023-0022-58542-A1, at 4-5.
    \259\ Valero, Docket No. NHTSA-2023-0022-58547-A5, at 4.
---------------------------------------------------------------------------

    We focus on including the provisions that CARB and other states 
currently have in place in their regulations and that have received a 
Clean Air Act

[[Page 52611]]

preemption waiver from EPA, and we have taken this into account by 
having incorporated changing standards and compliance landscapes in our 
past and current rulemakings. Valero further cited risks of ZEV 
programs such as varying compliance challenges across OEMs, consumer 
preferences, and affordability concerns, as well as general uncertainty 
in predicting future ZEV sales.\260\ NHTSA observes that companies have 
historically complied with California waivers and notes that even 
though industry entities such as Valero have previously made such 
comments about ZEV programs, historically, manufacturers have complied. 
Further, NHTSA notes that manufacturers have indicated that they intend 
to deploy electric vehicles consistent with the requirements of not 
just ACC I and ACT, but also ACC II. In this analysis, NHTSA has not 
assumed that the ACC II waiver will be granted. However, in the 
reference baseline, NHTSA has included electric vehicle deployment 
consistent with stated manufacturer plans to deploy such vehicles--and 
that level would result in full compliance with the ACC II 
program.\261\ Furthermore, many of the ZEVs that can earn credits from 
CARB are already present in the 2022 analysis fleet, leading the 
modeled MY 2022 analysis fleet to achieve 100% compliance with that 
years' ACC I requirement in MY 2022 (per CARB, the total ending year 
credit balances significantly exceed the annual credit 
requirements).\262\ NHTSA models manufacturers' compliance with ACC I 
and ACT and the additional electric vehicle deployment that 
manufacturers have announced they intend to execute because accounting 
for technology improvements that manufacturers would make even in the 
absence of CAFE standards allows NHTSA to gain a more accurate 
understanding of the effects of the final rule. Importantly, as noted 
above, NHTSA also developed an alternative baseline, the No ZEV 
alternative baseline, to test whether the standards remain consistent 
with the statutory factors regardless of the level of electrification 
that occurs in the reference baseline. NHTSA also modeled the HDPUV 
program assuming the ACT program was not included in the reference 
baseline, even though EPCA/EISA contains no limitations on the 
consideration of alternative fueled vehicles in that program.
---------------------------------------------------------------------------

    \260\ Valero, Docket No. NHTSA-2023-0022-58547-A5, at 5-6.
    \261\ For example, Stellantis has publicly committed to 
deployment levels consistent with California's electrification 
targets. See, https://www.gov.ca.gov/2024/03/19/stellantis-partners-with-california-on-clean-car-standards/.
    \262\ CARB. Annual ZEV Credits Disclosure Dashboard. Available 
at: https://ww2.arb.ca.gov/applications/annual-zev-credits-disclosure-dashboard. (Accessed Mar. 28, 2024).
---------------------------------------------------------------------------

    The Zero Emission Transportation Association commented that NHTSA 
should include CARB's Advanced Clean Fleets (ACF) regulation as part of 
its modeling. We do not include the Advanced Clean Fleets regulation in 
our modeling at this time, due to the small number of HDPUV Class 2b/3 
vehicles that would be affected by this regulation in the rulemaking 
time frame,\263\ and due to the analytical complexity of modeling this 
small amount of vehicles. We will continue to monitor this program to 
determine whether it should be featured in future analyses.
---------------------------------------------------------------------------

    \263\ CARB. Advanced Clean Fleets Regulation Summary. Available 
at: https://ww2.arb.ca.gov/resources/fact-sheets/advanced-clean-fleets-regulation-summary. (Accessed Mar. 28, 2024).
---------------------------------------------------------------------------

    This is the fourth analysis where we have modeled compliance with 
the ACC program (and now the ACT program) requirements in the CAFE 
Model. In the MY 2024-2026 final rule, we received feedback from 
commenters agreeing or disagreeing with the modeling inclusion of the 
ZEV programs at all, however, the only past substantive comments on the 
ZEV program modeling methodology have been requesting the inclusion of 
more states that signed on to adopt California's standards in our 
analysis. As noted below, the inclusion or exclusion of states in the 
analysis depends on which states have signed on to the programs at the 
time of our analysis. While we are aware of legal challenges to some 
states' adoption of the ZEV programs, it is beyond the scope of this 
rulemaking to evaluate the likelihood of success of those challenges. 
For purposes of our analysis, what is important is predicting, using a 
reasonable assessment, how the fleet will evolve in the future. The 
following discussion provides updates to our modeling methodology for 
the ZEV programs in the analysis.
    The ACC I and ACT programs require that increasing levels of 
manufacturers' sales in California and section 177 states in each MY be 
ZEVs, specifically BEVs, PHEVs, FCEVs.\264\ BEVs, PHEVs, and FCEVs each 
contribute a ``value'' towards a manufacturer's annual ZEV requirement, 
which is a product of the manufacturer's production volume sold in a 
ZEV state, multiplied by a ``percentage requirement.'' The percentage 
requirements increase in each year so that a greater portion of a 
manufacturer's fleet sold in ZEV states in a particular MY must be 
ZEVs. For example, a manufacturer selling 100,000 vehicles in 
California and 10,000 vehicles in Connecticut (both states that have 
ZEV programs) in MY 2025 must ensure that 22,000 ZEV credits are earned 
by California vehicles and 2,200 ZEV credits are earned by Connecticut 
vehicles. In MYs 2026 through 2030 of the ACC II program (if granted a 
waiver) would allow manufacturers to apply a capped amount of credits 
to the percentage requirement. In response to various commenters 
mentioning the pooled credits route, we added this option to our 
modeling, slightly scaling down the percent requirement assumed to be 
met by ZEV sales; this corresponds to the maximum pooled credits that 
would be allowed by CARB under ACC II, if granted a waiver.
---------------------------------------------------------------------------

    \264\ CARB. 2022. Final Regulation Order: Amendments to Section 
1962.2, Title 13, California Code of Regulations. Available at: 
https://ww2.arb.ca.gov/sites/default/files/barcu/regact/2022/accii/acciifro1962.2.pdf. (Accessed: Mar. 29, 2024).
---------------------------------------------------------------------------

    At the time of our analysis, seventeen states in addition to 
California have either formally signed on to the ACC I or ACC II 
standards or are in the process of adopting them.\265\ Although a few 
states are adopting these requirements in future MYs, for the ease of 
modeling we include in the unified ACC II group every state that has 
regulations in place to adopt or is already in the process of adopting 
the requirements by the time of our analysis at the start of December 
2023. A variety of commenters expressed concern with our NPRM approach 
of considering all the states as a group that adopted the programs in 
all the model years that CARB outlined. Hyundai noted in their comments 
that Nevada, Minnesota, and Virginia are ``unlikely to adopt ACC II.'' 
Commenters such as the AFPM and Nissan stated that several states have 
adopted only some model years of ACC II. NHTSA notes that its analysis 
does not assume legal enforcement of ACC II because it has not been 
granted a preemption waiver, but that manufacturers have nonetheless 
indicated they intend to deploy electric vehicles during these model 
years at levels that would be consistent with ACC II in both California 
and other states. However, to be appropriately conservative, NHTSA has 
updated its approach to reflect the

[[Page 52612]]

variety in model years to which states have committed and in response 
to comments, we now include different state sales share groups in our 
modeling. Splitting these groups based on model years in which they 
have indicated their participation also allows us to distinguish 
between assumed future ACC I compliance and the deployment that 
manufacturers have indicated they are intending to execute that would 
be consistent with ACC II. The seventeen states included in our light-
duty ZEV analysis have adopted ACC I and/or ACC II in at least one 
model year.
---------------------------------------------------------------------------

    \265\ California, Colorado, Connecticut, Delaware, Maine, 
Maryland, Massachusetts, Minnesota, Nevada, New York, New Jersey, 
New Mexico, Oregon, Rhode Island, Vermont, Virginia, and Washington. 
See California Air Resource Board. States that have Adopted 
California's Vehicle Standards under Section 177 of the Federal 
Clean Air Act. Available at: https://ww2.arb.ca.gov/our-work/programs/advanced-clean-cars-program/states-have-adopted-californias-vehicle-regulations (Accessed: Mar. 26, 2024).
---------------------------------------------------------------------------

    Some commenters such as the Center for Environmental Accountability 
and Nissan stated that many of the states included in our ZEV modeling 
had not actually adopted the ZEV programs.\266\ NHTSA disagrees; we 
include all states that have regulations in place to adopt or are 
already in the process of adopting ACC I, ACC II, or ACT, based on 
information available at the time of the analysis.\267\ Our final ZEV 
state assumptions are also consistent with those tracked by CARB on 
their website at the time of writing.\268\ This included adding states 
to our analysis that were not present in the NPRM ZEV modeling. 
Commenters such as ACEEE and the American Lung Association requested 
that we make these updates to the ZEV states list.\269\ We added the 
state of Colorado into our analysis, based on new information and their 
comment indicating their commitment to all three ZEV programs.\270\ 
Similarly, eleven states including California have formally adopted the 
ACT standards at the time of analysis. As this group is smaller and has 
somewhat less variety in start dates than the ACC I/ACC II states, we 
model ACT state shares without breaking out specific model year start 
dates.\271\
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    \266\ CEA, Docket No. NHTSA-2023-0022-61918-A1, at 9; Nissan, 
Docket No. NHTSA-2023-0022-60696, at 4.
    \267\ See ZEV states docket reference folder. NHTSA-2023-0022.
    \268\ CARB. 2024. States that have Adopted California's Vehicle 
Regulations. Available at: https://ww2.arb.ca.gov/our-work/programs/advanced-clean-cars-program/states-have-adopted-californias-vehicle-regulations. (Accessed: Mar. 26, 2024).
    \269\ ACEEE, Docket No. NHTSA-2023-0022-60684, at 11; ALA, 
Docket No, NHTSA-2023-0022-60091, at 3.
    \270\ RFA et al, Docket No. NHTSA-2023-0022-57625, at 1.
    \271\ California, Colorado, Connecticut, Maryland, 
Massachusetts, New Jersey, New Mexico, New York, Oregon, Vermont and 
Washington. We include Connecticut as their House passed the 
legislation instructing their Department of Energy and Environmental 
Protection to adopt ACT. See Electric Trucks Now. 2023. States are 
Embracing Electric Trucks. Available at: https://www.electrictrucksnow.com/states. (Accessed: Mar. 29, 2024); Vermont 
Biz. 2022. Vermont adopts rules for cleaner cars and trucks. 
Available at: https://vermontbiz.com/news/2022/november/24/vermont-adopts-rules-cleaner-cars-and-trucks. (Accessed: May 31, 2023); 
North Carolina Environmental Quality. Advanced Clean Trucks: Growing 
North Carolina's Clean Energy Economy. Available at: https://deq.nc.gov/about/divisions/air-quality/motor-vehicles-and-air-quality/advanced-clean-trucks (Accessed: May 31, 2023); Connecticut 
HB 5039. 2022. An Act Concerning Medium and Heavy-Duty Vehicle 
Emission Standards. Available at: https://www.cga.ct.gov/2022/fc/pdf/2022HB-05039-R000465-FC.pdf (Accessed: May 31, 2023).
---------------------------------------------------------------------------

    It is also important to note in the context of all the above 
comments on ZEV adoption that NHTSA developed an alternative baseline, 
the No ZEV alternative baseline, in order to evaluate whether the 
standards are consistent with the statutory factors regardless of the 
amount of electrification that occurs in the absence of NHTSA's 
standards during the standard setting years. NHTSA further evaluated 
sensitivity cases, that one could certainly consider as additional 
alternative baselines, that precluded electric vehicles from being 
added to the fleet between Model Years 2027-2035; between 2027-2050; 
and 2022-2050.
    It is important to note that not all section 177 states have 
adopted the ACC II or ACT program components. Furthermore, more states 
have formally adopted the ACC II program than the ACT program, so the 
discussion in the following sections will call states that have opted 
in ``ACC I/ACC II states'' or ``ACT states.'' Separately, many states 
signed a memorandum of understanding (MOU) in 2020 to indicate their 
intent to work collaboratively towards a goal of turning 100% of MD and 
HD vehicles into ZEVs in the future. For the purposes of CAFE analysis, 
we include only those states that have formally adopted the ACT in our 
modeling as ``ACT states.'' States that have signed the MOU but not 
formally adopted the ACT program are referred to as ``MOU states'' and 
are not included in CAFE modeling. When the term ``ZEV programs'' is 
used hereafter, it refers to both the ACC II and ACT programs.
    Incorporating ACC I and ACT as applicable legal requirements and 
ACC II as a proxy for additional electric vehicle deployment expected 
to occur regardless of the NHTSA standards into the model includes 
converting vehicles that have been identified as potential ZEV 
candidates into BEVs at the vehicle's ZEV application year so that a 
manufacturer's fleet meets its required ZEV credit requirements. We 
focused on BEVs as ZEV conversions, rather than PHEVs or FCEVs, 
because, as for 2026-2035, manufacturers cannot earn more than 20% of 
their ZEV credits through PHEV sales. Similarly, PHEVs receive a 
smaller number of credits than BEVs and FCEVs under ACC I, and those 
with lower all-electric range values would receive a smaller number of 
credits under ACC II if it became legally enforceable. We determined 
that including PHEVs in the ZEV modeling would have introduced 
unnecessary complication to the modeling and would have provided 
manufacturers little benefit in the modeled program. In addition, 
although FCEVs can earn the same number of credits as BEVs, we chose to 
focus on BEV technology pathways since FCEVs are generally less cost-
effective than BEVs and most manufacturers have not been producing them 
at high volumes. However, any PHEVs and FCEVs already present in the 
CAFE Model analysis fleets receive ZEV credits in our modeling.
    Total credits are calculated by multiplying the credit value each 
ZEV receives by the vehicle's volume. In the ACC I program, until 2025, 
each full ZEV can earn up to 4 credits. In the ACC II program, from 
2026 onwards, each full ZEV would earn one credit value per vehicle, 
while partial ZEVs (PHEVs) would earn credits based on their AER, if 
ACC II became legally enforceable. In the context of this section, 
``full ZEVs'' refers to BEVs and FCEVs, as PHEVs can receive a smaller 
number of credits than other ZEVs, as discussed above. Based on 
comments from CARB and the Strong PHEV Coalition,\272\ we adjusted the 
number of ZEV credits received by PHEV50s in our analysis to 1 full 
credit under the ACC II proxy after determining with Argonne that the 
range of all the PHEVs marked as ``PHEV50s'' in our analysis fleet was 
sufficient to receive the full ZEV credit. Credit targets in the ACT 
program (referred to as deficits) are calculated by multiplying sales 
by percentage requirement and weight class multiplier. Each HDPUV full 
ZEV in the 2b/3 class earns 0.8 credits and each near-zero emissions 
vehicle (called PHEVs in the CAFE Model) earns 0.75 credits.\273\ We 
adjusted some of the explanations in this section and the TSD 
accompanying this rule in response to a comment from CARB requesting 
that we very clearly distinguish between the number of credits earned 
between different vehicle types and programs.\274\
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    \272\ Strong PHEV Coalition, Docket No. NHTSA-2023-0022-60193, 
at 4-5; States and Cities, NHTSA-2023-0022-61904-A2, at 46.
    \273\ CARB. 2022. Final Regulation Order: Advanced Clean Trucks 
Regulation. Available at: https://www.cga.ct.gov/2022/fc/pdf/2022HB-05039-R000465-FC.pdf. (Accessed: Feb. 27, 2024).
    \274\ States and Cities, Docket No. NHTSA-2023-0022-61904-A2, at 
46.

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[[Page 52613]]

    The CAFE Model is designed to present outcomes at a national scale, 
so the ZEV programs analysis considers the states as a group as opposed 
to estimating each state's ZEV credit requirements individually. 
However, in response to comments discussed above, we adjusted our ZEV 
modeling to reflect states' varying commitments to the ACC I and ACC II 
programs in different model years. To capture the appropriate volumes 
subject to the ACT requirements and that would be deployed consistent 
with ACC II, we still calculated each manufacturer's total market share 
in ACC II or ACT states but also expanded the market share inputs to 
vary across model year according to how many states had opted into the 
program in each year between 2022 and 2035. We used Polk's National 
Vehicle Population Profile (NVPP) from January 2022 to calculate these 
percentages.\275\ These data include vehicle characteristics such as 
powertrain, fuel type, manufacturer, nameplate, and trim level, as well 
as the state in which each vehicle is sold. At the time of the data 
snapshot, MY 2021 data from the NVPP contained the most current 
estimate of new vehicle market shares for most manufacturers, and best 
represented the registered vehicle population on January 1, 2022. We 
assumed that this source of new registrations data was the best 
approximation of new sales given the data options. For MY 2021 vehicles 
in the latest NVPP, the ACC II State group at its largest makes up 
approximately 38% of the total LD sales in the United States. The ACT 
state groups comprise approximately 22% of the new Class 2b and 3 
(HDPUV) vehicle market in the U.S.\276\ We based the volumes used for 
the ZEV credit target calculation on each manufacturer's future assumed 
market share in ACC II and ACT states. We made this assumption after 
examining three past years of market share data and determining that 
the geographic distribution of manufacturers' market shares remained 
fairly constant.
---------------------------------------------------------------------------

    \275\ National Vehicle Population Profile (NVPP). 2022. Includes 
content supplied by IHS Markit. Copyright R.L. Polk & Co., 2022. All 
rights reserved. Available at: https://repository.duke.edu/catalog/caad9781-5438-4d65-b908-bf7d97a80b3a. (Accessed: Feb. 27, 2024).
    \276\ We consulted with Polk and determined that their NVPP data 
set that included vehicles in the 2b/3 weight class provided the 
most fulsome dataset at the time of analysis, recognizing that the 
2b/3 weight class includes both 2b/3 HD pickups and vans and other 
classes within 2b/3 segment. While we determined that this dataset 
was the best option for the analysis, it does not contain all Class 
3 pickups and vans sold in the United States.
---------------------------------------------------------------------------

    We calculated total credits required for ACT compliance and 
consistent with ACC II implementation by multiplying the percentages 
from each program's ZEV requirement schedule by the ACC II or ACT state 
volumes.\277\ For the first set of ACC I requirements covering 2022 
(the first modeled year in our analysis) through 2025, the percentage 
requirements start at 14.5% and ramp up in increments to 22 percent by 
2025.\278\ For ACC II, the potential percentage requirements start at 
35% in MY 2026 and would ramp up to 100% in MY 2035 and subsequent 
years if it became legally enforceable.\279\ For ACT Class 2b-3 Group 
vehicles (equivalent to HDPUVs in our analysis), the percentage 
requirements start at 5% in MY 2024 and increase to 55% in MYs 2035 and 
beyond.\280\ We then multiply the resulting national sales volume 
predictions by manufacturer by each manufacturer's total market share 
in the ACC II or ACT states to capture the appropriate volumes in the 
ZEV credits calculation. Credits consistent with ACC II by 
manufacturer, per year, are determined within the CAFE Model by 
multiplying the ACC II state volumes by CARB's ZEV credit percentage 
requirement for each program respectively. In the first five years of 
the ACC II program (as currently submitted to EPA), MYs 2026-2030, CARB 
would allow for a pooled credits allowance, capped at a specific 
percentage per year (which decreases in later years). We accounted for 
this in the final rule in response to comments by reducing the percent 
requirement in those years by the maximum pooled credit allowance.
---------------------------------------------------------------------------

    \277\ Note that the ACT credit target calculation includes a 
vehicle class-specific weight modifier.
    \278\ 13 CCR 1962.2(b).
    \279\ 13 CCR 1962.4.
    \280\ 13 CCR 1963.1(b).
---------------------------------------------------------------------------

    To ensure that the ACT credit requirements are met in the reference 
baseline and deployment consistent with ACC II is reflected in the 
reference baseline in each modeling scenario, we add ZEV candidate 
vehicles to the reference baseline. We flag ZEV candidates in the 
`vehicles' worksheet in the Market Data Input File, which is described 
above and in detail in TSD Chapter 2.5. Although we identify the ZEV 
candidates in the Market Data Input File, the actual conversion from 
non-ZEV to ZEV vehicles occurs within the CAFE Model. The CAFE Model 
converts a vehicle to a ZEV during the specified ZEV application year.
    We flag ZEV candidates in two ways: using reference vehicles with 
ICE powertrains or using PHEVs already in the existing fleet. When 
using ICE powertrains as reference vehicles, we create a duplicate row 
(which we refer to as the ZEV candidate row) in the Market Data Input 
File's Vehicles tab for the ZEV version of the original vehicle, 
designated with a unique vehicle code. The ZEV candidate row specifies 
the relevant electrification technology level of the ZEV candidate 
vehicle (e.g., BEV1, BEV2, and so on), the year that the 
electrification technology is applied,\281\ and zeroes out the 
candidate vehicle's sales volume. We identify all ICE vehicles with 
varying levels of technology up to and including strong hybrid electric 
vehicles (SHEVs) with rows that have 100 sales or more as ZEV 
candidates. The CAFE Model moves the sales volume from the reference 
vehicle row to the ZEV candidate row on an as-needed basis, considering 
the MY's ZEV credit requirements. When using existing PHEVs within the 
fleet as a starting point for identifying ZEV candidates, we base our 
determination of ZEV application years for each model based on 
expectations of manufacturers' future EV offerings. The entire sales 
volume for that PHEV model row is converted to BEV on the application 
year. This approach allows for only the needed additional sales volumes 
to flip to ZEVs, based on the ACC II and ACT targets, and keeps us from 
overestimating ZEVs in future years. The West Virginia Attorney 
General's Office commented that ``NHTSA programmed the CAFE model to 
assume that manufacturers will turn every internal combustion engine 
vehicle into a ZEV at the `first redesign opportunity.' '' \282\ This 
comment is a misunderstanding of the ZEV candidate modeling, where the 
model will shift only the necessary volumes to comply with the ZEV 
programs into ZEVs. As we stated in the NPRM and repeated above, this 
approach allows for only the needed additional sales volumes to flip to 
ZEVs, based on the ACC II and ACT targets, and keeps us from 
overestimating ZEVs in future years. See TSD Chapter 2.5 for more 
details on our ZEV program modeling.
---------------------------------------------------------------------------

    \281\ The model turns all ZEV candidates into BEVs in 2023, so 
sales volumes can be shifted from the reference vehicle row to the 
ZEV candidate row as necessary.
    \282\ West Virginia AG et al., Docket No. NHTSA-2023-0022-63056-
A1, at 4.
---------------------------------------------------------------------------

    We identify LD ZEV candidates by duplicating every row with 100 or 
more sales that is not a PHEV, BEV, or FCEV. We refer to the original 
rows as `reference vehicles.' Although PHEVs are all ZEV candidates, we 
do not duplicate those rows as we focus the CAFE Model's simulation of 
the ACC II and ACT programs on BEVs. However, any PHEVs already in the 
analysis fleet or made by the model will still receive

[[Page 52614]]

the appropriate ZEV credits. While flagging the ZEV candidates, we 
identified each one as a BEV1, BEV2, BEV3, and BEV4 (BEV technology 
types based on range), based partly on their price, market segment, and 
vehicle features. For instance, we assumed luxury cars would have 
longer ranges than economy cars. We also assigned AWD/4WD variants of 
vehicles shorter BEV ranges when appropriate. See TSD Chapter 3.3 for 
more detailed information on electrification options for this analysis. 
The CAFE Model assigns credit values per vehicle depending on whether 
the vehicle is a ZEV in a MY prior to 2026 or after, due to the change 
in value after the update of the standards from ACC II (as currently 
submitted to EPA).
    We follow a similar process in assigning HDPUV ZEV candidates as in 
assigning LD ZEV candidates. We duplicate every van row with 100 or 
more sales and duplicate every pickup truck row with 100 or more sales 
provided the vehicle model has a WF less than 7,500 and a diesel- or 
gasoline-based range lower than 500 miles based on their rated fuel 
efficiency and fuel tank size. This is consistent with our treatment of 
HDPUV technology applicability rules, which are discussed below in 
Section III.D and in TSD Chapter 3.3. Note that the model can still 
apply PHEV technology to HDPUVs because of CAFE standards, and like the 
LD analysis, any HDPUVs turned into PHEVs will receive credit in the 
ZEV program. When identifying ZEV candidates, we assign each candidate 
as either a BEV1 or a BEV2 based on their price, market segment, and 
other vehicle attributes.
    The CAFE Model brings manufacturers into compliance with ACC II (as 
currently submitted to EPA) and ACT first in the reference baseline, 
solving for the technology compliance pathway used to meet increasing 
ZEV standards. Valero commented on the BEV sales shift in the HDPUV 
analysis being too large for ACT compliance purposes.\283\ Our ZEV 
modeling structure is designed to only convert ZEV candidates if needed 
for the ACT program requirements. However, the CAFE Model also 
incorporates many other factors into its technology and CAFE compliance 
pathways decisions, technology payback, including technology costs and 
sizing requirements based on vehicle performance. See the TSD Chapter 
3.3 and Preamble Section III.D for further discussion of 
electrification pathways and sales volume results.
---------------------------------------------------------------------------

    \283\ Valero, Docket No. NHTSA-2023-0022-58547-A8, at 3.
---------------------------------------------------------------------------

    In the proposal, we did not include two provisions of the ZEV 
regulations in our modeling. First, while the ACC II program (as 
currently submitted to EPA) includes compliance options for providing 
reduced-price ZEVs to community mobility programs and for selling used 
ZEVs (known as ``environmental justice vehicle values''), these are 
focused on a more local level than we could reasonably represent in the 
CAFE Model. The data for this part of the program are also not 
available from real world application. Second, under ACC II (as 
currently submitted to EPA), CARB would allow for some banking of ZEV 
credits and credit pooling.\284\ In the proposal, we did not assume 
compliance with ZEV requirements through banking of credits when 
simulating the program in the CAFE Model and focused instead on 
simulating manufacturer's deployment of ZEV consistent with ACC II 
fully through the production of new ZEVs, after conversations with 
CARB. In past rules, we assumed 80% compliance through vehicle 
requirements and the remaining 20% with banked credits.\285\ In this 
rule, due to the complicated nature of accounting for the entire credit 
program, we focus only on incorporating CARB's allowance (as outlined 
in the ACC II program currently submitted to EPA) for manufacturers to 
use pooled credits in MYs 2026-2030 as part of their ZEV compliance in 
our modeling. Based on guidance from CARB in the NPRM and assessment of 
CARB's responses to manufacturer comments, we expect impacts of banked 
credit provisions on overall volumes to be small.\286\
---------------------------------------------------------------------------

    \284\ CARB. 2022. Final Regulation Order: Section 1962.4, Title 
13, California Code of Regulations. Available at: https://ww2.arb.ca.gov/sites/default/files/barcu/regact/2022/accii/acciifro1962.4.pdf. (Accessed: Feb. 27, 2024).
    \285\ CAFE TSD 2024-2026. Pg. 129.
    \286\ CARB. 2022. Final Statement of Reasons for Rulemaking, 
Including Summary of Comments and Agency Response. Appendix C: 
Summary of Comments to ZEV Regulation and Agency Response. Available 
at: https://ww2.arb.ca.gov/sites/default/files/barcu/regact/2022/accii/fsorappc.pdf. (Accessed: Feb. 27, 2024).
---------------------------------------------------------------------------

    TSD Chapter 2.5.1 includes more information about the process we 
use to simulate ACT program compliance and ZEV deployment consistent 
with ACC II in this analysis.
b. IRA Tax Credits
    The IRA included several new and expanded tax credits intended to 
encourage the adoption of clean vehicles.\287\ At the proposal stage, 
the agency was presented with three questions on how to incorporate the 
IRA. First, identifying which credits should be modeled. Next, 
determining the responses of consumers and producers to the subsidies. 
And finally determining which vehicles would qualify and how to value 
the credits. In its proposal, NHTSA modeled two provisions of the IRA. 
The first was the Advanced manufacturing production tax credit (AMPC). 
This provision provides a $35 per kWh tax credit for manufacturers of 
battery cells and an additional $10 per kWh for manufacturers of 
battery modules (all applicable to manufacture in the United 
States).\288\ The second provision modeled in the proposal was the 
Clean vehicle credit (Sec.  30D),\289\ which provides up to $7,500 
toward the purchase of clean vehicles with critical minerals extracted 
or processed in the United States or a country with which the United 
States has a free trade agreement or recycled in North America, and 
battery components manufactured or assembled in North America.\173\
---------------------------------------------------------------------------

    \287\ Public Law No: 117-169.
    \288\ 26 U.S.C. 45X. If a manufacturer produces a battery module 
without battery cells, they are eligible to claim up to $45 per kWh 
for the battery module. Two other provisions of the AMPC are not 
modeled at this time; (i) a credit equal to 10 percent of the 
manufacturing cost of electrode active materials, (ii) a credit 
equal to 10 percent of the manufacturing cost of critical minerals 
for battery production. We are not modeling these credits directly 
because of how we estimate battery costs and to avoid the potential 
to double count the tax credits if they are included into other 
analyses that feed into our inputs. For a full account of the credit 
and any limitations, please refer to the statutory text.
    \289\ 26 U.S.C. 30D. For a full account of the credit and any 
limitations, please refer to the statutory text.
---------------------------------------------------------------------------

    After NHTSA developed its methodology for incorporating the IRA tax 
credits into its analysis for the proposal, the Treasury Department 
clarified that leased vehicles qualify for the Credit for qualified 
commercial clean vehicles (Sec.  45W) and that the credit could be 
calculated based off of the DOE's Incremental Purchase Cost Methodology 
and Results for Clean Vehicles report for at least calendar year 2023 
as a safe harbor, rather than having the taxpayer estimate the actual 
cost differential.\290\ As a result, EPA modified their approach to 
modeling the IRA tax credits prior to finalizing their Multi-Pollutant 
Emissions Standards for Model Years 2027 and Later Light-Duty and 
Medium-Duty Vehicles proposal,

[[Page 52615]]

however NHTSA was unable to incorporate a similar methodology in time 
for its proposal.
---------------------------------------------------------------------------

    \290\ See Internal Revenue Service. 2022. Frequently asked 
questions related to new, previously-owned and qualified commercial 
clean Vehicle credits. Q4 and Q8. Available at: https://www.irs.gov/pub/taxpros/fs-2022-42.pdf. (Accessed: Apr. 1, 2024).
---------------------------------------------------------------------------

    NHTSA noted in the proposal that there are several other provisions 
of the IRA related to clean vehicles that were excluded from the 
analysis, including the Previously-owned Clean Vehicle credit,\291\ the 
Qualifying Advanced Energy Project credit (48C),\292\ IRA Sec.  50142 
Advanced Technology Vehicle Manufacturing Loan Program, IRA Sec.  50143 
Domestic Manufacturing Conversion Grants, IRA Sec.  70002 USPS Clean 
Fleets, and IRA Sec.  13404 Alternative Fuel Vehicle Refueling Property 
Credit. As NHTSA noted in the proposal, these credits and grants 
incentivize clean vehicles through avenues the CAFE Model is currently 
unable to consider as they typically affect a smaller subset of the 
vehicle market and may influence purchasing decisions through means 
other than price, e.g., through expanded charging networks. NHTSA also 
does not model individual state tax credits or rebate programs. Unlike 
ZEV requirements which are uniform across states that adopt them, state 
clean vehicle tax credits and rebates vary from jurisdiction to 
jurisdiction and are subject to more uncertainty than their Federal 
counterparts.\293\ Tracking sales by jurisdiction and modeling each 
program's individual compliance program would require significant 
revisions to the CAFE Model and likely provide minimal changes in the 
net outputs of the analysis.
---------------------------------------------------------------------------

    \291\ 26 U.S.C. 25E. For a full account of the credit and any 
limitations, please refer to the statutory text.
    \292\ 26 U.S.C. 48C. For a full account of the credit and any 
limitations, please refer to the statutory text.
    \293\ States have additional mechanisms to amend or remove tax 
incentives or rebates. Sometimes, even after these programs are 
enacted, uncertainty persists, see e.g. Farah, N. 2023. The Untimely 
Death of America's `Most Equitable' EV Rebate. Last Revised: Jan. 
30, 2023. Available at: https://www.eenews.net/articles/the-untimely-death-of-americas-most-equitable-ev-rebate/. (Accessed: May 
31, 2023).
---------------------------------------------------------------------------

    NHTSA sought comment from the public about which credits should be 
included in its analysis, and in particular whether the agency should 
include Sec.  45W. Rivian and the American Council for an Energy 
Efficient Economy (ACEEE) both suggested that NHTSA also include Sec.  
45W in its analysis, to avoid underestimating the impact of the IRA on 
reference baseline technology adoption.\294\ NHTSA did not receive any 
comments recommending either removing the AMPC or Sec.  30D from its 
analysis, or advocating for other credits, Federal or State, to be 
included.
---------------------------------------------------------------------------

    \294\ Rivian, Docket No. NHTSA-2023-0022-28017, at 1; ACEEE, 
Docket No. NHTSA-2023-0022-60684, at 9.
---------------------------------------------------------------------------

    For the Final Rule, NHTSA models three of the IRA provisions in its 
analysis. NHTSA is again modeling the AMPC and, based on the 
recommendations of commenters and guidance from the Treasury Department 
indicating that Sec.  45W applies to leased personal vehicles,\295\ 
NHTSA decided to jointly model Sec.  30D and Sec.  45W (collectively, 
the Clean Vehicle Credits or ``CVCs'').\296\ Both credits are available 
at the time of sale and provide up to $7,500 towards the purchase of 
light-duty and HDPUV PHEVs, BEVs, and FCEVs placed in service before 
the end of 2032. Sec.  30D is only available to purchasers of vehicles 
assembled in North America and which meet certain sourcing requirements 
for critical minerals and battery components manufactured in North 
America.\297\ Sec.  45W is available for commercial purchasers of 
vehicles covered by this rule for a purpose other than resale. The 
credit value is the lesser of the incremental cost to purchase a 
comparable ICE vehicle or 15 percent of the cost basis for PHEVs or 30 
percent of the cost basis for FCEVs and BEVs, up to $7,500 for vehicles 
with GVWR less than 14,000. Since only one of the CVCs may be claimed 
for purchasing a given vehicle, NHTSA modeled them jointly, employing a 
methodology similar to EPA's approach.
---------------------------------------------------------------------------

    \295\ See, e.g., Katten. Treasury Releases Guidance on Electric 
Vehicle Tax Credits (Jan. 3, 2023), available at https://katten.com/treasury-releases-guidance-on-electric-vehicle-tax-credits.
    \296\ 26 U.S.C. 45W. For a full account of the credit and any 
limitations, please refer to the statutory text.
    \297\ There are vehicle price and consumer income limitations on 
Sec.  30D as well. See Congressional Research Service. 2022. Tax 
Provisions in the Inflation Reduction Act of 2022 (H.R. 5376). 
Available at: https://crsreports.congress.gov/product/pdf/R/R47202/6. (Accessed: May 31, 2023).
---------------------------------------------------------------------------

    Interactions between producers and consumers in the marketplace 
tend to ensure that subsidies like the AMPC and the CVCs, regardless of 
whether they are initially paid to producers or consumers, are 
ultimately shared between the two groups. In the proposal, NHTSA 
assumed that manufacturers and consumers would each capture half the 
dollar value of each credit. NHTSA sought comment on its modeling 
assumptions related to how it modeled tax credits in the proposal. The 
Institute for Policy Integrity (IPI) suggested that NHTSA's assumptions 
about the incidence of tax credits were not compatible with its 
assumptions about the pass-through of changes in technology costs to 
consumers.\298\ AFPM commented that IRA tax credits may be eliminated 
or modified, and that manufacturers may not pass the cost savings from 
the AMPC through to consumers.\299\ NHTSA acknowledged uncertainty over 
its pass-through assumptions in its proposal and ran sensitivity cases 
which varied the degree to which these incentives are shared between 
consumers and manufacturers. NHTSA believes that changing the 
production quantities of these vehicles is a complex process that 
involves developing new supply chains and significant changes in 
production processes. As a result, NHTSA believes that manufacturers 
are likely to experience some motivation to recover these costs by 
attempting to capture some portion of IRA credits, for example, by 
raising prices of qualifying vehicles in response to availability of 
the 30D credit. On the other hand, NHTSA does not believe it is likely 
that manufacturers will be able to raise prices for these vehicles 
enough to fully capture the amount of credit in this way. NHTSA 
believes that the tax credits are likely to be a salient factor in the 
purchase decisions of consumers who purchase eligible vehicles and the 
Sec.  30D credits have strict price eligibility constraints, which 
likely limits the ability of manufacturers to raise prices enough to 
fully capture the credits for vehicles whose sticker prices are close 
to the limit. NHTSA notes that the overall new vehicle market supply 
curve is the sum of all individual vehicle supply curves, which are 
presumed to be upward sloping. This means that the overall new vehicle 
supply curve will be more elastic than individual vehicle supply curves 
at all price levels. This means that any effective tax or subsidy that 
only hits a subset of vehicles will have a greater incidence on the 
producer. Finally, unlike technology improvements, the Sec.  30D 
credits have income limits for eligibility. Thus, the effective price 
for buyers of these vehicles is not uniform since some potential buyers 
will be above this income limit and will not qualify for the credit 
(and may not wish to lease a vehicle in order to claim the Sec.  45W 
credit). Since manufacturers cannot set different MSRP's based on the 
customer's income, the sticker prices they choose may reflect a balance 
between raising prices and not losing market share from potential 
customers who do not qualify for the credits. As

[[Page 52616]]

a result, NHTSA believes that its split incidence of the credits 
represents a reasonable approach to modeling this policy. We believe 
that a similar logic applies to the AMPC where manufacturers operating 
in a competitive market will not be able to fully capture the tax 
credit. Many suppliers and OEMs work closely together through 
contractual agreements and partnerships, and these close connections 
promote fair pricing arrangements that prevent any one party from 
capturing the full value of the credit. With regard to the future 
existence of these tax credits, NHTSA conducted sensitivity analysis of 
a case in which the tax credits are not included in the analysis but 
does not believe that this should be treated as the central analysis 
since these incentives are currently being claimed and are scheduled to 
be available in the years that NHTSA analyzed.
---------------------------------------------------------------------------

    \298\ IPI, Docket No. NHTSA-2023-0022-60485, at 23-24.
    \299\ AFPM, Docket No. NHTSA-2023-0022-61911, at 2.
---------------------------------------------------------------------------

    For this analysis, the agency maintained its assumption from the 
proposal that manufacturers and consumers will each capture half of the 
dollar value of the AMPC and CVCs. The agency assumes that 
manufacturers' shares of both credits will offset part of the cost to 
supply models that are eligible for the credits--PHEVs, BEVs, and 
FCEVs. The subsidies reduce the costs of eligible vehicles and increase 
their attractiveness to buyers (however, in the LD fleet, the tax 
credits do not alter the penetration rate of BEVs in the regulatory 
alternatives).\300\ Because the AMPC credit scales with battery 
capacity, NHTSA staff determined average battery energy capacity by 
powertrain (e.g., PHEV, BEV, FCEV) for passenger cars, light trucks, 
and HDPUVs based on Argonne simulation outputs. For a more detailed 
discussion of these assumptions, see TSD Chapter 2.3.2. In the proposal 
NHTSA explained that it was unable to explicitly account for all of the 
eligibility requirements of Sec.  30D and the AMPC, such as the 
location of final assembly and battery production, the origin of 
critical minerals, and the income restrictions of Sec.  30D.\301\ 
Instead, we account for these restraints through the credit schedules 
that are constructed in part based off of these factors and allow all 
PHEVs, BEVs, and FCEVs produced and sold during the time frame that tax 
credits are offered to be eligible for those credits subject to the 
MSRP restrictions discussed above.
---------------------------------------------------------------------------

    \300\ In Table 9-4 of the FRIA, both the reference case (labeled 
``RC'') and the no tax credit case (``No EV tax credits'') show a 
32.3% penetration rate for BEVs in the baseline and preferred 
alternative.
    \301\ See 88 FR 56179 (Aug. 17, 2023) for a more detailed 
explanation of the process used for the proposal.
---------------------------------------------------------------------------

    To account for the agency's inability to dynamically model sourcing 
requirements and income limits for Sec.  30D, NHTSA used projected 
values of the average value of Sec.  30D and the AMPC for the proposal. 
The projections increased throughout the analysis due to the 
expectation that gradual improvements in supply chains over time would 
allow more vehicles to qualify for the credits. Commenters suggested 
that NHTSA's assumed values for the Sec.  30D credit were too 
optimistic and did not reflect limitations that manufacturers face in 
adjusting their supply chains and component manufacturing processes to 
produce vehicles that qualify for the credit.\302\ Similarly, some 
commenters argued that NHTSA did not adequately explain how it arrived 
at the credit estimates, did not offer any data to support the 
estimates, and failed to properly account for foreign entities of 
concern.\303\
---------------------------------------------------------------------------

    \302\ CFDC et al., Docket No. NHTSA-2023-0022-62242, at 13-15; 
NATSO et al., Docket No. NHTSA-2023-0022-61070, at 4-5; UAW, Docket 
No. NHTSA-2023-0022-63061, at 3-4.
    \303\ CFDC et al, Docket No. NHTSA-2023-0022-62242-A1, at 3.
---------------------------------------------------------------------------

    To address the concerns raised by commenters, NHTSA is using an 
independent report performed by DOE for the Final Rule that provides 
combined values of the CVCs.\304\ These values consider the latest 
information of EV penetration rates, EV retail prices, the share of US 
EV sales that meet the critical minerals and battery component 
requirements, the share of vehicles that exclude suppliers that are 
``Foreign Entities of Concern'', and lease rates for vehicles that 
qualify for the Sec.  45W CVC. The DOE projections are the most 
detailed and rigorous projections of credit availability that NHTSA is 
aware of at this time. According to DOE's analysis the average credit 
value for the CVCs across all PHEV, BEV, and FCEV sales in a given year 
will never reach its full $7,500 value for all vehicles, and instead 
project a maximum average credit value of $6,000. NHTSA is using the 
same projection for the average AMPC credit per kwh as in the proposal.
---------------------------------------------------------------------------

    \304\ U.S. Department of Energy.2024. Estimating Federal Tax 
Incentives for Heavy Duty Electric Vehicle Infrastructure and for 
Acquiring Electric Vehicles Weighing Less Than 14,000 Pounds. 
Memorandum, March 11, 2024.
---------------------------------------------------------------------------

    Similar to the proposal, the CAFE Model's approach to analyzing the 
effects of the CVCs includes a statutory restriction. The CAFE Model 
accounts for the MSRP restrictions of the Sec.  30D by assuming that 
the CVCs cannot be applied to cars with an MSRP above $55,000 or other 
vehicles with an MSRP above $80,000, since these are ineligible for 
Sec.  30D. Sec.  45W does not have the same MSRP restrictions, however 
since NHTSA is unable to model the CVCs separately at this time, the 
agency had to choose whether to model the restriction for both CVCs or 
not to model the restriction at all. NHTSA chose to include the 
restriction for both CVCs to be conservative.\305\ See Chapter 2.5.2 of 
the TSD for additional details on how NHTSA implements the IRA tax 
credits.
---------------------------------------------------------------------------

    \305\ Bureau of Transportation Statisitics. New and Used 
Passenger Car and Light Truck Sales and Leases. Avaliable at: 
https://www.bts.gov/content/new-and-used-passenger-car-sales-and-leases-thousands-vehicles. (Accessed: Apr. 2, 2024).
---------------------------------------------------------------------------

    As the agency was coordinating with EPA and DOE on tax credits, 
NHTSA discovered that it was using nominal values for tax credits in 
the proposal instead of real dollars. NHTSA uses real dollars for 
future costs and benefits, such as technology costs in future model 
years. Including the tax credits as nominal dollars instead of real 
dollars artificially raises the value of the credits in respect to 
other costs. For the Final Rule, NHTSA has converted the DOE 
projections to real dollars.
    As explained in the proposal, the CAFE model projects vehicles in 
model year cohorts rather than on a calendar year basis. Given that 
model years and calendar years can be misaligned, e.g., a MY 24 vehicle 
could be sold in calendar years 2023, 2024, or even 2025, choosing 
which calendar year a model year falls into is important for assigning 
tax credits which are phased-out during the analytical period. In the 
proposal, NHTSA assumed that the majority of vehicles of a given model 
year would be sold in the calendar year that preceded it, e.g., MY 2024 
would largely be sold in calendar year 2023. NHTSA also noted at the 
time that there was a possible incentive for manufacturers to pull-up 
sales in the last calendar years that tax credits are available. NHTSA 
reanalyzed the timing of new vehicle sales and new vehicle 
registrations and determined that for the Final Rule it was appropriate 
to change its assumption that credits available in a given calendar 
year be available to all vehicles sold in the following model year. 
Instead, NHTSA decided to model vehicles in a given model year as 
eligible for credits available in the same calendar year. As a result, 
NHTSA applies the credits to MYs 2023-2032 in the analysis for both 
LDVs and HDPUVs.

[[Page 52617]]

6. Technology Applicability Equations and Rules
    How does the CAFE Model decide how to apply technology to the 
analysis fleet of vehicles? We described above that the CAFE Model 
projects cost-effective ways that vehicle manufacturers could comply 
with CAFE standards, subject to limits that ensure that the model 
reasonably replicates manufacturer's decisions in the real-world. This 
section describes the equations the CAFE Model uses to determine how to 
apply technology to vehicles, including whether technologies are cost-
effective, and why we believe the CAFE Model's calculation of potential 
compliance pathways reasonably represents manufacturers' decision-
making. This section also gives a high-level overview of real-world 
limitations that vehicle manufacturers face when designing and 
manufacturing vehicles, and how we include those in the technology 
inputs and assumptions in the analysis.
    The CAFE Model begins by looking at a manufacturer's fleet in a 
given MY and determining whether the fleet meets its CAFE standard. If 
the fleet does not meet its standard, the model begins the process of 
applying technology to vehicles. We described above how vehicle 
manufacturers use the same or similar engines, transmissions, and 
platforms across multiple vehicle models, and we track vehicle models 
that share technology by assigning Engine, Transmission, and Platform 
Codes to vehicles in the analysis fleet. As an example, the Ford 10R80 
10-speed transmission is currently used in the following Ford Motor 
Company vehicles: 2017-present Ford F-150, 2018-present Ford Mustang, 
2018-present Ford Expedition/Lincoln Navigator, 2019-present Ford 
Ranger, 2020-present Ford Explorer/Lincoln Aviator, and the 2020-
present Ford Transit.\306\ The CAFE Model first determines whether any 
technology should be ``inherited'' from an engine, transmission, or 
platform that currently uses the technology to a vehicle that is due 
for a refresh or redesign. Using the Ford 10R80 10-speed transmission 
analysis as applied to the CAFE Model, the above models would be linked 
using the same Transmission Code. Even though the vehicles might be 
eligible for technology applications in different years because each 
vehicle model is on a different refresh or redesign cycle, each vehicle 
could potentially inherit the 10R80 10-speed transmission. The model 
then again evaluates whether the manufacturer's fleet complies with its 
CAFE standard. If it does not, the model begins the process of 
evaluating what from our universe of technologies could be applied to 
the manufacturer's vehicles.
---------------------------------------------------------------------------

    \306\ DOE. 2013. Light-Duty Vehicles Technical Requirements and 
Gaps for Lightweight and Propulsion Materials. Final Report. 
Available at: https://www.energy.gov/eere/vehicles/articles/workshop-reportlight-duty-vehicles-technical-requirements-and-gaps. 
(Accessed: Feb. 27, 2024).
---------------------------------------------------------------------------

    The CAFE Model applies the most cost-effective technology out of 
all technology options that could potentially be applied. To determine 
whether a particular technology is cost-effective, the model will 
calculate the ``effective cost'' of multiple technology options and 
choose the option that results in the lowest ``effective cost.'' The 
``effective cost'' calculation is actually multiple calculations, but 
we only describe the highest levels of that logic here; interested 
readers can consult the CAFE Model Documentation for additional 
information on the calculation of effective cost. Equation III-6 shows 
the CAFE Model's effective cost calculation for this analysis.
[GRAPHIC] [TIFF OMITTED] TR24JN24.059

Where:

TechCostTotal: the total cost of a candidate technology evaluated on 
a group of selected vehicles;
TaxCreditsTotal: the cumulative value of additional vehicle and 
battery tax credits (or, Federal Incentives) resulting from 
application of a candidate technology evaluated on a group of 
selected vehicles;
FuelSavingsTotal: the value of the reduction in fuel consumption 
(or, fuel savings) resulting from application of a candidate 
technology evaluated on a group of selected vehicles;
[Delta]Fines: the change in manufacturer's fines in the analysis 
year if the CAFE compliance program is being evaluated, or zero if 
evaluating compliance with CO2 standards;
[Delta]ComplianceCredits: the change in manufacturer's compliance 
credits in the analysis year, which depending on the compliance 
program being evaluated, corresponds to the change in CAFE credits 
(denominated in thousands of gallons) or the change in 
CO2 credits (denominated in metric tons); and
EffCost: the calculated effective cost attributed to application of 
a candidate technology evaluated on a group of selected vehicles.

    For the effective cost calculation, the CAFE Model considers the 
total cost of a technology that could be applied to a group of 
connected vehicles, just as a vehicle manufacturer might consider what 
new technologies it has that are ready for the market, and which 
vehicles should and could receive the upgrade. Next, like the 
technology costs, the CAFE Model calculates the total value of Federal 
incentives (for this analysis, Federal tax credits) available for a 
technology that could be applied to a group of vehicles and subtracts 
that total incentive from the total technology costs. For example, even 
though we do not consider the fuel economy of LD BEVs in our standard-
setting analysis, we do account for the costs of vehicles that 
manufacturers may build in response to California's ACC I program (and 
in the HDPUV analysis, the ACT program), and additional electric 
vehicles that manufacturers have committed to deploy (consistent with 
ACC II), as part of our evaluation of how the world would look without 
our regulation, or more simply, the regulatory reference baseline. If 
the CAFE Model is evaluating whether to build a BEV outside of the MYs 
for which NHTSA is setting standards (if applicable in the modeling 
scenario), it starts with the total technology cost for a group of BEVs 
and subtracts the total value of the tax credits that could be applied 
to that group of vehicles.
    The total fuel savings calculation is slightly more complicated. 
Broadly, when considering total fuel savings from switching from one 
technology to another, the CAFE Model must calculate the total fuel 
cost for the vehicle before application of a technology and subtract 
the total fuel cost for the vehicle after calculation of that 
technology. The total fuel cost for a given vehicle depends on both the 
price of gas (or gasoline

[[Page 52618]]

equivalent fuel) and the number of miles that a vehicle is driven, 
among other factors. As technology is applied to vehicles in groups, 
the total fuel cost is then multiplied by the sales volume of a vehicle 
in a MY to equal total fuel savings. This equation also includes an 
assumption that consumers are likely to buy vehicles with fuel economy-
improving technology that pays for itself within 2.5 years, or 30 
months. Finally, in the numerator, we subtract the change in a 
manufacturer's expected fines before and after application of a 
specific technology. Then, the result from the sequence above is 
divided by the change in compliance credits, which means a 
manufacturer's credits earned (expressed as thousands of gallons for 
the purposes of effective cost calculation) in a compliance category 
before and after the application of a technology to a group of 
vehicles.
    The effective cost calculation has evolved over successive CAFE 
Model iterations to become increasingly more complex; however, 
manufacturers' decision-making regarding what fuel economy-improving 
technology to add to vehicles has also become increasingly more 
complex. We believe this calculation appropriately captures a number of 
manufacturers implicit or explicit considerations.
    The model accounts explicitly for each MY, applying technologies 
when vehicles are scheduled to be redesigned or freshened and carrying 
forward technologies between MYs once they are applied. The CAFE Model 
accounts explicitly for each MY because manufacturers actually ``carry 
forward'' most technologies between MYs, tending to concentrate the 
application of new technology to vehicle redesigns or mid-cycle 
``freshenings,'' and design cycles vary widely among manufacturers and 
specific products. Comments by manufacturers and model peer reviewers 
to past CAFE rules have strongly supported explicit year-by-year 
simulation. The multi-year planning capability, simulation of ``market-
driven overcompliance,'' and EPCA credit mechanisms increase the 
model's ability to simulate manufacturers' real-world behavior, 
accounting for the fact that manufacturers will seek out compliance 
paths for several MYs at a time, while accommodating the year-by-year 
requirement. This same multi-year planning structure is used to 
simulate responses to standards defined in grams CO2/mile 
and utilizing the set of specific credit provisions defined under EPA's 
program, when applicable in the modeling scenario.\307\
---------------------------------------------------------------------------

    \307\ In this analysis, EPA's MYs 2022-2026 standards are 
included in the baseline, as discussed in more detail in Section IV.
---------------------------------------------------------------------------

    In addition to the model's technology application decisions 
pursuant to the compliance simulation algorithm, there are also several 
technology inputs and assumptions that work together to determine which 
technologies the CAFE Model can apply. The technology pathways, 
discussed in detail above, are one significant way that we instruct the 
CAFE Model to apply technology. Again, the pathways define technologies 
that are mutually exclusive (i.e., that cannot be applied at the same 
time), and define the direction in which vehicles can advance as the 
modeling system evaluates specific technologies for application. Then, 
the arrows between technologies instruct the model on the order in 
which to evaluate technologies on a pathway, to ensure that a vehicle 
that uses a more fuel-efficient technology cannot downgrade to a less 
efficient option.
    In addition to technology pathway logic, we have several technology 
applicability rules that we use to better replicate manufacturers' 
decision-making. The ``skip'' input--represented in the Market Data 
Input File as ``SKIP'' in the appropriate technology column 
corresponding to a specific vehicle model--is particularly important 
for accurately representing how a manufacturer applies technologies to 
their vehicles in the real world. This tells the model not to apply a 
specific technology to a specific vehicle model. SKIP inputs are used 
to simulate manufacturer decisions with cost-benefit in mind, including 
(1) parts and process sharing; (2) stranded capital; and (3) 
performance neutrality.
    First, parts sharing includes the concepts of platform, engine, and 
transmission sharing, which are discussed in detail in Section II.C.2 
and Section II.C.3, above. A ``platform'' refers to engineered 
underpinnings shared on several differentiated vehicle models and 
configurations. Manufacturers share and standardize components, 
systems, tooling, and assembly processes within their products (and 
occasionally with the products of another manufacturer) to manage 
complexity and costs for development, manufacturing, and assembly. 
Detailed discussion for this type of SKIP is provided in the ``adoption 
features'' section for different technologies, if applicable, in 
Chapter 3 of the TSD.
    Similar to vehicle platforms, manufacturers create engines that 
share parts. For instance, manufacturers may use different piston 
strokes on a common engine block or bore out common engine block 
castings with different diameters to create engines with an array of 
displacements. Head assemblies for different displacement engines may 
share many components and manufacturing processes across the engine 
family. Manufacturers may finish crankshafts with the same tools to 
similar tolerances. Engines on the same architecture may share pistons, 
connecting rods, and the same engine architecture may include both six- 
and eight-cylinder engines. One engine family may appear on many 
vehicles on a platform, and changes to that engine may or may not carry 
through to all the vehicles. Some engines are shared across a range of 
different vehicle platforms. Vehicle model/configurations in the 
analysis fleet that share engines belonging to the same platform are 
identified as such, and we also may apply a SKIP to a particular engine 
technology where we know that a manufacturer shares an engine 
throughout several of their vehicle models, and the engine technology 
is not appropriate for any of the platforms that share the same engine.
    It is important to note that manufacturers define common engines 
differently. Some manufacturers consider engines as ``common'' if the 
engines share an architecture, components, or manufacturing processes. 
Other manufacturers take a narrower definition, and only assume 
``common'' engines if the parts in the engine assembly are the same. In 
some cases, manufacturers designate each engine in each application as 
a unique powertrain. For example, a manufacturer may have listed two 
engines separately for a pair that share designs for the engine block, 
the crank shaft, and the head because the accessory drive components, 
oil pans, and engine calibrations differ between the two. In practice, 
many engines share parts, tooling, and assembly resources, and 
manufacturers often coordinate design updates between two similar 
engines. We consider engines together (for purposes of coding, 
discussed in Section III.C.2 above, and for SKIP application) if the 
engines share a common cylinder count and configuration, displacement, 
valvetrain, and fuel type, or if the engines only differed slightly in 
compression ratio (CR), horsepower, and displacement.
    Parts sharing also includes the concept of sharing manufacturing 
lines (the systems, tooling, and assembly

[[Page 52619]]

processes discussed above), since manufacturers are unlikely to build a 
new manufacturing line to build a completely new engine. A new engine 
that is designed to be mass manufactured on an existing production line 
will have limits in number of parts used, type of parts used, weight, 
and packaging size due to the weight limits of the pallets, material 
handling interaction points, and conveyance line design to produce one 
unit of a product. The restrictions will be reflected in the usage of a 
SKIP of engine technology that the manufacturing line would not 
accommodate.
    SKIPs also relate to instances of stranded capital when 
manufacturers amortize research, development, and tooling expenses over 
many years, especially for engines and transmissions. The traditional 
production life cycles for transmissions and engines have been a decade 
or longer. If a manufacturer launches or updates a product with fuel-
saving technology, and then later replaces that technology with an 
unrelated or different fuel-saving technology before the equipment and 
research and development investments have been fully paid off, there 
will be unrecouped, or stranded, capital costs. Quantifying stranded 
capital costs accounts for such lost investments. One design where 
manufacturers take an iterative redesign approach, as described in a 
recent SAE paper,\308\ is the MacPherson strut suspension. It is a 
popular low-cost suspension design and manufacturers use it across 
their fleet. As we observed previously, manufacturers may be shifting 
their investment strategies in ways that may alter how stranded capital 
could be considered. For example, some suppliers sell similar 
transmissions to multiple manufacturers. Such arrangements allow 
manufacturers to share in capital expenditures or amortize expenses 
more quickly. Manufacturers share parts on vehicles around the globe, 
achieving greater scale and greatly affecting tooling strategies and 
costs.
---------------------------------------------------------------------------

    \308\ Pilla, S. et al. 2021. Parametric Design Study of 
McPherson Strut to Stabilizer Bar Link Bracket Weld Fatigue Using 
Design for Six Sigma and Taguchi Approach. SAE Technical Paper 2021-
01-0235. Available at: https://doi.org/10.4271/2021-01-0235. 
(Accessed: Feb. 27, 2024).
---------------------------------------------------------------------------

    As a proxy for stranded capital, the CAFE Model accounts for 
platform and engine sharing and includes redesign and refresh cycles 
for significant and less significant vehicle updates. This analysis 
continues to rely on the CAFE Model's explicit year-by-year accounting 
for estimated refresh and redesign cycles, and shared vehicle platforms 
and engines, to moderate the cadence of technology adoption and thereby 
limit the implied occurrence of stranded capital and the need to 
account for it explicitly. In addition, confining some manufacturers to 
specific advanced technology pathways through technology adoption 
features acts as a proxy to indirectly account for stranded capital. 
Adoption features specific to each technology, if applied on a 
manufacturer-by-manufacturer basis, are discussed in each technology 
section. We discuss comments received on refresh and redesign cycles, 
parts-sharing, and SKIP logic below.
    The National Resources Defense Council (NRDC) commented about 
several aspects of the redesign and refresh cycles included in the 
model. NRDC commented that we did not clearly explain why 
manufacturers' historic redesign cadences ``are representative of what 
manufacturers `can' do if required,'' citing EPCA's command that each 
standard we set be the ``maximum feasible'' standard. NRDC gave several 
examples, like that ``NHTSA's historical data show that Ford and GM 
have redesigned heavier pickups every 6 years on average, Draft TSD at 
2-29, but show Toyota taking 9 years on average.'' NRDC stated that 
``[i]f it is feasible and practicable for two full-line manufacturers 
to redesign on a 6-year cadence, it is unclear why it is infeasible for 
others to do so as well.'' NRDC continued on to state that ``[t]he 
disparity between assumed redesign cycles for different automakers also 
appears to violate NHTSA's interpretation of `economic practicability,' 
which ``has long abandoned the `least capable manufacturer' approach. 
88 FR at 56,314.'' NRDC also took issue with our interpretation that 
redesign cycles help us to account for stranded capital costs, which we 
do not explicitly include in our modeling, stating that ``[t]he 
possibility of even considerable stranded capital for some automakers-a 
reduced probability given the considerable lead time to MY2031 here-is 
not a per se `harsh' economic consequence for the `industry,' . . . 
that might render standards not economically practicable.'' NRDC 
requested that an alternative with reduced time between redesigns/
refreshes should be modeled to compare the sensitivity of key 
metrics.\309\ NRDC also expressed that NHTSA's sensitivity case 
allowing for annual redesigns is not instructive and questioned the 
reasons for including it and not a more realistic case.
---------------------------------------------------------------------------

    \309\ Joint NGOs, Docket No. NHTSA-2023-0022-61944.
---------------------------------------------------------------------------

    NHTSA agrees with NRDC that refresh and redesign cycles are a 
significant input to the CAFE Model, and we understand that using 
refresh and redesign cycles to represent stranded capital that 
otherwise would be difficult to quantify has been a longstanding point 
of disagreement between the agency and NRDC. NHTSA continues to believe 
that the resources manufacturers spend on new vehicle technologies--
including developing, testing, and deploying those technologies--
represents a significant amount of capital, although that number may be 
declining because, like both NHTSA and NRDC mentioned, manufacturers 
are taking advantage of sharing suppliers and sharing parts (which 
NHTSA does model).
    While NHTSA does observe different trends in development cycles for 
different manufacturers, the adoption of new technologies, particularly 
for major and advanced components, continues to require multiple years 
of investment before being deployed to production models. Table 2-9 in 
the TSD contains information about the percentage of a manufacturer's 
vehicle fleet that is expected to be redesigned. The contents reflect 
that each manufacturer has their own development schedules, which vary 
due to multiple factors including technological adoption trends and 
consumer acceptance in specific market segments.\310\ \311\ We also 
show the average redesign schedules for each technology class in the 
TSD, which similarly bears out this trend. On the other hand, as 
discussed further in Section VI, vehicle manufacturers in comment to 
the proposal reiterated that their ability to spend resources improving 
ICE vehicles between now and MY 2031 are limited in light of the need 
to spend resources on the BEV transition. NHTSA understands this to 
mean that the potential for the negative consequences of stranding 
capital is an even more important consideration to manufacturers than 
it may have been in previous rules. For purposes of this analysis, we 
believe that our refresh and redesign cycles are reasonable, for the 
reasons discussed in more detail below. If NHTSA were to reevaluate 
refresh/

[[Page 52620]]

redesign cycles, it would be as part of a future rulemaking action, in 
which all stakeholders would have the opportunity to comment.
---------------------------------------------------------------------------

    \310\ An example of this is Nissan's Variable Compression Ratio 
engine that was first introduced in 2019 Infinity QX50 before it was 
expanded to other Nissan products few years later.
    \311\ Kojima, S. et al. 2018. Development of a New 2L Gasoline 
VC-Turbo Engine with the World's First Variable Compression Ratio 
Technology. SAE Technical Paper 2018-01-0371, Available at: https://doi.org/10.4271/2018-01-0371. (Accessed: Apr. 5, 2024).
---------------------------------------------------------------------------

    That said, we disagree that the way that we apply refresh and 
redesign cycles in the model is contrary to EPCA and we disagree with 
the examples that NRDC provided to illustrate that point. Allowing some 
manufacturers to have longer product redesign cycles does not conflict 
with our statement that we should not be setting standards with 
reference to a least capable manufacturer. There are several reasons 
why a manufacturer could be the ``least capable'' in fuel economy space 
that have nothing to do with its vehicles' refresh or redesign cycles. 
Using the example of manufacturers that NRDC provided, NHTSA's analysis 
estimates that under the preferred alternative in MY 2031, Ford's light 
truck fleet achieves a fuel economy level of 42.6 mpg, exactly meeting 
their standard, GM's light truck fleet achieves a fuel economy level of 
40.9 mpg, falling short of their standard by 0.9 mpg, while Toyota's 
light truck fleet achieves a fuel economy level of 50.2 mpg, exceeding 
their standard by 3.7 mpg.\312\ Each manufacturer takes a different 
approach to redesigning its pickup trucks--Ford and GM every six years 
and Toyota every nine years--but on a fleet average basis, which is the 
relevant metric when considering fuel economy standards, each 
manufacturer's pickup design cycles are not indicative of their fleets' 
performance.
---------------------------------------------------------------------------

    \312\ As a reminder, each manufacturer has a different projected 
standard based on the footprints and sales volumes of the vehicles 
it sells.
---------------------------------------------------------------------------

    NRDC also stated that using historical average redesign cadences 
``can obscure significant variation about the average,'' \313\ using as 
an example the design window for the Ram 1500 and the Ram 1500 Classic 
in their comment--stating that ``[i]t is not clear how the automaker 
can feasibly update the 1500 every six years but not upgrade the 1500 
Classic any faster than every 9 years.'' The most recent redesign of 
the Ram 1500 Classic was in 2009 and it will continue to be sold as-is 
for the 2024 model year.\314\ Ram did update the 1500 in 2019 with a 
BISG system, but for reasons unique to Ram they decided to keep making 
the existing 1500 Classic. Since the manufacturer chose to keep the 
same product for 15 years, we cannot assume there would be a ``lost'' 
redesign window for this particular product. Note that the Ram 1500 
Classic example is an extremely fringe example with a handful of other 
vehicles; as we showed in the Draft TSD and again in the Final TSD 
accompanying this rule, on average across the industry, manufacturers 
redesign vehicles every 6.6 years.
---------------------------------------------------------------------------

    \313\ We assume that NRDC means that using an average obscures 
large deviations from the average, but since we assign refresh and 
redesigns on a model level, not just at a manufacturer level, we can 
see where the deviations occur, and as discussed below in regards to 
this example, we believe these generally represent a small fraction 
of the fleet.
    \314\ Fitzgerald, J. 2024 The Ancient Ram 1500 Classic Returns 
for Another Year, Car and Driver. Last revised: Jan 5, 2024. 
Available at: https://www.caranddriver.com/news/a46297349/2024-ram-1500-classic-confirmed/. (Accessed: Apr. 5, 2024).
---------------------------------------------------------------------------

    NRDC also commented about the interaction between redesign cycles 
and shared components, citing the Dodge Challenger as example of when 
``a vehicle may go into a redesign window, yet not have major 
components such as engines upgraded, because the leader vehicle for 
that engine [the Ram 1500 Classic] has not yet entered its redesign 
window. NHTSA believes that NRDC's Dodge Challenger/Ram example to 
support using alternative redesign assumptions is an incomplete 
understanding of how the CAFE Model considers leader-follower 
relationships and redesigns. The CAFE Model considers each component 
separately when determining the most cost-effective path to compliance. 
Sticking to engines, the Dodge Challenger can accept four different 
engines, one of which is not used in any Ram truck.
    NHTSA does consider the effect of reducing the time between 
redesigns and refreshes through a sensitivity case, the ``annual 
redesigns case,'' \315\ which, as mentioned above, NRDC also took issue 
with. Perhaps we were not clear enough in the PRIA about the relative 
importance of this sensitivity case to our decision making, so we will 
clarify here. When we look at the annual redesign sensitivity case, we 
are examining the most extreme case of potential redesigns, explicitly 
not counting for the development, integration and manufacturing costs 
associated with such a cadence. Thus, this scenario is instructive of 
the upper bound of potential benefits under the assumption of 
unrestrained expenditures for vehicle design. While we agree that there 
are model outliers that could conceivably redesign closer to the 
average of six years, or even on an accelerated schedule of five years, 
we do not believe that we would see redesigns occurring, for example, 
any faster than three or four years. This is why we include planned 
vehicle refreshes in the modeling as well. Thus, the annual redesigns 
case is instructive because it shows us that any further refining of 
our redesign cadences (i.e., on a scale between what we currently use 
and what we might consider reasonable for a lower bound schedule, which 
presumably would not be any shorter than the refresh schedule) would 
not have a significant impact on the analysis.
---------------------------------------------------------------------------

    \315\ See FRIA Chapter 9.2.2.1, Redesign Schedules.
---------------------------------------------------------------------------

    Like we maintain in other aspects of our analysis, some 
manufacturers' redesign cycles may be shorter than we model, and some 
manufacturers' redesign cycles may be longer than we model. We believe 
that it is reasonable to, on average, have our analysis reflect the 
capability of the industry. NHTSA will continue to follow industry 
trends in vehicle refresh and redesigns--like moving sales volume of an 
ICE model to a hybrid model, for example, or evaluating which 
technologies are now more frequently being applied during refreshes 
than redesigns--and consider how the refresh and redesign inputs could 
be updated in future analyses.\316\
---------------------------------------------------------------------------

    \316\ Just as vehicle manufacturers must spend significant 
resources to develop, test, and deploy new vehicle technologies, 
NHTSA must spend a significant amount of time (generally longer than 
that permitted in one CAFE rulemaking cycle) to develop, test, and 
deploy any new significant model update. We would also like, as 
mentioned above, for any update to our approach to redesign 
schedules to be subject to public comment for stakeholder feedback.
---------------------------------------------------------------------------

    NHTSA also received two comments related to parts sharing. The 
Institute for Policy Integrity (IPI) at New York University School of 
Law commented that ``NHTSA assumes that manufacturers apply the same 
costly technology to multiple models that share the same vehicle 
platform (i.e., the car's essential design, engineering, and production 
components), while also (as noted above) maintaining their market 
shares irrespective of these cost changes.'' IPI stated that this 
assumption ``restricts manufacturers from optimizing their technology 
strategies,'' which leads the model to overstate compliance costs. 
Similarly, NRDC argued that ``NHTSA should reevaluate categorical 
restrictions on upgrading shared components on separate paths.'' NRDC 
included several examples of components shared on vehicles that it 
thought resulted in a vehicle not being updated with additional 
technology.
    While the CAFE Model considers part sharing by manufacturers across 
vehicle platforms, this assumption is based on real-world observations 
of the latest vehicle markets (See TSD 2.2, The Market Data Input 
File). As mentioned in TSD Chapter 2.2.1, manufacturers are expected to 
share parts across platforms to take advantage of economies of scale. 
These factors prevent the CAFE Model

[[Page 52621]]

from predicting the adoption of unreasonably costly technologies across 
vehicle fleets.
    While use of parts sharing by the CAFE Model is described as a 
restriction, we do not believe this is an accurate characterization. By 
considering upgrades across all vehicles that share a particular 
component, we are able to capture the total volume of that component in 
a way analogous to the manufacturers. If a potential upgrade is not 
cost-effective in the aggregate, it is unlikely that it would be cost-
effective for a subset with a smaller volume.
    IPI points to Mazda's MY 2032 estimated per-vehicle technology 
costs under alternative PC6LT8 as an example of an unrealistic outcome 
resulting from parts sharing. NHTSA maintains that this is an accurate 
projection of the effects of that regulatory alternative. The high per-
vehicle costs in this specific case are due to a confluence of factors. 
The CAFE Model calculates the least expensive total regulatory cost, 
which includes both technology costs and fines. Mazda's preference to 
avoid fines in MY 2032 means that they would spend more on technology 
in order to comply with the standards. As a manufacturer, Mazda has an 
uncommonly high level of platform commonality, which means that 
investments in platform technology are likely to be propagated 
throughout their fleet in order to amortize costs more quickly. Their 
relatively small sales volume also drives up the per-vehicle costs. 
Taken together, these explain why the projected technology cost for 
Mazda is high, yet it is still within the same order of magnitude as 
some of Mazda's peer manufacturers (see FRIA Chapter 8). In the next 
most stringent regulatory alternative, Mazda's per-vehicle costs are 
projected to be in the middle of the pack compared to their peers.
    NRDC also gave the example that the Dodge Challenger ``will be 
prevented from upgrading to any high-compression ratio (HCR) engine, 
because the [sales] leader Classic 1500 is categorically excluded from 
upgrading to an HCR engine in the CAFE model because it is a pickup 
truck'' as another example of the pitfalls of part sharing. NHTSA 
believes that this is a misreading of how the CAFE Model handles 
upgrade paths for shared components. The model restricts certain 
upgrade paths on the component level based on technology paths defined 
in TSD Chapter 3 and in this case, both the 1500 and the Challenger are 
only prevented from upgrading to a non-hybrid HCR engine. In the 
specific NRDC example, Engine Code 123602, a DOHC engine meant for high 
torque, was selected by Stellantis for, amongst other models, a pickup 
truck (Ram 1500 Classic) and a high-performance car (Dodge Challenger). 
HCR engines have higher efficiency at the cost of lower torque and 
lower power density, making them an unsuitable replacement for either 
model or any other model in this engine family. TSD Chapter 2.2.1, 
Characterizing Vehicles and their Technology Content has further 
information on how the CAFE Model applies SKIP logic. Also see TSD 
Chapter 3.1.1.2.3 for more information about HCR and Atkinson cycle 
engines.
    NRDC also cited [an] ``example of an engine-sharing family in its 
2018 fuel economy standards proposal included the Chevy Equinox SUV, 
which shared a 6-cylinder engine with the Colorado and Canyon pickups 
(along with other vehicles)'' that in later years ``did not maintain 
engine sharing.'' NHTSA stands by its position that historical data 
show manufacturers typically maintain parts commonality. The MY 2018 
Chevy Equinox was available with two engines, a 4-cylinder and 6-
cylinder, both naturally aspirated. The 4-cylinder variant was shared 
with the GMC Terrain and several Buick models which have since been 
discontinued, but not with the Chevy Colorado or GMC Canyon pickup 
trucks. This lineage was replaced by a choice of 1.5L or 2.0L 4-
cylinder turbo engines in MY 2020 and now a single 1.5L 4-cylinder 
turbo in MY 2022. This engine is still shared between the Chevy Equinox 
and the GMC Terrain. In contrast, the Colorado and Canyon Pickups 
continue to use naturally aspirated engines in the 4-cylinder and 6-
cylinder varieties, but these 4-cylinder engines are from a different 
lineage that were never shared with the Equinox. Instead of showing an 
example of manufacturers fracturing an existing engine family, this 
example validates our approach of considering technology upgrades at 
the component level.
    Finally, we ensure that our analysis is performance neutral because 
the goal is to capture the costs and benefits of vehicle manufacturers 
adding fuel economy-improving technology because of CAFE standards, and 
not to inappropriately capture costs and benefits for changing other 
vehicle attributes that may have a monetary value associated with 
them.\317\ This means that we ``SKIP'' some technologies where we can 
reasonably assume that the technology would not be able to maintain a 
performance attribute for the vehicle, and where our simulation over 
test cycles may not capture the technology limitation.
---------------------------------------------------------------------------

    \317\ See, e.g., 87 FR 25887, citing EPA, Consumer Willingness 
to Pay for Vehicle Attributes: What is the Current State of 
Knowledge? (2018)). Importantly, the EPA-commissioned study ``found 
very little useful consensus'' on how consumers value various 
vehicle attributes, which they concluded were of little value in 
informing policy decisions.
---------------------------------------------------------------------------

    For example, prior to the development of SAE J2807, manufacturers 
used internal rating methods for their vehicle towing capacity. 
Manufacturers switched to the SAE tow rating standard at the next 
redesign of their respective vehicles so that they could mitigate costs 
via parts sharing and remain competitive in performance. Usually, the 
most capable powertrain configuration will also have the highest towing 
capacity and can be reflected in using this input feature. Separately, 
we also ensure that the analysis is performance neutral through other 
inputs and assumptions, like developing our engine maps assuming use 
with a fuel grade most commonly available to consumers.\318\ Those 
assumptions are discussed throughout this section, and in Chapters 2 
and 3 of the TSD. Technology ``phase-in caps'' and the ``phase-in start 
years'' are defined in the Technology Cost Input File and offer a way 
to gradually ``phase-in'' technology that is not yet fully mature to 
the analysis. They apply to the manufacturer's entire estimated 
production and, for each technology, define a share of production in 
each MY that, once exceeded, will stop the model from further applying 
that technology to that manufacturer's fleet in that MY.
---------------------------------------------------------------------------

    \318\ See, e.g., 85 FR 24386. Please see the 2020 final rule for 
a significant discussion of how manufacturers consider fuel grades 
available to consumers when designing engines (including specific 
engine components).
---------------------------------------------------------------------------

    The influence of these inputs varies with regulatory stringency and 
other model inputs. For example, setting the inputs to allow immediate 
100 percent penetration of a technology will not guarantee any 
application of the technology if stringency increases are low and the 
technology is not at all cost effective. Also, even if these are set to 
allow only very slow adoption of a technology, other model aspects and 
inputs may nevertheless force more rapid application than these inputs, 
alone, would suggest (e.g., because an engine technology propagates 
quickly due to sharing across multiple vehicles, or because BEV 
application must increase quickly in response to ZEV requirements). For 
this analysis, nearly all of these inputs are set at levels that do not 
limit the simulation at all.

[[Page 52622]]

    This analysis also applies phase-in caps and corresponding start 
years to prevent the simulation from showing unlikely rates of applying 
battery-electric vehicles (BEVs), such as showing that a manufacturer 
producing very few BEVs in MY 2022 could plausibly replace every 
product with a 300- or 400-mile BEV by MY 2026. Also, this analysis 
applies phase-in caps and corresponding start years intended to ensure 
that the simulation's plausible application of the highest included 
levels of MR (20 percent reductions of vehicle ``glider'' weight) do 
not, for example, outpace plausible supply of raw materials and 
development of entirely new manufacturing facilities.
    These model logical structures and inputs act together to produce 
estimates of ways each manufacturer could potentially shift to new 
fuel-saving technologies over time, reflecting some measure of 
protection against rates of change not reflected in, for example, 
technology cost inputs. This does not mean that every modeled solution 
would necessarily be economically practicable. Using technology 
adoption features like phase-in caps and phase-in start years is one 
mechanism that can be used so that the analysis better represents the 
potential costs and benefits of technology application in the 
rulemaking timeframe.
D. Technology Pathways, Effectiveness, and Cost
    The previous section discussed, at a high level, how we generate 
the technology inputs and assumptions used in the CAFE Model. We do 
this in several ways: by evaluating data submitted by vehicle 
manufacturers; consolidating publicly available data, press materials, 
marketing brochures, and other information; collaborative research, 
testing, and modeling with other Federal agencies; research, testing, 
and modeling with independent organizations; determining that work done 
for prior rules is still relevant and applicable; considering feedback 
from stakeholders on prior rules and meetings conducted prior to the 
commencement of this rulemaking; and using our own engineering 
judgment.
    This section discusses the specific technology pathways, 
effectiveness, and cost inputs and assumptions used in the compliance 
analysis. As an example, interested readers learned in the previous 
section that the starting point for estimating technology costs is an 
estimate of the DMC--the component and assembly costs of the physical 
parts and systems that make up a complete vehicle--for any particular 
technology; in this section, readers will learn that our transmission 
technology DMCs are based on estimates from the NAS.
    After spending over a decade refining the technology pathways, 
effectiveness, and cost inputs and assumptions used in successive CAFE 
Model analyses, we have developed guiding principles to ensure that the 
CAFE Model's compliance analysis results in impacts that we would 
reasonably expect to see in the real world. These guiding principles 
are as follows:
    Technologies will have complementary or non-complementary 
interactions with the full vehicle technology system. The fuel economy 
improvement from any individual technology must be considered in 
conjunction with the other fuel economy-improving technologies applied 
to the vehicle, because technologies added to a vehicle will not result 
in a simple additive fuel economy improvement from each individual 
technology. In particular, we expect this result from engine and other 
powertrain technologies that improve fuel economy by allowing the ICE 
to spend more time operating at efficient engine speed and load 
conditions, or from combinations of engine technologies that work to 
reduce the effective displacement of the engine.
    The effectiveness of a technology depends on the type of vehicle 
the technology is being applied to. When we talk about ``vehicle type'' 
in our analysis, we're referring to our vehicle technology classes--
e.g., a small car, a medium performance SUV, or a pickup truck, among 
other classes. A small car and a medium performance SUV that use the 
exact same technology will start with very different fuel economy 
values; so, when the exact same technology is added to both of those 
vehicles, the technology will provide a different effectiveness 
improvement on both of those vehicles.
    The cost and effectiveness values for each technology should be 
reasonably representative of what can be achieved across the entire 
industry. Each technology model employed in the analysis is designed to 
be representative of a wide range of specific technology applications 
used in industry. Some manufacturers' systems may perform better or 
worse than our modeled systems and some may cost more or less than our 
modeled systems; however, employing this approach will ensure that, on 
balance, the analysis captures a reasonable level of costs and benefits 
that would result from any manufacturer applying the technology.
    A consistent reference point for cost and effectiveness values must 
be identified before assuming that a cost or effectiveness value could 
be employed for any individual technology. For example, as discussed 
below, this analysis uses a set of engine map models that were 
developed by starting with a small number of engine configurations, and 
then, in a very systematic and controlled process, adding specific 
well-defined technologies to create a new map for each unique 
technology combination. Again, providing a consistent reference point 
to measure incremental technology effectiveness values ensures that we 
are capturing accurate effectiveness values for each technology 
combination.
    The following sections discuss the engine, transmission, 
electrification, MR, aerodynamic, ROLL, and other vehicle technologies 
considered in this analysis. The following sections discuss:
     How we define the technology in the CAFE Model,\319\
---------------------------------------------------------------------------

    \319\ Note, due to the diversity of definitions industry 
sometimes employs for technology terms, or in describing the 
specific application of technology, the terms defined here may 
differ from how the technology is defined in the industry.
---------------------------------------------------------------------------

     How we assigned the technology to vehicles in the analysis 
fleet used as a starting point for this analysis,
     Any adoption features applied to the technology, so the 
analysis better represents manufacturers' real-world decisions,
     The technology effectiveness values, and
     Technology cost.
    Please note that the following technology effectiveness sections 
provide examples of the range of effectiveness values that a technology 
could achieve when applied to the entire vehicle system, in conjunction 
with the other fuel economy-improving technologies already in use on 
the vehicle. To see the incremental effectiveness values for any 
particular vehicle moving from one technology key to a more advanced 
technology key, see the CAFE Model Fuel Economy Adjustment Files that 
are installed as part of the CAFE Model Executable File, and not in the 
input/output folders. Similarly, the technology costs provided in each 
section are examples of absolute costs seen in specific MYs, for 
specific vehicle classes. Please refer to the Technologies Input File 
to see all absolute technology costs used in the analysis across all 
MYs.
    For the LD analysis we show two sets of technology effectiveness 
charts for each technology type, titled ``Unconstrained'' and 
``Standard Setting.'' For the Standard Setting charts, effectiveness 
values reflect the application of 49 U.S.C. 32902(h)

[[Page 52623]]

considerations to the technologies; for example, PHEV technologies only 
show the effectiveness achieved when operating in a gasoline only mode 
(charge sustaining mode). The Unconstrained charts show the 
effectiveness values modeled for the technologies without the 49 U.S.C; 
32902(h) constraints; when unconstrained, PHEV technologies show 
effectiveness for their full dual fuel use functionality. The standard 
setting values are used during the standard setting years being 
assessed in this analysis, and the unconstrained values are used for 
all other years.
1. Engine Paths
    ICEs convert chemical energy in fuel to useful mechanical power. 
The chemical energy in the fuel is released and converted to mechanical 
power by being oxidized, or burned, inside the engine. The air/fuel 
mixture entering the engine and the burned fuel/exhaust by-products 
leaving the engine are the working fluids in the engine. The engine 
power output is a direct result of the work interaction between these 
fluids and the mechanical components of the engine.\320\ The generated 
mechanical power is used to perform useful work, such as vehicle 
propulsion. For a complete discussion on fundamentals of engine 
characteristics, such as torque, torque maps, engine load, power 
density, brake mean effective pressure (BMEP), combustion cycles, and 
components, please refer to Heywood 2018.\321\
---------------------------------------------------------------------------

    \320\ Heywood, John B. Internal Combustion Engine Fundamentals. 
McGraw-Hill Education, 2018. Chapter 1.
    \321\ Heywood, John B. Internal Combustion Engine Fundamentals. 
McGraw-Hill Education, 2018.
---------------------------------------------------------------------------

    We classify the extensive variety of both LD and HDPUV vehicle ICE 
technologies into discrete Engine Paths. These paths are used to model 
the most representative characteristics, costs, and performance of the 
fuel economy-improving engine technologies most likely available during 
the rulemaking time frame. The paths are intended to be representative 
of the range of potential performance levels for each engine 
technology. In general, the paths are tied to ease of implementation of 
additional technology and how closely related the technologies are. The 
technology paths for LD and HDPUV can be seen in Chapter 3.1.1 of the 
TSD.
    The LD Engine Paths have been selected and refined over a period of 
more than ten years, based on engines in the market, stakeholder 
comments, and our engineering judgment, subject to the following 
factors: we included technologies most likely available during the 
rulemaking time frame and the range of potential performance levels for 
each technology, and excluded technologies unlikely to be feasible in 
the rulemaking timeframe, technologies unlikely to be compatible with 
U.S. fuels, or technologies for which there was not appropriate data 
available to allow the simulation of effectiveness across all vehicle 
technology classes in this analysis.
    For technologies on the HDPUV Engine Paths, we revisited work done 
for the HDPUV analysis in the Phase 2 rulemaking. We have updated our 
HDPUV Engine Paths based on that work, the availability of technology 
in the HDPUV analysis fleet, and technologies we believe will be 
available in the rulemaking timeframe. The HDPUV fleet is significantly 
smaller than the LD fleet with the majority of vehicles being produced 
by only three manufacturers, General Motors, Ford, and Stellantis. 
These vehicles include work trucks and vans that are focused on 
transporting people and moving equipment and supplies and tend to be 
more focused on a common need than that of vehicles in the LD fleet, 
which includes everything from sports cars to commuter cars and pickup 
trucks. The engine options between the two fleets are different in the 
real world and are accordingly different in the analysis. HDPUVs are 
work vehicles and their engines must be able to handle additional work 
such as higher payloads, towing, and additional stop and go demands. 
This results in HDPUVs often requiring larger, more robust, and more 
powerful engines. As a result of the HDPUV's smaller fleet size and 
narrowed focus, fewer engines and engine technologies are developed or 
used in this fleet. That said, we believe that the range of 
technologies included in the HDPUV Engine Paths and Electrification/
Hybrid/Electrics Path discussed in Section III.D.3 of this preamble 
presents a reasonable representation of powertrain options available 
for HDPUVs now and in the rulemaking time frame.
    The Engine Paths begin with one of the three base engine 
configurations: dual over-head camshaft (DOHC) engines have two 
camshafts per cylinder head (one operating the intake valves and one 
operating the exhaust valves), single over-head camshaft (SOHC) engines 
have a single camshaft, and over-head valve (OHV) engines also have a 
single camshaft located inside of the engine block (south of the valves 
rather than over-head) connected to a rocker arm through a push rod 
that actuates the valves. DOHC and SOHC engine configurations are 
common in the LD fleet, while OHV engine configurations are more common 
in the HDPUV fleet.
    The next step along the Engine Paths is at the Basic Engine Path 
technologies. These include variable valve lift (VVL), stoichiometric 
gasoline direct injection (SGDI), and a basic level of cylinder 
deactivation (DEAC). VVL dynamically adjusts how far the valve opens 
and reduces fuel consumption by reducing pumping losses and optimizing 
airflow over broader range of engine operating conditions. Instead of 
injecting fuel at lower pressures and before the intake valve, SGDI 
injects fuel directly into the cylinder at high pressures allowing for 
more precise fuel delivery while providing a cooling effect and 
allowing for an increase in the CR and/or more optimal spark timing for 
improved efficiency. DEAC disables the intake and exhaust valves and 
turns off fuel injection and spark ignition on select cylinders which 
effectively allows the engine to operate temporarily as if it were 
smaller while also reducing pumping losses to improve efficiency. New 
for the NPRM and carried into this final rule analysis is that variable 
valve timing (VVT) technology is integrated in all non-diesel engines, 
so we do not have a separate box for it on the Basic Engine Path. For 
the LD analysis, VVL, SGDI, and DEAC can be applied to an engine 
individually or in combination with each other, and for the HDPUV 
analysis, SGDI and DEAC can be applied individually or in combination.
    Moving beyond the Basic Engine Path technologies are the 
``advanced'' engine technologies, which means that applying the 
technology--both in our analysis and in the real world--would require 
significant changes to the structure of the engine or an entirely new 
engine architecture. The advanced engine technologies represent the 
application of alternate combustion cycles, various applications of 
forced induction technologies, or advances in cylinder deactivation.
    Advanced cylinder deactivation (ADEAC) systems, also known as 
rolling or dynamic cylinder deactivation systems, allow the engine to 
vary the percentage of cylinders deactivated and the sequence in which 
cylinders are deactivated. Depending on the engine's speed and 
associated torque requirements, an engine might have most cylinders 
deactivated (e.g., low torque conditions as with slower speed driving) 
or it might have all cylinders activated (e.g., high torque conditions 
as

[[Page 52624]]

with merging onto a highway).\322\ An engine operating at low speed/low 
torque conditions can then save fuel by operating as if it is only a 
fraction of its total displacement. We model two ADEAC technologies, 
advanced cylinder deactivation on a single overhead camshaft engine 
(ADEACS), and advanced cylinder deactivation on a dual overhead 
camshaft engine (ADEACD).
---------------------------------------------------------------------------

    \322\ See for example, Dynamic Skip Fire, Tula Technology, DSF 
in real world situations, https://www.tulatech.com/combustion-engine/. Our modeled ADEAC system is not based on this specific 
system, and therefore the effectiveness improvement will be 
different in our analysis than with this system, however, the theory 
still applies.
---------------------------------------------------------------------------

    Forced induction gasoline engines include both supercharged and 
turbocharged downsized engines, which can pressurize or force more air 
into an engine's intake manifold when higher power output is needed. 
The raised pressure results in an increased amount of airflow into the 
cylinder supporting combustion, increasing the specific power of the 
engine. The first-level turbocharged downsized technology (TURBO0) 
engine represents a basic level of forced air induction technology 
being applied to a DOHC engine. Cooled exhaust gas recirculation (CEGR) 
systems take engine exhaust gasses and passes them through a heat 
exchanger to reduce their temperature, and then mixes them with 
incoming air in the intake manifold to reduce peak combustion 
temperature and effect fuel efficiency and emissions. We model the base 
TURBO0 turbocharged engine with the addition of cooled exhausted 
recirculation (TURBOE), basic cylinder deactivation (TURBOD), and 
advanced cylinder deactivation (TURBOAD). Advancing further into the 
Turbo Engine Path leads to engines that have higher BMEP, which is a 
function of displacement and power. The higher the BMEP, the higher the 
engine performance. We model two levels of advanced turbocharging 
technology (TURBO1 and TURBO2) that run increasingly higher 
turbocharger boost levels, burning more fuel and making more power for 
a given displacement. As discussed above, we pair turbocharging with 
engine downsizing, meaning that the turbocharged downsized engines in 
our analysis improve vehicle fuel economy by using less fuel to power 
the smaller engine while maintaining vehicle performance.
    NHTSA received a limited number of comments on forced induction 
gasoline engines. The comments seemed to highlight some 
misunderstandings of our forced induction pathway rather than the 
technology itself and how it was applied in our analysis for this 
rulemaking. In discussing the turbocharged pathway NRDC commented, ``. 
. . NHTSA has not appropriately considered the relative efficiency of 
these engines with respect to each other when designing its technology 
pathways. As a result, the technology pathway does not reasonably 
reflect an appropriate consideration of the full availability of 
turbocharged engine improvements.''
    NRDC assumed that the pathways are in order from least effective to 
most effective,\323\ however, this is not how the technologies are 
arranged in the pathway. The technology pathways represent an increase 
in the level or combinations of technologies being applied, with lower 
levels at the top and higher levels at the bottom of the path. Chapter 
3.1.1 of the TSD shows the technology pathways for visualization 
purposes, however the CAFE Model could apply any cost-effective 
combinations of technologies from those given pathways. Levels of 
improvement are dependent upon the vehicle class and the technology 
combinations. As a reminder, we stated in the NPRM section describing 
the technology pathways just before the figure of the technology tree 
that ``[i]n general, the paths are tied to ease of implementation of 
additional technology and how closely related the technologies are.'' 
\324\ An example of how this applies to the TURBO family of 
technologies is described below. To the extent that the verbiage around 
the technology tree was confusing, we will endeavor to make that 
clearer moving forward. The pathways are not aligned from ``least 
effective'' to ``most effective'' because assuming so would ignore 
several important considerations, including how technologies interact 
on a vehicle, how technologies interact on vehicles of different sizes 
that have different power requirements, and how hardware changes may be 
required for a particular technology (see above, ``ease of 
implementation of additional technology,'' and the related example 
below that describes how once a manufacturer downsizes an engine 
accompanying the application of a turbocharger, it would most likely 
not then re-upsize the engine to add a less advanced turbocharger). The 
interaction of these technology combinations is discussed in more 
details in TSD Chapter 2.
---------------------------------------------------------------------------

    \323\ NRDC, Docket No. NHTSA-2023-0022-61944-A2, at 13.
    \324\ 88 FR 56159 (Aug. 17, 2023).
---------------------------------------------------------------------------

    While we have modeled TURBO0 with cooled EGR (TURBOE) and with DEAC 
(TURBOD), NRDC is correct that we do not apply these technologies to 
TURBO1 or TURBO2; this decision was intentional and not a lapse in 
engineering judgment, as NRDC seems to imply. We define TURBO1 in our 
analysis by adding VVL to the TURBO0 engine, and TURBO2 is our highest 
turbo downsized engine with a high BMEP. The benefits of cooled EGR and 
DEAC on TURBO1 and TURBO2 technologies would occur at high engine 
speeds and loads, which do not occur on the two-cycle tests. Because 
technology effectiveness in our analysis is measured based on the delta 
in improvements in vehicles' two-cycle test fuel consumption values, 
adding cooled EGR and DEAC to TURBO1 and TURBO2 would provide little 
effectiveness improvement in our analysis with a corresponding increase 
in cost that we do not believe manufacturers would adopt in the real 
world. These complex interactions among technologies are effectively 
captured in our modeling and this is an example of why we do not simply 
add effectiveness values from different technologies together.\325\ 
This potential for added costs with limited efficiency benefit is also 
an example of why we do not order our technology tree from least to 
most effective technology, and we choose to include particular 
technologies on the technology tree and not others. For more discussion 
on interactions among individual technologies in the full vehicle 
simulations, see TSD Chapter 2.
---------------------------------------------------------------------------

    \325\ NHTSA-2021-0053-0007-A3, at 15; NHTSA-2021-0053-0002-A9, 
at 21-23.
---------------------------------------------------------------------------

    NRDC also believes the model is improperly constrained because it 
cannot apply lower levels of technology over higher levels, which 
results in a situation where vehicles in the analysis fleet that have 
been assigned higher levels of turbocharging technology cannot adopt 
what NRDC alleges to be a more efficient turbocharged engine 
technology. For example, the model does not allow a vehicle assigned a 
TURBO2 technology to adopt a TURBOE technology. A vehicle in the 
analysis fleet that is assigned the TURBO2 technology tells us a 
manufacturer made the decision to either skip over or move on from 
lower levels of force induction technology. Moving backwards in the 
technology tree from TURBO2 to any of the lower turbo technologies 
would require the engine to be upsized to meet the same performance 
metrics as the analysis fleet vehicle. As discussed further in Section 
III.C.6, we ensure the vehicles in our analysis meet similar 
performance

[[Page 52625]]

levels after the application of fuel economy-improving technology 
because we want to measure the costs and benefits of manufacturers 
responding to CAFE standards in our analysis, and not the costs or 
benefits related to changing performance metrics in the fleet. Moving 
from a higher to a lower turbo technology works counter to saving fuel 
as the engine would grow in displacement requiring more fuel, adding 
frictional losses, and increasing weight and cost. While fuel economy 
is important to manufacturers, it is not the only parameter that drives 
engine or technology selection, and it goes against the industry trends 
for downsized engines.\326\ Accordingly, we believe that our Turbo 
engine pathway appropriately captures the ways manufacturers might 
apply increasing levels of turbocharging technology to their vehicles.
---------------------------------------------------------------------------

    \326\ 2023 EPA Trends Report.
---------------------------------------------------------------------------

    In this analysis, high compression ratio (HCR) engines represent a 
class of engines that achieve a higher level of fuel efficiency by 
implementing a high geometric CR with varying degrees of late intake 
valve closing (LIVC) (i.e., closing the intake valve later than usual) 
using VVT, and without the use of an electric drive motor.\327\ These 
engines operate on a modified Atkinson cycle allowing for improved fuel 
efficiency under certain engine load conditions but still offering 
enough power to not require an electric motor; however, there are 
limitations on how HCR engines can apply LIVC and the types of vehicles 
that can use this technology. The way that each individual manufacturer 
implements a modified Atkinson cycle will be unique, as each 
manufacturer must balance not only fuel efficiency considerations, but 
emissions, on-board diagnostics, and safety considerations that 
includes the vehicle being able to operate responsively to the driver's 
demand.
---------------------------------------------------------------------------

    \327\ Late intake valve closing (LIVC) is a method manufacturers 
use to reduce the effective compression ratio and allow the 
expansion ratio to be greater than the compression ratio resulting 
in improved fuel economy but reduced power density. Further 
technical discussion on HCR and Atkinson Engines are discussed in 
TSD Chapter 3.1.1.2.3. See the 2015 NAS report, Appendix D, for a 
short discussion on thermodynamic engine cycles.
---------------------------------------------------------------------------

    We define HCR engines as being naturally aspirated, gasoline, SI, 
using a geometric CR of 12.5:1 or greater,\328\ and able to dynamically 
apply various levels of LIVC based on load demand. An HCR engine uses 
less fuel for each engine cycle, which increases fuel economy, but 
decreases power density (or torque). Generally, during high loads--when 
more power is needed--the engine will use variable valve actuation to 
reduce the level of LIVC by closing the intake valve earlier in the 
compression stroke (leaving more air/fuel mixture in the combustion 
chamber), increasing the effective CR, reducing over-expansion, and 
sacrificing efficiency for increased power density.\329\ However, there 
is a limit to how much the air-fuel mixture can be compressed before 
ignition in the HCR engine due to the potential for engine knock \330\ 
Engine knock can be mitigated in HCR engines with higher octane fuel, 
however, the fuel specified for use in most vehicles is not this higher 
octane fuel. Conversely, at low loads the engine will typically 
increase the level of LIVC by closing the intake valve later in the 
compression stroke, reducing the effective CR, increasing the over-
expansion, and sacrificing power density for improved efficiency. By 
closing the intake valve later in the compression stroke (i.e., 
applying more LIVC), the engine's displacement is effectively reduced, 
which results in less air and fuel for combustion and a lower power 
output.\331\ Varying LIVC can be used to mitigate, but not eliminate, 
the low power density issues that can constrain the application of an 
Atkinson-only engine.
---------------------------------------------------------------------------

    \328\ Note that even if an engine has a compression ratio of 
12.5:1 or greater, it does not necessarily mean it is an HCR engine 
in our analysis, as discussed below. We look at a number of factors 
to perform baseline engine assignments.
    \329\ Variable valve actuation is a general term used to 
describe any single or combination of VVT, VVL, and variable valve 
duration used to dynamically alter an engines valvetrain during 
operation.
    \330\ Engine knock in spark ignition engines occurs when 
combustion of some of the air/fuel mixture in the cylinder does not 
result from propagation of the flame front ignited by the spark 
plug, but one or more pockets of air/fuel mixture explodes outside 
of the envelope of the normal combustion front.
    \331\ Power = (force x displacement)/time.
---------------------------------------------------------------------------

    When we say, ``lower power density issues,'' this translates to a 
low torque density,\332\ meaning that the engine cannot create the 
torque required at necessary engine speeds to meet load demands. To the 
extent that a vehicle requires more power in a given condition than an 
engine with low power density can provide, that engine would experience 
issues like engine knock for the reasons discussed above, but more 
importantly, an engine designer would not allow an engine application 
where the engine has the potential to operate in unsafe conditions in 
the first place. Instead, a manufacturer could significantly increase 
an engine's displacement (i.e., size) to overcome those low power 
density issues,\333\ or could add an electric motor and battery pack to 
provide the engine with more power, but a far more effective pathway 
would be to apply a different type of engine technology, like a 
downsized, turbocharged engine.\334\
---------------------------------------------------------------------------

    \332\ Torque = radius x force.
    \333\ But see the 2023 EPA Trends Report at 48 (``As vehicles 
have moved towards engines with a lower number of cylinders, the 
total engine size, or displacement, is also at an all-time low.''), 
and the discussion below about why we do not believe manufacturers 
will increase the displacement of HCR engines to make the necessary 
power because of the negative impacts it has on fuel efficiency.
    \334\ See, e.g., Toyota Newsroom. 2023. 2024 Toyota Tacoma Makes 
Debut on the Big Island, Hawaii. Available at: https://pressroom.toyota.com/2024-toyota-tacoma-makes-debut-on-the-big-island-hawaii/. (Accessed: Feb. 28, 2024). The 2024 Toyota Tacoma 
comes in 8 ``grades,'' all of which use a turbocharged engine.
---------------------------------------------------------------------------

    Vehicle manufacturers' intended performance attributes for a 
vehicle--like payload and towing capability, features for off-road use, 
and other attributes that affect aerodynamic drag and rolling 
resistance--dictate whether an HCR engine can be a suitable technology 
choice for that vehicle.\335\ As vehicles require higher payloads and 
towing capacities,\336\ or experience road load increases from larger 
all-terrain tires, a less aerodynamic design, or experience driveline 
losses for AWD and 4WD configurations, more engine torque is required 
at all engine speeds. Any time more engine torque is required the 
application of HCR technology becomes less effective and more 
limited.\337\ For these reasons, and to

[[Page 52626]]

maintain a performance-neutral analysis and as discussed further below, 
we limit non-hybrid and non-plug-in-hybrid HCR engine application to 
certain categories of vehicles.\338\ Also for these reasons, HCR 
engines are not found in the HDPUV analysis fleet nor are they 
available as an engine option in the HDPUV analysis.
---------------------------------------------------------------------------

    \335\ Supplemental Comments of Toyota Motor North America, Inc., 
Notice of Proposed Rulemaking: Safer Affordable Fuel-Efficient 
Vehicles Rule, Docket ID Numbers: NHTSA-2018-0067 and EPA-HQ-OAR-
2018-0283, at 6; Feng, R. et al. 2016. Investigations of Atkinson 
Cycle Converted from Conventional Otto Cycle Gasoline Engine. SAE 
Technical Paper 2016-01-0680. Available at: https://www.sae.org/publications/technical-papers/content/2016-01-0680/. (Accessed: Feb. 
28, 2024).
    \336\ See Tucker, S. 2023. What Is Payload: A Complete Guide. 
Kelly Blue Book. Last revised: Feb. 2, 2023. Availale at: https://www.kbb.com/car-advice/payload-guide/#link3. (Accessed: Feb. 28, 
2024). (``Roughly speaking, payload capacity is the amount of weight 
a vehicle can carry, and towing capacity is the amount of weight it 
can pull. Automakers often refer to carrying weight in the bed of a 
truck as hauling to distinguish it from carrying weight in a trailer 
or towing.'').
    \337\ Supplemental Comments of Toyota Motor North America, Inc., 
Notice of Proposed Rulemaking: Safer Affordable Fuel-Efficient 
Vehicles Rule, Docket ID Numbers: NHTSA-2018-0067 and EPA-HQ-OAR-
2018-0283. (``Tacoma has a greater coefficient of drag from a larger 
frontal area, greater tire rolling resistance from larger tires with 
a more aggressive tread, and higher driveline losses from 4WD. 
Similarly, the towing, payload, and off road capability of pick-up 
trucks necessitate greater emphasis on engine torque and horsepower 
over fuel economy. This translates into engine specifications such 
as a larger displacement and a higher stroke-to-bore ratio. . . . 
Tacoma's higher road load and more severe utility requirements push 
engine operation more frequently to the less efficient regions of 
the engine map and limit the level of Atkinson operation . . . This 
endeavor is not a simple substitution where the performance of a 
shared technology is universal. Consideration of specific vehicle 
requirements during the vehicle design and engineering process 
determine the best applicable powertrain.'').
    \338\ To maintain performance neutrality when sizing powertrains 
and selecting technologies we perform a series of simulations in 
Automime which are further discussed in the TSD Chapter 2.3.4 and in 
the CAFE Analysis Autonomie Documentation. The concept of 
performance neutrality is discussed in detail above in Section 
II.C.3, Technology Effectiveness Values, and additional reasons why 
we maintain a performance neutral analysis are discussed in Section 
II.C.6, Technology Applicability Equations and Rules.
---------------------------------------------------------------------------

    For this analysis, our HCR Engine Path includes three technology 
options: (1) a first-level Atkinson-enabled engine (HCR) with VVT and 
SGDI, (2) an Atkinson enabled engine with cooled exhaust gas 
recirculation (HCRE), and finally, (3) the Atkinson enabled engine with 
DEAC (HCRD). This updated family of HCR engine map models also reflects 
our statement in NHTSA's May 2, 2022 final rule that a single engine 
that employs an HCR, CEGR, and DEAC ``is unlikely to be utilized in the 
rulemaking timeframe based on comments received from the industry 
leaders in HCR technology application.'' \339\
---------------------------------------------------------------------------

    \339\ 87 FR 25796 (May 2, 2022).
---------------------------------------------------------------------------

    These three HCR Engine Path technology options (HCR, HCRE, HCRD) 
should not be confused with the hybrid and plug-in hybrid electric 
pathway options that also utilize HCR engines in combination with an P2 
hybrid powertrain (i.e., P2HCR, P2HCRE, PHEV20H, and PHEV50H); those 
hybridization path options are discussed in Section III.D.3, below. In 
contrast, Atkinson engines in our powersplit hybrid powertrains 
(SHEVPS, PHEV20PS, and PHEV50PS) for this analysis run the Atkinson 
Cycle full time but are connected to an electric motor. The full-time 
Atkinson engines are also discussed in Section III.D.3.
    The Miller cycle is another alternative combustion cycle that 
effectively uses an extended expansion stroke, similar to the Atkinson 
cycle but with the application of forced induction, to improve fuel 
efficiency. Miller cycle-enabled engines have a similar trade-off in 
power density as Atkinson engines; the lower power density requires a 
larger volume engine in comparison to an Otto cycle-based turbocharged 
system for similar applications.\340\ To address the impacts of the 
extended expansion stroke on power density during high load operating 
conditions, the Miller cycle operates in combination with a forced 
induction system. In our analysis, the first-level Miller cycle-enabled 
engine includes the application of variable turbo geometry technology 
(VTG), or what is also known as a variable-geometry turbocharger. VTG 
technology allows for the adjustment of key geometric characteristics 
of the turbocharging system, thus allowing adjustment of boost profiles 
and response based on the engine's operating needs. The adjustment of 
boost profile during operation increases the engine's power density 
over a broader range of operating conditions and increases the 
functionality of a Miller cycle-based engine. The use of a variable 
geometry turbocharger also supports the use of CEGR. The second level 
of VTG engine technology in our analysis (VTGE) is an advanced Miller 
cycle-enabled system that includes the application of at least a 40V-
based electronic boost system. An electronic boost system has an 
electric motor added to assist the turbocharger; the motor assist 
mitigates turbocharger lag and low boost pressure by providing the 
extra boost needed to overcome the torque deficit at low engine speeds.
---------------------------------------------------------------------------

    \340\ National Academies of Sciences, Engineering, and Medicine. 
2021. Assessment of Technologies for Improving Light-Duty Vehicle 
Fuel Economy 2025-2035. The National Academies Press: Washington, 
DC. Section 4. Available at: https://doi.org/10.17226/26092. 
(Accessed: Feb. 28, 2024). [hereinafter 2021 NAS report].
---------------------------------------------------------------------------

    Variable compression ratio (VCR) engines work by changing the 
length of the piston stroke of the engine to optimize the CR and 
improve thermal efficiency over the full range of engine operating 
conditions. Engines that use VCR technology are currently in production 
as small displacement turbocharged in-line four-cylinder, high BMEP 
applications.
    Diesel engines have several characteristics that result in better 
fuel efficiency over traditional gasoline engines, including reduced 
pumping losses due to lack of (or greatly reduced) throttling, high 
pressure direct injection of fuel, a combustion cycle that operates at 
a higher CR, and a very lean air/fuel mixture relative to an 
equivalent-performance gasoline engine. However, diesel technologies 
require additional systems to control NOX emissions, such as 
a NOX adsorption catalyst system or a urea/ammonia selective 
catalytic reduction system. We included two levels of diesel engine 
technology in both the LD and HDPUV analyses: the first-level diesel 
engine technology (ADSL) is a turbocharged diesel engine, and the more 
advanced diesel engine (DSLI) adds DEAC to the ADSL engine technology. 
The diesel engine maps are new for this analysis. The LD diesel engine 
maps and HD van engine maps are based on a modern 3.0L turbo-diesel 
engine, and the HDPUV pickup truck engine maps are based on a larger 
6.7L turbo-diesel engine.
    Finally, compressed natural gas (CNG) systems are ICEs that run on 
natural gas as a fuel source. The fuel storage and supply systems for 
these engines differ tremendously from gasoline, diesel, and flex fuel 
vehicles.\341\ The CNG engine option has been included in past 
analyses; however, the LD and HDPUV analysis fleets do not include any 
dedicated CNG vehicles. As with the last analyses, CNG engines are 
included as an analysis fleet-only technology and are not applied to 
any vehicle that did not already include a CNG engine.
---------------------------------------------------------------------------

    \341\ Flexible fuel vehicles (FLEX) are designed to run on 
gasoline or gasoline-ethanol blends of up to 85 percent ethanol.
---------------------------------------------------------------------------

    We received several comments that gave examples of vehicle 
technologies that work in various ways to improve fuel efficiency, some 
of which we use in our analysis and some we do not. MECA gave us 
several examples of fuel efficiency technologies that we use in our 
analysis such as cylinder deactivation, VVT and VVL, VTG, and 
VTGe.\342\ MECA also discussed technologies we do not use in the 
analysis such as turbo compounding. Similarly, ICCT gave examples of 
technology such as negative valve overlap in-cylinder fuel reforming 
(NVO), passive prechamber combustion (PPC), and high energy ignition, 
that we also did not use in this analysis.\343\
---------------------------------------------------------------------------

    \342\ MECA Clean Mobility, Docket No. NHTSA-2023-0022-63053, at 
11.
    \343\ ICCT, Docket No. NHTSA-2023-0022-54064, at 17.
---------------------------------------------------------------------------

    These technologies are in various stages of development and some 
like PPC are in very limited production; however, we did not include 
them in the analysis as we do not believe these technologies will gain 
enough adoption during the rulemaking timeframe. We had discussed this 
topic in detail in the 2022 final rule and we do not think that there 
has been any significant development since than that would indicate 
that manufacturers would pursue these costly technologies.\344\ If 
anything, manufacturers have indicated that they are willing to 
continue to research and develop more cost effective electrification 
technologies such as strong hybrids and PHEVs to meet

[[Page 52627]]

current and future regulations from multiple agencies.
---------------------------------------------------------------------------

    \344\ 87 FR 25784.
---------------------------------------------------------------------------

    The Alliance for Vehicle Efficiency commented that they want to see 
stronger support for hydrogen combustion and fuel cell vehicles in the 
HDPUV fleet.\345\ Hydrogen powertrain technology has been in 
development for years and there are several roadblocks to more 
mainstream adoption such as system packaging, infrastructure, 
technology reliability and durability, and costs to name a few. While 
hydrogen powertrain technology has the possibility to provide improved 
efficiency and even with funding support from the IRA, these 
technologies still do not show up in the HDPUV fleet today and we do 
not believe the technology will gain enough market penetration in the 
rule making timeframe for us to include them in the pathway to 
compliance.
---------------------------------------------------------------------------

    \345\ AVE, Docket No. NHTSA-2023-0022-60213, at 6.
---------------------------------------------------------------------------

    The first step in assigning engine technologies to vehicles in the 
LD and HDPUV analysis fleets is to use data for each manufacturer to 
determine which vehicle platforms share engines. Within each 
manufacturer's fleet, we develop and assign unique engine codes based 
on configuration, technologies applied, displacement, CR, and power 
output. While the process for engine assignments is the same between 
the LD and HDPUV analyses, engine codes are not shared between the two 
fleets, and engine technologies are not shared between the fleets, for 
the reasons discussed above. We also assign engine technology classes, 
which are codes that identify engine architecture (e.g., how many 
cylinders the engine has, whether it is a DOHC or SOHC, and so on) to 
accurately account for engine costs in the analysis.
    When we assign engine technologies to vehicles in the analysis 
fleets, we must consider the actual technologies on a manufacturer's 
engine and compare those technologies to the engine technologies in our 
analysis. We have just over 270 unique engine codes in the LD analysis 
fleet and just over 20 unique engine codes in the HDPUV fleet, meaning 
that for both analysis fleets, we must identify the technologies 
present on those almost 300 unique engines in the real world, and make 
decisions about which of our approximately 40 engine map models (and 
therefore engine technology on the technology tree) \346\ best 
represents those real-world engines. When we consider how to best fit 
each of those 300 engines to our 40 engine technologies and engine map 
models, we use specific technical elements contained in manufacturer 
publications, press releases, vehicle benchmarking studies, technical 
publications, manufacturer's specification sheets, and occasionally CBI 
(like the specific technologies, displacement, CR, and power mentioned 
above), and engineering judgment. For example, in the LD analysis, an 
engine with a 13.0:1 CR is a good indication that an engine would be 
considered an HCR engine in our analysis, and some engines that achieve 
a slightly lower CR, e.g., 12.5, may be considered an HCR engine 
depending on other technology on the engine, like inclusion of SGDI, 
increased engine displacement compared to other competitors, a high 
energy spark system, and/or reduction of engine parasitic losses 
through variable or electric oil and water pumps. Importantly, we never 
assign engine technologies based on one factor alone; we use data and 
engineering judgment to assign complex real-world engines to their 
corresponding engine technologies in the analysis. We believe that our 
initial characterization of the fleet's engine technologies reasonably 
captures the current state of the market while maintaining a reasonable 
amount of analytical complexity. Also, as a reminder, in addition to 
the 40 engine map models used in the Engine Paths Collection, we have 
over 20 additional potential powertrain technology assignments 
available in the Hybrid/Electric Paths Collection.
---------------------------------------------------------------------------

    \346\ We assign each engine code technology that most closely 
corresponds to an engine map; for most technologies, one box on the 
technology tree corresponds to one engine map that corresponds to 
one engine code.
---------------------------------------------------------------------------

    Engine technology adoption in the model is defined through a 
combination of technology path logic, refresh and redesign cycles, 
phase-in capacity limits,\347\ and SKIP logic. How does technology path 
logic define technology adoption? Once an engine design moves to the 
advanced engine tree it is not allowed to move to alternate advanced 
engine trees. For example, any LD basic engine can adopt one of the 
TURBO engine technologies, but vehicles that have turbocharged engines 
in the analysis fleet will stay on the Turbo Engine Path to prevent 
unrealistic engine technology change in the short timeframe considered 
in the rulemaking analysis. This represents the concept of stranded 
capital, which as discussed above, is when manufacturers amortize 
research, development, and tooling expenses over many years. Besides 
technology path logic, which applies to all manufacturers and 
technologies, we place additional constraints on the adoption of VCR 
and HCR technologies.
---------------------------------------------------------------------------

    \347\ Although we did apply phase-in caps for this analysis, as 
discussed in Chapter 3.1.1 of the TSD, those phase-in caps are not 
binding because the model has several other less advanced 
technologies available to apply first at a lower cost, as well as 
the redesign schedules. As discussed in TSD Chapter 2.2, 100 percent 
of the analysis fleet will not redesign by 2023, which is the last 
year that phase-in caps could apply to the engine technologies 
discussed in this section. Please see the TSD for more information 
on engine phase-in caps.
---------------------------------------------------------------------------

    VCR technology requires a complete redesign of the engine, and in 
the analysis fleet, only two models have incorporated this technology. 
VCR engines are complex, costly by design, and address many of the same 
efficiency losses as mainstream technologies like turbocharged 
downsized engines, making it unlikely that a manufacturer that has 
already started down an incongruent technology path would adopt VCR 
technology. Because of these issues, we limited adoption of the VCR 
engine technology to original equipment manufacturers (OEMs) that have 
already employed the technology and their partners. We do not believe 
any other manufacturers will invest to develop and market this 
technology in their fleet in the rulemaking time frame.
    HCR engines are subject to three limitations. This is because, as 
we have recognized in past analyses,\348\ HCR engines excel in lower 
power applications for lower load conditions, such as driving around a 
city or steady state highway driving without large payloads. Thus, 
their adoption is more limited than some other technologies.
---------------------------------------------------------------------------

    \348\ The discussions at 83 FR 43038 (Aug. 24, 2018), 85 FR 
24383 (April 30, 2020), 86 FR 49568 and 49661 (September 3, 2021), 
and 87 FR 25786 and 25790 (May 2, 2022) are adopted herein by 
reference.
---------------------------------------------------------------------------

    First, we do not allow vehicles with 405 or more horsepower, and 
(to simulate parts sharing) vehicles that share engines with vehicles 
with 405 or more horsepower, to adopt HCR engines due to their 
prescribed power needs being more demanding and likely not supported by 
the lower power density found in HCR-based engines.\349\ Because LIVC 
essentially reduces the engine's displacement, to make more power and 
keep the same levels of LIVC, manufacturers would need to increase the 
displacement of the engine to make the necessary power. We do not 
believe manufacturers will increase the displacement of their engines 
to accommodate HCR technology adoption because as displacement 
increases so does friction, pumping losses, and fuel consumption. This 
bears out in industry

[[Page 52628]]

trends: total engine size (or displacement) is at an all-time low, and 
trends show that industry focus on turbocharged downsized engine 
packages are leading to their much higher market penetration.\350\ 
Separately, as seen in the analysis fleet, manufacturers generally use 
HCR engines in applications where the vehicle's power requirements fall 
significantly below our horsepower threshold. In fact, the average 
horsepower for the sales weighted average of vehicles in the analysis 
fleet that use HCR Engine Path technologies is 179 hp, demonstrating 
that HCR engine use has indeed been limited to lower-hp applications, 
and well below our 405 hp threshold. In fringe cases where a vehicle 
classified as having higher load requirements does have an HCR engine, 
it is coupled to a hybrid system.\351\
---------------------------------------------------------------------------

    \349\ Heywood, John B. Internal Combustion Engine Fundamentals. 
McGraw-Hill Education, 2018. Chapter 5.
    \350\ See 2023 EPA Trends Report at 48, 78.
    \351\ See the Market Data Input File. As an example, the 
reported total system horsepower for the Ford Maverick HEV is also 
191 hp, well below our 405 hp threshold. See also the Lexus LC/LS 
500h: the Lexus LC/LS 500h also uses premium fuel to reach this 
performance level.
---------------------------------------------------------------------------

    Second, to maintain a performance-neutral analysis,\352\ we exclude 
pickup trucks and (to simulate parts sharing) \353\ vehicles that share 
engines with pickup trucks from receiving HCR engines that are not 
accompanied by an electrified powertrain. In other words, pickup trucks 
and vehicles that share engines with pickup trucks can receive HCR-
based engine technologies in the Hybridization Paths Collection of 
technologies. We exclude pickup trucks and vehicles that share engines 
with pickup trucks from receiving HCR engines that are not accompanied 
by an electrified powertrain because these often-heavier vehicles have 
higher low speed torque needs, higher base road loads, increased 
payload and towing requirements,\354\ and have powertrains that are 
sized and tuned to perform this additional work above what passenger 
cars are required to conduct. Again, vehicle manufacturers' intended 
performance attributes for a vehicle--like payload and towing 
capability, intention for off-road use, and other attributes that 
affect aerodynamic drag and rolling resistance--dictate whether an HCR 
engine can provide a reasonable fuel economy improvement for that 
vehicle.\355\ For example, road loads are comprised of aerodynamic 
loads, which include vehicle frontal area and its drag coefficient, 
along with tire rolling resistance that attribute to higher engine 
loads as vehicle speed increases.\356\ We assume that a manufacturer 
intending to apply HCR technology to their pickup truck or vehicle that 
shares an engine with a pickup truck would do so in combination with an 
electric system to assist with the vehicle's load needs, and indeed the 
only manufacturer that has an HCR-like engine (in terms of how we model 
HCR engines in this analysis) in its pickup truck in the analysis fleet 
has done so.
---------------------------------------------------------------------------

    \352\ As discussed in detail in Section III.C.3 and III.C.6 
above, we maintain a performance-neutral analysis to capture only 
the costs and benefits of manufacturers adding fuel economy-
improving technology to their vehicles in response to CAFE 
standards.
    \353\ See Section III.C.6.
    \354\ See SAE. Performance Requirements for Determining Tow-
Vehicle Gross Combination Weight Rating and Trailer Weight Rating. 
Surface Vehicle Recommended Practice J2807. Issued: Apr. 2008. 
Revised Feb. 2020.; Reed, T. 2015. SAE J207 Tow Tests--The Standard. 
Motortrend. Published: Jan 16, 2015. Available at: https://www.motortrend.com/how-to/1502-sae-j2807-tow-tests-the-standard/. 
(Accessed: Feb. 28, 2024). When we say ``increased payload and 
towing requirements,'' we are referring to a literal defined set of 
requirements that manufacturers follow to ensure the manufacturer's 
vehicle can meet a set of performance measurements when building a 
tow-vehicle in order to give consumers the ability to ``cross-shop'' 
between different manufacturer's vehicles. As discussed in detail 
above in Section III.C.3 and III.C.6, we maintain a performance 
neutral analysis to ensure that we are only accounting for the costs 
and benefits of manufacturers adding technology in response to CAFE 
standards. This means that we will apply adoption features, like the 
HCR application restriction, to a vehicle that begins the analysis 
with specific performance measurements, like a pickup truck, where 
application of the specific technology would likely not allow the 
vehicle to meet the manufacturer's baseline performance 
measurements.
    \355\ The Joint NGOs ask NHTSA to stop quoting a 2018 Toyota 
comment explaining why we do not allow HCR engines in pickup trucks, 
stating that we are misinterpreting Toyota's purpose in explaining 
that the Tacoma and Camry achieve different effectiveness 
improvements using their HCR engines. We disagree. Toyota's comment 
is still relevent for this final rule as the limitations of the 
technology have not changed, which Toyota describes in the context 
of comparing why the technology provides a benefit in the Camry that 
we should not expect to see in the Tacoma. Note that Toyota also 
submitted a second set of supplemental comments (NHTSA-2018-0067-
12431) that similarly confirm our understanding of the most 
important concept to our decision to limit HCR adoption on pickup 
trucks, which is that Atkinson operation is limited on pickup 
trucks. See Supplemental Comments of Toyota Motor North America, 
Inc., NHTSA-2018-0067-12376 (``Tacoma has a greater coefficient of 
drag from a larger frontal area, greater tire rolling resistance 
from larger tires with a more aggressive tread, and higher driveline 
losses from 4WD. Similarly, the towing, payload, and off road 
capability of pick-up trucks necessitate greater emphasis on engine 
torque and horsepower over fuel economy. This translates into engine 
specifications such as a larger displacement and a higher stroke-to-
bore ratio. . . . Tacoma's higher road load and more severe utility 
requirements push engine operation more frequently to the less 
efficient regions of the engine map and limit the level of Atkinson 
operation . . . This endeavor is not a simple substitution where the 
performance of a shared technology is universal. Consideration of 
specific vehicle requirements during the vehicle design and 
engineering process determine the best applicable powertrain.'').
    \356\ 2015 NAS Report at 207-242.
---------------------------------------------------------------------------

    Finally, we restrict HCR engine application for some manufacturers 
that are heavily performance-focused and have demonstrated a 
significant commitment to power dense technologies such as turbocharged 
downsizing.\357\ When we say, ``significant commitment to power dense 
technologies,'' we mean that their fleets use near 100% turbocharged 
downsized engines. This means that no vehicle manufactured by these 
manufacturers can receive an HCR engine. Again, we implement this 
adoption feature to avoid an unquantified amount of stranded capital 
that would be realized if these manufacturers switched from one 
technology to another.
---------------------------------------------------------------------------

    \357\ There are three manufacturers that met the criteria (near 
100 percent turbo downsized fleet, and future hybrid systems are 
based on turbo-downsized engines) described and were excluded: BMW, 
Daimler, and Jaguar Land Rover.
---------------------------------------------------------------------------

    Note, however, that these adoption features only apply to vehicles 
that receive HCR engines that are not accompanied by an electrified 
powertrain. A P2 hybrid system that uses an HCR engine overcomes the 
low-speed torque needs using the electric motor and thus has no 
restrictions or SKIPs applied.
    We received a limited number of comments disagreeing with the HCR 
restrictions we have in place,\358\ \359\ \360\ most of which had been 
received in previous rulemakings. To avoid repetition, previous 
discussions located in prior related documents are adopted here by 
reference.\361\
---------------------------------------------------------------------------

    \358\ Joint NGOs, Docket No. NHTSA-2023-0022-61944-A2, at 13.
    \359\ ICCT, Docket No. NHTSA-2023-0022-54064, at 22.
    \360\ States and Cities, Docket No. NHTSA-2023-0022-61904-A2, at 
29.
    \361\ 86 FR 74236 (December 29, 2021), 87 FR 25710 (May 2, 
2022), Final Br. for Resp'ts, Nat. Res. Def. Council v. NHTSA, Case 
No. 22-1080, ECF No. 2000002 (D.C. Cir. May 19, 2023).
---------------------------------------------------------------------------

    We realize that engine technology, vehicle type, and their 
applications are always evolving,\362\ and we agree with both the 
States and Cities and the Joint NGOs that the Hyundai Santa Cruz, 
unibody pickup truck with a 4-cylinder HCR engine, is one example of a 
pickup

[[Page 52629]]

truck with a non-hybrid HCR engine.\363\ However, we disagree that the 
Santa Cruz is comparable in capability to other pickup models like the 
Tacoma, Colorado, and Canyon, and that those pickup models should 
therefore be able to adopt non-hybrid HCR technology as well. Small 
unibody pickup trucks like the Santa Cruz and the Ford Maverick do not 
have the same capabilities and functionality as a body-on-frame pickup 
like the Toyota Tacoma.\364\ We believe our current restrictions for 
HCR are reasonable and appropriate and we have not been presented with 
any new information that would suggest otherwise. Our stance on this 
issue has also borne out in real-world trends. Manufacturers who had 
the potential to use HCR technologies for high utility capable vehicles 
like Toyota Tacoma and Mazda CX-90 (replacing CX-9) have incorporated 
turbocharged engines. We do not believe HCR in its current state can 
provide enough fuel efficiency benefit for us to remove our current HCR 
restrictions; however, this by no means precludes manufacturers from 
developing and deploying HCR technology for future iterations of their 
pickup trucks.
---------------------------------------------------------------------------

    \362\ NRDC and the Joint NGOs have disagreed with our HCR 
restrictions in the past and while we have made attempts to better 
explain our position on HCR technology and where we believe it is 
appropriate, our justification has remained the same. We do not 
believe the HCR technology is applicable to these types of vehicles 
because of the nature of how the technology works and removing the 
restrictions would present an unrealistic pathway to compliance for 
manufacturer that is not maximum feasible.
    \363\ The Joint NGOs also give the example of the hybrid-HCR 
Ford Maverick as a reason why we should remove HCR restrictions from 
other pickup trucks; however we believe that whether an HCR can be 
applied to a pickup truck and whether a hybrid-HCR can be applied to 
a pickup truck are two separate questions. There does not seem to be 
a disagreement between the Joint NGOs and NHTSA that pickup trucks 
can adopt hybrid-HCR engines in the analysis.
    \364\ We have provided the specification of 2022 Ford Maverick, 
Toyota Tacoma, and Hyundai Santa Cruz in the docket accompying this 
final rule. See also Cargurus. 2023 Toyota Tacoma vs 2023 Ford 
Maverick: Cargurus Comparison. 2023. Available at: https://www.cargurus.com/Cars/articles/2023-toyota-tacoma-vs-2023-ford-maverick-comparison. (Accessed: Mar. 1, 2024). (``This is an 
incredibly tightly fought contest, as evidenced by the fact that 
CarGurus experts awarded both the 2023 Tacoma and 2023 Maverick 
identical overall scores of 7.3 out of 10. However, making a 
recommendation is easy on account of these trucks not being direct 
competitors. Where the Tacoma is a midsize truck that's designed for 
supreme offroad ability, the Maverick is a compact truck that's more 
at home in the city. So the choice here comes down to how much you 
value the Tacoma's ruggedness, extra carrying capacity and 
reputation for reliability over the Maverick's significantly lower 
price and running costs.'').
---------------------------------------------------------------------------

    We would also like to emphasize in response to the Joint NGOs that 
manufacturers do not pursue technology pathways because we model them 
in our analysis supporting setting CAFE and HDPUV standards. We have 
stated multiple times that we give an example of a low-cost compliance 
pathway, and no manufacturer has to comply with the pathway as we have 
modeled it. In fact, it is more than likely they will not follow the 
technology pathways we project in our standard-setting analysis because 
of the standard setting restrictions we have in place. Also, we do not 
allege that manufacturers cannot use different technologies than we 
model in our analysis to meet their standard, we just do not believe 
that manufacturers will abandon investments in one technology pathway 
for another, particularly with respect to HCR technology for pickup 
trucks and high horsepower vehicles. If we were to model unrealistic 
pathways to compliance, manufacturers would incur more cost, and/or see 
less efficiency improvement than we estimate for any given level of 
CAFE standards, resulting in a standard that is more stringent than 
maximum feasible. For this and other reasons we endeavor to model our 
best estimates of a low-cost pathway to compliance.
    We conducted a sensitivity case in which we removed all HCR 
restrictions, which is titled ``Limited HCR skips'' and is described in 
more detail in Chapter 9.2.2.4 of the RIA. By MY 2031 in this 
sensitivity case, we see a 7.5% increase in HCR technology penetration, 
but it corresponds with an additional 3 billion gallons of gasoline and 
27 million metric tons more CO2 when compared to the reference 
baseline. The limited HCR skips sensitivity has a total social cost 
that is $500 million less than the reference baseline, however, the 
2.50% discount rate of the net social benefits is $100 million more 
than the reference baseline. This sensitivity shows that without the 
HCR restrictions we use more gasoline and we do not see an appreciable 
societal benefit. With that, and in lieu of no new developments in HCR 
technology we have left our HCR restrictions in place for the final 
rule but will continue to monitor and assess the technology for future 
rulemakings.\365\
---------------------------------------------------------------------------

    \365\ See Chapter 9.2.2.4 of the Final RIA for discussion and 
data on the Limited HCR skips sensitivity, where we removed all HCR 
restrictions and compared the results to our reference case 
analysis.
---------------------------------------------------------------------------

    How effective an engine technology is at improving a vehicle's fuel 
economy depends on several factors such as the vehicle's technology 
class and any additional technology that is being added or removed from 
the vehicle in conjunction with the new engine technology, as discussed 
in Section III.C, above. The Autonomie model's full vehicle simulation 
results provide most of the effectiveness values that we use as inputs 
to the CAFE Model. For a full discussion of the Autonomie modeling see 
Chapter 2.4 of the TSD and the CAFE Analysis Autonomie Documentation. 
The Autonomie modeling uses engine map models as the primary inputs for 
simulating the effects of different engine technologies.
    Engine maps provide a three-dimensional representation of engine 
performance characteristics at each engine speed and load point across 
the operating range of the engine. Engine maps have the appearance of 
topographical maps, typically with engine speed on the horizontal axis 
and engine torque, power, or BMEP on the vertical axis. A third engine 
characteristic, such as brake-specific fuel consumption (BSFC), is 
displayed using contours overlaid across the speed and load map. The 
contours provide the values for the third characteristic in the regions 
of operation covered on the map. Other characteristics typically 
overlaid on an engine map include engine emissions, engine efficiency, 
and engine power. We refer to the engine maps developed to model the 
behavior of the engines in this analysis as engine map models.
    The engine map models we use in this analysis are representative of 
technologies that are currently in production or are expected to be 
available in the rulemaking timeframe. We develop the engine map models 
to be representative of the performance achievable across industry for 
a given technology, and they are not intended to represent the 
performance of a single manufacturer's specific engine. We target a 
broadly representative performance level because the same combination 
of technologies produced by different manufacturers will have 
differences in performance, due to manufacturer-specific designs for 
engine hardware, control software, and emissions calibration. 
Accordingly, we expect that the engine maps developed for this analysis 
will differ from engine maps for manufacturers' specific engines. 
However, we intend and expect that the incremental changes in 
performance modeled for this analysis, due to changes in technologies 
or technology combinations, will be similar to the incremental changes 
in performance observed in manufacturers' engines for the same changes 
in technologies or technology combinations.
    IAV developed most of the LD engine map models we use in this 
analysis. IAV is one of the world's leading automotive industry 
engineering service partners with an over 35-year history of performing 
research and development for powertrain components, electronics,

[[Page 52630]]

and vehicle design.\366\ Southwest Research Institute (SwRI) developed 
the LD diesel and HDPUV engine maps for this analysis. SwRI has been 
providing automotive science, technology, and engineering services for 
over 70 years.\367\ Both IAV and SwRI developed our engine maps using 
the GT-POWER(copyright) Modeling tool (GT-POWER). GT-POWER is a 
commercially available, industry standard, engine performance 
simulation tool. GT-POWER can be used to predict detailed engine 
performance characteristics such as power, torque, airflow, volumetric 
efficiency, fuel consumption, turbocharger performance and matching, 
and pumping losses.\368\
---------------------------------------------------------------------------

    \366\ IAV Automotive Engineering. Available at: https://www.iav.com/en. (Accessed: Feb. 28, 2024).
    \367\ Southwest Research Institite. Available at: https://www.swri.org. (Accessed: Feb. 28, 2024).
    \368\ For additional information on the GT-POWER tool please see 
https://www.gtisoft.com/gt-suite-applications/propulsion-systems/gt-power-engine-simulation-software.
---------------------------------------------------------------------------

    Just like Argonne optimizes a single vehicle model in Autonomie 
following the addition of a singular technology to the vehicle model, 
our engine map models were built in GT-POWER by incrementally adding 
engine technology to an initial engine--built using engine test data, 
component test data, and manufacturers' and suppliers' technical 
publications--and then optimizing the engine to consider real-world 
constraints like heat, friction, and knock. One of the basic 
assumptions we make when developing our engine maps is using 87 octane 
gasoline because it is the most common octane rating engines are 
designed to operate on and it is going to be the test fuel 
manufacturers will have to use for EPA fuel economy testing.\369\ We 
use a small number of initial engine configurations with well-defined 
BSFC maps, and then, in a very systematic and controlled process, add 
specific well-defined technologies to optimize a BSFC map for each 
unique technology combination. This could theoretically be done through 
engine or vehicle testing, but we would need to conduct tests on a 
single engine, and each configuration would require physical parts and 
associated engine calibrations to assess the impact of each technology 
configuration, which is impractical for the rulemaking analysis because 
of the extensive design, prototype part fabrication, development, and 
laboratory resources that are required to evaluate each unique 
configuration. We and the automotive industry use modeling as an 
approach to assess an array of technologies with more limited testing. 
Modeling offers the opportunity to isolate the effects of individual 
technologies by using a single or small number of initial engine 
configurations and incrementally adding technologies to those initial 
configurations. This provides a consistent reference point for the BSFC 
maps for each technology and for combinations of technologies that 
enables us to carefully identify and quantify the differences in 
effectiveness among technologies.
---------------------------------------------------------------------------

    \369\ 79 FR 23414 (April 28, 2014).
---------------------------------------------------------------------------

    We received several comments regarding the use and benefits of 
high-octane and low carbon fuels in our analysis. The Missouri Corn 
Growers Association commented, ``[t]he proposed rule, along with 
NHTSA's larger policy vision around vehicles ignores the widely diverse 
range of powertrain and liquid fuel options that could be more widely 
deployed to improve energy conservation . . . .'' \370\ They go on to 
discuss the benefits of high-octane low carbon ethanol blended fuels 
and when combined with higher technology engines. Both the Alliance for 
Vehicle Efficiency \371\ and the Defour Group \372\ had similar 
comments on high octane low carbon fuels, particularly when used with 
HCR technology.
---------------------------------------------------------------------------

    \370\ Missouri Corn Growers Association, Docket No. NHTSA-2023-
0022-58413 at 3.
    \371\ AVE, Docket No. NHTSA-2023-0022-60213, at 6.
    \372\ Defour Group, Docket No. NHTSA-2023-0022-59777, at 11.
---------------------------------------------------------------------------

    While we agree that a higher-octane fuel can work to improve engine 
fuel efficiency, we do not include it in our analysis. Our engine maps 
were developed with the use of 87 octane Tier 3 fuel,\373\ which 
represents the most commonly available fuel used by consumers.\374\ As 
we have stated previously, regulation of fuels is outside the scope of 
NHTSA's authority.\375\ Accordingly, we made no updates to the fuel 
assumed used in the engine map models.
---------------------------------------------------------------------------

    \373\ See TSD Chapter 3.1 for a detailed discussion on engine 
map model assumptions.
    \374\ DOE. Selecting the Right Octane Fuel. Available at: 
https://www.fueleconomy.gov/feg/
octane.shtml#:~:text=You%20should%20use%20the%20octane%20rating%20req
uired%20for,others%20are%20designed%20to%20use%20higher%20octane%20fu
el. (Accessed: Mar. 27, 2024).
    \375\ 49 U.S.C. 32904(c).
---------------------------------------------------------------------------

    Before use in the Autonomie analysis, both IAV and SwRI validated 
the generated engine maps against a global database of benchmarked 
data, engine test data, single cylinder test data, prior modeling 
studies, technical studies, and information presented at 
conferences.\376\ IAV and SwRI also validated the effectiveness values 
from the simulation results against detailed engine maps produced from 
the Argonne engine benchmarking programs, as well as published 
information from industry and academia.\377\ This ensures reasonable 
representation of simulated engine technologies. Additional details and 
assumptions that we use in the engine map modeling are described in 
detail in Chapter 3.1 of the TSD and the CAFE Analysis Autonomie Model 
Documentation chapter titled ``Autonomie--Engine Model.''
---------------------------------------------------------------------------

    \376\ Friedrich, I. et al. 2006. Automatic Model Calibration for 
Engine-Process Simulation with Heat-Release Prediction. SAE 
Technical Paper 2006-01-0655. Available at: https://doi.org/10.4271/2006-01-0655. (Accessed: Feb. 28, 2024); Rezaei, R. et al. 2012. 
Zero-Dimensional Modeling of Combustion and Heat Release Rate in DI 
Diesel Engines. SAE International Journal Of Engines. Vol. 5(3): at 
874-85. Available at: https://doi.org/10.4271/2012-01-1065. 
(Accessed: Feb. 28, 2024); Berndt, R. et al. 2015. Multistage 
Supercharging for Downsizing with Reduced Compression Ratio. 2015. 
MTZ Worldwide. Vol. 76: at 10-11. Available at: https://link.springer.com/article/10.1007/s38313-015-0036-4. (Accessed: May 
31, 2023); Neukirchner, H. et al. 2014. Symbiosis of Energy Recovery 
and Downsizing. 2014. MTZ Worldwide. Vol. 75: at 4-9. Available at: 
https://link.springer.com/article/10.1007/s38313-014-0219-4. 
(Accessed: May 31, 2023).
    \377\ Bottcher, L., & Grigoriadis, P. 2019. ANL--BSFC Map 
Prediction Engines 22-26. IAV. Available at: https://lindseyresearch.com/wp-content/uploads/2021/09/NHTSA-2021-0053-0002-20190430_ANL_Eng-22-26-Updated_Docket.pdf. (Accessed: May 31, 2023); 
Reinhart, T. 2022. Engine Efficiency Technology Study. Final Report. 
SwRI Project No. 03.26457.
---------------------------------------------------------------------------

    Note that we never apply absolute BSFC levels from the engine maps 
to any vehicle model or configuration for the rulemaking analysis. We 
only use the absolute fuel economy values from the full vehicle 
Autonomie simulations to determine incremental effectiveness for 
switching from one technology to another technology. The incremental 
effectiveness is then applied to the absolute fuel economy or fuel 
consumption value of vehicles in the analysis fleet, which are based on 
CAFE or FE compliance data. For subsequent technology changes, we apply 
incremental effectiveness changes to the absolute fuel economy level of 
the previous technology configuration. Therefore, for a technically 
sound analysis, it is most important that the differences in BSFC among 
the engine maps be accurate, and not the absolute values of the 
individual engine maps.
    While the fuel economy improvements for most engine technologies in 
the analysis are derived from the database of Autonomie full-vehicle 
simulation results, the analysis incorporates a handful of what we 
refer to as analogous effectiveness values. We use these when we do not 
have an engine map model for a particular

[[Page 52631]]

technology combination. To generate an analogous effectiveness value, 
we use data from analogous technology combinations for which we do have 
engine map models and conduct a pairwise comparison to generate a data 
set of emulated performance values for adding technology to an initial 
application. We only use analogous effectiveness values for four 
technologies that are all SOHC technologies. We determined that the 
effectiveness results using these analogous effectiveness values 
provided reasonable results. This process is discussed further in 
Chapter 3.1.4.2 of the TSD.
    The engine technology effectiveness values for all vehicle 
technology classes can be found in Chapter 3.1.4. of the TSD. These 
values show the calculated improvement for upgrading only the listed 
engine technology for a given combination of other technologies. In 
other words, the range of effectiveness values seen for each specific 
technology (e.g., TURBO1) represents the addition of the TURBO1 
technology to every technology combination that could select the 
addition of TURBO1.
    These values are derived from the Argonne Autonomie simulation 
dataset and the righthand side Y-axis shows the number of Autonomie 
simulations that achieve each percentage effectiveness improvement 
point. The dashed line and grey shading indicate the median and 1.5X 
interquartile range (IQR), which is a helpful metric to use to identify 
outliers. Comparing these histograms to the box and whisker plots 
presented in prior CAFE program rule documents, it is much easier to 
see that the number of effectiveness outliers is extremely small.
    We received a comment from the International Council on Clean 
Transportation (ICCT) regarding the application of the engine sizing 
algorithm, and when it is applied in relation to vehicle road load 
improvement technologies. ICCT stated that, ``NHTSA continues to only 
downsize engines for large changes in tractive load,'' which they 
assume artificially increases the overall performance of the fleet. 
These are incorrect assumptions and chapter 2.3.4 of the TSD discusses 
our approach of sizing powertrains by iteratively going through both 
low and high speed acceleration performance loops and adjusting 
powertrain size as needed based on the performance neutrality 
requirements.\378\
---------------------------------------------------------------------------

    \378\ CAFE Analysis Autonomie Documentation chapters titled 
``Vehicle and Component Assumptions'' and ``Vehicle Sizing 
Process.''
---------------------------------------------------------------------------

    We disagree with the comment implying that engine resizing is 
required for every technology change on a vehicle platform. We believe 
that this would artificially inflate effectiveness relative to cost. 
Manufacturers have repeatedly and consistently conveyed that the costs 
for redesign and the increased manufacturing complexity resulting from 
continual resizing engine displacement for small technology changes 
preclude them from doing so. NHTSA believes that it would not be 
reasonable or cost-effective to expect resizing powertrains for every 
unique combination of technologies, and even less reasonable and cost-
effective for every unique combination of technologies across every 
vehicle model due to the extreme manufacturing complexity that would be 
required to do so.\379\ In addition, a 2011 NAS report stated that 
``[f]or small (under 5 percent [of curb weight]) changes in mass, 
resizing the engine may not be justified, but as the reduction in mass 
increases (greater than 10 percent [of curb weight]), it becomes more 
important for certain vehicles to resize the engine and seek secondary 
mass reduction opportunities.'' \380\
---------------------------------------------------------------------------

    \379\ For more details, see comments and discussion in the 2020 
Rulemaking Preamble Section VI.B.3.(a)(6) Performance Neutrality.
    \380\ National Research Council. 2011. Assessment of Fuel 
Economy Technologies for Light-Duty Vehicles. The National Academies 
Press. Washington, DC at 107. Available at: https://doi.org/10.17226/12924. (Accessed: Apr. 5, 2024) (hereinafter, 2011 NAS 
Report).
---------------------------------------------------------------------------

    We also believe that ICCT's comment regarding Autonomie's engine 
resizing process is further addressed by Autonomie's powertrain 
calibration process. We do agree that the powertrain should be re-
calibrated for every unique technology combination and this calibration 
is performed as part of the transmission shift initializer 
routine.\381\ Autonomie runs the shift initializer routine for every 
unique Autonomie full vehicle model configuration and generates 
customized transmission shift maps. The algorithms' optimization is 
designed to balance minimization of energy consumption and vehicle 
performance.
---------------------------------------------------------------------------

    \381\ See FRM CAFE Analysis Autonomie Documentation at Paragraph 
4.4.5.2.
---------------------------------------------------------------------------

    ICCT also submitted a comment regarding the validity of the 
continued use of our engine map models. ICCT stated that, ``[a]lthough 
NHTSA scales its MY2010 hybrid Atkinson engine map to match the thermal 
efficiency of the MY2017 Toyota Prius, this appears to have been the 
only update made to the several engine maps that underpin all base and 
advanced engine technologies. The remaining engine maps are still 
primarily based on outdated engines (e.g., from MY2011, 2013 and 2014 
vehicles). Even with the updated hybrid engine, the newest Toyota Prius 
demonstrates an additional 10% improvement over the outgoing variant, 
due in part to improvements in engine efficiency.'' ICCT also took 
issue with NHTSA not using two of EPA's engine map models, and for the 
perceived lack of effectiveness benefit for adding cylinder 
deactivation technology to turbocharged and HCR engines.
    We disagree with statements that our engine maps are outdated. Many 
of the engine maps were developed specifically to support analysis for 
the current rulemaking timeframe. The engine map models encompass 
engine technologies that are present in the analysis fleet and 
technologies that could be applied in the rulemaking timeframe. In many 
cases those engine technologies are mainstream today and will continue 
to be during the rulemaking timeframe. For example, the engines on some 
MY 2022 vehicles in the analysis fleet have technologies that were 
initially introduced ten or more years ago. Having engine maps 
representative of those technologies is important for the analysis. The 
most basic engine technology levels also provide a useful consistent 
starting point for the incremental improvements for other engine 
technologies. The timeframe for the testing or modeling is unimportant 
because time by itself doesn't impact engine map data. A given engine 
or model will produce the same BSFC map regardless of when testing or 
modeling is conducted. Simplistic discounting of engine maps based on 
temporal considerations alone could result in discarding useful 
technical information.
    We also disagree with ICCT's example that our hybrid engine map 
models are outdated and have even been provided comments that our 
hybrid effectiveness values exceed reasonable thermal efficiency.\382\ 
This is further discussed in the III.D.3 of this preamble. Finally, we 
responded to ICCT's criticisms that we did not employ EPA's engine map 
models in the 2020 final rule for MYs 2021-2026 standards, where we 
showed that our modeled engines provided similar incremental 
effectiveness values as the EPA engine map models.\383\ As far as we 
are aware, ICCT has not provided additional information

[[Page 52632]]

showing that our engine map models are not reasonably similar to (if 
not providing a better effectiveness improvement than, in the case of 
the benchmarked Honda engine) EPA's engine map models.
---------------------------------------------------------------------------

    \382\ Supplemental Comments of Toyota Motor North America, Inc., 
Notice of Proposed Rulemaking: Safer Affordable Fuel-Efficient 
Vehicles Rule, Docket No. NHTSA-2018-0067 and EPA-HQ-OAR-2018-0283.
    \383\ 85 FR 24397-8 (April 30, 2020).
---------------------------------------------------------------------------

    Finally, in regard to engine effectiveness modeling, ICCT commented 
that ``[t]he modeled benefit of adding cylinder deactivation (DEAC) to 
turbocharged and HCR engines appears to be only about 25% of the 
benefit of adding DEAC to the base engine. While DEAC added to turbo or 
HCR engines will have lower pumping loss reductions than when added to 
base naturally aspirated engines, DEAC can still be expected to provide 
significant pumping loss reductions while enabling the engine to 
operate in a more thermally efficient region of the engine map.''
    In the NPRM we gave an example of the effects of adding DEAC to a 
turbocharged engine and discussed more about how fuel-efficient 
technologies have complex interactions and the effectiveness values of 
technology cannot be simply added together.\384\ Turbocharging and DEAC 
both work to reduce engine pumping losses and when working together 
they often provide a fuel-efficiency improvement greater then when they 
are working independently; however, much of these improvement happen in 
the same regions of engine operation where one or the other technology 
has a dominate effect which overshadows the benefits of the other. In 
other words, the benefits of the technologies are overlapping in the 
similar regions where the engine operates. These complex interactions 
among technologies are captured in our engine modeling.
---------------------------------------------------------------------------

    \384\ 88 FR 56167 (August 17, 2023). This example is also given 
in section III.C.3 of this preamble.
---------------------------------------------------------------------------

    The engine costs in our analysis are the product of engine DMCs, 
RPE, the LE, and updating to a consistent dollar year. We sourced 
engine DMCs from multiple sources, but primarily from the 2015 NAS 
report.\385\ For VTG and VTGE technologies (i.e., Miller Cycle), we 
used cost data from a FEV technology cost assessment performed for 
ICCT,\386\ aggregated using individual component and system costs from 
the 2015 NAS report. We considered costs from the 2015 NAS report that 
referenced a Northeast States Center for a Clean Air Future (NESCCAF) 
2004 report,\387\ but believe the reference material from the FEV 
report provides more updated cost estimates for the VTG technology.
---------------------------------------------------------------------------

    \385\ 2015 NAS Report, Table S.2, at 7-8.
    \386\ Isenstadt, A. et al. 2016. Downsized, Boosted Gasoline 
Engines. Working Paper. ICCT 2016-22. Available at: https://theicct.org/wp-content/uploads/2021/06/Downsized-boosted-gasoline-engines_working-paper_ICCT_27102016_1.pdf. (Accessed: May 31, 2023).
    \387\ NESCCAF. 2004. Reducing Greenhouse Gas Emissions from 
Light-Duty Motor Vehicles. Available at: https://www.nesccaf.org/documents/rpt040923ghglightduty.pdf. (Accessed: May 31, 2023).
---------------------------------------------------------------------------

    All engine technology costs start with a base engine cost, and then 
additional technology costs are based on cylinder and bank count and 
configuration; the DMC for each engine technology is a function of unit 
cost times either the number of cylinders or number of banks, based on 
how the technology is applied to the system. The total costs for all 
engine technologies in all MYs across all vehicle classes can be found 
in the Technologies Input file.
2. Transmission Paths
    Transmissions transmit torque generated by the engine from the 
engine to the wheels. Transmissions primarily use two mechanisms to 
improve fuel efficiency: (1) a wider gear range, which allows the 
engine to operate longer at higher efficiency speed-load points; and 
(2) improvements in friction or shifting efficiency (e.g., improved 
gears, bearings, seals, and other components), which reduce parasitic 
losses.
    We only model automatic transmissions in both the LD and HDPUV 
analyses. The four subcategories of automatic transmissions that we 
model in the LD analysis include traditional automatic transmissions 
(AT), dual clutch transmissions (DCT), continuously variable 
transmissions (CVT and eCVT), and direct drive (DD) transmissions.\388\ 
We also include high efficiency gearbox (HEG) technology improvements 
as options to the transmission technologies (designated as L2 or L3 in 
our analysis to indicate level of technology improvement).\389\ There 
has been a significant reduction in manual transmissions over the years 
and they made up less than 1% of the vehicles produced in MY 2022.\390\ 
Due to the trending decline of manual transmissions and their current 
low production volumes, we have removed manual transmissions from this 
analysis and have assigned vehicles using manual transmissions as DCTs 
in the analysis fleet.
---------------------------------------------------------------------------

    \388\ Note that eCVT and DD transmissions are only coupled with 
electrified drivetrains and are therefore not included as a 
standalone transmission option on the CAFE Model's technology 
pathways.
    \389\ See 2015 NAS Report, at 191. HEG improvements for 
transmissions represent incremental advancements in technology that 
improve efficiency, such as reduced friction seals, bearings and 
clutches, super finishing of gearbox parts, and improved 
lubrication. These advancements are all aimed at reducing frictional 
and other parasitic loads in transmissions to improve efficiency. We 
consider three levels of HEG improvements in this analysis based on 
the National Academy of Sciences (NAS) 2015 recommendations, and CBI 
data.
    \390\ 2023 EPA Automotive Trends Report.
---------------------------------------------------------------------------

    We only model ATs in the HDPUV analysis because, except for DD 
transmissions that are only included as part of an electrified 
drivetrain, all HDPUV fleet analysis vehicles use ATs. In addition, 
from an engineering standpoint, DCTs and CVTs are not suited for HDPUV 
work requirements, as discussed further below. The HDPUV automatic 
transmissions work in the same way as the LD ATs and are labeled the 
same, but they are sized and mapped, in the Autonomie effectiveness 
modeling,\391\ to account for the additional work, durability, and 
payload these vehicles are designed to conduct. The HDPUV transmissions 
are sized with larger clutch packs, higher hydraulic line pressures, 
different shift schedules, larger torque converter and different lock 
up logic, and stronger components when compared to their LD 
counterparts. Chapter 3.2.1 of the TSD discusses the technical 
specifications of the four different AT subtypes in more detail. The LD 
and HDPUV transmission technology paths are shown in Chapter 3.2.3 of 
the TSD.
---------------------------------------------------------------------------

    \391\ Autonomie Input and Assumptions Description Files.
---------------------------------------------------------------------------

    To assign transmission technologies to vehicles in the analysis 
fleets, we identify which Autonomie transmission model is most like a 
vehicle's real-world transmission, considering the transmission's 
configuration, costs, and effectiveness. Like with engines, we use 
manufacturer CAFE compliance submissions and publicly available 
information to assign transmissions to vehicles and determine which 
platforms share transmissions. To link shared transmissions in a 
manufacturer's fleet, we use transmission codes that include 
information about the manufacturer, drive configuration, transmission 
type, and number of gears. Just like manufacturers share transmissions 
in multiple vehicles, the CAFE Model will treat transmissions as 
``shared'' if they share a transmission code and transmission 
technologies will be adopted together.
    While identifying an AT's gear count is fairly easy, identifying 
HEG levels for ATs and CVTs is more difficult. We reviewed the age of 
the transmission design, relative performance versus previous designs, 
and technologies incorporated to assign an HEG level. There are no HEG 
Level 3 automatic transmissions in either the LD or the

[[Page 52633]]

HDPUV analysis fleets. For the LD analysis we found all 7-speed, all 9-
speed, all 10-speed, and some 8-speed automatic transmissions to be 
advanced transmissions operating at HEG Level 2 equivalence. We 
assigned eight-speed automatic transmissions and CVTs newly introduced 
for the LD market in MY 2016 and later as HEG Level 2. All other 
automatic transmissions are assigned to their respective transmission's 
initial technology level (i.e., AT6, AT8, and CVT). For DCTs, the 
number of gears in the assignments usually match the number of gears 
listed by the data sources, with some exceptions (we assign dual-clutch 
transmissions with seven and nine gears to DCT6 and DCT8 respectively). 
We assigned vehicles in either the LD or HDPUV analyses fleets with a 
fully electric powertrain a DD transmission. We assigned any vehicle in 
the LD analysis fleet with a power-split hybrid (SHEVPS) powertrain an 
electronic continuously variable transmission (eCVT). Finally, we 
assigned the limited number of manual transmissions in the LD fleet as 
DCTs, as we did not model manual transmissions in Autonomie for this 
analysis.
    Most transmission adoption features are instituted through 
technology path logic (i.e., decisions about how less advanced 
transmissions of the same type can advance to more advanced 
transmissions of the same type). Technology pathways are designed to 
prevent ``branch hopping''--changes in transmission type that would 
correspond to significant changes in transmission architecture--for 
vehicles that are relatively advanced on a given pathway. For example, 
any automatic transmission with more than five gears cannot move to a 
dual-clutch transmission. We also prevent ``branch hopping'' as a proxy 
for stranded capital, which is discussed in more detail in Section 
III.C and Chapter 2.6 of the TSD.
    For the LD analysis, the automatic transmission path precludes 
adoption of other transmission types once a platform progresses past an 
AT8. We use this restriction to avoid the significant level of stranded 
capital loss that could result from adopting a completely different 
transmission type shortly after adopting an advanced transmission, 
which would occur if a different transmission type were adopted after 
AT8 in the rulemaking timeframe. Vehicles that did not start out with 
AT7L2 transmissions cannot adopt that technology in the model. It is 
likely that other vehicles will not adopt the AT7L2 technology, as 
vehicles that have moved to more advanced automatic transmissions have 
overwhelmingly moved to 8-speed and 10-speed transmissions.\392\
---------------------------------------------------------------------------

    \392\ 2023 EPA Automotive Trends Report, at 71, Figure 4.24.
---------------------------------------------------------------------------

    CVT adoption is limited by technology path logic and is only 
available in the LD fleet analysis and therefore, not in the technology 
path for the HDPUV analysis. Vehicles that do not originate with a CVT 
or vehicles with multispeed transmissions beyond AT8 in the analysis 
fleet cannot adopt CVTs. Vehicles with multispeed transmissions greater 
than AT8 demonstrate increased ability to operate the engine at a 
highly efficient speed and load. Once on the CVT path, the platform is 
only allowed to apply improved CVT technologies. Due to the limitations 
of current CVTs, discussed in TSD Chapter 3.2, this analysis restricts 
the application of CVT technology on LDVs with greater than 300 lb.-ft 
of engine torque. This is because of the higher torque (load) demands 
of those vehicles and CVT torque limitations based on durability 
constraints. We believe the 300 lb.-ft restriction represents an 
increase over current levels of torque capacity that is likely to be 
achieved during the rule making timeframe. This restriction aligns with 
CVT application in the analysis fleet, in that CVTs are only witnessed 
on vehicles with under 280 lb.-ft of torque.\393\ Additionally, this 
restriction is used to avoid stranded capital. Finally, the analysis 
allows vehicles in the analysis fleet that have DCTs to apply an 
improved DCT and allows vehicles with an AT5 to consider DCTs. 
Drivability and durability issues with some DCTs have resulted in a low 
relative adoption rate over the last decade. This is also broadly 
consistent with manufacturers' technology choices.\394\ DCTs are not a 
selectable technology for the HDPUV analysis.
---------------------------------------------------------------------------

    \393\ Market Data Input File.
    \394\ 2023 EPA Automotive Trends Report, at 77, Figure 4.24.
---------------------------------------------------------------------------

    Autonomie models transmissions as a sequence of mechanical torque 
gains. The torque and speed are multiplied and divided, respectively, 
by the current ratio for the selected operating condition. Furthermore, 
torque losses corresponding to the torque/speed operating point are 
subtracted from the torque input. Torque losses are defined based on a 
three-dimensional efficiency lookup table that has the following 
inputs: input shaft rotational speed, input shaft torque, and operating 
condition. We populate transmission template models in Autonomie with 
characteristics data to model specific transmissions.\395\ 
Characteristics data are typically tabulated data for transmission gear 
ratios, maps for transmission efficiency, and maps for torque converter 
performance, as applicable. Different transmission types require 
different quantities of data. The characteristics data for these models 
come from peer-reviewed sources, transmission and vehicle testing 
programs, results from simulating current and future transmission 
configurations, and confidential data obtained from OEMs and 
suppliers.\396\ We model HEG improvements by modeling improvements to 
the efficiency map of the transmission. As an example, the AT8 model 
data comes from a transmission characterization study.\397\ The AT8L2 
has the same gear ratios as the AT8, however, we improve the gear 
efficiency map to represent application of the HEG level 2 
technologies. The AT8L3 models the application of HEG level 3 
technologies using the same principle, further improving the gear 
efficiency map over the AT8L2 improvements. Each transmission (15 for 
the LD analysis and 6 for the HDPUV analysis) is modeled in Autonomie 
with defined gear ratios, gear efficiencies, gear spans, and unique 
shift logic for the technology configuration the transmission is 
applied to. These transmission maps are developed to represent the gear 
counts and span, shift and torque converter lockup logic, and 
efficiencies that can be seen in the fleet, along with upcoming 
technology improvements, all while balancing key attributes such as 
drivability, fuel economy, and performance neutrality. This modeling is 
discussed in detail in Chapter 3.2 of the TSD and the CAFE Analysis 
Autonomie Documentation chapter titled ``Autonomie--Transmission 
Model.''
---------------------------------------------------------------------------

    \395\ Autonomie Input and Assumptions Description Files.
    \396\ Downloadable Dynamometer Database: https://www.anl.gov/energy-systems/group/downloadable-dynamometer-database. (Accessed: 
May 31, 2023).; Kim, N. et al. 2014. Advanced Automatic Transmission 
Model Validation Using Dynamometer Test Data. SAE 2014-01-1778. SAE 
World Congress: Detroit, MI.; Kim, N. et al. 2014. Development of a 
Model of the Dual Clutch Transmission in Autonomie and Validation 
With Dynamometer Test Data. International Journal of Automotive 
Technologies. Vol. 15(2): pp 263-71.
    \397\ CAFE Analysis Autonomie Documentation chapter titled 
``Autonomie--Transmission Model.''
---------------------------------------------------------------------------

    The effectiveness values for the transmission technologies, for all 
LD and HDPUV technology classes, are shown in Chapter 3.2.4 of the TSD. 
Note that the effectiveness for the AT5, eCVT, and DD technologies is 
not shown. The DD and eCVT transmissions do not have

[[Page 52634]]

standalone effectiveness values because those technologies are only 
implemented as part of electrified powertrains. The AT5 has no 
effectiveness values because it is a reference-point technology against 
which all other transmission technologies are compared.
    Our transmission DMCs come from the 2015 NAS report and studies 
cited therein. The LD costs are taken almost directly from the 2015 NAS 
report adjusted to the current dollar year or for the appropriate 
number of gears. We applied a 20% cost increase for HDPUV transmissions 
based on comparing the additional weight, torque capacity, and 
durability required in the HDPUV segment. Chapter 3.2 of the TSD 
discusses the specific 2015 NAS report costs used to generate our 
transmission cost estimates, and all transmission costs across all MYs 
can be found in CAFE Model's Technologies Input file. We have used the 
2015 NAS report transmission costs for the last several LD CAFE Model 
analyses (since reevaluating all transmission costs for the 2020 final 
rule) and have received no comments or feedback on these costs. We 
again sought comment on our approach to estimating all transmission 
costs, but in particular on HDPUV transmission costs for this analysis, 
in addition to any publicly available data from manufacturers or 
reports on the cost of HDPUV transmissions. We received no comments or 
feedback on these costs, so we continue to use the NPRM estimates for 
the analysis supporting this final rule.
3. Electrification Paths
    The electrification paths include a set of technologies that share 
common electric powertrain components, like batteries and electric 
motors, for certain vehicle functions that were traditionally powered 
by combustion engines. While all vehicles (including conventional ICE 
vehicles) use batteries and electric motors in some form, some 
component designs and powertrain architectures contribute to greater 
levels of electrification than others, allowing the vehicle to be less 
reliant on gasoline or other fuel.
    Several stakeholders commented about general topics related to 
electrification technologies like the perceived merits or disadvantages 
of electric vehicles,\398\ OEM investments in electric vehicles,\399\ 
and infrastructure and supply chain considerations around electric 
vehicles.\400\ Additional comments stated that hybrids are ``popular, 
cost effective'' \401\ and that dozens of new electric vehicle models 
having reached ``twice as many as before the pandemic'' \402\ with 
highly efficient electric vehicle technology \403\ that ``is scalable 
and increasingly accessible.'' \404\ Stakeholders stated that 
``[n]early every automaker has publicly committed to transitioning 
model line-ups to new technologies with substantially less fuel 
consumption'' \405\ and more electrified vehicles will enter the market 
``with the goal of making these mobility options more accessible for 
everyone . . . offering a diverse portfolio of EVs to meet varying 
customer needs.'' \406\ Insofar as our electrification technology 
penetration rates reach into the rulemaking timeframe, several other 
commenters stated that our future electrification penetration rates are 
not realistic due to limitations/uncertainty with battery material 
acquisition, manufacturing/production, and the current state of 
infrastructure \407\ \408\ \409\ and are expecting PHEVs to ``play a 
more prominent role over the near to mid-term.'' \410\ On the other 
hand, ICCT stated that our penetration rates of electrification 
technologies in the no action and action alternatives ``are reasonable 
and feasible.'' \411\
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    \398\ See, e.g., OCT, NHTSA-2023-0022-51242; ZETA, NHTSA-2023-
0022-60508; ACI, NHTSA-2023-0022-50765; West Virginia AG et al., 
NHTSA-2023-0022-63056; Heritage Foundation, NHTSA-2023-0022-61952.
    \399\ Nissan, NHTSA-2023-0022-60696; GM, NHTSA-2023-0022-60686; 
ZETA, NHTSA-2023-0022-60508.
    \400\ See Section II.B for a discusssion of comments related to 
infrastructure and supply chain considerations.
    \401\ Consumer Reports, Docket No. NHTSA-2023-0022-61101-A2, at 
1.
    \402\ ZETA, Docket No. NHTSA-2023-0022-60508, (citing their 
reference #294 ``Global EV Outlook 2023 Catching up with climate 
ambitions,'' IEA, (2023)).
    \403\ OCT, Docket No. NHTSA-2023-0022-51242-A1, at 4.
    \404\ Lucid, Docket No. NHTSA-2023-0022-50594-A1, at 2.
    \405\ ICCT, Docket No. NHTSA-2023-0022-54064-A1, at 8.
    \406\ Nissan, Docket No. NHTSA-2023-0022-60696-A1, at 3.
    \407\ West Virginia AG et al, Docket No. NHTSA-2023-0022-63056-
A1, at 13-14.
    \408\ MECA, Docket No. NHTSA-2023-0022-63053-A1, at 8.
    \409\ AFPM, Docket No. NHTSA-2023-0022-61911-A1, at 37.
    \410\ Toyota, Docket No. NHTSA-2023-0022-61131-A1, at 8.
    \411\ ICCT, Docket No. NHTSA-2023-0022-54064-A1, at 12 
(referring to ``NHTSA's estimates of battery-electric and plug-in 
hybrid electric vehicle penetration rates under the No Action and 
four ``action'' alternatives'').
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    NHTSA thanks commenters for expressing their opinions and 
submitting relevant data on topics surrounding electrification 
technology adoption. We endeavor to reasonably model technologies that 
manufacturers use to respond to our standards, other government 
standards, and consumer preferences, and we believe that the inputs and 
assumptions that we selected to represent electrification technologies 
results in reasonable outcomes. The grounds for building the foundation 
to determine appropriate electrification technology effectiveness and 
cost values (therefore resulting in appropriate technology penetration 
rates) as these technologies affect the reference baseline and out 
years was based on numerous well-thought-out inputs and assumptions. 
Although time and resources limit consideration of each and every 
individual electrification technology, NHTSA focused on key inputs and 
assumptions (e.g., the costs of batteries and applicability of specific 
electrified technologies for vehicles that do extensive work in the 
HDPUV fleet) to provide reasonable results for compliance pathways. 
While we recognize that stakeholders identified issues that they 
believed to be impediments to electrification technology adoption in 
particular fleets or market segments, we feel confident that we took 
the appropriate approach to determining the technologies applicable for 
vehicles in this analysis and that we capture many of these 
considerations explicitly in the analysis or qualitatively in 
additional technical support for this final rule. We have provided 
details of the inputs and assumptions in the TSD accompanying this 
final rule and provided more information to support our responses to 
comments throughout Section II and III of this preamble.
    Unlike with other technologies in the analysis, including other 
electrification technologies, Congress placed specific limitations on 
how we consider the fuel economy of alternative fueled vehicles (such 
as PHEVs, BEVs, and FCEVs) when setting CAFE standards.\412\ We 
implement these restrictions in the CAFE Model by using fuel economy 
values that assume ``charge sustaining'' (gasoline-only) PHEV 
operation,\413\ and by restricting technologies that convert a vehicle 
to a BEV or a FCEV from being

[[Page 52635]]

applied during ``standard-setting'' years.\414\ However, there are 
several reasons why we must still accurately model PHEVs, BEVs, and 
FCEVs in the analysis; these reasons are discussed in detail throughout 
this preamble and, in particular, in Sections IV and VI. In brief: we 
must consider the existing fleet fuel economy level in calculating the 
maximum feasible fuel economy level that manufacturers can achieve in 
future years. Accurately calculating the pre-existing fleet fuel 
economy level is crucial because it marks the starting point for 
determining what further efficiency gains will be feasible during the 
rulemaking timeframe. As discussed in detail above and in TSD Chapter 
2.2, PHEVs, BEVs, and FCEVs currently exist in manufacturer's fleets 
and count towards manufacturer's reference baseline compliance fuel 
economy values.
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    \412\ 49 U.S.C. 32902(h)(1), (2). In determining maximum 
feasible fuel economy levels, ``the Secretary of Transportation--(1) 
may not consider the fuel economy of dedicated automobiles; [and] 
(2) shall consider dual fueled automobiles to be operated only on 
gasoline or diesel fuel.''
    \413\ We estimated two sets of technology effectivness values 
using the Argonne full vehicle simulations: one set does not include 
the electrificaiton portion of PHEVs, and one set includes the 
combined fuel economy for both ICE operation and electric operation.
    \414\ CAFE Model Documentation at S4.6 Technology Fuel Economy 
Improvements.
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    In addition to accurately capturing an analysis, or initial, fleet 
of vehicles in a given MY, we must capture a regulatory ``no action'' 
reference baseline in each MY; that is, the regulatory reference 
baseline captures what the world will be like if our rule is not 
adopted, to accurately capture the costs and benefits of CAFE 
standards. The ``no-action'' reference baseline includes our 
representation of the existing fleet of vehicles (i.e., the LD and 
HDPUV analysis fleets) and (with some restrictions) our representation 
of manufacturer's fleets in the absence of our standards. Specifically, 
we assumed that in the absence of LD CAFE and HDPUV FE standards, 
manufacturers will produce certain BEVs to comply with California's ACC 
I and ACT program. We further assumed, consistent with manufacturer 
comments, that they will (regardless of legal requirements) produce 
additional BEVs consistent with the levels that would be required by 
California's ACC II program, were it to be granted a Clean Air Act 
preemption waiver. Accounting for electrified vehicles that 
manufacturers produced in response to state regulatory requirements or 
will produce for their own reasons improves the accuracy of the 
analysis of the costs and benefits of additional technology added to 
vehicles in response to CAFE standards, while adhering to the statutory 
prohibition against considering the fuel economy gains that could be 
achieved if manufacturers create new dedicated automobiles to comply 
with the CAFE standards.
    Next, the costs and benefits of CAFE standards do not end in the 
MYs for which we are setting standards. Vehicles produced in standard-
setting years, e.g., MYs 2027 through MY 2031 in this analysis, will 
continue to have effects for years after they are produced as the 
vehicles are sold and driven. To accurately capture the costs and 
benefits of vehicles subject to the standards in future years, the CAFE 
Model projects compliance through MY 2050. Outside of the standard-
setting years, we model the extent to which manufacturers could produce 
electrified vehicles, in order to improve the accuracy and realism of 
our analysis in situations where statute does not prevent us from doing 
so. Finally, due to NEPA requirements, we do consider the effects of 
electrified vehicle adoption in the CAFE Model under a ``real-world'' 
scenario where we lift EPCA/EISA's restrictions on our decision-making. 
On the basis of our NEPA analysis, we can consider the actual 
environmental impacts of our actions in the decision-making process, 
subject to EPCA's constraints.\415\
---------------------------------------------------------------------------

    \415\ 40 CFR 1500.1(a).
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    For those reasons, we must still accurately model electrified 
vehicles. That said, PHEVs, BEVs, and FCEVs only represent a portion of 
the electrified technologies that we include in the analysis. We 
discuss the range of modeled electrified technologies below and in 
detail in Chapter 3.3.1 of the TSD.
    Among the simpler configurations with the fewest electrification 
components, micro HEV technology (SS12V) uses a 12-volt system that 
simply restarts the engine from a stop. Mild HEVs use a 48-volt belt 
integrated starter generator (BISG) system that restarts the engine 
from a stop and provides some regenerative braking functionality.\416\ 
Mild HEVs are often also capable of minimal electric assist to the 
engine on take-off.
---------------------------------------------------------------------------

    \416\ See 2015 NAS Report, at 130. (``During braking, the 
kinetic energy of a conventional vehicle is converted into heat in 
the brakes and is thus lost. An electric motor/generator connected 
to the drivetrain can act as a generator and return a portion of the 
braking energy to the battery for reuse. This is called regenerative 
braking. Regenerative braking is most effective in urban driving and 
in the urban dynamometer driving schedule (UDDS) cycle, in which 
about 50 percent of the propulsion energy ends up in the brakes (NRC 
2011, 18).'').
---------------------------------------------------------------------------

    Strong hybrid-electric vehicles (SHEVs) have higher system voltages 
compared to mild hybrids with BISG systems and are capable of engine 
start/stop, regenerative braking, electric motor assist of the engine 
at higher speeds, and power demands with the ability to provide limited 
all-electric propulsion. Common SHEV powertrain architectures, 
classified by the interconnectivity of common electrified vehicle 
components, include both a series-parallel architecture by power-split 
device (SHEVPS) as well as a parallel architecture (P2).\417\ P2s--
although enhanced by the electrification components, including just one 
electric motor--remains fundamentally similar to a conventional 
powertrain.\418\ In contrast, SHEVPS is considerably different than a 
conventional powertrain; SHEVPSs use two electric motors, which allows 
the use of a lower-power-density engine. This results in a higher 
potential for fuel economy improvement compared to a P2, although the 
SHEVPS' engine power density is lower.\419\ Or, put another way, ``[a] 
disadvantage of the power split architecture is that when towing or 
driving under other real-world conditions, performance is not 
optimum.'' \420\ In contrast, ``[o]ne of the main reasons for using 
parallel hybrid architecture is to enable towing and meet maximum 
vehicle speed targets.'' \421\ This is an important distinction to 
understand why we allow certain types of vehicles to adopt P2 
powertrains and not SHEVPS powertrains, and to understand why we 
include only P2 strong hybrid architectures in the HDPUV analysis. Both 
concepts are discussed further below.
---------------------------------------------------------------------------

    \417\ Readers familiar with the last CAFE Model analysis may 
remember this category of powertrains referred to as ``SHEVP2s.'' 
Now that the SHEVP2 pathway has been split into three pathways based 
on the paired ICE technology, we refer to this broad category of 
technologies as ``P2s.''
    \418\ Kapadia, J. et al. 2017. Powersplit or Parallel--Selecting 
the Right Hybrid Architecture. SAE International Journal of 
Alternative Power. Vol. 6(1). Available at: https://doi.org/10.4271/2017-01-1154. (Accessed: May 31, 2023) (Parallel hybrids 
architecture typically adds the electrical system components to an 
existing conventional powertrain).
    \419\ Id.
    \420\ 2015 NAS report, at 134.
    \421\ Kapadia, J. et al. 2017. Powersplit or Parallel--Selecting 
the Right Hybrid Architecture. SAE International Journal of 
Alternative Power. Vol. 6(1). Available at: https://doi.org/10.4271/2017-01-1154. (Accessed: May 31, 2023).
---------------------------------------------------------------------------

    Plug-in hybrids (PHEVs) utilize a combination gasoline-electric 
powertrain, like that of a SHEV, but have the ability to plug into the 
electric grid to recharge the battery, like that of a BEV; this 
contributes to all-electric mode capability in both blended and non-
blended PHEVs.\422\ The analysis

[[Page 52636]]

includes PHEVs with an all-electric range (AER) of 20 and 50 miles to 
encompass the range of PHEV AER in the market today. BEVs have an all-
electric powertrain and use only batteries for the source of propulsion 
energy. BEVs with ranges of 200 to more than 350 miles are used in the 
analysis. Finally, FCEVs are another form of electrified vehicle that 
have a fully electric powertrain that uses a fuel cell system to 
convert hydrogen fuel into electrical energy. See TSD Chapter 3.3 for 
more information on every electrification technology considered in the 
analysis, including its acronym and a brief description. For brevity, 
we refer to technologies by their acronyms in this section.
---------------------------------------------------------------------------

    \422\ Some PHEVs operate in charge-depleting mode (i.e., 
``electric-only'' operation--depleting the high-voltage battery's 
charge) before operating in charge-sustaining mode (similar to 
strong hybrid operation, the gasoline and electric powertrains work 
together), while other (blended) PHEVs switch between charge-
depleting mode and charge-sustaining mode during operation.
---------------------------------------------------------------------------

    Readers familiar with previous LD CAFE analyses will notice that we 
have increased the number of engine options available for strong 
hybrid-electric vehicles and plug-in hybrid-electric vehicles. As 
discussed above, this better represents the diversity of different 
hybrid architectures and engine options available in the real world for 
SHEVs and PHEVs, while still maintaining a reasonable level of 
analytical complexity. In addition, we now refer to the BEV options as 
BEV1, BEV2, BEV3, and BEV4, rather than by their range assignments as 
in the previous analysis, to accommodate using the same model code for 
the LD and HDPUV analyses. Note that BEV1 and BEV2 have different range 
assignments in the LD and HDPUV analyses; further, within the HDPUV 
fleet, different range assignments exist for HD pickups and HD vans.
    In the CAFE Model, HDPUVs only have one SHEV option and one PHEV 
option.\423\ The P2 architecture supports high payload and high towing 
requirements versus other types of hybrid architecture,\424\ which are 
important considerations for HDPUV commercial operations. The 
mechanical connection between the engine, transmission, and P2 hybrid 
systems enables continuous power flow to be able to meet high towing 
weights and loads at the cost of system efficiency. We do not allow 
engine downsizing in this setup in so that when the battery storage 
system is depleted, the vehicle is still able to operate while 
achieving its original performance. We picked the P2 architecture for 
HDPUV SHEVs because, although there are currently no SHEV HDPUVs in the 
market on which to base a technology choice, we believe that the P2 
strong hybrid architecture would more likely be picked than other 
architecture options, such as ones with power-split powertrains. This 
is because, as discussed above, the P2 architecture ``can be integrated 
with existing conventional powertrain systems that already meet the 
additional attribute requirements of these large vehicle segments.'' 
\425\
---------------------------------------------------------------------------

    \423\ Note that while the HDPUV PHEV option is labeled 
``PHEV50H'' in the technology pathway, it actually uses a basic 
engine. This is so the same technology pathway can be used in the LD 
and HDPUV CAFE Model analyses.
    \424\ Kapadia, J. et al. 2017. Powersplit or Parallel--Selecting 
the Right Hybrid Architecture. SAE International Journal of 
Alternative Power, Vol. 6(1): at 68-76. Available at: https://doi.org/10.4271/2017-01-1154. (Accessed: May 31, 2023). (Using 
current powersplit design approaches, critical attribute 
requirements of larger vehicle segments, including towing 
capability, performance and higher maximum vehicle speeds, can be 
difficult and in some cases impossible to meet. Further work is 
needed to resolve the unique challenges of adapting powersplit 
systems to these larger vehicle applications. Parallel architectures 
provide a viable alternative to powersplit for larger vehicle 
applications because they can be integrated with existing 
conventional powertrain systems that already meet the additional 
attribute requirements of these large vehicle segments).
    \425\ Kapadia, J. et al. 2017. Powersplit or Parallel--Selecting 
the Right Hybrid Architecture. SAE International Journal of 
Alternative Power. Vol. 6(1): at 68-76. Available at: https://doi.org/10.4271/2017-01-1154. (Accessed: May 31, 2023).
---------------------------------------------------------------------------

    We only include one HDPUV PHEV option as there are no PHEVs in the 
HDPUV analysis fleet,\426\ and there are no announcements from major 
manufacturers that indicate this a pathway that they will pursue in the 
short term (i.e., the next few years).\427\ We believe this is in part 
because PHEVs, which are essentially two separate powertrains combined, 
can decrease HDPUV capability by increasing the curb weight of the 
vehicle and reducing cargo capacity. A manufacturer's ability to use 
PHEVs in the HDPUV segment is highly dependent on the load requirements 
and the duty cycle of the vehicle. However, in the right operation, 
HDPUV PHEVs can have a cost-effective advantage over their conventional 
counterparts.\428\ More specifically, there would be a larger fuel 
economy benefit the more the vehicle could rely on its electric 
operation, with partial help from the ICE; examples of duty cycles 
where this would be the case include short delivery applications or 
construction trucks that drive between work sites in the same city. 
Accordingly, we do think that PHEVs can be a technology option for 
adoption in the rulemaking timeframe. We picked a 50-mile AER for this 
segment based on discussions with experts at Argonne, who were also 
involved in DOE projects and provided guidance for this segment.\429\ 
Additional information about each technology we considered is located 
in Chapter 3.3.1 of the TSD.
---------------------------------------------------------------------------

    \426\ National Renewable Energy Laboratory, Lawrence Berkeley 
National Laboratory, Kevala Inc., and U.S. Department of Energy. 
2024. Multi-State Transportation Electrification Impact Study: 
Preparing the Grid for Light-, Medium-, and Heavy-Duty Electric 
Vehicles. DOE/EE-2818, U.S. Department of Energy, 2024.
    \427\ We recognize that there are some third-party companies 
that have converted HDPUVs into PHEVs, however, HDPUV incomplete 
vehicles that are retrofitted with electrification technology in the 
aftermarket are not regulated under this rulemaking unless the 
manufacturer optionally chooses to certify them as a complete 
vehicle. See 49 CFR 523.7.
    \428\ For the purpose of the Fuel Efficiency regulation, HDPUVs 
are assessed on the 2-cycle test procedure similar to the LDVs. The 
GVWR does not exceed 14,000 lbs in this segment. NREL. 2023. 
Electric and Plug-in Hybrid Electric Vehicle Publications. Available 
at: https://www.nrel.gov/transportation/fleettest-publications-electric.html. (Accessed: May 31, 2023); Birky, A. et al. 2017. 
Electrification Beyond Light Duty: Class 2b-3 Commercial Vehicles. 
Final Report. ORNL/TM-2017/744. Available at: https://doi.org/10.2172/1427632. (Accessed: May 31, 2023).
    \429\ DOE. 2023. 21st Century Truck Partnership. Vehicle 
Technologies Office. Available at: https://www.energy.gov/eere/vehicles/21st-century-truck-partnership. (Accessed: May 31, 2023); 
Islam, E. et al. 2022. A Comprehensive Simulation Study to Evaluate 
Future Vehicle Energy and Cost Reduction Potential. Final Report. 
ANL/ESD-22/6. Available at: https://publications.anl.gov/anlpubs/2023/11/179337.pdf. (Accessed: Mar. 14, 2024).
---------------------------------------------------------------------------

    We sought comment on the range of electrification path technologies 
and received comment from stakeholders regarding electrified powertrain 
options for both the light-duty and HDPUV fleets.
    Two commenters \430\ repeatedly referenced a Roush report \431\ and 
suggested that we should include more-capable, higher output 48-volt 
mild hybrid systems beyond P0 mild hybrids in our modeling, such as 
``P2, P3, or P4 configurations'' \432\ which offer additional benefits 
of ``electric power take-offs'' \433\ (i.e., launch assist) or ``slow-
speed electric driving'' \434\ on the vehicle's drive axle(s). It was 
also noted in comment that P2 mild hybrids mated with more advanced 
engine technologies have the ability to increase system 
efficiency.\435\
---------------------------------------------------------------------------

    \430\ ICCT, Docket No. NHTSA-2023-0022-54064; John German, 
Docket No. NHTSA-2023-0022-53274.
    \431\ Roush. 2021. Gasoline Engine Technologies for Revised 2023 
and Later Model Year Light-Duty Vehicle Greenhouse Gas Emission 
Standards. Final Report at 11. Sept. 24, 2021. Available at: https://downloads.regulations.gov/EPA-HQ-OAR-2021-0208-0210/attachment_2.pdf. (Accessed: Apr. 5, 2024).
    \432\ John German, Docket No. NHTSA-2023-0022-53274-A1, at 6-7.
    \433\ MECA, Docket No. NHTSA-2023-0022-63053-A1, at 13.
    \434\ ICCT, Docket No. NHTSA-2023-0022-54064-A1, at 20.
    \435\ ICCT, Docket No. NHTSA-2023-0022-54064-A1, at 20-21; John 
German, Docket No. NHTSA-2023-0022-53274-A1, at 6-7; MECA, Docket 
No. NHTSA-2023-0022-63053-A1, at 12-14.

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

[[Page 52637]]

    We agree with the commenters that these mild hybrid configurations, 
such as P2 (mild) and P4, could offer better improvements compared to 
P0 mild hybrids. Non-P0 powertrains, however, require significant 
changes to the powertrain and would require a higher capacity battery--
both leading to increase powertrain cost; this is similar to what we 
observed in past rulemakings with the (P1) CISG system, with the non-P0 
mild hybrid not being a cost-effective way for manufacturers to meet 
standards in the rulemaking time frame. Accordingly, we did not include 
additional mild hybrid technology for this final rule but will consider 
mild hybrid advancements, such as P2 through P4, in future analysis if 
they become more prevalent in the U.S. market.
    To extent possible, for any analyses conducted for any new 
rulemaking, we update as much of the technical aspects as possible with 
available data and time allotted. For example, we have significantly 
expanded our strong hybrid and plug-in hybrid offering for adopting in 
the rulemaking time frame, we have also updated our full vehicle 
modeling \436\ based on the testing of Toyota RAV4 Prime,\437\ Nissan 
Leaf,\438\ and Chevy Bolt,\439\ for HDPUV we worked with SwRI to 
develop a new engine map for P2 Hybrids.
---------------------------------------------------------------------------

    \436\ Islam, E. S. et al. 2023. Vehicle Simulation Process to 
Support the Analysis for MY 2027 and Beyond CAFE and MY 2030 and 
Beyond HDPUV FE Standards. Report No. DOT HS 813 431. NHTSA.
    \437\ Iliev, S. et al. 2022. Vehicle Technology Assessment, 
Model Development, and Validation of a 2021 Toyota RAV4 Prime. 
Report No. DOT HS 813 356. NHTSA.
    \438\ Jehlik, F. et al. 2022. Vehicle Technology Assessment, 
Model Development, and Validation of a 2019 Nissan Leaf Plus. Report 
No. DOT HS 813 352. NHTSA.
    \439\ Jehlik, F. et al. 2022. Vehicle Technology Assessment, 
Model Development, and Validation of a 2020 Chevrolet Bolt. Report 
No. DOT HS 813 351. NHTSA.
---------------------------------------------------------------------------

    We also received a handful of comments on technologies considered 
for the HDPUV analysis. ICCT commended ``NHTSA for incorporating 
[hybrid technologies, including PHEVs] into its modeling of the HD 
pickup and van fleet.'' \440\ We received related supportive comment on 
PHEVs for HDPUV from MECA stating, ``[p]lug-in hybrids (PHEVs) can be 
practical for light and medium- duty trucks (e.g., Class 1 through 3) 
that do not travel long distances or operate for long periods of time 
without returning to a central location.'' \441\
---------------------------------------------------------------------------

    \440\ ICCT, Docket No. NHTSA-2023-0022-54064-A1, at 25.
    \441\ MECA, Docket No. NHTSA-2023-0022-63053-A1, at 14.
---------------------------------------------------------------------------

    NHTSA appreciates the comment and MECA's technological insight. 
NHTSA thanks other commenters, such as ICCT, for support of our 
underlying assumptions and providing insight into technology trends.
    Related to the electrified HDPUV fleet, AFPM stated that we ``do 
not distinguish between the less costly lower range BEV1 and BEV2 
options, and the much more costly and virtually unavailable higher 
range BEV3 and BEV4 options'' for HDPUVs and that ``NHTSA should adjust 
its modeling to fully assess the real feasibility (and cost) of the 
BEVs that commercial HDPUV fleet operators really need.'' \442\
---------------------------------------------------------------------------

    \442\ AFPM, Docket No. NHTSA-2023-0022-61911-A2, at 88.
---------------------------------------------------------------------------

    We believe that AFPM misunderstood our proposal documents. As was 
clear in the NPRM and outlined in TSD Chapter 3.3, there are no BEV3 or 
BEV4 options for HDPUVs. This is because we ensure that BEVs (and all 
vehicles) are modeled to meet sizing and utility (such as towing and 
hauling) requirements as described in Autonomie Model 
Documentation.\443\ Additionally, we do not allow high towing capable 
vehicles to be fully converted BEVs as they have utility requirements 
that far exceed driving range of BEVs. These and other considerations 
of vehicle's capabilities and utility have been further discussed in 
the TSD Chapter 3.3. However, NHTSA disagrees with AFPM that BEV HDPUVs 
analyzed by NHTSA for this rule have a more limited carrying capacity 
than their ICE counterparts. NHTSA examined HDPUV BEV configurations in 
conjunction with Argonne and meetings with stakeholders prior to 
finalizing inputs for the CAFE Model analysis and does not believe that 
battery pack sizes will limit cargo capacity for HDPUVs (as opposed to 
what may be seen for larger MD/HD vehicles). This is especially true 
with the relatively lower total mileage ranges needed for HDPUV 
delivery vehicles, which generally operate in a more limited spatial 
area (as opposed again to the long-distance requirements and larger 
cargo area needed with larger MD/HD vehicles). To reflect these 
considerations, NHTSA only modeled two HDPUV range configurations for 
HDPUVs (termed ``BEV1'' and ``BEV2''). NHTSA disagrees that we should 
adjust our HDPUV modeling as we have conducted analysis based on 
available data on technologies and capabilities of vehicles within the 
fleet but appreciates AFPM's comment nonetheless; NHTSA has not made 
any changes to electrification pathways in the model for HDPUVs for 
this rulemaking.
---------------------------------------------------------------------------

    \443\ Islam, E.S. et al. 2023. Vehicle Simulation Process to 
Support the Analysis for MY 2027 and Beyond CAFE and MY 2030 and 
Beyond HDPUV FE Standards. Report No. DOT HS 813 431. NHTSA. See the 
``HDPUV Specifications'' section, at 137-38.
---------------------------------------------------------------------------

    We received comment from Alliance for Vehicle Efficiency (AVE) 
relating to the inclusion of FCEVs in the analysis, stating that, 
``NHTSA dismisses [FCEV] chances for meaningful market penetration'' 
and that they encourage ``NHTSA to fully assess the fuel economy 
benefits that hydrogen vehicles could achieve and how these vehicles 
could become cost-effective solutions for manufacturers.'' \444\ We 
disagree--not only have we assessed each powertrain technology 
specifically for this analysis (which includes FCEVs), our market 
penetration for FCEVs is aligned with market projections during the 
rulemaking time frame.\445\
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    \444\ AVE, Docket No. NHTSA-2023-0022-60213-A1, at 6.
    \445\ Rho Motion. EV Battery subscriptions. Available at: 
https://rhomotion.com/. (Accessed: Mar. 12, 2024).
---------------------------------------------------------------------------

    As described in TSD Chapter 3.3, we assigned electrification 
technologies to vehicles in the LD and HDPUV analysis fleets using 
manufacturer-submitted CAFE compliance information, publicly available 
technical specifications, marketing brochures, articles from reputable 
media outlets, and data from Wards Intelligence.\446\ TSD Chapter 3.3.2 
shows the penetration rates of electrification technologies in the LD 
and HDPUV analysis fleets, respectively. Over half the LD analysis 
fleet has some level of electrification, with the vast majority--over 
50 percent of the fleet--being micro hybrids; BEV3 (>275 miles; <=350 
miles) is the most common LD BEV technology. The HDPUV analysis fleet 
has only a conventional non-electrified powertrain, currently; however, 
the first year of HDPUV standards in this analysis is MY 2030, and we 
expect additional electrification technologies to be applied in the 
fleet before then. Like the other technology pathways, as the CAFE 
Model adopts electrification technologies for vehicles, more advanced 
levels of electrification technologies will supersede all prior levels, 
while certain technologies within each level are mutually exclusive. 
The only adoption feature applicable to micro (SS12V) and mild (BISG) 
hybrid technology is path logic; vehicles can only adopt micro and mild 
hybrid

[[Page 52638]]

technology if the vehicle did not already have a more advanced level of 
electrification.
---------------------------------------------------------------------------

    \446\ Wards Intelligence. 2022. U.S. Car and Light Truck 
Specifications and Prices, '22 Model Year. Available at: https://wardsintelligence.informa.com/WI966023/US-Car-and-Light-Truck-Specifications-and-Prices-22-Model-Year. (Accessed: May 31, 2023).
---------------------------------------------------------------------------

    The adoption features that we apply to strong hybrid technologies 
include path logic, powertrain substitution, and vehicle class 
restrictions. Per the technology pathways, SHEVPS, P2x, P2TRBx, and the 
P2HCRx technologies are considered mutually exclusive. In other words, 
when the model applies one of these technologies, the others are 
immediately disabled from future application. However, all vehicles on 
the strong hybrid pathways can still advance to one or more of the 
plug-in technologies, when applicable in the modeling scenario (i.e., 
allowed in the model).
    When the model applies any strong hybrid technology to a vehicle, 
the transmission technology on the vehicle is superseded; regardless of 
the transmission originally present, P2 hybrids adopt an advanced 8-
speed automatic transmission (AT8L2), and PS hybrids adopt a 
continuously variable transmission via power-split device (eCVT). When 
the model applies the P2 technology, the model can consider various 
engine options to pair with the P2 architecture according to existing 
engine path constraints--taking into account relative cost 
effectiveness. For SHEVPS technology, the existing engine is replaced 
with a full time Atkinson cycle engine.\447\ For P2s, we picked the 8-
speed automatic transmission to supersede the vehicle's incoming 
transmission technology. This is because most P2s in the market use an 
8-speed automatic transmission,\448\ therefore it is representative of 
the fleet now. We also think that 8-speed transmissions are 
representative of the transmissions that will continue to be used in 
these hybrid vehicles, as we anticipate manufacturers will continue to 
use these ``off-the-shelf'' transmissions based on availability and 
ease of incorporation in the powertrain. The eCVT (power-split device) 
is the transmission for SHEVPSs and is therefore the technology we 
picked to supersede the vehicle's prior transmission when adopting the 
SHEVPS powertrain.
---------------------------------------------------------------------------

    \447\ Designated Eng26 in the list of engine map models used in 
the analysis. See TSD Chapter 3.1.1.2.3 for more information.
    \448\ We are aware that some Hyundai vehicles use a 6-speed 
transmission and some Ford vehicles use a 10-speed transmission, but 
we have observed that the majority of P2s use an 8-speed 
transmission.
---------------------------------------------------------------------------

    SKIP logic is also used to constrain adoption for SHEVPS and 
PHEV20/50PS technologies. These technologies are ``skipped'' for 
vehicles with engines \449\ that meet one of the following conditions: 
the engine belongs to an excluded manufacturer; \450\ the engine 
belongs to a pickup truck (i.e., the engine is on a vehicle assigned 
the ``pickup'' body style); the engine's peak horsepower is more than 
405 hp; or if the engine is on a non-pickup vehicle but is shared with 
a pickup. The reasons for these conditions are similar to those for the 
SKIP logic that we apply to HCR engine technologies, discussed in more 
detail in Section III.D.1. In the real world, performance vehicles with 
certain powertrain configurations cannot adopt the technologies listed 
above and maintain vehicle performance without redesigning the entire 
powertrain.
---------------------------------------------------------------------------

    \449\ This refers to the engine assigned to the vehicle in the 
2022 analysis fleet.
    \450\ Excluded manufacturers included BMW, Daimler, and Jaguar 
Land Rover.
---------------------------------------------------------------------------

    It may be helpful to understand why we do not apply SKIP logic to 
P2s and to understand why we do apply SKIP logic to SHEVPSs. Remember 
the difference between P2 and SHEVPS architectures: P2 architectures 
are better for ``larger vehicle applications because they can be 
integrated with existing conventional powertrain systems that already 
meet the additional attribute requirements'' of large vehicle 
segments.\451\ No SKIP logic applies to P2s because we believe that 
this type of electrified powertrain is sufficient to meet all of the 
performance requirements for all types of vehicles. Manufacturers have 
proven this now with vehicles like the Ford F-150 Hybrid and Toyota 
Tundra Hybrid.\452\ In contrast, ``[a] disadvantage of the power split 
architecture is that when towing or driving under other real-world 
conditions, performance is not optimum.'' \453\ If we were to size (in 
the Autonomie simulations) the SHEVPS motors and engines to achieve not 
``not optimum'' performance, the electric motors would be 
unrealistically large (on both a size and cost basis), and the 
accompanying engine would also have to be a very large displacement 
engine, which is not characteristic of how vehicle manufacturers apply 
SHEVPS ICEs in the real-world. Instead, for vehicle applications that 
have particular performance requirements--defined in our analysis as 
vehicles with engines that belong to an excluded manufacturer, engines 
belonging to a pickup truck or shared with a pickup truck, or the 
engine's peak horsepower is more than 405hp--those vehicles can adopt 
P2 architectures that should be able to handle the vehicle's 
performance requirements.
---------------------------------------------------------------------------

    \451\ Kapadia, J. et al. 2017. Powersplit or Parallel--Selecting 
the Right Hybrid Architecture. SAE International Journal of 
Alternative Power. Vol. 6(1). Available at: https://doi.org/10.4271/2017-01-1154. (Accessed: May 31, 2023).
    \452\ SAE International. 2021. 2022 Toyota Tundra: V8 Out, Twin-
Turbo Hybrid Takes Over. Last revised: September 22, 2021. Available 
at: https://www.sae.org/news/2021/09/2022-toyota-tundra-gains-twin-turbo-hybrid-power. (Accessed: May 30, 2023); SAE International. 
2020. Hybridization the Highlight of Ford's All-New 2021 F-150. Last 
revised: June 30, 2020. Available at: https://www.sae.org/news/2020/06/2021-ford-f-150-reveal. (Accessed: May 30, 2023).
    \453\ 2015 NAS report, at 134.
---------------------------------------------------------------------------

    NHTSA received general comments from ICCT related to the strong 
hybrid technology pathway restrictions. ICCT suggested that the 
analysis should allow strong ``hybridization on all vehicle types'' 
\454\ in the analysis, without further elaboration on what of the above 
explanation they disagreed with or any technical justification for 
making their proposed change. To be clear, strong hybridization is 
allowed on all vehicle types. However, we allow different types of 
strong hybrid powertrains to be applied to different types of vehicles 
for the reasons discussed above. We believe that allowing SHEVPS and P2 
powertrains to be applied subject to the base vehicle's performance 
requirements is a reasonable approach to maintaining a performance-
neutral analysis.
---------------------------------------------------------------------------

    \454\ ICCT, Docket No. NHTSA-2023-0022-54064-A1, at 18.
---------------------------------------------------------------------------

    LD PHEV adoption is limited only by technology path logic; however, 
in the HDPUV analysis, PHEV technology is not available in the model 
until MY 2025 for HD vans and MY 2027 for HD pickups. As discussed 
above, there are no PHEVs in the HDPUV analysis fleet and there are no 
announcements from major manufacturers that indicate this a pathway 
that they will pursue in the short term; that said, we do believe this 
is a technology that could be beneficial for very specific HDPUV 
applications. However, the technology is fully available for adoption 
by HDPUVs in the rulemaking timeframe (i.e., MYs 2030 and beyond). We 
sought comment on this assumption, and any other information available 
from manufacturers or other stakeholders on the potential that original 
equipment manufacturers will implement PHEV technology prior to MY 2025 
for HD vans, and prior to MY 2027 for HD pickups. We did not receive 
any specific comments on this request and so we finalized the NPRM 
assumptions for PHEV availability in the HDPUV fleet.
    The engine and transmission technologies on a vehicle are 
superseded when PHEV technologies are applied. For example, the model

[[Page 52639]]

applies an AT8L2 transmission with all PHEV20T/50T plug-in 
technologies, and the model applies an eCVT transmission for all 
PHEV20PS/50PS and PHEV20H/50H plug-in technologies in the LD fleet and 
for more details on different system combinations of electrification 
see TSD Chapter 3.3. A vehicle adopting PHEV20PS/50PS receives a hybrid 
full Atkinson cycle engine, and a vehicle adopting PHEV20H/PHEV50H 
receives an HCR engine. For PHEV20T/50T, the vehicle receives a TURBO1 
engine.
    Adoption of BEVs and FCEVs is limited by both path logic and phase-
in caps. They are applied as end-of-path technologies that supersede 
previous levels of electrification. Phase-in caps, which are defined in 
the CAFE Model Input Files, are percentages that represent the maximum 
rate of increase in penetration rate for a given technology. They are 
accompanied by a phase-in start year, which determines the first year 
the phase-in cap applies. Together, the phase-in cap and start year 
determine the maximum penetration rate for a given technology in a 
given year; the maximum penetration rate equals the phase-in cap times 
the number of years elapsed since the phase-in start year. Note that 
phase-in caps do not inherently dictate how much a technology is 
applied by the model. Rather, they represent how much of the fleet 
could have a given technology by a given year.
    Because a BEV1 costs less and has slightly higher effectiveness 
values than other advanced electrification technologies,\455\ the model 
will have vehicles adopt it first, until it is restricted by the phase-
in cap. However, this only applies during non-standard setting years as 
well as when the analysis is simulated for the EIS. The standard 
setting simulations do not consider BEVs; thus, phase-in caps are not 
applicable throughout this timeframe. TSD Chapter 3.3.3 shows the 
phase-in caps, phase-in year, and maximum penetration rate through 2050 
for BEV and FCEV technologies.
---------------------------------------------------------------------------

    \455\ This is because BEV1 uses fewer batteries and weighs less 
than BEVs with greater ranges.
---------------------------------------------------------------------------

    The LD BEV1 phase-in cap is informed by manufacturers' tendency to 
move away from low-range passenger vehicle offerings in part because of 
potential consumer concern with range anxiety.\456\ In some cases, the 
advertised range on EVs may not reflect the actual real-world range in 
cold and hot ambient temperatures and real-world driving conditions, 
affecting the utility of these lower range vehicles.\457\ Many 
manufacturers, including comments from General Motors,\458\ as 
discussed further below, have told us that the portion of consumers 
willing to accept a vehicle with the lowest modeled range is small, 
with manufacturers targeting range values well above BEV1 range.
---------------------------------------------------------------------------

    \456\ Pratt, D. 2021. How Much Do Cold Temperatures Affect an 
Electric Vehicle's Driving Range? Consumer Reports. Last Revised: 
Dec. 19, 2021. Available at: https://www.consumerreports.org/hybrids-evs/how-much-do-cold-temperatures-affect-an-evs-driving-range-a5751769461. (Accessed: May 31, 2023); 2022 EPA Trends Report 
at 60; IEA. 2022. Trends in Electric Light-Duty Vehicles. Available 
at: https://www.iea.org/reports/global-ev-outlook-2022/trends-in-electric-light-duty-vehicles. (Accessed: May 31, 2023).
    \457\ AAA. 2019. AAA Electric Vehicle Range Testing. Last 
Revised: Feb. 2019. Available at: https://www.aaa.com/AAA/common/AAR/files/AAA-Electric-Vehicle-Range-Testing-Report.pdf. (Accessed: 
May 31, 2023).
    \458\ GM, Docket No. NHTSA-2023-0022-60686.
---------------------------------------------------------------------------

    Furthermore, the average BEV range has steadily increased over the 
past decade,\459\ due to battery technological progress increasing 
energy density as well as batteries becoming more cost effective. EPA 
observed in its 2023 Automotive Trends Report that ``the average range 
of new EVs has climbed substantially. In MY 2022, the average new EV is 
305 miles, or more than four times the range of an average EV in 
2011.'' \460\ Based on the cited examples and basis described in this 
section, the maximum growth rate for LD BEV1s in the model is set 
accordingly low to less than 0.1 percent per year. While this rate is 
significantly lower than that of the other BEV technologies, the BEV1 
phase-in cap allows the penetration rate of low-range BEVs to grow by a 
multiple of what is currently observed in the market.
---------------------------------------------------------------------------

    \459\ DOE. 2023. Vehicle Technologies Office Fact of the Week 
(FOTW) #1290, In Model Year 2022, the Longest-Range EV Reached 520 
Miles on a Single Charge. Published: May 15, 2023. Available at: 
https://www.energy.gov/eere/vehicles/articles/fotw-1290-may-15-2023-model-year-2022-longest-range-ev-reached-520-miles. (Accessed: Mar. 
13, 2024). See also DOE, Vehicle Technologies Office. FOTW #1234, 
April 18, 2022: Volumetric Energy Density of Lithium-ion Batteries 
Increased by More than Eight Times Between 2008 and 2020. Available 
at: https://www.energy.gov/eere/vehicles/articles/fotw-1234-april-18-2022-volumetric-energy-density-lithium-ion-batteries. (Accessed: 
Mar. 13, 2024).
    \460\ 2023 EPA Automotive Trends Report, at 64.
---------------------------------------------------------------------------

    For higher BEV ranges (such as that for BEV2 for both LD and 
HDPUVs), phase-in caps are intended to conservatively reflect potential 
challenges in the scalability of BEV manufacturing and implementing BEV 
technology on many vehicle configurations, including larger vehicles. 
In the short term, the penetration of BEVs is largely limited by 
battery material acquisition and manufacturing.\461\ Incorporating 
battery packs with the capacity to provide greater electric range also 
poses its own engineering challenges. Heavy batteries and large packs 
may be difficult to integrate for many vehicle configurations and 
require vehicle structure modifications. Pickup trucks and large SUVs, 
in particular, require higher levels of stored energy as the number of 
passengers and/or payload increases, for towing and other high-torque 
applications. In the LD analysis, we use the LD BEV3 and BEV4 phase-in 
caps to reflect these transitional challenges. For HDPUV analysis, we 
use similar phase-in caps for the BEV1 and BEV2 to control for 
realities of adoption of electrified technologies in work vehicles.
---------------------------------------------------------------------------

    \461\ See, e.g., BNEF. 2022. China's Battery Supply Chain Tops 
BNEF Ranking for Third Consecutive Time, with Canada a Close Second. 
Bloomberg New Energy Finance. Last Revised: Nov. 12, 2022. Available 
at: https://about.bnef.com/blog/chinas-battery-supply-chain-tops-bnef-ranking-for-third-consecutive-time-with-canada-a-close-second/. 
(Accessed: May 31, 2023).
---------------------------------------------------------------------------

    Recall that BEV phase-in caps are a tool that we use in the 
simulations to allow the model to build higher-range BEVs (when the 
modeling scenario allows, as in outside of standard-setting years), 
because if we did not, the model would only build BEV1s, as they are 
the most cost-effective BEV technology. Based on the analysis provided 
above, we believe there is a reasonable justification for different BEV 
phase-in caps based on expected BEV ranges in the future. We sought 
comment on the BEV phase-in caps for the LD and HDPUV analyses, and we 
received comment from several stakeholders that asked us to reevaluate 
our phase-in caps for BEVs: \462\ one comment from General Motors 
asserted a specific issue with the penetration rates of short-range 
BEVs, stating, ``[t]he agency assumes a very large portion of the 
market will adopt BEVs with less than 300-mile range'' \463\ and that 
we should adjust ``phase-in caps to recognize that 100% of the market 
is unlikely to adopt BEVs with 300 miles range or less.'' \464\
---------------------------------------------------------------------------

    \462\ GM, Docket No. NHTSA-2023-0022-60686-A2, at 1-4; MEMA, 
Docket No. NHTSA-2023-0022-59204-A1, at 8; Valero, Docket No. NHTSA-
2023-0022-58547-A2, at 10.
    \463\ GM, Docket No. NHTSA-2023-0022-60686-A2, at 3.
    \464\ GM, Docket No. NHTSA-2023-0022-60686-A2, at 1-8.
---------------------------------------------------------------------------

    We have modified the values of our phase-in caps for LD BEVs, as 
shown above in TSD Chapter 3.3.3, to ``produce more realistic 
compliance pathways that project higher shares of longer-range BEVs and 
restrict or eliminate the projection of shorter-range BEVs in some 
applications;'' \465\ the broad LD

[[Page 52640]]

phase-in cap values adjust shorter-range BEV prevelance in the fleet.
---------------------------------------------------------------------------

    \465\ GM, Docket No. NHTSA-2023-0022-60686-A2, at 2.
---------------------------------------------------------------------------

    MEMA commented that phase-in caps constrain ``the ability of the 
industry to pursue all compliance options'' and ``keep the production 
volume of BEV/FCEV technologies low.'' It was suggested that a delayed 
launch of some technologies (like BEVs and FCEVs, when they're more 
advanced) would be more practical.\466\ Similarly, we also received 
comment from Valero on HDPUV phase-in caps for BEVs, which stated, 
``NHTSA sets phase-in caps at unrealistically high values that ignore 
the actual penetration rates in the 2022 baseline fleet. Furthermore, 
NHTSA's application of fleetwide phase-in caps fails to account for the 
unique penetration hurdles of each tech class within the HDPUV fleet--
Van 2b, Van 3, Pickup 2b, and Pickup 3.'' \467\
---------------------------------------------------------------------------

    \466\ MEMA, Docket No. NHTSA-2023-0022-59204-A1, at 8.
    \467\ Valero, Docket No. NHTSA-2023-0022-58547-A2, at 10.
---------------------------------------------------------------------------

    NHTSA disagrees, in general, that phase-in caps are constraining, 
as these limitations are applied based on market availability, cost, 
and consumer acceptance in the rulemaking timeframe. Our internal 
research, discussions with stakeholders, and other outreach has led us 
to not be too optimistic on these crucial technologies, but we believe 
the phase-in caps represent a reasonable middle ground between allowing 
for the application of technology at reasonable levels. The details of 
phase-in caps are discussed this further in TSD Chapter 3.3.3.4.
    NHTSA also disagrees with the argument that HDPUV BEV penetration 
from the underlying phase-in caps is unrealistic, for a few reasons. 
First, NHTSA's HDPUV HDPUV analysis fleet contains vehicles that span a 
range of model years prior to and including MY 2022 vehicles, based on 
the most up-to-date compliance data we had at the time of modeling. 
Between the earliest MY vehicle in the analysis fleet and the first MY 
for which we are setting standards, MY 2030, in the absence of phase-in 
caps, the model will pick a cost-effective pathway for compliance that 
manufacturers themselves may not have selected, and we want the years 
prior to the first analysis year to reasonably reflect reality. There 
are already annoucements of HDPUV BEV production and sales that are not 
captured in the HDPUV analysis fleet but can be observed in the 
analysis years.\468\ Second, as discussed further in Section VI, NHTSA 
understands that there could be uncertatinty in looking out eight to 
thirteen MYs in the future; this affects new vehicle technology 
adoption, and so we applied some conservatatism in setting phase-in 
caps. Finally, when applying technologies to the HDPUVs, we considered 
the applications of the vehicle and what could be the limiting factors 
in allowing more advanced technologies to apply. For example, we 
maintain the engine size when a vehicle adopts PHEV technologies, and 
we do not allow HD pickups with work factors greater than 7500 and 
higher than 500 mile range to adopt BEVs, further discussed in TSD 
Chapters 2.3.2 and 3.3. However, we understand unique technological 
barriers to each of the HDPUV vehicle types, and we will continue to 
monitor this space and consider updating the phase-in cap modeling 
approach in the future.
---------------------------------------------------------------------------

    \468\ See, e.g., https://www.ford.com/commercial-trucks/e-transit/models/cargo-van/; https://media.stellantisnorthamerica.com/newsrelease.do?id=25617&mid=1538; https://news.gm.com/newsroom.detail.html/Pages/news/us/en/2023/nov/1116-brightdrop.html.
---------------------------------------------------------------------------

    The phase-in cap for FCEVs is assigned based on existing market 
share as well as historical trends in FCEV production for LDVs and 
HDPUVs. FCEV production share in the past five years has been extremely 
low and the lack of fueling infrastructure remains a limiting factor 
\469\--we set the phase-in cap accordingly.\470\ As with BEV1, however, 
the phase-in cap still allows for the market share of FCEVs to grow 
several times over.
---------------------------------------------------------------------------

    \469\ DOE. 2023. Hydrogen Refueling Infrastructure Development. 
Alternative Fuels Data Center. Available at: https://afdc.energy.gov/fuels/hydrogen_infrastructure.html. (Accessed: May 
31, 2023).
    \470\ 2023 EPA Automotive Trends Report, at 61, Figure 4.15.
---------------------------------------------------------------------------

    Autonomie determines the effectiveness of each electrified 
powertrain type by modeling the basic components, or building blocks, 
for each powertrain, and then combining the components modularly to 
determine the overall efficiency of the entire powertrain. The 
components, or building blocks, that contribute to the effectiveness of 
an electrified powertrain in the analysis include the vehicle's 
battery, electric motors, power electronics, and accessory loads. 
Autonomie identifies components for each electrified powertrain type 
and then interlinks those components to create a powertrain 
architecture. Autonomie then models each electrified powertrain 
architecture and provides an effectiveness value for each architecture. 
For example, Autonomie determines a BEV's overall efficiency by 
considering the efficiencies of the battery (including charging 
efficiency), the electric traction drive system (the electric machine 
and power electronics), and mechanical power transmission devices.\471\ 
Or, for a PHEV, Autonomie combines a very similar set of components to 
model the electric portion of the hybrid powertrain and then also 
includes the ICE and related power for transmission components.\472\ 
Argonne uses data from their Advanced Mobility Technology Laboratory 
(AMTL) to develop Autonomie's electrified powertrain models. The 
modeled powertrains are not intended to represent any specific 
manufacturer's architecture but act as surrogates predicting 
representative levels of effectiveness for each electrification 
technology. We discuss the procedures for modeling each of these sub-
systems in detail in the TSD and in the CAFE Analysis Autonomie 
Documentation and include a brief summary below.
---------------------------------------------------------------------------

    \471\ Iliev, S. et al. 2023. Vehicle Technology Assessment, 
Model Development, and Validation of a 2021 Toyota RAV4 Prime. 
Report No. DOT HS 813 356. National Highway Traffic Safety 
Administration.
    \472\ See the CAFE Analysis Autonomie Documentation.
---------------------------------------------------------------------------

    The fundamental components of an electrified powertrain's 
propulsion system--the electric motor and inverter--ultimately 
determine the vehicle's performance and efficiency. For this analysis, 
Autonomie employed a set of electric motor efficiency maps created by 
Oak Ridge National Laboratory (ORNL), one for a traction motor and an 
inverter, the other for a motor/generator and inverter.\473\ Autonomie 
also uses test data validations from technical publications to 
determine the peak efficiency of BEVs and FCEVs. The electric motor 
efficiency maps, created from production vehicles like the 2007 Toyota 
Camry hybrid, 2011 Hyundai Sonata hybrid, and 2016 Chevrolet Bolt, 
represent electric motor efficiency as a function of torque and motor 
rotations per minute (RPM). These efficiency maps provide nominal and 
maximum speeds, as well as a maximum torque curve. Argonne uses the 
maps to determine the efficiency characteristics of the motors, which 
includes some of the losses due to power transfer through the electric 
machine.\474\ Specifically, Argonne scales the efficiency maps, 
specific to powertrain type, to have total system peak efficiencies 
ranging from

[[Page 52641]]

96-98 percent \475\--such that their peak efficiency value corresponds 
to the latest state-of-the-art technologies, opposed to retaining dated 
system efficiencies (90-93 percent).\476\
---------------------------------------------------------------------------

    \473\ ORNL. 2008. Evaluation of the 2007 Toyota Camry Hybrid 
Synergy Drive System; ORNL. 2011. Annual Progress Report for the 
Power Electronics and Electric Machinery Program.
    \474\ CAFE Analysis Autonomie Documentation chapter titled 
``Vehicle and Component Assumptions--Electric Machines--Electric 
Machine Efficiency Maps.''
    \475\ CAFE Analysis Autonomie Documentation chapter titled 
``Vehicle and Component Assumptions--Electric Machines--Electric 
Machine Peak Efficiency Scaling.''
    \476\ ORNL. 2008. Evaluation of the 2007 Toyota Camry Hybrid 
Synergy Drive System; ORNL. 2011. Annual Progress Report for the 
Power Electronics and Electric Machinery Program.
---------------------------------------------------------------------------

    Beyond the powertrain components, Autonomie also considers electric 
accessory devices that consume energy and affect overall vehicle 
effectiveness, such as headlights, radiator fans, wiper motors, engine 
control units, transmission control units, cooling systems, and safety 
systems. In real-world driving and operation, the electrical accessory 
load on the powertrain varies depending on how the driver uses certain 
features and the condition in which the vehicle is operating, such as 
for night driving or hot weather driving. However, for regulatory test 
cycles related to fuel economy, the electrical load is repeatable 
because the fuel economy regulations control for these factors. 
Accessory loads during test cycles do vary by powertrain type and 
vehicle technology class, since distinctly different powertrain 
components and vehicle masses will consume different amounts of energy.
    The analysis fleets consist of different vehicle types with varying 
accessory electrical power demand. For instance, vehicles with 
different motor and battery sizes will require different sizes of 
electric cooling pumps and fans to optimally manage component 
temperatures. Autonomie has built-in models that can simulate these 
varying sub-system electrical loads. However, for this analysis, we use 
a fixed (by vehicle technology class and powertrain type), constant 
power draw to represent the effect of these accessory loads on the 
powertrain on the 2-cycle test. We intend and expect that fixed 
accessory load values will, on average, have similar impacts on 
effectiveness as found on actual manufacturers' systems. This process 
is in line with the past analyses.\477\ \478\ For this analysis, we 
aggregate electrical accessory load modeling assumptions for the 
different powertrain types (electrified and conventional) and 
technology classes (both LD and HDPUV) from data from the Draft TAR, 
EPA Proposed Determination,\479\ data from manufacturers,\480\ research 
and development data from DOE's Vehicle Technologies Office,\481\ \482\ 
\483\ and DOT-sponsored vehicle benchmarking studies completed by 
Argonne's AMTL.
---------------------------------------------------------------------------

    \477\ Technical Assessment Report (July 2016), Chapter 5.
    \478\ EPA Proposed Determination TSD (November 2016), at 2-270.
    \479\ EPA Proposed Determination TSD (November 2016), at 2-270.
    \480\ Alliance of Automobile Manufacturers (now Alliance for 
Automotive Innovation) Comments on Draft TAR, at 30.
    \481\ DOE. 2023. Electric Drive Systems Research and 
Development. Vehicle Technologies Office. Available at: https://www.energy.gov/eere/vehicles/vehicle-technologies-office-electric-drive-systems. (Accessed: Mar. 13, 2024).
    \482\ Argonne. 2023. Advanced Mobility Technology Laboratory 
(AMTL). Available at: https://www.anl.gov/es/advanced-mobility-technology-laboratory. (Accessed: Mar. 13, 2024).
    \483\ DOE's lab years are ten years ahead of manufacturers' 
potential production intent (e.g., 2020 Lab Year is MY 2030).
---------------------------------------------------------------------------

    Certain technologies' effectiveness for reducing fuel consumption 
requires optimization through the appropriate sizing of the powertrain. 
Autonomie uses sizing control algorithms based on data collected from 
vehicle benchmarking,\484\ and the modeled electrification components 
are sized based on performance neutrality considerations. This analysis 
iteratively minimizes the size of the powertrain components to maximize 
efficiency while enabling the vehicle to meet multiple performance 
criteria. The Autonomie simulations use a series of resizing algorithms 
that contain ``loops,'' such as the acceleration performance loop (0-60 
mph), which automatically adjusts the size of certain powertrain 
components until a criterion, like the 0-60 mph acceleration time, is 
met. As the algorithms examine different performance or operational 
criteria that must be met, no single criterion can degrade; once a 
resizing algorithm completes, all criteria will be met, and some may be 
exceeded as a necessary consequence of meeting others.
---------------------------------------------------------------------------

    \484\ CAFE Analysis Autonomie Documentation chapter titled 
``Vehicle Sizing Process--Vehicle Powertrain Sizing Algorithms--
Light-Duty Vehicles--Conventional Vehicle Sizings Algorithm.''; CAFE 
Analysis Autonomie Documentation chapter titled ``Vehicle Sizing 
Process--Vehicle Powertrain Sizing Algorithms--Heavy-Duty Pickups 
and Vans--Conventional Vehicle Sizings Algorithm.''
---------------------------------------------------------------------------

    Autonomie applies different powertrain sizing algorithms depending 
on the type of vehicle considered because different types of vehicles 
not only contain different powertrain components to be optimized, but 
they must also operate in different driving modes. While the 
conventional powertrain sizing algorithm must consider only the power 
of the engine, the more complex algorithm for electrified powertrains 
must simultaneously consider multiple factors, which could include the 
engine power, electric machine power, battery power, and battery 
capacity. Also, while the resizing algorithm for all vehicles must 
satisfy the same performance criteria, the algorithm for some electric 
powertrains must also allow those electrified vehicles to operate in 
certain driving cycles, like the US06 cycle, without assistance of the 
combustion engine and ensure the electric motor/generator and battery 
can handle the vehicle's regenerative braking power, all-electric mode 
operation, and intended range of travel.
    To establish the effectiveness of the technology packages, 
Autonomie simulates the vehicles' performance on compliance test 
cycles.\485\ For vehicles with conventional powertrains and micro 
hybrid powertrains, Autonomie simulates the vehicles using the 2-cycle 
test procedures and guidelines.\486\ For mild HEVs and strong HEVs, 
Autonomie simulates the same 2-cycle test, with the addition of 
repeating the drive cycles until the final state of charge (SOC) is 
approximately the same as the initial SOC, a process described in SAE 
J1711; SAE J1711 also provides test cycle guidance for testing specific 
to plug-in HEVs.\487\ PHEVs have a different range of modeled 
effectiveness during ``standard setting'' CAFE Model runs, in which the 
PHEV operates under a ``charge sustaining'' (gasoline-only) mode--
similar to how SHEVs function--compared to ``EIS'' runs, in which the 
same PHEV operates under a ``charge depleting'' mode--similar to how 
BEVs function. For BEVs and FCEVs, Autonomie simulates vehicles 
performing the test cycles per guidance provided in SAE J1634.\488\
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    \485\ EPA. 2023. How Vehicles are Tested. Available at: https://www.fueleconomy.gov/feg/how_tested.shtml. (Accessed: May 31, 2023); 
EPA. 2017. EPA Test Procedures for Electric Vehicles and Plug-in 
Hybrids. Draft Summary. Available at: https://www.fueleconomy.gov/feg/pdfs/EPA%20test%20procedure%20for%20EVs-PHEVs-11-14-2017.pdf. 
(Accessed: May 31, 2023); CAFE Analysis Autonomie Documentation, 
Chapter titled `Test Procedure and Energy Consumption Calculations.'
    \486\ 40 CFR part 600.
    \487\ PHEV testing is broken into several phases based on SAE 
J1711: charge-sustaining on the city and HWFET cycle, and charge-
depleting on the city and HWFET cycles.
    \488\ SAE. 2017. Battery Electric Vehicle Energy Consumption and 
Range Test Procedure. SAE J1634. Available at: https://www.sae.org/standards/content/j1634_202104/. (Accessed: Apr. 5, 2024).
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    Chapters 2.4 and 3.3 of the TSD and the CAFE Analysis Autonomie 
Documentation chapter titled ``Test Procedure and Energy Consumption 
Calculations'' discuss the components

[[Page 52642]]

and test cycles used to model each electrified powertrain type; please 
refer to those chapters for more technical details on each of the 
modeled technologies discussed in this section.
    The range of effectiveness for the electrification technologies in 
this analysis is a result of the interactions between the components 
listed above and how the modeled vehicle operates on its respective 
test cycle. This range of values will result in some modeled 
effectiveness values being close to real-world measured values, and 
some modeled values that will depart from measured values, depending on 
the level of similarity between the modeled hardware configuration and 
the real-world hardware and software configurations. The range of 
effectiveness values for the electrification technologies applied in 
the LD fleets are shown in TSD Figure 3-23 and Figure 3-24. 
Effectiveness values for electrification technologies in the HDPUV 
fleet are shown in TSD Figure 3-25.
    Some advanced engine technologies indicate low effectiveness values 
when paired with hybrid architectures. The low effectiveness results 
from the application of advanced engines to existing P2 architectures. 
This effect is expected and illustrates the importance of using the 
full vehicle modeling to capture interactions between technologies, and 
capture instances of both complimentary technologies and non-
complimentary technologies. When developing our hybrid engine maps, we 
consider the engine, engine technologies, electric motor power, and 
battery pack size. We calibrate our hybrid engine maps to operate in 
their respective hybrid architecture most effectively and to allow the 
electric machine to provide propulsion or assistance in regions of the 
engine map that are less efficient. As the model sizes the powertrain 
for any given application, it considers all these parameters as well as 
performance neutrality metrics to provide the most efficient solution. 
In this instance, the P2 powertrain improves fuel economy, in part, by 
allowing the engine to spend more time operating at efficient engine 
speed and load conditions. This reduces the advantage of adding 
advanced engine technologies, which also improve fuel economy, by 
broadening the range of speed and load conditions for the engine to 
operate at high efficiency. This redundancy in fuel savings mechanism 
results in a lower effectiveness when the technologies are added to 
each other.
    We received limited comment on ways to improve our strong hybrid 
effectiveness modeling in the analysis. Toyota commented that our 
strong hybrid fuel economy improvements are ``unrealistic'' because of 
``ICE and hybrid powertrains approaching the limits of diminishing 
returns''; Toyota also noted and disagreed with the associated rolling 
resistance and aerodynamic advancements producing ``such dramatic fuel 
efficiency gains.'' \489\ Conversely, ICCT commented that our hybrid 
engine effectiveness is ``outdated'' and that ``NHTSA assumes no 
additional hybrid powertrain improvements,'' \490\ mentioning ``every 
subsequent generation of Toyota's hybrid system significantly improves 
upon the prior generation's efficiency.'' \491\ A similar commenter 
suggested that we mischaracterize ``how hybrid systems can improve 
engine efficiency,'' \492\ also referencing a Roush report.\493\
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    \489\ Toyota, Docket No. NHTSA-2023-0022-61131-A1, at 18.
    \490\ ICCT, Docket No. NHTSA-2023-0022-54064-A1, at 18.
    \491\ ICCT, Docket No.NHTSA-2023-0022-54064-A1, at 18.
    \492\ John German, Docket No. NHTSA-2023-0022-53274-A1, at 7-8.
    \493\ Roush report on Gasoline Engine Technologies for Improved 
Efficiency (Roush 2021 LDV), page 12.
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    We disagree with comment that the electrification technology 
represented in this analysis is ``outdated'' or ``unrealistic''--the 
majority of the technologies were developed specifically to support 
analysis for this rulemaking time frame. For example, the hybrid 
Atkinson engine peak thermal efficiency was updated based on 2017 
Toyota Prius engine data.\494\ Toyota stated that their current hybrid 
engines achieve 41 percent thermal efficiency, which aligns with our 
modeling.\495\ Similarly, the electric machine peak efficiency for 
FCEVs and BEVs is 98 percent and based on the 2016 Chevy Bolt.\496\ 
Specifically, Argonne scales the efficiency maps, specific to 
powertrain type, to have total system peak efficiencies ranging from 
96-98 percent \497\--such that their peak efficiency value corresponds 
to the latest state-of-the-art technologies, as opposed to retaining 
dated system efficiencies (90-93 percent).\498\ The 2016 maps scaled to 
peak efficiency are equivalent to (if not exceed) efficiencies seen in 
vehicles today and in the future. Although the base references for 
these technologies are from a few years ago, we have worked with 
Argonne to update individual inputs to reflect the latest improvements. 
Accordingly, we have made no changes to the electric machine efficiency 
maps for this final rule analysis.
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    \494\ Atkinson Engine Peak Efficiency is based on 2017 Prius 
peak efficiency and scaled up to 41 percent. Autonomie Model 
Documentation at 138. See, ANL--All 
Assumptions_Summary_NPRM_022021.xlsx, ANL--Summary of Main Component 
Performance Assumptions_NPRM_022021.xlsx, Argonne Autonomie Model 
Documentation_NPRM.pdf and ANL--Data Dictionary_NPRM_022021.XLSX., 
which can be found in the rulemaking docket (NHTSA-2023-0022) by 
filtering for Supporting & Related Material.
    \495\ Carney, D. 2018. Toyota unveils more new gasoline ICEs 
with 40% thermal efficiency. SAE. April 4, 2018. Available at: 
https://www.sae.org/news/2018/04/toyota-unveils-more-new-gasoline-ices-with-40-thermal-efficiency. (Accessed Dec. 21, 2021).
    \496\ Momen, F. et al. 2016. Electrical propulsion system design 
of Chevrolet Bolt battery electric vehicle. 2016 IEEE Energy 
Conversion Congress and Exposition (ECCE) at 1-8. Available at:, 
doi: 10.1109/ECCE.2016.7855076.
    \497\ See CAFE Analysis Autonomie Documentation, chapter titled 
`Electric Machine Peak Efficiency Scaling.'
    \498\ Burress, T.A. et al. 2008. Evaluation of the 2007 Toyota 
Camry Hybrid Synergy Drive System. Oak Ridge National Laboratory. 
ORNL/TM-2007/190. Available at: https://www.osti.gov/biblio/928684/. 
(Accessed: Dec. 6, 2023).; Oak Ridge National Laboratory. ORNL/TM-
2011/263. Available at: https://digital.library.unt.edu/ark:/67531/metadc845565/m2/1/high_res_d/1028161.pdf. (Accessed: Feb. 9, 2024).
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    We also received comments on the interaction between vehicle 
weights in the Autonomie modeling and vehicle weights when 
transitioning to BEVs in the real world. Commenters spoke to EV 
batteries ``creating a heavier product'' \499\ and that ``some of these 
electric vehicles will exceed 8,500 lbs. GVWR, even though they are 
substitutes for comparable internal combustion engine products that 
certify as light trucks'' to meet customer demands.\500\ Another 
comment from Ford requested that NHTSA reconsider the classification of 
MDPVs in lieu of LTs that could have weights that would force them into 
the HDPUV regulatory class, but still have characteristics of the light 
truck regulatory class.\501\
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    \499\ ACI, Docket No. NHTSA-2023-0022-50765-A1, at 5.
    \500\ GM, Docket No. NHTSA-2023-0022-60686-A2, at 4.
    \501\ Ford, Docket No. NHTSA-2023-0022-60837-A1, at 7.
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    In regard to reclassifying or offering credits for MDPVs, NHTSA is 
bound by statute as to how these vehicles are classified for the 
purpose of CAFE program, and we discuss this concept further in 
response to these comments and other similar comments in Section VII of 
this preamble.
    In regard to concerns that heavy vehicles could fall out of the 
light truck fleet into the HDPUV fleet because of the weight of 
batteries, and in response to comments we received on the MYs 2024-2026 
analysis, for the NPRM and continued into this final rule analysis we 
coordinated with Argonne to

[[Page 52643]]

conduct the Autonomie modeling in a way that maintained the vehicle 
regulatory class when a vehicle was upgraded to a BEV. This process was 
described further in the Autonomie Model Documentation.\502\ In some 
cases, this means some range was sacrificed, but we believe that is a 
tradeoff that manufacturers could make in the real world. In addition, 
we believe this situation where a vehicle would hop regulatory classes 
with the addition of a heavy battery pack only affects a very small 
subset of vehicles. While some manufacturers are choosing to make very 
large BEVs,\503\ other manufacturers have chosen to focus their efforts 
on BEVs with smaller battery packs.\504\ Our review of the MY 2022 
market shows that these novelty vehicles that could toe regulatory 
class lines are being manufactured in lower volumes and that these 
moving to the HDPUV regulatory classes may have limited impact on 
manufacturer compliance.
---------------------------------------------------------------------------

    \502\ See Vehicle Technical Specification in Autonomie Model 
Documentation.
    \503\ GM Newsroom. An Exclusive Special Edition: 2024 GMC HUMMER 
EV Omega Edition Has Landed. Available at: https://news.gm.com/newsroom.detail.html/content/Pages/news/us/en/2023/may/0505-hummer.html. (Accesed Mar. 28, 2024).
    \504\ Martinez, M. Ford delays 3-row EVs as focus shifts to 
smaller, affordable products, sources say, Auto News (March 19, 
2024). Available at: https://www.autonews.com/cars-concepts/ford-shifts-3-row-evs-smaller-affordable-models. (Accessed: Apr. 5, 
2024).
---------------------------------------------------------------------------

    When the CAFE Model turns a vehicle powered by an ICE into an 
electrified vehicle, it must remove the parts and costs associated with 
the ICE (and, potentially, the transmission) and add the costs of a 
battery pack and other non-battery electrification components, such as 
the electric motor and power inverter. To estimate battery pack costs 
for this analysis, we need an estimate of how much battery packs cost 
now (i.e., a ``base year'' cost), and estimates of how that cost could 
reduce over time (i.e., the ``learning effect.''). The general concept 
of learning effects is discussed in detail in Section III.C and in 
Chapter 2 of the TSD, while the specific learning effect we applied to 
battery pack costs in this analysis is discussed below. We estimate 
base year battery pack costs for most electrification technologies 
using BatPaC, which is an Argonne model designed to calculate the cost 
of EV battery packs.
    Traditionally, a user would use BatPaC to cost a battery pack for a 
single vehicle, and the user would vary factors such as battery cell 
chemistry, battery power and energy, battery pack interconnectivity 
configurations, battery pack production volumes, and/or charging 
constraints, just to name a few, to see how those factors would 
increase or decrease the cost of the battery pack. However, several 
hundreds of thousands of simulated vehicles in our analysis have 
electrified powertrains, meaning that we would have to run individual 
BatPaC simulations for each full vehicle simulation that requires a 
battery pack. This would have been computationally intensive and 
impractical. Instead, Argonne staff builds ``lookup tables'' with 
BatPaC that provide battery pack manufacturing costs, battery pack 
weights, and battery pack cell capacities for vehicles with varying 
power requirements modeled in our large-scale simulation runs.
    Just like with other vehicle technologies, the specifications of 
different vehicle manufacturer's battery packs are extremely diverse. 
We, therefore, endeavored to develop battery pack costs that reasonably 
encompass the cost of battery packs for vehicles in each technology 
class.
    In conjunction with our partners at Argonne working on the CAFE 
analysis Autonomie modeling, we referenced BEV outlook reports,\505\ 
vehicle teardown reports,\506\ and stakeholder discussions \507\ to 
determine common battery pack chemistries for each modeled 
electrification technology. The CAFE Analysis Autonomie Documentation 
chapter titled ``Battery Performance and Cost Model--BatPaC Examples 
from Existing Vehicles in the Market'' includes more detail about the 
reports referenced for this analysis.\508\ For mild hybrids, we used 
the LFP-G \509\ chemistry because power and energy requirements for 
mild hybrids are very low, the charge and discharge cycles (or need for 
increased battery cycle life) are high, and the battery raw materials 
are much less expensive than a nickel manganese cobalt (NMC)-based cell 
chemistry. We used NMC622-G \510\ for all other electrified vehicle 
technology base (MY 2022) battery pack cost calculations. While we made 
this decision at the time of modeling based on the best available 
information, while also considering feedback on prior rules,\511\ more 
recent data affirms that BEV batteries using NMC622 cathode chemistries 
are still a significant part of the market.\512\ We recognize there is 
ongoing research and development with battery cathode chemistries that 
may have the potential to reduce costs and increase battery 
capacity.\513\ In

[[Page 52644]]

particular, we are aware of a recent shift by manufacturers to 
transition to lithium iron phosphate (LFP) chemistry-based battery 
packs as prices for materials used in battery cells fluctuate (see 
additional discussion below); however, we believe that based on 
available data,\514\ NMC622 is more representative for our MY 2022 base 
year battery costs than LFP, and any additional cost reductions from 
manufacturers switching to LFP chemistry-based battery packs in years 
beyond 2022 are accounted for in our battery cost learning effects. The 
learning effects estimate potential cost savings for future battery 
advancements (a learning rate applied to the battery pack DMC), this 
final rule includes a dynamic NMC/LFP cathode mix over each future 
model year, as discussed in more detail below. As discussed above, the 
battery chemistry we use is intended to reasonably represent what is 
used in the MY 2022 U.S. fleet, the DMC base year for our BatPaC 
calculations.
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    \505\ Rho Motion. EV Battery subscriptions. Available at: 
https://rhomotion.com/. (Accessed: Mar. 12, 2024); BNEF. 2023. 
Electric Vehicle Outlook 2023. Available at: https://about.bnef.com/electric-vehicle-outlook/. (Accessed: May 31, 2023); Benchmark 
Mineral Intelligence. Cathode, Anode, and Gigafactories 
subscriptions. Available at: https://benchmarkminerals.com/. 
(Accessed: Mar. 12, 2024); Bibra, E. et al. 2022. Global EV Outlook 
2022--Securing Supplies For an Electric Future. International Energy 
Agency. Available at: https://iea.blob.core.windows.net/assets/ad8fb04c-4f75-42fc-973a-6e54c8a4449a/GlobalElectricVehicleOutlook2022.pdf. (Accessed: May 31, 2023).
    \506\ Hummel, P. et al. 2017. UBS Evidence Lab Electric Car 
Teardown--Disruption Ahead? UBS. Available at: https://neo.ubs.com/shared/d1ZTxnvF2k. (Accessed: May 31, 2023); A2Mac1: Automotive 
Benchmarking. (Proprietary data). Available at: https://portal.a2mac1.com/. (Accessed: May 31, 2023).
    \507\ See Ex Parte Meetings Prior to Publication of the 
Corporate Average Fuel Economy Standards for Passenger Cars and 
Light Trucks for Model Years 2027-2032 and Fuel Efficiency Standards 
for Heavy-Duty Pickup Trucks and Vans for Model Years 2030-2035 
Notice of Proposed Rulemaking memorandum, which can be found in the 
rulemaking Docket (NHTSA-2023-0022) by filtering for References and 
Supporting Material.
    \508\ CAFE Analysis Autonomie Documentation chapter titled 
``Battery Performance and Cost Model--BatPac Examples from Existing 
Vehicles in the Market.''
    \509\ Lithium Iron Phosphate (LiFePO4) cathode and 
Graphite anode.
    \510\ Lithium Nickel Manganese Cobalt Oxide 
(LiNiMnCoO2) cathode and Graphite anode.
    \511\ Stakeholders had commented on both the 2020 and 2022 final 
rules that batteries using NMC811 chemistry had either recently come 
into or were imminently coming into the market, and therefore we 
should have selected NMC811 as the appropriate chemistry for 
modeling battery pack costs.
    \512\ Rho Motion. Seminar Series Live, Q1 2023--Seminar 
Recordings. Emerging Battery Technology Forum. February 7, 2023. 
Available at: https://rhomotion.com/rho-motion-seminar-series-live-q1-2023-seminar-recordings. (Accessed: May 31, 2023). More 
specifically, the monthly weighted average global EV battery cathode 
chemistry across all vehicle classes shows that 19% use NMC622 and 
20% use NMC811+, representing a fairly even split. Even though we 
considered domestic battery production rather than global battery 
production for the analysis supporting this final rule, NMC622 is 
still prevalent even at a global level. Note that this seminar video 
is no longer publicly available to non-subscribers. See Rho Motion. 
EV Battery subscriptions. Available at: https://rhomotion.com/. 
(Accessed: Mar. 12, 2024); Benchmark Mineral Intelligence. Lithium-
ion Batteries & Cathode monthly & quarterly subscriptions. Available 
at: https://benchmarkminerals.com/. (Accessed: Mar. 12, 2024).
    \513\ Slowik, P. et. al. 2022. Assessment of Light-Duty Electric 
Vehicle Costs and Consumer Benefits in the United States in the 
2022-2035 Time Frame. International Council on Clean Transportation. 
Available at: https://theicct.org/wp-content/uploads/2022/10/ev-cost-benefits-2035-oct22.pdf. (Accessed: May 31, 2023); Batteries 
News. 2022. Solid-State NASA Battery Beats The Model Y 4680 Pack at 
Energy Density by Stacking all Cells in One Case. Last revised: Oct. 
20, 2022. Available at: https://batteriesnews.com/solid-state-nasa-battery-beats-model-y-4680-pack-energy-density-stacking-cells-one-case/. (Accessed: May 31, 2023); Sagoff, J. 2023. Scientists Develop 
More Humane, Environmentally Friendly Battery Material. ANL. 
Available at: https://www.anl.gov/article/scientists-develop-more-humane-environmentally-friendly-battery-material. (Accessed: May 31, 
2023); IEA. 2023. Global EV Outlook 2023. Available at https://www.iea.org/reports/global-ev-outlook-2023. (Accessed: May 31, 
2023); Motavalli, J. 2023. SAE International. Can solid-state 
batteries commercialize by 2030? Nov. 9, 2023. Available at: https://www.sae.org/news/2023/11/solid-state-battery-status. (Accessed: 
Mar. 12, 2024).
    \514\ Rho Motion. EV Battery subscriptions. Available at: 
https://rhomotion.com/. (Accessed: Mar. 12, 2024); IEA. 2023. Global 
EV Outlook 2023.. Available at https://www.iea.org/reports/global-ev-outlook-2023. (Accessed: Mar. 12, 2024). As of IEA's 2023 Global 
EV Outlook report, ``around 95% of the LFP batteries for electric 
LDVs went to vehicles produced in China, and BYD [a Chinese EV 
manufacturer] alone represents 50% of demand. Tesla accounted for 
15%, and the share of LFP batteries used by Tesla increased from 20% 
in 2021 to 30% in 2022. Around 85% of the cars with LFP batteries 
manufactured by Tesla were manufactured in China, with the remainder 
being manufactured in the United States with cells imported from 
China. In total, only around 3% of electric cars with LFP batteries 
were manufactured in the United States in 2022.'' This is not to say 
that as of 2022 there were no current production or use of vehicle 
battery packs with LFP-based chemistries in the U.S., but rather 
that based on available data, we are more certain that NMC622 was a 
reasonable chemistry selection for our 2022 base year battery costs.
---------------------------------------------------------------------------

    We also looked at vehicle sales volumes in MY 2022 to determine a 
reasonable base production volume assumption.\515\ In practice, a 
single battery plant can produce packs using different cell chemistries 
with different power and energy specifications, as well as battery pack 
constructions with varying battery pack designs--different cell 
interconnectivities (to alter overall pack power end energy) and 
thermal management strategies--for the same base chemistry. However, in 
BatPaC, a battery plant is assumed to manufacture and assemble a 
specific battery pack design, and all cost estimates are based on one 
single battery plant manufacturing only that specific battery pack. For 
example, if a manufacturer has more than one BEV in its vehicle lineup 
and each uses a specific battery pack design, a BatPaC user would 
include manufacturing volume assumptions for each design separately to 
represent each plant producing each specific battery pack. As a 
consequence, we examined battery pack designs for vehicles sold in MY 
2022 to determine a reasonable manufacturing plant production volume 
assumption. We considered each assembly line designed for a specific 
battery pack and for a specific BEV as an individual battery plant. 
Since battery technologies and production are still evolving, it is 
likely to be some time before battery cells can be treated as commodity 
where the specific numbers of cells are used for varying battery pack 
applications and all other metrics remain the same.
---------------------------------------------------------------------------

    \515\ See Chapter 2.2.1.1 of the TSD for more information on 
data we use for MY 2022 sales volumes.
---------------------------------------------------------------------------

    Similar to previous rulemakings, we used BEV sales as a starting 
point to analyze potential base modeled battery manufacturing plant 
production volume assumptions. Since actual production data for 
specific battery manufacturing plants are extremely hard to obtain and 
the battery cell manufacturer is not always the battery pack 
manufacturer,\516\ we calculated an average production volume per 
manufacturer metric to approximate BEV production volumes for this 
analysis. This metric was calculated by taking an average of all BEV 
battery energies reported in vehicle manufacturer's PMY 2022 reports 
\517\ and dividing by the averaged sales-weighted energy per-vehicle; 
the resulting volume was then rounded to the nearest 5,000. 
Manufacturers are not required to report gross battery pack sizes for 
the PMY report, so we estimated pack size for each vehicle based on 
publicly available data, like manufacturer's announced specifications. 
This process was repeated for all other electrified vehicle 
technologies. We believe this gave us a reasonable base year plant 
production volume--especially in the absence of actual production 
data--since the PMY data from manufacturers already includes accurate 
related data, such as vehicle model and estimated sales information 
metrics.\518\ Our final battery manufacturing plant production volume 
assumptions for different electrification technologies are as follows: 
mild hybrid and strong hybrids are manufactured assuming 200,000 packs, 
PHEVs are manufactured assuming 20,000 packs, and BEVs are manufactured 
assuming 60,000 packs.
---------------------------------------------------------------------------

    \516\ Lithium-Ion Battery Supply Chain for E-Drive Vehicles in 
the United States: 2010-2020, ANL/ESD-21/3; Gohlke, D. et al. 2024. 
Quantification of Commercially Planned Battery Component Supply in 
North America through 2035. Final Report. ANL-24/14. Available at: 
https://publications.anl.gov/anlpubs/2024/03/187735.pdf. (Accessed: 
Apr. 5, 2024).
    \517\ 49 CFR 537.7.
    \518\ NHTSA used publicly available range and pack size 
information and linked the information to vehicle models.
---------------------------------------------------------------------------

    We believe it was reasonable to consider U.S. sales for purposes of 
this calculation rather than global sales based on the best available 
data we had at the time of modeling and based on our understanding of 
how manufacturers design BEVs for particular markets.\519\ \520\ A 
manufacturer may have previously sold the same vehicle with different 
battery packs in two different markets, but as the outlook for battery 
materials and global economic events dynamically shift, manufacturers 
could take advantage of significant design overlap and other synergies 
like from vertical integration to introduce lower-cost battery packs in 
markets that it previously perceived had different design 
requirements.\521\ To the extent that manufacturers' costs are based 
more closely on global volumes of battery packs produced, our base year 
battery pack production volume assumption could potentially be 
conservative; however, as discussed further below, our base year MY 
2022 battery pack costs fall well within the range of reasonable 
estimates based on 2023 data. We sought comment on our

[[Page 52645]]

approach to calculating base year cost estimates, and we also sought 
comment from manufacturers and other stakeholders on how vehicle and 
battery manufacturers take advantage of design overlap across markets 
to maintain cost reduction progress in battery technology; we did not 
receive comment on either of these particular issues.
---------------------------------------------------------------------------

    \519\ As an example, a manufacturer might design a BEV to suit 
local or regional duty cycles (i.e., how the vehicle is driven day-
to-day) due to local geography and climate, customer preferences, 
affordability, supply constraints, and local laws. This is one 
factor that goes into chemistry selection, as different battery 
chemistries affect a vehicle's range capability, rate of 
degradation, and overall vehicle mass.
    \520\ Rho Motion. EV Battery subscriptions. Available at: 
https://rhomotion.com/. (Accessed: Mar. 12, 2024).
    \521\ As an example, some U.S. Tesla Model 3 and Model Y battery 
packs use a nickel cobalt aluminum (Lithium Nickel Manganese Cobalt 
Aluminum Oxide cathode with Graphite anode, commonly abbreviated as 
NCA)-based cell, while the same vehicles for sale in China use LFP-
based packs. However, Tesla has introduced LFP-based battery packs 
to some Model 3 vehicles sold in the U.S., showing how manufacturers 
can take advantage of experience in other markets to introduce 
different battery technology in the United States. See Electric 
Vehicle Database. 2023. Tesla Model 3 Standard Range Plus LFP. 
Available at: https://ev-database.uk/car/1320/Tesla-Model-3-Standard-Range-Plus-LFP. (Accessed: May 31, 2023). See the Tesla 
Model 3 Owner's Manual for additional considerations regarding LFP-
based batteries, at https://www.tesla.com/ownersmanual/model3/en_jo/GUID-7FE78D73-0A17-47C4-B21B-54F641FFAEF4.html.
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    As mentioned above, our BatPaC lookup tables provide $/kWh battery 
pack costs based on vehicle power and energy requirements. As an 
example, a midsized SUV with mid-level road load reduction technologies 
might require a 110-120kWh energy and 200-210kW power battery pack. 
From our base year BatPaC cost estimates, that vehicle might have a 
battery pack that costs around $123/kWh. Note that the total cost of a 
battery pack increases the higher the power/energy requirements, 
however the cost per kWh decreases. This represents the cost of 
hardware that is needed in all battery packs but is deferred across 
more kW/kWh in larger packs, which reduces the per kW/kWh cost. Table 
3-78 in TSD Chapter 3.3.5 shows an example of the BatPaC-based lookup 
tables for the BEV3 SUV through pickup technology classes.
    Note that the values in the table above should not be considered 
the total battery $/kWh costs that are used for vehicles in the 
analysis in future MYs. As detailed below, battery costs are also 
projected to decrease over time as manufacturers improve production 
processes, shift battery chemistries, and make other technological 
advancements. In addition, select modeled tax credits further reduce 
our estimated costs; additional discussion of those tax credits is 
located throughout this preamble, TSD Chapter 2.3, and the FRIA 
Chapters 8 and 9.
    The CAFE Analysis Autonomie Documentation details other specific 
assumptions that Argonne used to simulate battery packs and their 
associated base year costs for the full vehicle simulation modeling, 
including updates to the battery management unit costs, and the range 
of power and energy requirements used to bound the lookup tables.\522\ 
Please refer to the CAFE Analysis Autonomie Documentation and Chapter 
3.3 of the TSD for further information about how we used BatPaC to 
estimate base year battery costs. The full range of BatPaC-generated 
battery DMCs is located in the file ANL--Summary of Main Component 
Performance Assumptions_NPRM_2206. Note again that these charts 
represent the DMC using a dollar per kW/kWh metric; battery absolute 
costs used in the analysis by technology key can be found in the CAFE 
Model Battery Costs File.
---------------------------------------------------------------------------

    \522\ CAFE Analysis Autonomie Documentation chapter titled 
``Battery Performance and Cost Model--Use of BatPac in Autonomie.''
---------------------------------------------------------------------------

    Our method of estimating future battery costs has three fundamental 
components: (1) an estimate of MY 2022 battery pack costs (i.e., our 
base year costs generated in the BatPaC model (version 5.0, March 2022 
release) to estimate battery pack costs for specific vehicles, 
depending on factors such as pack size and power requirements, 
discussed above), (2) future learning rates estimated using a learning 
curve,\523\ and (3) the effect of changes in the cost of key minerals 
on battery pack costs, which are discussed below.
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    \523\ See Wene, C. 2000. Experience Curves for Energy Technology 
Policy. International Energy Agency, OECD. Paris. Available at: 
https://doi.org/10.1787/9789264182165-en. (Accessed: May 31, 2023). 
The concept of a learning curve was initially developed to describe 
cost reduction due to improvements in manufacturing processes from 
knowledge gained through experience in production; however, it has 
since been recognized that other factors make important 
contributions to cost reductions associated with cumulative 
production. We discuss this concept further, in Section II.C.
---------------------------------------------------------------------------

    For the proposal, NHTSA estimated learning rates using a study by 
Mauler et al.,\524\ in which the authors fit a central tendency curve 
to 237 published estimates of lithium-ion battery costs. To reflect the 
combination of fluctuating mineral costs and an increase in demand in 
the near-term, NHTSA also held the battery pack cost learning curve 
constant between MYs 2022 and 2025. We explained that this was a 
conservative assumption that was also employed by EPA in their proposed 
rule (and now final rule, as discussed further below) for light duty 
vehicles and medium duty vehicles beginning in MY 2027 at NPRM Preamble 
Section II.D.3 and Draft Technical Support Document Chapter 3.3.5.3.1. 
The assumption reflected increased lithium costs since 2020 that were 
not expected to decline appreciably to circa 2020 levels until 
additional capacity (mining, materials processing, and cell production) 
comes on-line,\525\ although prices had already fallen from 2022 highs 
at the time the NPRM was published. NHTSA stated that a continuation of 
high prices for a few years followed by a decrease to near previous 
levels is reasonable because world lithium resources are more than 
sufficient to supply a global EV market and higher prices should 
continue to induce investment in lithium mining and refining.\526\ 
\527\ NHTSA stated that the resulting battery cost estimates provided a 
reasonable representation of potential future costs across the 
industry, based on the information available to us at the time of the 
analysis for this proposal was completed. We also included a summary of 
current and future battery cost estimates from other government 
agencies, consulting firms, and manufacturers to both highlight the 
uncertainties in estimating future battery costs and to show that our 
estimated costs fell reasonably within the range of projections.\528\ 
NHTSA also examined several battery sensitivity cases that showed 
examples of how changing different battery pack assumptions could 
change battery pack costs over time. NHTSA also reminded commenters 
that because of NHTSA's inability to consider manufacturers building 
BEVs in response to CAFE standards during standard-setting years, net 
social costs and benefits do not change significantly between battery 
cost sensitivity cases, and similarly would not change significantly if 
much lower battery costs were used.
---------------------------------------------------------------------------

    \524\ Mauler, L. et al.. Battery Cost Forecasting: A Review Of 
Methods And Results With An Outlook To 2050. Energy and 
Environmental Science: at 4712-4739.
    \525\ Trading Economics. 2023. Lithium. Available at: https://tradingeconomics.com/commodity/lithium. (Accessed: May 31, 2023).
    \526\ Barlock, T.A. et al. February 2024. Securing Critical 
Materials for the U.S. Electric Vehicle Industry. ANL-24/06. Final 
Report. Available at: https://publications.anl.gov/anlpubs/2024/03/187907.pdf. (Accessed: Apr. 5, 2024); U.S. Geological Survey. 2023. 
Lithium Statistics and Information. Available at: https://www.usgs.gov/centers/national-minerals-information-center/lithium-statistics-and-information. (Accessed: May 31, 2023).
    \527\ According to 2021 estimates from the U.S. Geological 
Survey (USGS), global lithium resources are currently four times as 
large as global reserves. Lithium resources and reserves have both 
grown over time as production has increased. These resources and 
reserves, however, are not evenly distributed geographically. 
Bolivia (24%), Argentina (22%), Chile (11%), the United States 
(10%), Australia (8%) and China (6%) together hold four-fifths of 
the world's lithium resources. USGS defines ``resources'' as a 
concentration of naturally occurring solid, liquid, or gaseous 
material in or on the Earth's crust in such form and amount that 
economic extraction of a commodity from the concentration is 
currently or potentially feasible. USGS defines ``reserves'' as the 
part of the reserve base that could be economically extracted or 
produced at the time of determination. USGS defines ``reserve base'' 
as the part of an identified resource that meets specified minimum 
physical and chemical criteria related to mining and production 
practices, including those for grade, quaality, thickness, and 
depth. See https://pubs.usgs.gov/periodicals/mcs2021/mcs2021-lithium.pdf for USGS's 2021 estimates and https://pubs.usgs.gov/periodicals/mcs2022/mcs2022-appendixes.pdf for USGS definitions.
    \528\ 88 FR 56219-20 (Aug. 17, 2023).
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    NHTSA also noted ongoing conversations with DOE and EPA on battery 
costs,\529\ and sought comment on a variety of topics surrounding 
future battery costs. We sought comment in

[[Page 52646]]

particular from vehicle and battery manufacturers on any additional 
data they could submit (preferably publicly) to further the 
conversation about battery pack costs in the later part of this decade 
through the early 2030s. In addition, we sought comment on all aspects 
of our methodology for modeling base year and future year battery pack 
costs, and welcomed data or other information that could inform our 
approach for the final rulemaking. We specifically sought comment on 
how the performance metrics may change in response to shifts in 
chemistries used in vehicle models driven by global policies affecting 
battery supply chain development, total global production and 
associated learning rates, and related sensitivity analyses. Finally, 
NHTSA also recognized the uncertainty in critical minerals prices into 
the near future and sought comment on representation of mineral costs 
in the learning curve, and any other feedback relevant to incorporating 
these considerations into our modeling framework.
---------------------------------------------------------------------------

    \529\ 88 FR 56222 (Aug. 17, 2023).
---------------------------------------------------------------------------

    We received comments from several stakeholders regarding general 
trends and forecasts in battery costs, our battery cost curves, and 
underlying battery cost assumptions. Some stakeholders cited outside 
sources they said supported our battery cost values, and other 
stakeholders cited outside sources they claimed showed our battery cost 
values were too low. ZETA stated generally that, ``[o]verall, the cost 
of lithium-ion batteries declined substantially between 2008 and 2022, 
down to $153 per kWh,'' \530\ citing DOE's estimates \531\ as well as 
Benchmark Minerals information. ICCT commented that ``there is evidence 
available to support lower BEV costs than NHTSA has modeled'' and that 
automakers ``are investing heavily in BEV R&D and manufacturing 
capacity and are achieving higher production volumes with more advanced 
technologies at lower costs.'' \532\ ICCT continued to cite their 
research from 2022,\533\ also referenced by NHTSA in the NPRM, stating, 
``[c]ontinued technological advancements and increased battery 
production volumes mean that pack-level battery costs are expected to 
decline to about $105/kWh by 2025 and $74/kWh by 2030.''
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    \530\ ZETA, Docket No. NHTSA-2023-0022-60508-A1, at 16-17.
    \531\ DOE. Office of Energy Efficiency & Renewable Energy. 2023. 
FOTW #1272, January 9, 2023: Electric Vehicle Battery Pack Costs in 
2022 Are Nearly 90% Lower than in 2008, according to DOE Estimates. 
Available at: https://www.energy.gov/eere/vehicles/articles/fotw-1272-january-9-2023-electric-vehicle-battery-pack-costs-2022-are-nearly. (Accessed: Apr. 5, 2024).
    \532\ ICCT, Docket No. NHTSA-2023-0022-54064-A1, at 12.
    \533\ Slowik, P. et al. 2022. Assessment of Light-Duty Electric 
Vehicle Costs and Consumer Benefits in the United States in the 
2022-2035 Time Frame. International Council on Clean Transportation. 
Available at: https://theicct.org/wp-content/uploads/2022/10/ev-cost-benefits-2035-oct22.pdf. (Accessed: Feb. 12, 2024).
---------------------------------------------------------------------------

    NHTSA appreciates the extensive data on declining EV battery costs 
provided by ZETA, and we believe that the provided data and lines up 
with our estimates from the NPRM and now this final rule reasonably 
well. NHTSA agrees with ICCT that there is evidence to support lower 
BEV costs than what was modeled in the NPRM. NHTSA has since, in 
collaboration with DOE/Argonne and EPA, modified the battery learning 
curve used in this analysis, which ultimately reflects lower future 
battery costs compared to the NPRM. The methodology that NHTSA employed 
is discussed further below and in TSD Chapter 3.3.
    On the other hand, comments from POET highlighted a BNEF reference 
from 2022, stating that our optimistic learning curve is contradictory 
to BNEF's analysis \534\--citing ``demand continues to grow, battery 
producers and automakers are scrambling to secure key metals such as 
lithium and nickel, battling high prices and tight supply'' \535\ and 
stating we should ``not rely on battery back [sic] learning curves, 
which have significant uncertainties.'' \536\ Additional commenters 
stated that battery cost reduction curves have flattened and costs 
``rose 7 percent in 2022'' \537\ with AFPM stating further, ``BEV 
makers will need to increase prices by 25% to account for rising 
battery prices,'' citing a March 2022 Bloomberg article on Morgan 
Stanley projections; \538\ Valero commented that some ``forecasters 
have made na[iuml]ve predictions that the cost declines will 
continue,'' \539\ with Clean Fuels Development Coalition in agreement 
stating that the decline in battery costs ``isn't realistic.'' \540\ 
Valero commented that our ``learning curve analysis ignores a host of 
pressures that will be pushing average battery prices higher between 
now and 2032,'' which include ``batteries that can power longer-range 
EVs'' and ``battery suppliers that can access lithium and other key raw 
materials at an affordable price.''
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    \534\ POET, Docket No. NHTSA-2023-0022-61561-A1, at 17-18.
    \535\ POET cites the older BNEF article from July 2022 instead 
of December 2022: BNEF. 2022. The Race to Net Zero: The Pressures of 
the Battery Boom in Five Charts. Last revised: July 21, 2022. 
Available at: https://about.bnef.com/blog/race-to-net-zero-the-pressures-of-the-battery-boom-in-five-charts/. (Accessed: Mar. 12, 
2024).
    \536\ POET, Docket No. NHTSA-2023-0022-61561-A1, at 17-18.
    \537\ CFDC et al., Docket No. NHTSA-2023-0022-62242-A1, at 13; 
Valero, Docket No. NHTSA-2023-0022-58547-A4, at 4; AFPM, Docket No. 
NHTSA-2023-0022-61911-A2, at 47.
    \538\ Thornhill, J. 2022. Morgan Stanley Flags EV Demand 
destruction as Lithium Soars. Bloomberg. Chart 7. Available at: 
https://www.bloomberg.com/news/articles/2022-03-25/morgan-stanley-flags-ev-demand-destruction-as-lithium-soars. (Accessed: Apr. 5, 
2024).
    \539\ Valero, Docket No. NHTSA-2023-0022-58547-A4, at 4.
    \540\ CFDC et al., Docket No. NHTSA-2023-0022-62242-A1, at 13.
---------------------------------------------------------------------------

    NHTSA disagrees with commenters that battery costs will continue to 
plateau indefinitely or increase in the rulemaking timeframe and 
believes that battery costs will continue to trend downward in the mid- 
and long-term. BNEF has since continued to predict a reduction in 
lithium-ion battery pack price since the BNEF article referenced in 
POET's comments, stating ``[l]ithium prices reached a high point at the 
end of 2022, but fears that prices would remain high have largely 
subsided since then and prices are now falling again.'' \541\ This is 
in agreement with expert interagency projections from our working group 
with DOE/Argonne and EPA,\542\ in addition to other recent trends \543\ 
and expert projections \544\ \545\ However, NHTSA does agree that 
mineral prices have remained elevated during the time of this 
rulemaking, which is reflected in us continuing to incorporate a 
learning plateau from MY 2022 to MY 2025 as we did in the NPRM--holding 
our battery learning rate constant to account for potential fluctuating 
mineral prices.\546\
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    \541\ BloombergNEF. November 23, 2023. Lithium-Ion Battery Pack 
Prices Hit Record Low of $139/kWh. Available at: https://about.bnef.com/blog/lithium-ion-battery-pack-prices-hit-record-low-of-139-kwh/. (Accessed: Mar. 12, 2024).
    \542\ ANL. 2024. Cost Analysis and Projections for U.S.-
Manufactured Automotive Lithium-ion Batteries. ANL/CSE-24/1. 
Available at: https://publications.anl.gov/anlpubs/2024/01/187177.pdf. (Accessed: Mar. 12, 2024).
    \543\ Benchmark Mineral Intelligence. Cathode & Anode monthly 
subscriptions. Available at: https://benchmarkminerals.com/. 
(Accessed: Mar. 12, 2024).
    \544\ Benchmark Mineral Intelligence. ``Lithium ion cell prices 
fall below $100 per kWh: Battery market--2023 in Review.'' Dec. 21 
2023. Available at: https://source.benchmarkminerals.com/video/watch/lithium-ion-cell-prices-fall-below-100-per-kwh-battery-market-2023-in-review. (Accessed: Apr. 10, 2024.)
    \545\ Liu, S. and Patton, D. 2023. China Lithium Price Poised 
for Further Decline in 2024.--Analysts. Reuters, December 19, 2023. 
Available at: https://www.reuters.com/markets/commodities/china-lithium-price-poised-further-decline-2024-analysts-2023-12-01/. 
(Accessed: Apr. 5, 2024).
    \546\ Trading Economics. Commodity: Lithium. Available at: 
https://tradingeconomics.com/commodity/lithium. (Accessed: Apr. 10, 
2024); Barlock, T.A. et al. 2024. Securing Critical Materials for 
the U.S. Electric Vehicle Industry. ANL-24/06. Final Report. 
Available at: https://publications.anl.gov/anlpubs/2024/03/187907.pdf. (Accessed: Apr. 5, 2024). Benchmark Mineral 
Intelligence. 2023. Lithium price decline casts shadow over long-
term supply prospects--2023 in review. Dec. 22, 2023. Available at: 
https://source.benchmarkminerals.com/article/lithium-price-decline-casts-shadow-over-long-term-supply-prospects-2023-in-review. 
(Accessed: Apr. 10, 2024.)

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[[Page 52647]]

    We have also considered many of these challenges identified by 
Valero to the extent possible for this final rule. In addition to 
continuing the learning curve plateau from MY 2022 to MY 2025 to 
account for materials-related uncertainties, mentioned above, we worked 
with DOE/Argonne and EPA to conduct an analysis that confirms the 
availability of raw materials for batteries, such as lithium.\547\ 
While the analysis from DOE is exogenous to our CAFE Model analysis for 
the final rule, it does confirm that the availability of battery 
materials necessary to support the BEVs projected to be built in 
NHTSA's reference baseline projection as a function of ZEV programs or 
expected manufacturer production at levels consistent with ACC II 
levels.
---------------------------------------------------------------------------

    \547\ Barlock, T.A. et al. February 2024. Securing Critical 
Materials for the U.S. Electric Vehicle Industry. ANL-24/06. Final 
Report. Available at: https://publications.anl.gov/anlpubs/2024/03/187907.pdf. (Accessed: Apr. 5, 2024).
---------------------------------------------------------------------------

    We received additional comment from Valero stating, ``NHTSA should 
not embed chemistry changes into the `learning effect.' NHTSA should 
instead forecast between now and 2032 what fraction of new vehicles 
will have one battery design versus another and develop cost estimates 
for each battery design,'' \548\ citing that the only major change in 
chemistry is likely towards LFP. We also received related comment from 
Rivian stating, ``we encourage the agency to elaborate on the extent to 
which it considered battery cell chemistry trends as they relate 
specifically to the HDPUV fleet'' \549\ and that it was unclear whether 
the NMC battery chemistry applied to the HDPUV fleet, specifically that 
the ``logic of applying LFP in this market is so compelling that it 
could become the chemistry of choice in the very near term.''
---------------------------------------------------------------------------

    \548\ Valero, Docket No. NHTSA-2023-0022-58547-A4, at 5-6.
    \549\ Rivian, Docket No. NHTSA-2023-0022-59765-A1, at 16.
---------------------------------------------------------------------------

    We thank Valero and Rivian for providing comment and agree that LFP 
should be considered in our battery learning curve. Since our NPRM, we 
have updated our learning curves to accommodate these concerns--
including in the HDPUV fleet. NHTSA and EPA worked with DOE/Argonne to 
distinguish a battery learning curve that is dynamic over the 
rulemaking period in the following ways: (1) there is a unique learning 
curve for each powertrain type (HEV or PHEV/BEV) and vehicle type 
(compact passenger car through the HDPUV space), which is based 
primarily on battery pack energy and power for the specific vehicle; 
\550\ (2) there is now a weighted mix between cathode chemistries (NMC 
vs LFP) throughout the rulemaking period to accommodate the increased 
prevalence of LFP in the market.\551\ NHTSA continues to collaborate 
with other agencies in developing battery-related metrics for 
rulemakings that are reflective of industry.
---------------------------------------------------------------------------

    \550\ Autonomie full vehicle model simulation data was used to 
determine average battery pack energy across vehicle segments. For 
details of how Autonomie Full Vehicle Model simulations was used for 
this rulemaking see TSD Chapter 2.4.
    \551\ Referred to as a ``composite correlation equation'' 
earlier in this section.
---------------------------------------------------------------------------

    Finally, we received comment from POET on our battery cost curves 
where they cited comments on EPA's recent ``vehicle GHG proposed rule'' 
where POET commented that they found ``substantial learning related to 
the production of BEV componentry has already occurred in the light-
duty vehicle sector as evidenced by the current mass production of BEVs 
and further learning curve benefits would therefore be expected to be 
much smaller than those assumed by U.S. EPA.'' \552\ Further, POET 
stated that NHTSA ``should not rely on battery pack learning curves 
that have significant uncertainties to increase the stringency of the 
CAFE regulations.'' POET gave no further guidance on how our battery 
learning curve could be changed to account for these uncertainties.
---------------------------------------------------------------------------

    \552\ POET, Docket No. NHTSA-2023-0022-61561-A1, at 18.
---------------------------------------------------------------------------

    While we agree that there have been advancements in the battery 
production process, those advancements have been captured in our 
BatPaC-based circa-MY 2022 battery costs as well as our future battery 
costs. The BatPaC model is used to set our base year battery costs as 
well as our battery learning curve, which are dependent on vehicle/
powertrain metrics as well as battery-related parameters (such as 
chemistry, production volume, production efficiency, labor rates, 
equipment costs and material costs, to name a few). Additionally, we 
examined several battery cost sensitivity cases, which explore 
variations of battery cost DMCs as well as material costs; more 
information on these sensitivities can be found in RIA Chapter 9.2.2 
and the Final Rule Battery Costs Docket Memo. We believe our BatPaC-
based circa-MY 2022 battery costs and future costs via the learning 
curve have been developed in a transparent way that involved feedback 
from stakeholders and expertise from leading government experts on 
battery-related issues. Despite high-granularity with modeling, there 
are still inherent uncertainties with modeling any metric (such as fuel 
prices, for instance); however, just because something is uncertain 
doesn't mean we shouldn't model it--this is why we sought comment from 
stakeholders on our inputs and assumptions and have incorporated that 
feedback in the final rule analysis as discussed in more detail.
    For this analysis, to reflect the evolution of battery 
manufacturing, comments from stakeholders, and for better alignment of 
battery assumptions between government agencies, the Department of 
Energy and Argonne, with significant input from NHTSA and EPA, 
developed battery cost correlation equations from BatPaC for use in 
both the NHTSA CAFE and EPA GHG analyses.\553\ These cost equations--
developed for use through MY 2035--were tailored for different vehicle 
segments,\554\ different levels of electrification,\555\ and 
anticipated plant production volumes.\556\ These equations represent 
cost improvements achieved from advanced manufacturing, pack design, 
and cell design with current and anticipated future battery 
chemistries,\557\ design parameters,

[[Page 52648]]

forecasted market prices, and vehicle technology penetration. Please 
see Argonne's Cost Analysis and Projections for U.S.-Manufactured 
Automotive Lithium-ion Batteries report for a more detailed discussion 
of the inputs and assumptions that were used to generate these cost 
equations.\558\ The methodology outlined in the report is largely the 
same that we used in previous rules, which utilized the most up-to-date 
BatPaC model to estimate future battery costs based on current 
chemistries, production volumes, and projected material prices.
---------------------------------------------------------------------------

    \553\ ANL. 2024. Cost Analysis and Projections for U.S.-
Manufactured Automotive Lithium-ion Batteries. ANL/CSE-24/1. 
Available at: https://publications.anl.gov/anlpubs/2024/01/187177.pdf. (Accessed: Mar. 12, 2024); EPA. Final Rule: Multi-
Pollutant Emissions Standards for Model Years 2027 and Later Light-
Duty and Medium-Duty Vehicles. 2024. Available at: https://www.epa.gov/regulations-emissions-vehicles-and-engines/regulations-greenhouse-gas-emissions-passenger-cars-and. See EPA's RIA section 
2.5.2.1 Battery cost modeling methodology.
    \554\ The vehicle classes considered in this project include 
compact cars, midsize cars, midsize SUVs, and pickup trucks.
    \555\ The levels of electrification considered in this project 
include light-duty HEVs, PHEVs, and BEVs (~250 and ~300 mile ranges) 
as well as medium/heavy-duty BEVs.
    \556\ Production volumes were determined for each vehicle class 
and type for each model year. See, U.S. Department of Energy. 
Argonne National Laboratory. Cost Analysis and Projections for U.S.-
Manufactured Automotive Lithium-ion Batteries. ANL/CSE-24/1. 
Equation 1 and Table 13. Available at: https://www.osti.gov/biblio/2280913/. (Accessed: Jan. 25, 2024).
    \557\ Battery cathode chemistries considered in this project 
include nickel-based materials (NMC622, NMC811, NMC95, and LMNO) as 
well as lower-cost LFP cathodes; varying percentages of silicon 
content (5%, 15%, and 35%) within a graphite anode were considered, 
as well.
    \558\ ANL. 2024. Cost Analysis and Projections for U.S.-
Manufactured Automotive Lithium-ion Batteries. ANL/CSE-24/1. 
Available at: https://publications.anl.gov/anlpubs/2024/01/187177.pdf. (Accessed: Mar. 12, 2024).
---------------------------------------------------------------------------

    Similar to our past BatPaC-based estimates for a battery learning 
curve, the employed learning curve explicitly assumes particular 
battery chemistry is used; unlike in previous rulemakings, however, a 
dynamic NMC/LFP mix has been incorporated into the learning curve in 
collaboration with EPA and DOE/Argonne, which is discussed in more 
detail below. We believe that during the rulemaking time frame, based 
on ongoing research and discussions with stakeholders,\559\ the 
industry will continue to employ lithium-ion NMC as the predominant 
battery cell chemistry for the near-term but will transition more fully 
to advanced high-nickel battery chemistries \560\ like NMC811 or less-
costly cell chemistries like LFP-G during the middle or end of the 
decade--i.e., during the rulemaking timeframe. We acknowledge there are 
other battery cell chemistries currently being researched that reduce 
the use of cobalt, use solid opposed to liquid electrolyte, use of 
silicon-dominant anodes or lithium-metal anodes, or even eliminate use 
of lithium in the cell altogether; \561\ however, at this time, we are 
limiting battery chemistry to NMC622, NMC811, and LFP for this 
rulemaking but will continue to monitor work from DOE and related 
government agencies as well as other developments in the advancement of 
battery cell chemistries.\562\
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    \559\ Docket Submission of Ex Parte Meetings Prior to 
Publication of the Corporate Average Fuel Economy Standards for 
Passenger Cars and Light Trucks for Model Years 2027-2032 and Fuel 
Efficiency Standards for Heavy-Duty Pickup Trucks and Vans for Model 
Years 2030-2035 Notice of Proposed Rulemaking memorandum, which can 
be found under References and Supporting Material in the rulemaking 
Docket No. NHTSA-2023-0022.
    \560\ Panayi, A. 2023. Into the Next Phase, the EV Market 
Towards 2030--The TWh year: The Outlook for the EV & Battery Markets 
in 2023. RhoMotion. Available at: https://rhomotion.com/rho-motion-seminar-series-live-q1-2023-seminar-recordings. (Accessed: May 31, 
2023).
    \561\ Slowik, P. et al. 2022. Assessment of Light-Duty Electric 
Vehicle Costs and Consumer Benefits in the United States in the 
2022-2035 Time Frame. International Council on Clean Transportation. 
Available at: https://theicct.org/wp-content/uploads/2022/10/ev-cost-benefits-2035-oct22.pdf. (Accessed: May 31, 2023); Batteries 
News. 2022. Solid-State NASA Battery Beats The Model Y 4680 Pack at 
Energy Density by Stacking all Cells in One Case. Last revised: 
October 20, 2022. Available at: https://batteriesnews.com/solid-state-nasa-battery-beats-model-y-4680-pack-energy-density-stacking-cells-one-case/. (Accessed: May 31, 2023).
    \562\ Barlock, T.A. et al. February 2024. Securing Critical 
Materials for the U.S. Electric Vehicle Industry. ANL-24/06. Final 
Report. Available at: https://publications.anl.gov/anlpubs/2024/03/187907.pdf. (Accessed: Apr. 5, 2024).
---------------------------------------------------------------------------

    As discussed above, due to the potential increasing prevalence of 
LFP displacing NMC cathodes in the U.S. EV market,\563\ especially in 
the rulemaking years, NHTSA uses a dynamic NMC/LFP mix between the 
battery cost correlation equations, referred to as a composite 
correlation equation; LFP market projections \564\ used for the mix are 
noted in TSD Chapter 3.3. LFP market share starts at 1 percent in MY 
2021 and grows to 19 percent in MY 2028. For the model years that the 
composite cost equation covers (for MYs through 2035), NMC battery 
cathode chemistry is assumed for the remaining market share. Note the 
composite cost equation only corresponds with BEV and PHEV 
electrification technologies and not HEV or FCEV electrification 
technologies. For more information on the development of battery 
learning curves, please see TSD Chapter 3.3.5.3.1.
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    \563\ Gohlke, D. et al. March 2024. Quantification of 
Commercially Planned Battery Component Supply in North America 
through 2035. Final Report. ANL-24/14. Available at: https://publications.anl.gov/anlpubs/2024/03/187735.pdf. (Accessed: Apr. 5, 
2024).
    \564\ A composite learning curve (used for PHEV and BEV battery 
cost projections) was developed, in coordination with DOE/ANL and 
EPA, to include a North American market mix of NMC and LFP 
chemistries (dynamic, over time); the NMC/LFP market presence 
projections values were based on (averaged, rounded, and smoothed) 
Rho Motion and Benchmark Mineral Intelligence proprietary data.
---------------------------------------------------------------------------

    Beyond the extent of the battery cost correlation equation, 
starting in MY 2036, a constant 1.5% learning rate was used through MY 
2050.\565\ NHTSA used this constant rate due to uncertainty associated 
with reducing the cost of the pack below the cost of the raw material 
to build the pack in that far out time frame.
---------------------------------------------------------------------------

    \565\ Like in our other parts of this analyses, there are 
uncertainties associated with predicting estimated costs beyond 
2035. Additionally, like our estimated learning curves for other 
technologies beyond this time frame, we used a similar convervative 
estimate continue learning down technology costs without having to 
fall below the costs of raw material to make the components.
---------------------------------------------------------------------------

    As there are inherent uncertainties in projecting future technology 
costs such as battery pack due to several factors, including the timing 
of the analysis used to support this final rule, we performed several 
battery-related cost sensitivity analyses. These include cases 
increasing the battery pack DMCs by 25%, decreasing the battery pack 
DMC by 15%, high and low mineral costs, and a curve we used for the 
NPRM. These results are presented in Chapter 9 of the FRIA. One 
important point that these sensitivity case results emphasize is that 
because of NHTSA's inability to consider manufacturers building BEVs 
and consider the combined fuel economy of PHEVs in response to CAFE 
standards during standard-setting years (i.e., MYs 2027-2031 for this 
final rule), net social costs and benefits do not change significantly 
between battery cost sensitivity cases, and similarly would not change 
significantly if much lower battery costs were used.
    Additional discussion in TSD Chapter 3 shows that our projected 
costs fall fairly well in the middle of the range of other costs 
projected by various studies and organizations for future years.\566\ 
Using the same approach as the rest of our analysis--that our costs 
should represent an average achievable performance across the 
industry--we believe that the battery DMCs with the learning curve 
applied provide a reasonable representation of potential future costs 
across the industry, based on the information available to us at the 
time of the analysis for this final rule was completed. RIA chapter 
9.2.2 shows how our reference and sensitivity case cost projections 
change over time using different base year and learning assumptions.
---------------------------------------------------------------------------

    \566\ TSD Chapter 3.3, Figure 3-32: Comparing Battery Pack Cost 
Estimates from Multiple Sources.
---------------------------------------------------------------------------

    We received two other comments suggesting the price of BEVs are not 
accurately accounted for in our analysis. CEA and the Corn Growers 
Associations stated that NHTSA bases its technology costs on nominal 
prices or MSRP, which do not reflect actual costs to 
manufacturers.\567\ \568\ Both commenters stated that this does not 
reflect reality, as vehicle manufacturers have been reportedly cross-
subsidizing electric vehicle costs to different extents since 
introducing their electrified vehicles.
---------------------------------------------------------------------------

    \567\ CFDC et al, Docket No. NHTSA-2023-0022-62242-A1, at 11.
    \568\ CEA, Docket No. NHTSA-2023-0022-61918-A1, at 24.
---------------------------------------------------------------------------

    NHTSA disagrees with these comments and believes that a fundamental 
misunderstanding of how technology costs are calculated in the analysis 
could have led to this mistake

[[Page 52649]]

in the commenters' comprehension of this issue. While all of these 
concepts were described in detail in the NPRM and Draft TSD (and now 
this final rule and Final TSD), we will summarize the relevant concepts 
here. Please see Final TSD Chapter 2.4., Technology Costs, for more 
detailed information. Our technology costs are from real price 
teardowns and ground up assembly costs of the component being added to 
the vehicle.\569\ When vehicles adopt technologies in the reference 
baseline or in response to standards in the analysis, the costs for 
those technologies are based on the incremental addition of the ground 
up costs to the reference price, which in this case is the vehicle 
price. Note that we determine the direct manufacturing costs of the 
components first, then apply a retail price equivalent markup to that 
cost before incrementally applying the technology cost to the vehicle 
price.\570\ TSD Chapter 3.3 discusses in detail in how we have 
developed the ground up costs for BEV batteries and components, and TSD 
Chapter 2.4 discusses how we account for direct manufacturing costs and 
retail costs.
---------------------------------------------------------------------------

    \569\ See, e.g., Final TSD, Chapter 2.4.1 (``The analysis uses 
agency-sponsored tear-down studies of vehicles and parts to estimate 
the DMCs of individual technologies, in addition to independent 
tear-down studies, other publications, and CBI.'').
    \570\ See, e.g., Final TSD, Chapter 2.4.2, Table 2-24: Retail 
Price Components, and the discussion of our methodology to estimate 
indirect costs.
---------------------------------------------------------------------------

    We also received several comments related to electric vehicle 
maintenance \571\ and battery replacement costs.\572\ For more 
information on repair/maintenance costs, please see Preamble Section 
III.G.3.
---------------------------------------------------------------------------

    \571\ Consumer Reports, Docket No. NHTSA-2023-0022-61101-A2, at 
11-12.
    \572\ Heritage Foundation, Docket No. NHTSA-2023-0022-61952-A1, 
at 12-13; ACI, Docket No. NHTSA-2023-0022-50765-A1, at 2-4; AFPM, 
Docket No. NHTSA-2023-0022-61911-A2, at 51.
---------------------------------------------------------------------------

    While batteries and relative battery components are the biggest 
cost driver of electrification, non-battery electrification components, 
such as electric motors, power electronics, and wiring harnesses, also 
add to the total cost required to electrify a vehicle. Different 
electrified vehicles have variants of non-battery electrification 
components and configurations to accommodate different vehicle classes 
and applications with respective designs; for instance, some BEVs may 
be engineered with only one electric motor and some BEVs may be 
engineered with two or even four electric motors within their 
powertrain to provide all wheel drive function. In addition, some 
electrified vehicle types still include conventional powertrain 
components, like an ICE and transmission.
    For all electrified vehicle powertrain types, we group non-battery 
electrification components into four major categories: electric motors 
(or e-motors), power electronics (generally including the DC-DC 
converter, inverter, and power distribution module), charging 
components (charger, charging cable, and high-voltage cables), and 
thermal management system(s). We further group the components into 
those comprising the electric traction drive system (ETDS), and all 
other components. Although each manufacturer's ETDS and power 
electronics vary between the same electrified vehicle types and between 
different electrified vehicle types, we consider the ETDS for this 
analysis to be comprised of the e-motor and inverter, power 
electronics, and thermal system.
    When researching costs for different non-battery electrification 
components, we found that different reports vary in components 
considered and cost breakdown. This is not surprising, as vehicle 
manufacturers use different non-battery electrification components in 
different vehicles systems, or even in the same vehicle type, depending 
on the application. In order of the component categories discussed 
above, we examined the following cost teardown studies discussed in TSD 
3.3.5 on Table 3-82. Using the best available estimate for each 
component from the different reports captures components in most 
manufacturer's systems but not all; we believe, however, that this is a 
reasonable metric and approach for this analysis, given the non-
standardization of electrified powertrain designs and subsequent 
component specifications. Other sources we used for non-battery 
electrification component costs include an EPA-sponsored FEV teardown 
of a 2013 Chevrolet Malibu ECO with eAssist for some BISG component 
costs,\573\ which we validated against a 2019 Dodge Ram eTorque 
system's publicly available retail price,\574\ and the 2015 NAS 
report.\575\ Broadly, our total BISG system cost, including the 
battery, fairly matches these other cost estimates.
---------------------------------------------------------------------------

    \573\ FEV. 2014. Light Duty Vehicle Technology Cost Analysis 
2013 Chevrolet Malibu ECO with eAssist BAS Technology Study. FEV 
P311264. Contract no. EP-C-12-014, WA 1-9.
    \574\ Colwell, K.C. 2019. The 2019 Ram 1500 eTorque Brings Some 
Hybrid Tech, If Little Performance Gain, to Pickups. Last revised: 
Mar. 14, 2019. Available at: https://www.caranddriver.com/reviews/a22815325/2019-ram-1500-etorque-hybrid-pickup-drive. (Accessed: May 
31, 2023).
    \575\ 2015 NAS report, at 305.
---------------------------------------------------------------------------

    While the majority of electric vehicle cost comments related to 
batteries, we did receive three comments pertaining to non-battery 
electrification costs or electrification costs more generally. The 
Strong PHEV Coalition asserted that despite agreeing with other costs 
in the analysis,\576\ our PHEV50 transmission costs (as shown in the 
Draft TSD Table 3-89) ``disagrees with ANL's previous studies which 
show a transmission for about $1600 less than shown in the draft 
technical support document,'' \577\ referencing an Argonne Light Duty 
Vehicle Techno-Economic Analysis \578\ and quoted, ``ANL shows a PHEV 
transmission cost of $793.'' Additionally, the Strong PHEV Coalition 
stated, ``several additional technical modifications can lower the cost 
of PHEVs that most analyses do not consider,'' without providing 
further specifics.
---------------------------------------------------------------------------

    \576\ Strong PHEV Coalition, Docket No. NHTSA-2023-0022-60193-
A1, at 3.
    \577\ Strong PHEV Coalition, Docket No. NHTSA-2023-0022-60193-
A1, at 7.
    \578\ ANL--ESD-2110 Report--BEAN Tool--Light Duty Vehicle 
Techno-Economic Analysis. Available at: https://publications.anl.gov/anlpubs/2021/10/171713.pdf. (Accessed: Apr. 5, 
2024).
---------------------------------------------------------------------------

    Upon inspection of the cited Argonne reference, the stated $793 
value (or any PHEV50 transmission specific value) could not be found in 
documentation (in neither the Part One light-duty section nor the Part 
Two medium-heavy duty section); the only information on PHEV 
transmissions in the document relates to the number of transmission 
gears, and the only component-specific costs live in the medium-heavy 
duty section (without a specific transmission cost given).\579\ We use 
the cost of the AT8L2 transmission as a cost proxy for the hybrid 
transmission architecture in P2 hybrid systems and CVTL2 transmission 
architecture in SHEVPS hybrid systems, whose DMCs are based on 
estimates from Table 8A.2a of the 2015 NAS report; these transmissions 
are used for other powertrain configurations in the analysis and 
represents costs that have been agreed on by industry today.\580\
---------------------------------------------------------------------------

    \579\ NHTSA coordinated with Argonne about this reference and 
Argonne confirmed that the $793 value is not directly provided in 
their report.
    \580\ 2015 NAS report, at 298-99.
---------------------------------------------------------------------------

    John German argued that our power-split hybrid costs are 
``incomprehensively high compared with both NHTSA's own previous 
estimates and with independent cost assessments.'' \581\ John German 
claimed that the teardown study conducted by FEV North America, 
Inc.\582\ ``on 2013

[[Page 52650]]

hybrids found mid-size car powersplit hybrid direct manufacturing cost 
(DMC) is about $2,050--far below the estimated DMC of $2,946 for 
electrical components alone in Table 3-89 of the proposed rule TSD that 
excludes the battery cost.'' \583\
---------------------------------------------------------------------------

    \581\ John German, Docket No. NHTSA-2023-0022-53274-A1, at 2.
    \582\ The 2013 FEV study for ICCT is titled ``Light-Duty Vehicle 
Technology Cost Analysis European Vehicle Market Updated Indirect 
Cost Multiplier (ICM) Methodology'' and can be downloaded from 
ICCT's website.
    \583\ Mid-size car emphasized. Note that our DMC is in 2021$.
---------------------------------------------------------------------------

    NHTSA has responded to this comment in prior rules, extensively 
detailing the agency's reasons for not relying on particular FEV 
studies to estimate hybrid costs.\584\ Upon further examination of the 
FEV document, the ``Net Incremental Direct Manufacturing Cost'' for a 
midsize passenger car for power-split HEVs was stated as 
``[euro]2,230'' \585\ (or approximately $2,943 in 2012$ and about 
$3,474 in 2021$). Taking a different approach, converting John German's 
stated value of $2,050 into Euros (which is approximately [euro]1,553, 
used to search within the FEV study), it is found that this is a value 
that is listed for a subcompact power-split hybrid in Table E-5 titled 
``Power-Split Hybrid Electric Vehicle Case Study Results Eastern Europe 
Labor Rate Substitution.'' As detailed extensively in the documentation 
supporting our analysis, we consider ten vehicle classes, and we 
believe a subcompact vehicle is only likely to represent vehicles 
covering a small portion of the vehicles we consider.
---------------------------------------------------------------------------

    \584\ 85 FR 24431-2, 85 FR 42513-4 (April 30, 2020), 87 FR 
25801-2 (May 2, 2022).
    \585\ John German's Table A.3 shows that this cost includes not 
only the electric machines but also the battery, high-voltage 
cables, etc. Recall that our quoted cost excludes the battery.
---------------------------------------------------------------------------

    Further, the commenter oversimplifies a technology walk between 
powertrains in a given model year, stating a 2023 Toyota Camry ``SE 
list price is $27,960 and SE hybrid is $30,390, for an increment of 
$2,430. If RPE is 1.5, then DMC is $1,620.'' As discussed in more 
detail in Final TSD Chapter 2.4 and referenced in a comment response 
above, we do not use vehicle prices to estimate technology costs, 
rather we estimate technology costs from the ground-up. For a more-
accurate representation of a technology walk from a conventional 
powertrain to a power-split powertrain, see RIA Chapter 4.\586\ We have 
not made any changes to power-split hybrid costs for this final rule.
---------------------------------------------------------------------------

    \586\ Memorandum to Docket No. NHTSA-2023-0022, Electrification 
Technology Cost Walk in Support of the Corporate Average Fuel 
Economy Standards for Passenger Cars and Light Trucks for Model 
Years 2027 and Beyond and Fuel Efficiency Standards for Heavy-Duty 
Pickup Trucks and Vans for Model Years 2030 and Beyond.
---------------------------------------------------------------------------

    As discussed earlier in Section III.C, our technology costs account 
for three variables: retail price equivalence (RPE), which is 1.5 times 
the DMC, the technology learning curve, and the adjustment of the 
dollar value to 2021$ for this analysis. While HDPUVs have larger non-
battery electrification componentry than LDVs, the cost calculation 
methodology is identical, in that the $/kW metric is the same, but the 
absolute costs are higher. As a result, HDPUVs and LDVs share the same 
non-battery electrification DMCs.
    For the non-battery electrification component learning curves, in 
both the LD and HDPUV fleets, we used cost information from Argonne's 
2016 Assessment of Vehicle Sizing, Energy Consumption, and Cost through 
Large-Scale Simulation of Advanced Vehicle Technologies report.\587\ 
The report provides estimated cost projections from the 2010 lab year 
to the 2045 lab year for individual vehicle components.\588\ We 
considered the component costs used in electrified vehicles and 
determined the learning curve by evaluating the year over year cost 
change for those components. Argonne published a 2020 and a 2022 
version of the same report; however, those versions did not include a 
discussion of the high and low-cost estimates for the same 
components.\589\ Our learning estimates generated using the 2016 report 
align in the middle of these two ranges, and therefore we continue to 
apply the learning curve estimates based on the 2016 report. There are 
many sources that we could have picked to develop learning curves for 
non-battery electrification component costs, however given the 
uncertainty surrounding extrapolating costs out to MY 2050, we believe 
these learning curves provide a reasonable estimate.
---------------------------------------------------------------------------

    \587\ Moawad, A. et al. 2016. Assessment of Vehicle Sizing, 
Energy Consumption and Cost Through Large Scale Simulation of 
Advanced Vehicle Technologies. ANL/ESD-15/28. Available at: https://www.osti.gov/biblio/1245199. (Accessed: May 31, 2023).
    \588\ DOE's lab year equates to five years after a model year, 
e.g., DOE's 2010 lab year equates to MY 2015. ANL/ESD-15/28 at 116.
    \589\ Islam, E. et al. 2020. Energy Consumption and Cost 
Reduction of Future Light-Duty Vehicles through Advanced Vehicle 
Technologies: A Modeling Simulation Study Through 2050. ANL/ESD-19/
10. Available at: https://publications.anl.gov/anlpubs/2020/08/161542.pdf. (Accessed: May 31, 2023); Islam, E. et al. 2022. A 
Comprehensive Simulation Study to Evaluate Future Vehicle Energy and 
Cost Reduction Potential. ANL/ESD-22/6. Available at: https://publications.anl.gov/anlpubs/2023/11/179337.pdf. (Accessed: Mar. 14, 
2024).
---------------------------------------------------------------------------

    In summary, we calculate total electrified powertrain costs by 
summing individual component costs, which ensures that all technologies 
in an electrified powertrain appropriately contribute to the total 
system cost. We combine the costs associated with the ICE (if 
applicable) and transmission, non-battery electrification components 
like the electric machine, and battery pack to create a full-system 
cost. Chapter 3.3.5.4 of the TSD presents the total costs for each 
electrified powertrain option, broken out by the components we 
discussed throughout this section. In addition, the chapter discusses 
where to find each of the component costs in the CAFE Model's various 
input files.
4. Road Load Reduction Paths
    No car or truck uses energy (whether gas or otherwise) 100% 
efficiently when it is driven down the road. If the energy in a gallon 
of gas is thought of as a pie, the amount of energy ultimately 
available from that gallon to propel a car or truck down the road would 
only be a small slice. So where does the lost energy go? Most of it is 
lost due to thermal and frictional loses in the engine and drivetrain 
and drag from ancillary systems (like the air conditioner, alternator 
generator, various pumps, etc.). The rest is lost to what engineers 
call road loads. For the most part, road loads include wind resistance 
(or aerodynamics), drag in the braking system, and rolling resistance 
from the tires. At low speeds, aerodynamic losses are very small, but 
as speeds increases these loses rapidly become dramatically higher than 
any other road load. Drag from the brakes in most cars is practically 
negligible. ROLL losses can be significant: at low speeds ROLL losses 
can be more than aerodynamic losses. Whatever energy is left after 
these road loads are spent on accelerating the vehicle anytime a its 
speed increases. This is where reducing the mass of a vehicle is 
important to efficiency because the amount of energy to accelerate the 
vehicle is always directly proportional to a vehicle's mass. All else 
being equal, reduce a car's mass and better fuel economy is guaranteed. 
However, keep in mind that at freeway speeds, aerodynamics plays a more 
dominant role in determining fuel economy than any other road load or 
than vehicle mass.
    We include three road load reducing technology paths in this 
analysis: the MR Path, Aerodynamic Improvements (AERO) Path, and ROLL 
Path. For all three vehicle technologies, we assign analysis fleet 
technologies and identify adoption features based on the vehicle's body 
style. The LD fleet body styles we include in the analysis are 
convertible,

[[Page 52651]]

coupe, sedan, hatchback, wagon, SUV, pickup, minivan, and van. The 
HDPUV fleet body styles include chassis cab, cutaway, fleet SUV, work 
truck, and work van. Figure III-7 and Figure III-8 show the LD and 
HDPUV fleet body styles used in the analysis.
BILLING CODE 4910-59-P
[GRAPHIC] [TIFF OMITTED] TR24JN24.060

[GRAPHIC] [TIFF OMITTED] TR24JN24.061


[[Page 52652]]


BILLING CODE 4910-59-C
    As expected, the road load forces described above operate 
differently based on a vehicle's body style, and the technology 
adoption features and effectiveness values reflect this. The following 
sections discuss the three Road Load Reduction Paths.
a. Mass Reduction
    MR is a relatively cost-effective means of improving fuel economy, 
and vehicle manufacturers are expected to apply various MR technologies 
to meet fuel economy standards. Vehicle manufacturers can reduce 
vehicle mass through several different techniques, such as modifying 
and optimizing vehicle component and system designs, part 
consolidation, and adopting materials that are conducive to MR 
(advanced high strength steel (AHSS), aluminum, magnesium, and plastics 
including carbon fiber reinforced plastics).
    We received multiple comments on how this analysis evaluated mass 
reduction as a possible pathway for manufacturers to use to meet the 
standards. Raw aluminum supplier Arconic, the Aluminum Association, the 
American Chemistry Council and the California Attorney General 
commented generally about the benefits of mass reduction to increasing 
fuel economy.\590\ Stakeholders also commented broadly about mass 
reduction technology given the current state of the vehicle fleet and 
anticipated future fleet technology transitions. Even given the 
effectiveness of mass reduction as a pathway to CAFE compliance as well 
as tightening CAFE standards, multiple aluminum industry members noted 
that the average mass of vehicles continues to increase. They also 
noted that there are limited indications of adoption of aluminum 
primary structure in the fleet and that this will not change by 2032. 
They also pointed out that significant average mass increases are at 
least partially being driven by the higher masses associated with BEVs 
and their heavy batteries. Furthermore, they called on BEV 
manufacturers to use more aluminum to offset the higher masses 
associated with the batteries in these vehicles. Similarly, the States 
and Cities commented with research showing that potential fuel economy 
improvements from mass reduction have not been fully realized because 
manufacturers add weight back to the vehicle for other reasons, and 
because of increasing vehicle footprints.\591\ Additional discussion of 
how NHTSA considers various materials in the mass reduction analysis 
are given below and in TSD Chapter 3.4, and NHTSA's discussion of 
vehicle footprint trends is located in TSD Chapter 1.
---------------------------------------------------------------------------

    \590\ States and Cities, Docket No. NHTSA-2023-0022-61904; ACC, 
Docket No. NHTSA-2023-0022-60215; Arconic, Docket No. NHTSA-2023-
0022-48374; Aluminum Association, Docket No. NHTSA-2023-0022-58486.
    \591\ States and Cities, Docket No. NHTSA-2023-0022-61904.
---------------------------------------------------------------------------

    For the LD fleet portion of this analysis, we considered five 
levels of MR technology (MR1-MR5) that include increasing amounts of 
advanced materials and MR techniques applied to the vehicle's 
glider.\592\ The subsystems that may make up a vehicle glider include 
the vehicle body, chassis, interior, steering, electrical accessory, 
brake, and wheels systems. We accounted for mass changes associated 
with powertrain changes separately.\593\ We considered two levels of MR 
(MR1-MR2) and an initial level (MR0) for the HDPUV fleet. We use fewer 
levels because vehicles within the HD fleets are built for a very 
different duty cycle \594\ than those in the LD fleet and tend to be 
larger and heavier. Moreover, there are different vehicle parameters, 
like towing capacity, that drive vehicle mass in the HD fleet rather 
than, for example, NVH (noise, vibration, and harshness) performance in 
the LD fleet. Similarly, HDPUV MR is assumed to come from the 
glider,\595\ and powertrain MR occurs during the Autonomie modeling. 
Our estimates of how manufacturers could reach each level of MR 
technology in the LD and HDPUV analyses, including a discussion of 
advanced materials and MR techniques, can be found in Chapter 3.4 of 
the TSD.
---------------------------------------------------------------------------

    \592\ Note that in the previous analysis associated with the MYs 
2024-2026 final rule, there was a sixth level of mass reduction 
available as a pathway to compliance. For this analysis, this 
pathway was removed because it relied on extensive use of carbon 
fiber composite technology to an extent that is only found in 
purpose-built racing cars and a few hundred road legal sports cars 
costing hundreds of thousands of dollars. TSD Chapter 3.4 provides 
additional discussion on the decision to include five mass reduction 
levels in this analysis.
    \593\ Glider mass reduction can sometimes enable a smaller 
engine while maintaining performance neutrality. Smaller engines 
typically weigh less than bigger ones. We captured any changes in 
the resultant fuel savings associated with powertrain mass reduction 
and downsizing via the Autonomie simulation. Autonomie calculates a 
hypothetical vehicle's theoretical fuel mileage using a mass 
reduction to the vehicle curb weight equal to the sum of mass 
savings to the glider plus the mass savings associated with the 
downsized powertrain.
    \594\ HD vans that are used for package delivery purposes are 
frequently loaded to GVWR. However, LD passenger cars are never 
loaded to GVWR. Operators of HD vans have an economic motivation to 
load their vehicles to GVWR. In contrast studies show that between 
38% and 82% of passenger cars are used soley to transport their 
drivers. (Bureau of Transportation Studies, 2011, FHWA Publication 
No. FHWA-PL-18-020, 2019).
    \595\ We also assumed that an HDPUV glider comprises 71 percent 
of a vehicle's curb weight, based on a review of mass reduction 
technologies in the 2010 Transportation Research Board and National 
Research Council's ``Technologies and Approaches to Reducing the 
Fuel Consumption of Medium- and Heavy-Duty Vehicles.'' See 
Transportation Research Board and National Research Council. 2010. 
Technologies and Approaches to Reducing the Fuel Consumption of 
Medium- and Heavy-Duty Vehicles. Washington, DC: The National 
Academies Press. At page 120-121. Available at: https://nap.nationalacademies.org/12845/. (Accessed: May 31, 2023).
---------------------------------------------------------------------------

    A coalition of NGOs stated that achieving the highest degree of 
mass reduction, MR5, can be achieved in the mainstream fleet with 
aluminum alone and carbon fiber technology is not necessary.\596\ We 
disagree with this conclusion. While aluminum technology can be a 
potent mass reduction pathway, it does have its limitations. First, 
aluminum, does not have a fatigue endurance limit. That is, with 
aluminum components there is always some combination of stress and 
cycles when failure occurs. Automotive design engineering teams will 
dimension highly stressed cross sections to provide an acceptable 
number of cycles to failure. But this often comes at mass savings 
levels that fall short of what would be expected purely based on 
density specific strength and stiffness properties for aluminum.
---------------------------------------------------------------------------

    \596\ National Resource Defense Council et al., Docket No. 
NHTSA-2023-0022-61944.
---------------------------------------------------------------------------

    Looking at real data, the mostly aluminum (cab and bed are made 
from aluminum), 2021 Ford F150 achieves less than a 14 percent mass 
reduction compared to its 2014 all-steel predecessor.\597\ This is an 
especially pertinent comparison because both vehicles have the same 
footprint within a 2% margin and presumably were engineered to similar 
duty cycles given that they both came from the same manufacturer. Per 
our regression analysis, the Ford F-150 achieves MR3. As mentioned in 
the TSD Chapter 3.4, a body in white structure made almost entirely 
from aluminum is roughly required to get to MR4. It may be possible to 
achieve MR5 without the use of carbon fiber, but the resultant vehicle 
would not achieve performance parity with customer expectations in 
terms of crash safety, noise and vibration levels, and interior 
content. The discontinued Lotus Elise is an example of an aluminum and 
fiberglass car that achieved MR5 but represents an

[[Page 52653]]

extremely niche vehicle application that is unlikely to translate to 
mainstream, high-volume models. Therefore, it is entirely reasonable to 
assume that carbon fiber ``hang on'' panels and closures would be 
necessary to achieve MR5 at performance parity.
---------------------------------------------------------------------------

    \597\ Ford. 2021 F-150 Technical Specifications. Available at: 
https://media.ford.com/content/dam/fordmedia/North%20America/US/product/2021/f150/pdfs/2021-F-150-Technical-Specs.pdf. (Accessed on 
Mar. 21, 2024); Ford. 2014 F-150 Technical Specifications. Available 
at: https://media.ford.com/content/dam/fordmedia/North%20America/US/2014_Specs/2014_F150_Specs.pdf. (Accessed on Mar. 21, 2024).
---------------------------------------------------------------------------

    There were also comments from the NGO coalition regarding the mass 
reduction section in the NAS study. The commenters noted that the NAS 
study relies on very little application of carbon fiber technology to 
achieve their highest level of mass reduction technology. NHTSA would 
like to note that the NAS study espouses a maximum level of mass 
reduction of approximately 14.5% using composites (e.g., fiberglass) 
and carbon fiber technology only in closures structures (e.g., doors, 
hoods, and decklids) and hang-on panels (e.g., fenders). This is the 
``alternative scenario 2'' in the NAS study. This is similar 
lightweighting technology application strategy to what our analysis 
roughly associates with MR5, but MR5 requires a 20% mass reduction. In 
this scenario, we are allotting more mass reduction potential for the 
same carbon fiber technology application than the NAS study does.
    We assigned MR levels to vehicles in both the LD and HDPUV analysis 
fleets by using regression analyses that consider a vehicle's body 
design \598\ and body style, in addition to several vehicle design 
parameters, like footprint, power, bed length (for pickup trucks), and 
battery pack size (if applicable), among other factors. We have been 
improving on the LD regression analysis since the 2016 Draft Technical 
Assessment Report (TAR) and continue to find that it reasonably 
estimates MR technology levels of vehicles in the analysis fleet. We 
developed a similar regression for the HDPUV fleet for this analysis 
using the factors described above and other applicable HDPUV attributes 
and found that it similarly appropriately assigns initial MR technology 
levels to analysis fleet vehicles. Chapter 3.4 of the TSD contains a 
full description of the regression analyses used for each fleet and 
examples of results of the regression analysis for select vehicles.
---------------------------------------------------------------------------

    \598\ The body design categories we used are 3-box, 2-box, HD 
pickup, and HD van. A 3-box can be explained as having a box in the 
middle for the passenger compartment, a box in the front for the 
engine and a box in the rear for the luggage compartment. A 2-box 
has a box in front for the engine and then the passenger and luggage 
box are combined into a single box.
---------------------------------------------------------------------------

    NHTSA received comments from a coalition of NGOs that the mass 
reduction regression curves used in the analysis for quantifying 
analysis fleet mass reduction overestimates the application mass 
reduction technology in the fleet.\599\ They believe that the mass 
reduction modeling used by Argonne National Lab for estimating 
powertrain weight in the Autonomie vehicle simulations more accurately 
reflects how much mass reduction technology is really in the fleet, and 
stated that we should be using those regression models for the analysis 
instead. Although we would like to repeat the NGO's calculations to 
that led them to this opinion, they did not provide enough detail on 
its methodology and calculations for NHTSA to confirm its accuracy. 
Consequently, we are only able to respond with general concepts here.
---------------------------------------------------------------------------

    \599\ National Resource Defense Council et al., Docket No. 
NHTSA-2023-0022-61944.
---------------------------------------------------------------------------

    NHTSA disagrees that the methods used by Autonomie to calculate the 
MR analysis fleet starting levels would lead to a better analysis than 
our regression. There are multiple reasons for this. First, Autonomie 
relies on data collected by the subscription benchmarking database 
A2Mac1 and other limited sources. As much as NHTSA and Argonne rely on 
data from A2Mac1 for learning about technical aspects of the fleet, it 
is not representative data for the entire US fleet. Whereas the CAFE 
mass reduction regressions use data from all vehicles and multiple trim 
levels in the US fleet (examples discussed above and further in TSD 
Chapter 3.4), A2Mac1 is limited in the number of vehicles it can 
teardown in a given year and thus only makes small samples from the US 
fleet. Using the entire fleet for the regression analysis provides a 
more accurate snapshot of how vehicles compare to one another when it 
comes to assigning MR levels to vehicles in the analysis fleets. 
Second, the NGOs claim that it is better to arrive at a glider weight 
by taking the average powertrain weight for a given technology class 
and subtracting that value from the curb weight of all vehicles in the 
fleet with that same tech class. We calculate a percentage for the 
powertrain of the curb weight based on the average powertrain mass for 
all of the technology classes. We then multiply this same percentage 
(which for the current fleet is 71%) by the curb weight of each vehicle 
in the fleet to arrive at the glider share. We did not use bespoke 
powertrain percentages for each corresponding technology class in the 
fleet because it will most likely not make a substantial difference in 
how MR is applied. Third, it must also be noted that Autonomie's glider 
share percent does not take into account sales weighting because 
Autonomie simulates every possible combination of vehicles and 
powertrains. By taking into account sales volumes, our analysis does a 
better job of representing the actual fleet.
    The Joint NGOs also commented that the regression model we used for 
calculating MR for analysis fleet vehicles is invalid because it was 
developed using prior model year fleets. We disagree. The regression 
relies on establishing correlations between various vehicle parameters 
and the mass of a vehicle. For the most part, these correlations 
reflect physics and automotive design practices that have not changed 
substantially since these regressions were developed and updated. For 
example, one parameter correlated in the regression is rear wheel drive 
(RWD) vs. front wheel drive (FWD). The regression accurately predicts 
that going from RWD to FWD will save mass. The mass change associated 
in going from RWD to FWD arises from the elimination of a drive 
driveshaft and a discrete differential housing (unless the vehicle is 
mid or rear engine, which is rare in the fleet). This mass change is 
expected in the same way today as it would have been when the 
regression was developed. As a second example, another parameter that 
we correlate in the regression is convertible vs. non-convertible. 
Convertibles tend to be heavier than, say, sedans because they do not 
have the upper load path created by having a sedan's roof rail and C- 
(or D-) pillars. Consequently, manufacturers must compensate by 
reinforcing the floor pan to account for the lack of a primary load 
path. This results in higher mass for convertibles. Between when we 
developed the regression and today, the physics and fundamentals of 
this structural dynamic have not changed. Hence the regression we use 
in this regard is still valid today.
    There are several ways we ensure that the CAFE Model considers MR 
technologies like manufacturers might apply them in the real world. 
Given the degree of commonality among the vehicle models built on a 
single platform, manufacturers do not have complete freedom to apply 
unique technologies to each vehicle that shares the same platform. 
While some technologies (e.g., low rolling resistance tires) are very 
nearly ``bolt-on'' technologies, others involve substantial changes to 
the structure and design of the vehicle, and therefore often 
necessarily affect all vehicle models that share that platform. In most 
cases, MR technologies are applied to platform level components and 
therefore the same design and components are used on all vehicle models 
that share the

[[Page 52654]]

platform. Each vehicle in the analysis fleet is associated with a 
specific platform family. A platform ``leader'' in the analysis fleet 
is a vehicle variant of a given platform that has the highest level of 
MR technology in the analysis fleet. As the model applies technologies, 
it will ``level up'' all variants on a platform to the highest level of 
MR technology on the platform. For example, if a platform leader is 
already at MR3 in MY 2022, and a ``follower'' starts at MR0 in MY 2022, 
the follower will get MR3 at its next redesign (unless the leader is 
redesigned again before that time, and further increases the MR level 
associated with that platform, then the follower would receive the new 
MR level).
    In addition to leader-follower logic for vehicles that share the 
same platform, we also restrict MR5 technology to platforms that 
represent 80,000 vehicles or fewer. The CAFE Model will not apply MR5 
technology to platforms representing high volume sales, like a 
Chevrolet Traverse, for example, where hundreds of thousands of units 
are sold per year. We use this particular adoption feature and the 
80,000-unit threshold in particular, to model several relevant 
considerations. First, we assume that MR5 would require carbon fiber 
technology.\600\ There is high global demand from a variety of 
industries for a limited supply of carbon fibers; specifically, 
aerospace, military/defense, and industrial applications demand most of 
the carbon fiber currently produced. Today, only about 10 percent of 
the global dry fiber supply goes to the automotive industry, which 
translates to the global supply base only being able to support 
approximately 70,000 cars.\601\ In addition, the production process for 
carbon fiber components is significantly different than for traditional 
vehicle materials. We use this adoption feature as a proxy for stranded 
capital (i.e., when manufacturers amortize research, development, and 
tooling expenses over many years) from leaving the traditional 
processes, and to represent the significant paradigm change to tooling 
and equipment that would be required to support molding carbon fiber 
panels. There are no other adoption features for MR in the LD analysis, 
and no adoption features for MR in the HDPUV analysis.
---------------------------------------------------------------------------

    \600\ See the Final TSD for CAFE Standards for MYs 2024-2026, 
and Chapter 3.4 of the TSD accompanying this rulemaking for more 
information about carbon fiber.
    \601\ Sloan, J. 2020. Carbon Fiber Suppliers Gear up for Next 
Generation Growth. Last revised: Jan. 1, 2016. Available at: https://www.compositesworld.com/articles/carbon-fiber-suppliers-gear-up-for-next-gen-growth. (Accessed: May 31, 2023).
---------------------------------------------------------------------------

    In the Autonomie simulations, MR technology is simulated as a 
percentage of mass removed from the specific subsystems that make up 
the glider. The mass of subsystems that make up the vehicle's glider is 
different for every technology class, based on glider weight data from 
the A2Mac1 database \602\ and two NHTSA-sponsored studies that examined 
light-weighting a passenger car and light truck. We account for MR from 
powertrain improvements separately from glider MR. Autonomie considers 
several components for powertrain MR, including engine downsizing, and, 
fuel tank, exhaust systems, and cooling system light-weighting.\603\ 
With regard to the LDV fleet, the 2015 NAS report suggested an engine 
downsizing opportunity exists when the glider mass is light-weighted by 
at least 10 percent. The 2015 NAS report also suggested that 10 percent 
light-weighting of the glider mass alone would boost fuel economy by 3 
percent and any engine downsizing following the 10 percent glider MR 
would provide an additional 3 percent increase in fuel economy.\604\ 
The NHTSA light-weighting studies applied engine downsizing (for some 
vehicle types but not all) when the glider weight was reduced by 10 
percent. Accordingly, the analysis limits engine resizing to several 
specific incremental technology steps; important for this discussion, 
engines in the analysis are only resized when MR of 10 percent or 
greater is applied to the glider mass, or when one powertrain 
architecture replaces another architecture. For the HDPUV analysis, we 
do not allow engine downsizing at any MR level. This is because HDPUV 
designs are sized with the maximum GVWR and GCWR in mind, as discussed 
earlier in this section. We are objectively controlling the vehicles' 
utility and performance by this method in Autonomie. For example, if 
more MR technology is applied to a HD van, the payload capacity 
increases while maintaining the same maximum GVWR and GCWR.\605\ The 
lower laden weight enables these vehicles to improve fuel efficiency by 
increased capacity. A summary of how the different MR technology levels 
improve fuel consumption is shown in TSD Chapter 3.4.4.
---------------------------------------------------------------------------

    \602\ A2Mac1: Automotive Benchmarking. Available at: https://portal.a2mac1.com/. (Accessed: May 31, 2023). The A2Mac1 database 
tool is widely used by industry and academia to determine the bill 
of materials (a list of the raw materials, sub-assemblies, parts, 
and quantities needed to manufacture an end-product) and mass of 
each component in the vehicle system.
    \603\ Although we do not acount for mass reduction in 
transmissions, we do reflect design improvements as part of mass 
reduction when going from, for example, an older AT6 to a newer AT8 
that has similar if not lower mass.
    \604\ NRC. 2015. Cost, Effectiveness, and Deployment of Fuel 
Economy Technologies for Light-Duty Vehicles. The National Academies 
Press: Washington DC. Available at: https://doi.org/10.17226/21744. 
(Accessed: May 31, 2023).
    \605\ Transportation Research Board and National Research 
Council. 2010. Technologies and Approaches to Reducing the Fuel 
Consumption of Medium- and Heavy-Duty Vehicles. The National 
Academies Press: Washington, DC at 116. Available at: https://nap.nationalacademies.org/12845/. (Accessed: May 31, 2023).
---------------------------------------------------------------------------

    Our MR costs are based on two NHTSA light-weighting studies--the 
teardown of a MY 2011 Honda Accord and a MY 2014 Chevrolet Silverado 
pickup truck \606\--and the 2021 NAS report.\607\ The costs for MR1-MR4 
rely on the light-weighting studies, while the cost of MR5 references 
the carbon fiber costs provided in the 2021 NAS report. The same cost 
curves are used for the HDPUV analysis; however, we used linear 
interpolation to shift the HDPUV MR2 curve (by roughly a factor of 20) 
to account for the fact that MR2 in the HDPUV analysis represents a 
different level than MR2 in the LD analysis. Unlike the other 
technologies in our analysis that have a fixed technology cost (for 
example, it costs about $3,000 to add a AT10L3 transmission to a LD SUV 
or pickup truck in MY 2027), the cost of MR is calculated on a dollar 
per pound saved basis based on a vehicle's starting weight. Put another 
way, for a given vehicle platform, an initial mass is assigned using 
the aforementioned regression model. The amount of mass to reach each 
of the five levels of MR is calculated by the CAFE Model based on this 
number and then multiplied by the dollar per pound saved figure for 
each of the five MR levels. The dollar per pound saved figure increases 
at a nearly linear rate going from MR0 to M4. However, this figure 
increases steeply going from MR4 to MR5 because the technology cost to 
realize the associated mass savings level is an order of magnitude 
larger. This dramatic increase is reflected by all three studies we 
relied on for MR costing, and we believe that it reasonably represents 
what manufacturers would expect to pay for including increasing amounts 
of

[[Page 52655]]

carbon fiber on their vehicles. For the HDPUV analysis, there is also a 
significant cost increase from MR1 to MR2. This is because the MR going 
from MR1 to MR2 in the HDPUV fleet analysis is a larger step than going 
from MR1 to MR2 for the LD fleet analysis--5% to 7.5% off the glider 
compared to 1.4% to 13%.
---------------------------------------------------------------------------

    \606\ Singh, H. 2012. Final Report, Mass Reduction for Light-
Duty Vehicles for Model Years 2017-2025. DOT HS 811 666.; Singh, H. 
et al. 2018. Mass Reduction for Light-Duty Vehicles for Model Years 
2017-2025. DOT HS 812 487.
    \607\ This analysis applied the cost estimates per pound derived 
from passenger cars to all passenger car segments, and the cost 
estimates per pound derived from full-size pickup trucks to all 
light-duty truck and SUV segments. The cost estimates per pound for 
carbon fiber (MR5) were the same for all segments.
---------------------------------------------------------------------------

    Like past analyses, we considered several options for MR technology 
costs. Again, we determined that the NHTSA-sponsored studies accounted 
for significant factors that we believe are important to include our 
analysis, including materials considerations (material type and gauge, 
while considering real-world constraints such as manufacturing and 
assembly methods and complexity), safety (including the Insurance 
Institute for Highway Safety's (IIHS) small overlap tests), and 
functional performance (including towing and payload capacity, noise, 
vibration, and harshness (NVH)), and gradeability in the pickup truck 
study.
    We received comments that the costs used in the analysis to achieve 
MR5 are high, both because of the way that we calculated MR5 costs, and 
how we applied updated costs in the model.\608\ Regarding the price of 
carbon fiber technology, considering a 4-5 year time horizon, we 
believe that our prices are conservative when taking into account 
rising energy costs to pyrolyze acrylic fibers to carbon fibers and 
considering all the costs car manufacturers much shoulder on developing 
processes to turn the dry fibers into reliable structural components. 
The recent NAS study confirms our pricing.\609\ It explicitly indicates 
an average price (over the time period of interest, 2027-2030) for 
carbon fiber materials as approximately $8.25 per pound saved and a 
manufacturing cost for carbon fiber reinforced polymer components of 
$13 per pound saved. Multiply the sum of these tow numbers by an RPE of 
1.5 (direct and indirect and net income) results in roughly $32 per 
pound saved which is the figure listed in the Technologies Input File 
used for the CAFE model for 2027.
---------------------------------------------------------------------------

    \608\ National Resource Defense Council et al., Docket No. 
NHTSA-2023-0022-61944.
    \609\ 2021 NAS report, at 7-242-3.
---------------------------------------------------------------------------

    Regarding the comment that NHTSA misapplied the MR5 costs in the 
model, on further review NHTSA agrees that not all MR5 pounds saved 
will be saved with carbon fiber and that cost should be adjusted to 
include carbon fiber costs proportional to the materials' use in total 
pounds saved. We would like to investigate using an incremental or 
bracketed approach (think US tax structure but with pounds saved and 
cost) in a future analysis where the costs associated with carbon fiber 
technology will only be applied to the incremental mass reduction in 
going from one level of MR to another. We did not make that change for 
this final rule analysis, however. This is a relatively involved change 
in the model, which we did not have time to implement and QA/QC in the 
time available to complete the analysis associated with this final 
rule. That said, we do not believe that this change would result in a 
significant change in the analysis for the reasons listed below and are 
comfortable that the analysis associated with this final rule still 
reasonably represents manufacturer's decision-making, effectiveness, 
and cost associated with applying the highest levels of mass reduction 
technology.
    First, we limited application of MR5 in the analysis to represent 
the limited volume of available dry carbon fiber and the resultant high 
costs of the raw materials. This constraint is described above and in 
more detail in TSD Chapter 3. The CAFE Model assumes that there is not 
enough carbon fiber readily available to support vehicle platforms with 
more than 80,000 vehicles sold per year. We believe this volume 
constraint does more to limit the application of MR5 technology in the 
analysis than does its high price. Even if we used a lower price, this 
dominant constraint would still be volume. Second, we do not believe 
that that a lower price would prove to be a competitive pathway to 
compliance for exotic materials technology compared to other less 
expensive technologies with higher effectiveness. The MR5 effectiveness 
as applied to the vehicle in this analysis considers the total effect 
of reducing that level of mass from the vehicle, from the vehicle's 
starting MR level. As an example, while the cost of going from MR0 or 
MR1 to MR5 may be slightly overstated (but still limited in total 
application by the volume cap), the cost of going from MR4 to MR5 is 
not. NHTSA will continue to consider the balance of carbon fiber and 
other advanced materials for mass reduction to meet MR5 levels and 
update that value in future rules.
b. Aerodynamic Improvements
    The energy required for a vehicle to overcome wind resistance, or 
more formally what is known as aerodynamic drag, ranges from minimal at 
low speeds to incredibly significant at highway speeds.\610\ Reducing a 
vehicle's aerodynamic drag is, therefore, an effective way to reduce 
the vehicle's fuel consumption. Aerodynamic drag is characterized as 
proportional to the frontal area (A) of the vehicle and a factor called 
the coefficient of drag (Cd). The coefficient of drag 
(Cd) is a dimensionless value that represents a moving 
object's resistance against air, which depends on the shape of the 
object and flow conditions. The frontal area (A) is the cross-sectional 
area of the vehicle as viewed from the front. Aerodynamic drag of a 
vehicles is often expressed as the product of the two values, 
CdA, which is also known as the drag area of a vehicle. The 
force imposed by aerodynamic drag increases with the square of vehicle 
velocity, accounting for the largest contribution to road loads at 
higher speeds.\611\
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    \610\ 2015 NAS Report, at 207.
    \611\ See, e.g., Pannone, G. 2015. Technical Analysis of Vehicle 
Load Reduction Potential for Advanced Clean Cars, Final Report. 
April 2015. Available at: https://ww2.arb.ca.gov/sites/default/files/2020-04/13_313_ac.pdf. (Accessed: May 31, 2023). The graph on 
page 20 shows how at higher speeds the aerodyanmic force becomes the 
dominant load force.
---------------------------------------------------------------------------

    Manufacturers can reduce aerodynamic drag either by reducing the 
drag coefficient or reducing vehicle frontal area, which can be 
achieved by passive or active aerodynamic technologies. Passive 
aerodynamics refers to aerodynamic attributes that are inherent to the 
shape and size of the vehicle. Passive attributes can include the shape 
of the hood, the angle of the windscreen, or even overall vehicle ride 
height. Active aerodynamics refers to technologies that variably deploy 
in response to driving conditions. Example of active aerodynamic 
technologies are grille shutters, active air dams, and active ride 
height adjustment. Manufacturers may employ both passive and active 
aerodynamic technologies to improve aerodynamic drag values.
    There are four levels of aerodynamic improvement (over AERO0, the 
first level) available in the LD analysis (AERO5, AERO10, AERO15, 
AERO20), and two levels of improvements available for the HDPUV 
analysis (AERO10, AERO20). There are fewer levels available for the 
HDPUV analysis because HDPUVs have less diversity in overall vehicle 
shape; prioritization of vehicle functionality forces a boxy shape and 
limits incorporation of many of the ``shaping''-based aerodynamic 
technologies, such as smaller side-view mirrors, body air flow, rear 
diffusers, and so on. Refer back to Figure III-7 and Figure III-8 for a 
visual of each body style considered in the LD and HDPUV analyses.
    Each AERO level associates with 5, 10, 15, or 20 percent 
aerodynamic drag

[[Page 52656]]

improvement values over a reference value computed for each vehicle 
body style. These levels, or bins, respectively correspond to the level 
of aerodynamic drag reduction over the reference value, e.g., ``AERO5'' 
corresponds to the 5 percent aerodynamic drag improvement value over 
the reference value, and so on. While each level of aerodynamic drag 
improvement is technology agnostic--that is, manufacturers can 
ultimately choose how to reach each level by using whatever 
technologies work for the vehicle--we estimated a pathway to each 
technology level based on data from an NRC Canada-sponsored wind tunnel 
testing program. The program included an extensive review of production 
vehicles utilizing aerodynamic drag improvement technologies, and 
industry comments.\612\ Our example pathways for achieving each level 
of aerodynamic drag improvements is discussed in Chapter 3.5 of the 
TSD.
---------------------------------------------------------------------------

    \612\ Larose, G. et al. 2016. Evaluation of the Aerodynamics of 
Drag Reduction Technologies for Light-duty Vehicles--a Comprehensive 
Wind Tunnel Study. SAE International Journal of Passenger Cars--
Mechanical Systems. Vol.9(2): at 772-784. Available at: https://doi.org/10.4271/2016-01-1613. (Accessed: May 31, 2023).
---------------------------------------------------------------------------

    We assigned aerodynamic drag reduction technology levels in the 
analysis fleets based on vehicle body styles.\613\ We computed an 
average coefficient of drag based on vehicle body styles, using 
coefficient of drag data from the MY 2015 analysis fleet for the LD 
analysis, and data from the MY 2019 Chevy Silverado and MY 2020 Ford 
Transit and the MY 2022 Ford e-Transit for cargo vans for the HDPUV 
analysis. Different body styles offer different utility and have 
varying levels of form drag. This analysis considers both frontal area 
and body style as unchangeable utility factors affecting aerodynamic 
forces; therefore, the analysis assumes all reduction in aerodynamic 
drag forces come from improvement in the drag coefficient. Then we used 
drag coefficients for each vehicle in the analysis fleet to establish 
an initial aerodynamic technology level for each vehicle. We compared 
the vehicle's drag coefficient to the calculated drag coefficient by 
body style mentioned above, to assign initial levels of aerodynamic 
drag reduction technology to vehicles in the analysis fleets. We were 
able to find most vehicles' drag coefficients in manufacturer's 
publicly available specification sheets; however, in cases where we 
could not find that information, we used engineering judgment to assign 
the initial technology level.
---------------------------------------------------------------------------

    \613\ These assignments do not necessarily match the body styles 
that manufacturers use for marketing purposes. Instead, we make 
these assignments based on engineering judgment and the categories 
used in our modeling, considering how this affects a vehicle's AERO 
and vehicle technology class assignments.
---------------------------------------------------------------------------

    We also looked at vehicle body style and vehicle horsepower to 
determine which types of vehicles can adopt different aerodynamic 
technology levels. For the LD analysis, AERO15 and AERO20 cannot be 
applied to minivans, and AERO20 cannot be applied to convertibles, 
pickup trucks, and wagons. We also did not allow application of AERO15 
and AERO20 technology to vehicles with more than 780 horsepower. There 
are two main types of vehicles that inform this threshold: performance 
ICE vehicles and high-power BEVs. In the case of the former, we 
recognize that manufacturers tune aerodynamic features on these 
vehicles to provide desirable downforce at high speeds and to provide 
sufficient cooling for the powertrain, rather than reducing drag, 
resulting in middling drag coefficients despite advanced aerodynamic 
features. Therefore, manufacturers may have limited ability to improve 
aerodynamic drag coefficients for high performance vehicles with ICEs 
without reducing horsepower. Only 4,047 units of sales volume in the 
analysis fleet include limited application of aerodynamic technologies 
due to ICE vehicle performance.\614\
---------------------------------------------------------------------------

    \614\ See the Market Data Input File.
---------------------------------------------------------------------------

    In the case of high-power BEVs, the 780-horsepower threshold is set 
above the highest peak system horsepower present on a BEV in the 2020 
fleet. We originally set this threshold based on vehicles in the MY 
2020 fleet in parallel with the 780-horsepower ICE limitation. For this 
analysis, the restriction does not have any functional effect because 
the only BEVs that have above 780-horsepower in the MY 2022 analysis 
fleet--the Tesla Model S and X Plaid, and variants of the Lucid Air--
are already assigned AERO20 as an initial technology state and there 
are no additional levels of AERO technology left for those vehicles to 
adopt. Note that these high horsepower BEVs have extremely large 
battery packs to meet both performance and range requirements. These 
bigger battery packs make the vehicles heavier, which means they do not 
have the same downforce requirements as a similarly situated high-
horsepower ICE vehicle. Broadly speaking, BEVs have different 
aerodynamic behavior and considerations than ICE vehicles, allowing for 
features such as flat underbodies that significantly reduce drag.\615\ 
BEVs are therefore more likely to achieve higher AERO levels, so the 
horsepower threshold is set high enough that it does not restrict 
AERO15 and AERO20 application. BEVs that do not currently use high AERO 
technology levels are generally bulkier (e.g., SUVs or trucks) or lower 
budget vehicles.
---------------------------------------------------------------------------

    \615\ 2020 EPA Automotive Trends Report, at 227.
---------------------------------------------------------------------------

    There are no additional adoption features for aerodynamic 
improvement technologies in the HDPUV analysis. We limited the range of 
technology options for reasons discussed above, but both AERO 
technology levels are available to all HDPUV body styles.
    The aerodynamic technology effectiveness values that show the 
potential fuel consumption improvement from AERO0 technology are found 
and discussed in Chapter 3.5.4 of the TSD. For example, the AERO20 
values shown represent the range of potential fuel consumption 
improvement values that could be achieved through the replacement of 
AERO0 technology with AERO20 technology for every technology key that 
is not restricted from using AERO20. We use the change in fuel 
consumption values between entire technology keys and not the 
individual technology effectiveness values. Using the change between 
whole technology keys captures the complementary or non-complementary 
interactions among technologies.
    We carried forward the established AERO technology costs previously 
used in the 2020 final rule and again into the MY 2024-2026 standards 
analysis,\616\ and updated those costs to the dollar-year used in this 
analysis. For LD AERO improvements, the cost to achieve AERO5 is 
relatively low, as manufacturers can make most of the improvements 
through body styling changes. The cost to achieve AERO10 is higher than 
AERO5, due to the addition of several passive aerodynamic technologies, 
and consecutively the cost to achieve AERO15 and AERO20 are much higher 
than AERO10 due to use of both passive and active aerodynamic 
technologies. The two AERO technology levels available for HDPUVs are 
similar in technology type and application to LDVs in the same 
technology categories, specifically light trucks. Because of this 
similarity, and unlike other technology areas that are required to 
handle higher loads or greater wear, aerodynamics technologies can be 
almost directly ported between fleets. As a result, there is no 
difference in technology cost

[[Page 52657]]

between LD and HDPUV fleets for this analysis. The cost estimates are 
based on CBI submitted by the automotive industry in advance of the 
2018 CAFE NPRM, and on our assessment of manufacturing costs for 
specific aerodynamic technologies. See the 2018 FRIA for discussion of 
the cost estimates.\617\ We received no additional comments from 
stakeholders regarding the costs established in the 2018 FRIA during 
the MY 2024-2026 standards analysis and continued to use the 
established costs for this analysis. TSD Chapter 3.5 contains 
additional discussion of aerodynamic improvement technology costs, and 
costs for all technology classes across all MYs are in the CAFE Model's 
Technologies Input File. We received no additional comments on 
aerodynamics technologies and costs and continue to use the established 
costs for this final rule analysis.
---------------------------------------------------------------------------

    \616\ See the FRIA accompanying the 2020 final rule, Chapter 
VI.C.5.e.
    \617\ See the PRIA accompanying the 2018 NPRM, Chapter 
6.3.10.1.2.1.2 for a discussion of these cost estimates.
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c. Low Rolling Resistance Tires
    Tire rolling resistance burns additional fuel when driving. As a 
car or truck tire rolls, at the point the tread touches the pavement, 
the tire flattens-out to create what tire engineers call the contact 
patch. The rubber in the contact patch deforms to mold to the tiny 
peaks and valleys of the payment. The interlock between the rubber and 
these tiny peaks and valleys creates grip. Every time the contact patch 
leaves the road surface as the tire rotates, it must recover to its 
original shape and then as the tire goes all the way around it must 
create a new contact patch that molds to a new piece of road surface. 
However, this molding and repeated re-molding action takes energy. Just 
like when a person stretches a rubber band it takes work, so does 
deforming the rubber and the tire to form the contact patch. When 
thinking about the efficiency of driving a car down the road, this 
means that not all the energy produced by a vehicle's engine can go 
into propelling the vehicle forward. Instead, some small, but 
appreciable, amount goes into deforming the tire and creating the 
contact patch repeatedly. This also explains why tires with low 
pressure have higher rolling resistance than properly inflated tires. 
When the tire pressure is low, the tire deforms more to create the 
contact patch which is the same as stretching the rubber farther in the 
analogy above. The larger deformations burn up even more energy and 
results in worse fuel mileage. Lower-rolling-resistance tires have 
characteristics that reduce frictional losses associated with the 
energy dissipated mainly in the deformation of the tires under load, 
thereby improving fuel economy.
    We use three levels of low rolling resistance tire technology for 
LDVs and two levels for HDPUVs. Each level of low rolling resistance 
tire technology reduces rolling resistance by 10 percent from an 
industry-average rolling resistance coefficient (RRC) value of 
0.009.\618\ While the industry-average RRC is based on information from 
LDVs, we also determined that value is appropriate for HDPUVs. RRC data 
from a NHTSA-sponsored study shows that similar vehicles across the LD 
and HDPUV categories have been able to achieve similar RRC 
improvements. See Chapter 3.6 of the TSD for more information on this 
comparison. TSD Chapter 3.6.1 shows the LD and HDPUV low rolling 
resistance technology options and their associated RRC.
---------------------------------------------------------------------------

    \618\ See Technical Analysis of Vehicle Load Reduction by 
CONTROLTEC for California Air Resources Board (April 29, 2015). We 
determined the industry-average baseline RRC using a CONTROLTEC 
study prepared for the CARB, in addition to considering CBI 
submitted by vehicle manufacturers prior to the 2018 LD NPRM 
analysis. The RRC values used in this study were a combination of 
manufacturer information, estimates from coast down tests for some 
vehicles, and application of tire RRC values across other vehicles 
on the same platform. The average RRC from surveying 1,358 vehicle 
models by the CONTROLTEC study is 0.009. The CONTROLTEC study 
compared the findings of their survey with values provided by the 
U.S. Tire Manufacturers Association for original equipment tires. 
The average RRC from the data provided by the U.S. Tire 
Manufacturers Association is 0.0092, compared to the average of 
0.009 from CONTROLTEC.
---------------------------------------------------------------------------

    We have been using ROLL10 and ROLL20 in the last several CAFE Model 
analyses. New for this analysis is ROLL30 for the LD fleet. In past 
rulemakings, we did not consider ROLL30 due to lack of widespread 
commercial adoption of ROLL30 tires in the fleet within the rulemaking 
timeframe, despite commenters' argument on availability of the 
technology on current vehicle models and possibility that there would 
be additional tire improvements over the next decade.\619\ Comments we 
received during the comment period for the last CAFE rule also 
reflected the application of ROLL30 by OEMs, although they discouraged 
considering the technology due to high cost and possible wet traction 
reduction. With increasing use of ROLL30 application by OEMs,\620\ and 
material selection making it possible to design low rolling resistance 
independent of tire wet grip (discussed in detail in Chapter 3.6 of the 
TSD), we now consider ROLL30 as a viable future technology during this 
rulemaking period. We believe that the tire industry is in the process 
of moving automotive manufacturers towards higher levels of rolling 
resistance technology in the vehicle fleet. We believe that at this 
time, the emerging tire technologies that would achieve 30 percent 
improvement in rolling resistance, like changing tire profile, 
stiffening tire walls, novel synthetic rubber compounds, or adopting 
improved tires along with active chassis control, among other 
technologies, will be available for commercial adoption in the fleet 
during this rulemaking timeframe.
---------------------------------------------------------------------------

    \619\ NHTSA-2018-0067-11985.
    \620\ Docket No. NHTSA-2021-0053-0010, Evaluation of Rolling 
Resistance and Wet Grip Performance of OEM Stock Tires Obtained from 
NCAP Crash Tested Vehicles Phase One and Two, Memo to Docket--
Rolling Resistance Phase One and Two; Technical Analysis of Vehicle 
Load Reduction by CONTROLTEC for California Air Resources Board 
(April 29, 2015); NHTSA DOT HS 811 154.
---------------------------------------------------------------------------

    However, we did not consider ROLL30 for the HDPUV fleet, for 
several reasons. We do not believe that HDPUV manufacturers will use 
ROLL30 tires because of the significant added cost for the technology 
while they would see more fuel efficiency benefits from powertrain 
improvements. As discussed further below, our cost estimates for ROLL30 
technology--which incorporate both technology and materials costs--are 
approximately double the costs of ROLL20. In addition, a significant 
majority of the HDPUV fleet currently employs no low rolling resistance 
tire technology. We believe that HDPUV manufacturers will still move 
through ROLL10 and ROLL20 technology in the rulemaking timeframe. For 
the final rule, we did not receive feedback from commenters regarding 
using ROLL30 for HDPUVs. We finalized this rulemaking analysis without 
including ROLL30 for the HDPUV fleet.
    Assigning low rolling resistance tire technology to the analysis 
fleet is difficult because RRC data is not part of tire manufacturers' 
publicly released specifications, and because vehicle manufacturers 
often offer multiple wheel and tire packages for the same nameplate. 
Consistent with previous rules, we used a combination of CBI data, data 
from a NHTSA-sponsored ROLL study, and assumptions about parts-sharing 
to assign tire technology in the analysis fleet. A slight majority of 
vehicles (52.9%) in the LD analysis fleet do not use any ROLL 
improvement technology, while 16.2% of vehicles use ROLL10 and 24.9% of 
vehicles use ROLL20. Only 6% of vehicles in the LD analysis fleet use 
ROLL30. Most (74.5%) vehicles in the HDPUV analysis fleet do

[[Page 52658]]

not use any ROLL improvement technology, and 3.0% and 22.5% use ROLL10 
and ROLL20, respectively.
    The CAFE Model can apply ROLL technology at either a vehicle 
refresh or redesign. We recognize that some vehicle manufacturers 
prefer to use higher RRC tires on some performance cars and SUVs. Since 
most of performance cars have higher torque, to avoid tire slip, OEMs 
prefer to use higher RRC tires for these vehicles. Like the aerodynamic 
technology improvements discussed above, we applied ROLL technology 
adoption features based on vehicle horsepower and body style. All 
vehicles in the LD and HDPUV fleets that have below 350hp can adopt all 
levels of ROLL technology.
    TSD Chapter 3.6.3 shows that all LDVs under 350 hp can adopt ROLL 
technology, and as vehicle hp increases, fewer vehicles can adopt the 
highest levels of ROLL technology. Note that ROLL30 is not available 
for vehicles in the HDPUV fleet not because of an adoption feature, but 
because it is not included in the ROLL technology pathway.
    TSD Chapter 3.6 shows how effective the different levels of ROLL 
technology are at improving vehicle fuel consumption.
    DMCs and learning rates for ROLL10 and ROLL20 are the same as prior 
analyses,\621\ but are updated to the dollar-year used in this 
analysis. In the absence of ROLL30 DMCs from tire manufacturers, 
vehicle manufacturers, or studies, to develop the DMC for ROLL30 we 
extrapolated the DMCs for ROLL10 and ROLL20. In addition, we used the 
same DMCs for the LD and HDPUV analyses. This is because the original 
cost of a potentially heaver or sturdier HDPUV tire is already 
accounted for in the initial MSRP of a HDPUV in our analysis fleet, and 
the DMC represents the added cost of the improved tire technology. In 
addition, as discussed above, LD and HDPUV tires are often 
interchangeable. We believe that the added cost of each tire technology 
accurately represents the price difference that would be experienced by 
the different fleets. ROLL technology costs are discussed in detail in 
Chapter 3.6 of the TSD, and ROLL technology costs for all vehicle 
technology classes can be found in the CAFE Model's Technologies Input 
File. We did not receive comments on this approach used for this 
analysis and so we finalized the NPRM approach for the final rule.
---------------------------------------------------------------------------

    \621\ See NRC/NAS Special Report 286, Tires and Passenger 
Vehicle Fuel Economy: Informing Consumers, Improving Performance 
(2006); Corporate Average Fuel Economy for MY 2011 Passenger Cars 
and Light Trucks, Final Regulatory Impact Analysis (March 2009), at 
V-137; Joint Technical Support Document: Rulemaking to Establish 
Light-Duty Vehicle Greenhouse Gas Emission Standards and Corporate 
Average Fuel Economy Standards (April 2010), at 3-77; Draft 
Technical Assessment Report: Midterm Evaluation of Light-Duty 
Vehicle Greenhouse Gas Emission Standards and Corporate Average Fuel 
Economy Standards for Model Years 2022-2025 (July 2016), at 5-153 
and 154, 5-419. In brief, the estimates for ROLL10 are based on the 
incremental $5 value for four tires and a spare tire in the NAS/NRC 
Special Report and confidential manufacturer comments that provided 
a wide range of cost estimates. The estimates for ROLL20 are based 
on incremental interpolated ROLL10 costs for four tires (as NHTSA 
and EPA believed that ROLL20 technology would not be used for the 
spare tire), and were seen to be generally fairly consistent with 
CBI suggestions by tire suppliers.
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5. Simulating Air Conditioning Efficiency and Off-Cycle Technologies
    Off-cycle and AC efficiency technologies can provide fuel economy 
benefits in real-world vehicle operation, but the traditional 2-cycle 
test procedures (i.e., FTP and HFET) used to measure fuel economy 
cannot fully capture those benefits.\622\ Off-cycle technologies can 
include, but are not limited to, thermal control technologies, high-
efficiency alternators, and high-efficiency exterior lighting. As an 
example, manufacturers can claim a benefit for thermal control 
technologies like active seat ventilation and solar reflective surface 
coating, which help to regulate the temperature within the vehicle's 
cabin--making it more comfortable for the occupants and reducing the 
use of low-efficiency heating, ventilation, and air-conditioning (HVAC) 
systems. AC efficiency technologies are technologies that reduce the 
operation of or the loads on the compressor, which pressurizes AC 
refrigerant. The less the compressor operates or the more efficiently 
it operates, the less load the compressor places on the engine or 
battery storage system, resulting in better fuel efficiency. AC 
efficiency technologies can include, but are not limited to, blower 
motor controls, internal heat exchangers, and improved condensers/
evaporators.
---------------------------------------------------------------------------

    \622\ Pursuant to 49 U.S.C 32904(c), the Administrator of the 
EPA must measure fuel economy for each model and calculate average 
fuel economy for a manufacturer under testing and calculation 
procedures prescribed by the Administrator. The Administrator is 
required to use the same procedures for passenger automobiles used 
for model year 1975 (weighted 55 percent urban cycle and 45 percent 
highway cycle), or procedures that give comparable results.
---------------------------------------------------------------------------

    Vehicle manufacturers have the option to generate credits for off-
cycle technologies and improved AC systems under the EPA's 
CO2 program and receive a fuel consumption improvement value 
(FCIV) equal to the value of the benefit not captured on the 2-cycle 
test under NHTSA's CAFE program. The FCIV is not a ``credit'' in the 
NHTSA CAFE program--unlike, for example, the statutory overcompliance 
credits prescribed in 49 U.S.C. 32903--but FCIVs increase the reported 
fuel economy of a manufacturer's fleet, which is used to determine 
compliance. EPA applies FCIVs during determination of a fleet's final 
average fuel economy reported to NHTSA.\623\ We only calculate and 
apply FCIVs at a manufacturer's fleet level, and the improvement is 
based on the volume of the manufacturer's fleet that contains 
qualifying technologies.
---------------------------------------------------------------------------

    \623\ 49 U.S.C. 32904. Under EPCA, the Administrator of the EPA 
is responsible for calculating and measuring vehicle fuel economy.
---------------------------------------------------------------------------

    We currently do not model AC efficiency and off-cycle technologies 
in the CAFE Model like we model other vehicle technologies, for several 
reasons. Each time we add a technology option to the CAFE Model's 
technology pathways we increase the number of Autonomie simulations by 
approximately a hundred thousand. This means that to add just five AC 
efficiency and five off-cycle technology options would double our 
Autonomie simulations to around two million total simulations. In 
addition, 40 CFR 600.512-12 does not require manufacturers to submit 
information regarding AC efficiency and off-cycle technologies on 
individual vehicle models in their FMY reports to EPA and NHTSA.\624\ 
In their FMY reports, manufacturers are only required to provide 
information about AC efficiency and off-cycle technology application at 
the fleet level. However, starting with MY 2023, manufacturers are 
required to submit AC efficiency and off-cycle technology data to NHTSA 
in the new CAFE Projections Reporting Template for PMY, MMY and 
supplementary reports. Once we begin evaluating manufacturer 
submissions in the CAFE Projections Reporting Template we may 
reconsider how off-cycle and AC efficiency technologies are evaluated 
in future analysis. However, developing a robust methodology for 
including off-cycle and AC efficiency technologies in the analysis 
depends on manufacturers giving us robust data.
---------------------------------------------------------------------------

    \624\ 40 CFR 600.512-12.
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    Instead, the CAFE Model applies predetermined AC efficiency and 
off-cycle benefits to each manufacturer's fleet after the CAFE Model 
applies traditional technology pathway options. The CAFE Model attempts 
to apply pathway technologies and AC efficiency

[[Page 52659]]

and off-cycle technologies in a way that both minimizes cost and allows 
the manufacturer to meet a given CAFE standard without over or under 
complying. The predetermined benefits that the CAFE Model applies for 
AC efficiency and off-cycle technologies are based on EPA's 2022 Trends 
Report and CBI compliance data from vehicle manufacturers. We started 
with each manufacturer's latest reported values and extrapolated the 
values to the regulatory cap for benefits that manufacturers are 
allowed to claim, considering each manufacturer's fleet composition 
(i.e., passenger cars versus light trucks) and historic AC efficiency 
and off-cycle technology use. In general, data shows that manufacturers 
apply less off-cycle technology to passenger cars than pickup trucks, 
and our input assumptions reflect that. Additional details about how we 
determined AC efficiency and off-cycle technology application rates are 
discussed Chapter 3.7 of the TSD.
    New for this rulemaking cycle, we also developed a methodology for 
considering BEV AC efficiency and off-cycle technology application when 
estimating the maximum achievable credit values for each manufacturer. 
We did this because the analytical ``no-action'' reference baseline 
against which we measure the costs and benefits of our standards 
includes an appreciable number of BEVs. Because BEVs are not equipped 
with a traditional engine or transmission, they cannot benefit from 
off-cycle technologies like engine idle start-stop, active transmission 
and engine warm-up, and high efficiency alternator technologies. 
However, BEVs still benefit from technologies like high efficiency 
lighting, solar panels, active aerodynamic improvement technologies, 
and thermal control technologies. We calculated the maximum off-cycle 
benefit that the model could apply for each manufacturer and each MY 
based on off-cycle technologies that could be applied to BEVs and the 
percentage of BEVs in each manufacturer's fleet. Note that we do not 
include PHEVs in this calculation, because they still use a 
conventional ICE and manufacturers are not required to report UF 
estimates for individual vehicles, which would have made partial 
estimation for off-cycle and AC efficiency benefits at the fleet level 
very difficult. However, we do think that this is reasonable because 
PHEVs overall constitute less than 2% of the current fleet and the off-
cycle and AC efficiency FCIVs for those vehicles only receive a 
fractional benefit.\625\ We discuss additional details and assumptions 
for this calculation in Chapter 3.7 of the Final TSD.
---------------------------------------------------------------------------

    \625\ For example, if UF of a PHEV is esitmated oepration to be 
30% ICE and 70% electric than the benefit of Off-cycle and AC 
efficiecny would only apply to the ICE portiona only.
---------------------------------------------------------------------------

    Note also that we do not model AC efficiency and off-cycle 
technology benefits for HDPUVs. We have received petitions for off-
cycle benefits for HDPUVs from manufacturers, but to date, none have 
been approved.
    Because the CAFE Model applies AC efficiency and off-cycle 
technology benefits independent of the technology pathways, we must 
account for the costs of those technologies independently as well. We 
generated costs for these technologies on a dollars per gram of 
CO2 per mile ($ per g/mi) basis, as AC efficiency and off-
cycle technology benefits are applied in the CAFE Model on a gram per 
mile basis (as in the regulations). For this final rule, we updated our 
AC efficiency and off-cycle technology costs by implementing an updated 
calculation methodology and converting the DMCs to 2021 dollars. The AC 
efficiency costs are based on data from EPA's 2010 Final Regulatory 
Impact Analysis (FRIA) and the 2010 and 2012 Joint NHTSA/EPA 
TSDs.626 627 628 We used data from EPA's 2016 Proposed 
Determination TSD \629\ to develop the updated off-cycle costs that 
were used for the 2022 final rule and now this final rule. Additional 
details and assumptions used for AC efficiency and off-cycle costs are 
discussed in Chapter 3.7.2 of the Final TSD.
---------------------------------------------------------------------------

    \626\ Final Rulemaking to Establish Light-Duty Vehicle 
Greenhouse Gas Emission Standards and Corporate Average Fuel Economy 
Standards Regulatory Impact Analysis for MYs 2012-2016.
    \627\ Final Rulemaking to Establish Light-Duty Vehicle 
Greenhouse Gas Emission Standards and Corporate Average Fuel Economy 
Standards Joint Technical Support Document for MYs 2012-2016.
    \628\ Joint Technical Support Document: Final Rulemaking for 
2017-2025 Light-Duty Vehicle Greenhouse Gas Emission Standards and 
Corporate Average Fuel Economy Standards.
    \629\ Proposed Determination on the Appropriateness of the Model 
Year 2022-2025 Light-Duty Vehicle Greenhouse Gas Emissions Standards 
under the Midterm Evaluation: Technical Support Document.
---------------------------------------------------------------------------

    We received limited comments on how we model off-cycle and AC 
efficiency FCIVs for this rulemaking analysis.630 631 
Mitsubishi commented that the differences between NHTSA and EPA's 
proposed rules, ``would force manufacturers to choose between applying 
off-cycle technologies that only apply to the CAFE standard or on-cycle 
technologies--which are potentially more expensive--that would apply to 
both the GHG and CAFE standards. NHTSA should model the effects of the 
EPA GHG proposal on the adoption of off-cycle technology to avoid 
overestimating the industry's ability to comply, and underestimating 
the cost of compliance.'' The Alliance commented that ``for MYs 2023 
through 2026 the limit is 15 g/mile on . . . passenger car and trucks 
fleets. For all other years it is currently 10 g/mile. NHTSA's modeling 
of off-cycle credits frequently exceeds the 10 g/mile cap in MYs 2027 
and later. Assuming NHTSA intends manufacturers to follow the caps 
defined by EPA, it should correct its modeling so that off-cycle 
credits are limited to the capped amount.''
---------------------------------------------------------------------------

    \630\ Mitsubishi, Docket No. NHTSA-2023-0022-61637.
    \631\ The Alliance, Docket No. NHTSA-2023-0022-60652-A3.
---------------------------------------------------------------------------

    We agree with Mitsubishi's comment that differences between the 
proposed changes to our off-cycle program and EPA's proposed changes to 
its program could make it difficult for manufacturers to select which 
off-cycle technologies to place on the vehicles in their compliance 
fleets. We also agree with the Alliance that, in our modeling for the 
NPRM, the off-cycle caps exceeded the limits established in the 
regulation. For this final rule, to align with EPA, NHTSA has changed 
its proposed limit on the number of off-cycle FCIVs available to 
manufacturers in MYs 2027 through 2050 in our modeling. For passenger 
cars powered by an internal combustion engine, we changed the off-cycle 
FCIV limit from 10.0 g/mi in MYs 2030 through 2050 to 8.0 g/mi in MY 
2031, 6.0 g/mi in MY 2032, and 0 g/mi in MYs 2033 through 2050. For 
light trucks powered by an internal combustion engine, we changed the 
off-cycle FCIV limit from 15.0 g/mi in MYs 2027 through 2050 to 10.0 g/
mi in MYs 2027 through 2030, 8.0 g/mi in MY 2031, 6.0 g/mi in MY 2032, 
and 0 g/mi in MYs 2033 through 2050. Starting in MY 2027, BEVs will no 
longer be eligible for off-cycle FCIVs in the CAFE program. To 
facilitate this, we set the off-cycle FCIV limit for BEVs in both the 
passenger car and light truck regulatory categories to 0 g/mi for MYs 
2027 through 2050.
    The Alliance also commented that NHTSA proposed to eliminate AC 
efficiency FCIVs for BEVs beginning in MY 2027 but allowed the credit 
caps set prior to MY 2027 to be carried forward through MY 2050. They 
stated that if NHTSA finalizes its proposal to eliminate AC efficiency 
FCIVs for BEVs, it should adjust its modeling to reflect that.
    We agree with the commenter that, in our proposal, we did not model 
the elimination of AC efficiency FCIVs for

[[Page 52660]]

BEVs in MYs 2027 through 2050. However, we have corrected this error in 
our modeling for the final rule. Starting in MY 2027, BEVs will no 
longer be eligible for AC efficiency FCIVs in the CAFE program. To 
facilitate this, we set the AC efficiency credit limit for BEVs in both 
the passenger car and light truck regulatory categories to 0 g/mi for 
MYs 2027 through 2050 in our modeling.

E. Consumer Responses to Manufacturer Compliance Strategies

    Previous subsections of Section III have so far discussed how 
manufacturers might respond to changes in the standards. While the 
technology analysis outlined different compliance strategies available 
to manufacturers, the tangible costs and benefits that accrue because 
of the standards also depend on how consumers respond to manufacturers 
decisions. Some of the benefits and costs resulting from changes to 
standards are private benefits that accrue to the buyers of new 
vehicles, produced in the MYs under consideration. These benefits and 
costs largely flow from changes to vehicle ownership and operating 
costs that result from improved fuel economy, and the costs of the 
technologies required to achieve those improvements. The remaining 
benefits are also derived from how consumers use--or do not use--
vehicles, but because these are experienced by the broader public 
rather than borne directly by consumers who purchase and drive new 
vehicles, we categorize these as ``external'' benefits even when they 
do not meet the formal economic definition of externalities. The next 
few subsections outline how the agency's analysis models consumers' 
responses to changes in vehicles implemented by manufacturers to 
respond to the CAFE and HDPUV standards.
1. Macroeconomic and Consumer Behavior Assumptions
    Most economic effects of the new standards this final rule 
establishes are influenced by macroeconomic conditions that are outside 
the agency's influence. For example, fuel prices are mainly determined 
by global petroleum supply and demand, yet they partially determine how 
much fuel efficiency-improving technology U.S. manufacturers will apply 
to their vehicles, how much more consumers are willing to pay to 
purchase models offering higher fuel economy or efficiency, how much 
buyers decide to drive them, and the value of each gallon of fuel saved 
from higher standards. Constructing these forecasts requires robust 
projections of demographic and macroeconomic variables that span the 
full timeframe of the analysis, including real GDP, consumer 
confidence, U.S. population, and real disposable personal income.
    The analysis presented with this final rule employs fuel price 
forecasts developed by the U.S. Energy Information Administration 
(EIA), an agency within the U.S. DOE which collects, analyzes, and 
disseminates independent and impartial energy information to promote 
sound policymaking and public understanding of energy and its 
interaction with the economy and the environment. EIA uses its National 
Energy Modeling System (NEMS) to produce its Annual Energy Outlook 
(AEO), which presents forecasts of future fuel prices among many other 
economic and energy-related variables, and these are the source of some 
inputs to the agency's analysis. NHTSA noted in its proposal that it 
was considering updating the inputs used to analyze this final rule to 
include projections from the 2023 AEO for its final rule, and the 
California Attorney General and others commented that NHTSA should make 
this change. The agency's analysis of this final rule uses the 2023 EIA 
AEO's forecasts of U.S. population, GDP, disposable personal income, 
GDP deflator, fuel prices and electricity prices.\632\
---------------------------------------------------------------------------

    \632\ States and Cities, Docket No. NHTSA-2023-0022-61904, at 
27.
---------------------------------------------------------------------------

    The analysis also relies on S&P Global's forecasts of total the 
number of U.S. households, and the University of Michigan's Consumer 
Confidence Index from its annual Global Economic Outlook, which EIA 
also uses to develop the projections it reports in its AEO.
    While these macroeconomic assumptions are important inputs to the 
analysis, they are also uncertain, particularly over the long lifetimes 
of the vehicles affected by this final rule. To reflect the effects of 
this uncertainty, the agency also uses forecasts of fuel prices from 
AEO's Low Oil Price and High Oil Price side cases to analyze the 
sensitivity of its analysis to alternative fuel price projections. The 
purpose of the sensitivity analyses, discussed in greater detail in 
Chapter 9 of the FRIA, is to measure the degree to which important 
outcomes can change under different assumptions about fuel prices. 
NHTSA similarly uses low and high growth cases from the AEO as bounding 
cases for the macroeconomic variables in its analysis.
    Some commenters argued that electricity prices charged to users of 
public charging stations are somewhat higher on average than the 
residential rates in AEO 2023.\633\ NHTSA expects that at-home charging 
will continue to be the primary charging method, and thus residential 
electricity rates are the most representative electricity prices to use 
in our analysis, and the CAFE Model as currently constructed cannot 
differentiate between residential and public charging.
---------------------------------------------------------------------------

    \633\ NATSO et al., Docket No. NHTSA-2023-0022-61070, at 7-8.
---------------------------------------------------------------------------

    The first year included in this analysis is model year 2022, and 
data for that year represent actual observations rather than forecasts 
to the extent possible. The projected macroeconomic inputs used in this 
analysis as well as the forecasts that depend on them--aggregate demand 
for driving, new vehicle sales, and used vehicle retirement rates--
reflect a continued return to pre-pandemic growth rates under all 
regulatory alternatives. See Chapter 4.1 of the TSD for a more complete 
discussion of the macroeconomic forecasts and assumptions used in this 
analysis.
    Another key assumption that permeates the agency's analysis is how 
much consumers are willing to pay for improved fuel economy. Increased 
fuel economy offers vehicle owners savings through reduced fuel 
expenditures throughout the lifetime of a vehicle. If buyers fully 
value the savings in fuel costs that result from driving (and 
potentially re-selling) vehicles with higher fuel economy, and 
manufacturers supply all improvements in fuel economy that buyers 
demand, then market-determined levels of fuel economy would reflect 
both the cost of improving it and the private benefits from doing so. 
In that case, regulations on fuel economy would only be necessary to 
reflect environmental or other benefits not experienced by buyers 
themselves. But if consumers instead undervalue future fuel savings or 
appear unwilling to purchase cost-minimizing levels of fuel economy for 
other reasons, manufacturers would spend too little on fuel-saving 
technology (or deploy its energy-saving benefits to improve vehicles' 
other attributes). In that case, more stringent fuel economy standards 
could lead manufacturers to make improvements in fuel economy that not 
only reduce external costs from producing and consuming fuel, but also 
improve consumer welfare.
    Increased fuel economy offers vehicle owners significant potential 
savings. The analysis shows that the value of prospective fuel savings 
exceeds manufacturers' technology costs to comply with the preferred 
alternatives

[[Page 52661]]

for each regulatory class when discounted at 3 percent. It seems 
reasonable to assume that well-informed vehicle shoppers who do not 
face time constraints or other barriers to economically rational 
decision-making will recognize the full value of fuel savings from 
purchasing a model that offers higher fuel economy, since they would be 
compensated with an equivalent increase in their disposable income and 
the other consumption opportunities it affords them. For commercial 
operators, higher fuel efficiency and the reduced fuel costs it 
provides would free up additional capital for either higher profits or 
additional business ventures. If consumers did value the full amount of 
fuel savings, more fuel-efficient vehicles would functionally be less 
costly for consumers to own when considering both their purchase prices 
and subsequent operating costs, thus making the models that 
manufacturers are likely to offer under stricter alternatives more 
attractive than those available under the No-Action Alternative.
    Recent econometric research is inconclusive. Some studies conclude 
that consumers value most or all of the potential savings in fuel costs 
from driving higher-mpg vehicles, and others conclude that consumers 
significantly undervalue expected fuel savings. More circumstantial 
evidence appears to show that consumers do not fully value the expected 
lifetime fuel savings from purchasing higher-mpg models. Although the 
average fuel economy of new light vehicles reached an all-time high in 
MY 2021 of 25.4 mpg,\634\ this is still significantly below the fuel 
economy of the fleet's most efficient vehicles that are readily 
available to consumers.\635\ Manufacturers have repeatedly informed the 
agency that consumers only value between 2 to 3 years of fuel savings 
when choosing among competing models to purchase.
---------------------------------------------------------------------------

    \634\ See EPA 2022 Automotive Trends Report at 5. Available at 
https://www.epa.gov/system/files/documents/2022-12/420r22029.pdf. 
(Accessed: Feb. 27, 2024).
    \635\ Id. at 9.
---------------------------------------------------------------------------

    The potential for buyers to forego improvements in fuel economy 
that appear to offer future savings exceeding their initial costs is 
one example of what is often termed the ``energy paradox'' or ``energy-
efficiency gap.'' This appearance of a gap between the level of energy 
efficiency that would minimize consumers' overall expenses and the 
level they choose to purchase is typically based on engineering 
calculations that compare the initial cost for providing higher energy 
efficiency to the discounted present value of the resulting savings in 
future energy costs. There has long been an active debate about whether 
such a gap actually exists and why it might arise. Economic theory 
predicts, assuming perfect information and absent market failures, that 
economically rational individuals will purchase more energy-efficient 
products only if the savings in future energy costs they offer promise 
to offset their higher initial purchase cost.
    However, the field of behavioral economics has documented 
situations in which the decision-making of consumers can differ from 
what the standard model of rational consumer behavior predicts, 
particularly when the choices facing consumers involve uncertain 
outcomes.\636\ The future value of purchasing a vehicle that offers 
higher fuel economy is inherently uncertain for many reasons, but 
particularly because the mileage any particular driver experiences will 
differ from that shown on fuel economy labels, potential buyers may be 
uncertain how much they will actually drive a new vehicle, future 
resale prices may be unpredictable, and future fuel prices are highly 
uncertain. Recent research indicates that some consumers exhibit 
several departures from purely rational economic behavior, some of 
which could account for undervaluation of fuel economy to an extent 
roughly consistent with the agency's assumed 30-month payback rule. 
These include valuing potential losses more than potential gains of 
equal value when faced with an uncertain choice (``loss aversion''), 
the tendency to apply discount rates that decrease over time (``present 
bias,'' also known as hyperbolic discounting), a preference for choices 
with certain rather than uncertain outcomes (``certainty bias''), and 
inattention or ``satisficing.'' \637\
---------------------------------------------------------------------------

    \636\ E.g. Dellavigna, S. 2009. Psychology and Economics: 
Evidence from the Field. Journal of Economic Literature. 47(2): at 
315-372.
    \637\ Satisficing is when a consumer finds a solution that meets 
enough of their requirements instead of searching for a vehicle that 
optimizes their utility.
---------------------------------------------------------------------------

    There are also a variety of more conventional explanations for why 
consumers might not be willing to pay the cost of improvements in fuel 
efficiency that deliver net savings, including informational 
asymmetries among consumers, dealerships, and manufacturers; market 
power; first-mover disadvantages for both consumers and manufacturers; 
principal-agent problems that create differences between the incentives 
of vehicle purchasers and vehicle drivers; and positional 
externalities.\638\
---------------------------------------------------------------------------

    \638\ For a discussion of these potential market failures, see 
Rothschild, R., Schwartz, J. 2021. Tune Up: Fixing Market Failures 
to Cut Fuel Costs and Pollution from Cars and Trucks. IPI. New York 
University School of Law.
---------------------------------------------------------------------------

    The proposal assumed that potential buyers value only the 
undiscounted savings in fuel costs from purchasing a higher-mpg model 
they expect to realize over the first 30 months (i.e., 2.5 years) they 
own it. NHTSA sought comment on the 30-month payback period assumption 
in its proposal. IPI agreed with NHTSA's choice to include the energy 
efficiency gap as a potential cause for why consumers may not fully 
value fuel savings in their purchase decisions.\639\ IPI also suggested 
that NHTSA's discussion of the energy efficiency gap omitted relevant 
findings from the literature and expressed undue uncertainty regarding 
the existence of the gap. Consumer Reports suggested that NHTSA should 
continue to rely on a shorter payback period when modeling how much 
fuel savings manufacturers believe consumers will value but use a 
longer payback period to represent consumers preferences.
---------------------------------------------------------------------------

    \639\ IPI, Docket No. NHTSA-2023-0022-60485, at. 2, 31-32.
---------------------------------------------------------------------------

    Valero commented and suggested that NHTSA's 30-month payback 
assumption is ``unsupported,'' and that in the proposal's No-Action 
case a large number of vehicle models were converted to BEVs with 
payback periods longer than 30 months.\640\ The Center for 
Environmental Accountability suggested that manufacturers have not 
supported the 30-month payback period and have instead stated that 
consumers do not display any myopic tendencies. They suggested NHTSA 
should switch from a 30-month assumption to a more conservative and 
longer payback period and pointed towards the lower net benefits found 
in the proposal's 60-month payback period sensitivity case as evidence 
that this would lower net benefits from the preferred alternative, in 
some cases causing them to become negative.\641\
---------------------------------------------------------------------------

    \640\ Valero, Docket No. NHTSA-2023-0022-58547, at 10.
    \641\ CEA, Docket No. NHTSA-2023-0022-61918, at 18.
---------------------------------------------------------------------------

    Although commenters expressed dissatisfaction with NHTSA's 
assumption and proposed various alternatives to it, NHTSA ultimately 
decided to continue using its methodology from the proposal in its 
final rule analysis. In preparation for the final rule, NHTSA updated 
its review of research on the energy efficiency gap, concluding that 
estimates of how

[[Page 52662]]

consumers value fuel savings reported in recent published literature 
continue to show a wide range, and updated its discussion of this topic 
in Chapter 2.4 of the FRIA to reflect this finding. While survey data 
like the results that Consumer Reports submitted are suggestive of a 
broad appeal for fuel savings among consumers, they represent the 
stated preferences of respondents for some increased level of fuel 
economy and may not accurately describe their actual purchasing 
behavior when faced with the range of fuel economy levels in today's 
new vehicle market. In fact, previous surveys performed by Consumer 
Reports show that a significantly smaller fraction--29%--of those who 
are willing to pay for increased fuel economy would be willing to pay 
for improvements that required longer than 3 years to repay the higher 
costs of purchasing models that offered them, with the average consumer 
willing to pay only for fuel economy improvements that recouped their 
upfront costs within 2 to 3 years.\642\
---------------------------------------------------------------------------

    \642\ See 87 FR 25856. NHTSA notes that Consumer Reports has 
seemingly discountiued reporting this statistic in the report 
accompanying their comment to the proposal.
---------------------------------------------------------------------------

    In response to Valero and the Center for Environmental 
accountability, NHTSA disagrees that its methodology is unsupported. 
This assumption is based on what manufacturers have told NHTSA they 
believe to be consumers' willingness to pay, and this belief is 
ultimately what determines the amount of technology that manufacturers 
will freely adopt. The Center for Environmental Accountability seems to 
misconstrue comments submitted by the Alliance to the revised Circular 
A-4 proposal, which explores the possibility that consumers value most 
if not all fuel savings at higher personal discount rates. The 
Alliance's comment to OMB mirrors the language included in the 
proposal's TSD, and as the agency found in the proposal and again for 
this final rule, is not incongruent with the 30-month payback 
assumption, as explained in Chapter 2.4 of the FRIA. The Alliance's 
comment to OMB also cites a recent paper by Leard (2023) which found 
higher willingness to pay for fuel economy improvements. NHTSA 
considered and referenced this same paper alongside other recent 
research in its own evaluation of the literature in the proposal and in 
the final rule. Furthermore, the Alliance has traditionally supported a 
30-month payback assumption for the central analysis.\643\
---------------------------------------------------------------------------

    \643\ See 87 FR 25856.
---------------------------------------------------------------------------

    NHTSA did not choose to adopt separate assumptions about consumer 
willingness to pay for fuel savings in its sales and technology modules 
for the final rule. As profit maximizing firms, manufacturers have a 
strong interest in producing vehicles with the attributes that 
consumers will most value. Indeed, the EPA trends report finds that in 
2022 the 90th percentile real-world fuel economy for the fleet of new 
vehicles was over 3 times the median value.\644\ If fuel economy was 
valued by consumers at a significantly higher rate than manufacturers 
believe that they value it, then presumably these high fuel economy 
vehicles would have severe excess demand and inventory for them would 
be incredibly scarce, which NHTSA does not observe in the data.\645\ 
NHTSA would need more compelling evidence about the market failures 
that would lead manufacturers to consistently incorrectly assess the 
willingness to pay of consumers for fuel savings. NHTSA believes that 
without such evidence, the approach from the proposal is a more 
reasonable method for modeling this variable.
---------------------------------------------------------------------------

    \644\ See EPA Automotive Trends Report, Available at: https://www.epa.gov/automotive-trends/explore-automotive-trends-data#DetailedData, (Accessed: April 12, 2024).
    \645\ See Cox Automotive, ``New-vehicle inventory surpasses 2.5 
million units, 71 days' supply'', December 14, 2023, available at: 
https://www.coxautoinc.com/market-insights/new-vehicle-inventory-november-2023/, (Accessed: April 12, 2024).
---------------------------------------------------------------------------

    The 30-month payback period assumption also has important 
implications for other results of our regulatory analysis, including 
the effect of raising standards on sales and use of new vehicles, the 
number and use of older vehicles, safety, and emissions of air 
pollutants. Recognizing the consequences of these effects for our 
regulatory analysis, NHTSA also includes a handful of sensitivity cases 
to examine the impacts of longer and shorter payback periods on its 
outcomes. These concepts are explored more thoroughly in Chapter 
4.2.1.1 of the TSD and Chapter 2.4 of the FRIA.
    It is possible that buyers of vehicles used in commercial or 
business enterprises, who presumably act as profit-maximizing entities, 
could value tradeoffs between long-term fuel savings and initial 
purchase prices differently than the average non-commercial consumer. 
However, both commercial and non-commercial consumers face their own 
sources of uncertainty or other constraints that may prevent them from 
purchasing levels of fuel efficiency that maximize their private net 
benefits. Additionally, the CAFE Model is unable to distinguish between 
these two types of purchasers. Given this constraint, NHTSA believes 
that using the same payback period for the HDPUV fleet as for the LD 
fleet continues to make sense. Similar to the light-duty analysis, the 
agency is including several sensitivity cases testing alternative 
payback assumptions for HDPUVs. One commenter noted that switching to a 
60-month payback period in its sensitivity case caused net benefits to 
become negative.\646\ NHTSA acknowledged the sensitivity of this result 
in the proposal but believes that for the reasons noted above, that a 
30 month payback period is still a better supported choice for 
modelling HDPUV buyers' payback period within the constraints of the 
CAFE Model.
---------------------------------------------------------------------------

    \646\ CEA, Docket No. NHTSA-2023-0022-61918, at 18.
---------------------------------------------------------------------------

2. Fleet Composition
    The composition of the on-road fleet--and how it changes in 
response to establishing higher CAFE and fuel efficiency standards--
determines many of the costs and benefits of the final rule. For 
example, how much fuel the LD fleet consumes depends on the number and 
efficiency of new vehicles sold, how rapidly older (and less efficient) 
vehicles are retired, and how much the vehicles of each age that remain 
in use are driven.
    Until the 2020 final rule, previous CAFE rulemaking analyses used 
static fleet forecasts that were based on a combination of manufacturer 
compliance data, public data sources, and proprietary forecasts (or 
product plans submitted by manufacturers). When simulating compliance 
with regulatory alternatives, those analyses projected identical sales 
and retirements for each manufacturer and model under every regulatory 
alternative. Exactly the same number of each model was assumed to be 
sold in a given MY under both the least stringent alternative 
(typically the reference baseline) and the most stringent alternative 
considered (intended to represent ``maximum technology'' scenarios in 
some cases).
    However, a static fleet forecast is unlikely to be representative 
of a broad set of regulatory alternatives that feature significant 
variation in prices and fuel economy levels for new vehicles. Several 
commenters on previous regulatory actions and peer reviewers of the 
CAFE Model encouraged NHTSA to consider the potential impact of fuel 
efficiency standards on new vehicle prices and sales, the changes to 
compliance strategies that those shifts

[[Page 52663]]

could necessitate, and the accompanying impact on vehicle retirement 
rates. In particular, the continued growth of the utility vehicle 
segment causes changes within some manufacturers' fleets as sales 
volumes shift from one region of the footprint curve to another, or as 
mass is added to increase the ride height of a vehicle originally 
designed on a sedan platform to create a crossover utility vehicle with 
the same footprint as the sedan on which it is based.
    The analysis accompanying this final rule, like the 2020 and 2022 
rulemakings, dynamically simulates changes in the vehicle fleet's size, 
composition, and usage as manufacturers and consumers respond to 
regulatory alternatives, fuel prices, and macroeconomic conditions. The 
analysis of fleet composition is comprised of two forces: how sales of 
new vehicles and their integration into the existing fleet change in 
response to each regulatory alternative, and the influence of economic 
and regulatory factors on retirement of used vehicles from the fleet 
(or scrappage). Below are brief descriptions of how the agency models 
sales and scrappage; for full explanations, readers should refer to 
Chapter 4.2 of the TSD.
    A number of commenters argued that future demand for BEVs is likely 
to be weaker than assumed by the agency and that the agency's approach 
to forecasting sales should account for the possibility of BEV adoption 
causing the total number of new vehicles sales to drop. These 
commenters theorize that buyers' skepticism towards new technology, the 
limited driving range of most current BEVs, lack of charging 
infrastructure, uncertainty over battery life and resale value, and 
generally higher purchase prices will combine to hamper BEV sales. 
Commenters similarly argued that even if consumers do purchase BEVs, 
they will drive fewer miles because of limited charging infrastructure.
    Within the CAFE Model's logic, there is an implicit assumption that 
new vehicle models within the same vehicle class (e.g., passenger cars 
v. light trucks) are close substitutes for one another, including 
vehicles with differing powertrains.\647\ NHTSA recognizes that 
different vehicle attributes may change a vehicle's utility and NHTSA 
has implemented several safeguards to prevent the CAFE Model from 
adopting technologies for fuel economy that could adversely affect the 
utility of vehicles, such as maintaining performance neutrality, 
including phase-in caps, and using engineering judgment in defining 
technology pathways. The agency further considers that even with these 
safeguards in place, there is a potential that vehicles could have been 
improved in ways that would have further increased consumer utility in 
the absence of standards.
---------------------------------------------------------------------------

    \647\ The CAFE Model does not assign different preferences 
between technologies, and outside the standard setting restrictions, 
will apply technology on a cost-effectiveness basis. Similarly, 
outside of the sales response to changes in regulatory costs, 
consumers are assumed to be indifferent to specific technology 
pathways and will demand the same vehicles despite any changes in 
technological composition.
---------------------------------------------------------------------------

    This is not the first time the agency has received comments 
suggesting that other vehicle attributes beyond price and fuel economy 
affect vehicle sales and usage. Some commenters to past rules have 
suggested that a more detailed representation of the new vehicle market 
would enable the agency to incorporate the effect of additional vehicle 
attributes on buyers' choices among competing models, reflect 
consumers' differing preferences for specific vehicle attributes, and 
provide the capability to simulate responses such as strategic pricing 
strategies by manufacturers intended to alter the mix of models they 
sell and enable them to comply with new CAFE standards. The agency has 
previously invested considerable resources in developing such a 
discrete choice model of the new automobile market, although those 
investments have not yet produced a satisfactory and operational model.
    The agency's experience partly reflects the fact that these models 
are highly sensitive to their data inputs and estimation procedures, 
and even versions that fit well when calibrated to data from a single 
period--usually a cross-section of vehicles and shoppers or actual 
buyers--often produce unreliable forecasts for future periods, which 
the agency's regulatory analyses invariably require. This occurs 
because they are often unresponsive to relevant shifts in economic 
conditions or consumer preferences, and also because it is difficult to 
incorporate factors such as the introduction of new model offerings--
particularly those utilizing advances in technology or vehicle design--
or shifts in manufacturers' pricing strategies into their 
representations of choices and forecasts of future sales or market 
shares. For these reasons, most vehicle choice models have been better 
suited for analysis of the determinants of historical variation in 
sales patterns than to forecasting future sales volumes and market 
shares of particular categories.
    Commenters' predictions of weak BEV demand demonstrate exactly how 
formidable these challenges can be. The information commenters used to 
arrive at their conclusions is largely informed by characteristics from 
some of the earliest BEVs introduced into the market. Many of the 
factors that commenters raised as weaknesses such as range, sparse 
charging infrastructure, and high prices, have already experienced 
significant improvements since those early models were released, and 
the agency anticipates that efforts such as funding for charging 
stations and tax credits from the BIL and the IRA will only serve to 
further enhance these attributes.
    Some commenters also offered subjective opinions of BEVs that they 
felt the agency should consider in their analysis which NHTSA finds too 
subjective to include in its primary regulatory analysis. For example, 
one commenter suggested that consumers will reject BEVs because they 
are ``less fun'' to drive than ``freedom machines.'' \648\ However, 
some consumers find the driving experience of BEVs preferrable to ICE 
vehicles because of their quietness, quick response, and ability to be 
charged from nearly anywhere with a working outlet. Moreover, as a 
larger and more diverse array of vehicle models become available with 
BEV powertrains consumers will be more likely to find vehicles in this 
class that satisfy their desire for other attributes. Under these 
conditions, NHTSA would expect that consumer acceptance for BEVs will 
normalize and more closely resemble current consumer demand for other 
new vehicles.
---------------------------------------------------------------------------

    \648\ Heritage Foundation, Docket No. NHTSA-2023-0022-61952, at 
6-7.
---------------------------------------------------------------------------

    However, commenters are likely to be correct that some demographic 
segment of consumers will still have reservations about transitioning 
to BEVs, especially in the near-term. NHTSA's standards are 
performance-based standards, and the market can dictate which 
technologies should be applied to meet the standards. While the agency 
believes there is a strong chance that the number of BEVs that will be 
voluntarily adopted are underestimated in the agency's CAFE Model 
simulations due to how the agency incorporates EPCA's statutory 
constraints, the CAFE Model simulations project that BEVs will 
represent only a quarter of the fleet by MY 2031--all of which occurs 
in the reference baseline. While the agency disagrees with these 
commenters, if commenters are correct in their assertions that BEV 
demand will be weak, the CAFE Model simulations show that consumers 
will continue to

[[Page 52664]]

enjoy a heterogenous marketplace with both BEV and non-BEV options, and 
those who are strongly averse to purchasing a BEV are represented 
within the nearly 70 percent of the fleet that remains non-electrified 
under the reference baseline.
    NHTSA also notes that consumer acceptance towards EVs is likely to 
continue to normalize as a larger and more diverse array of vehicle 
models become available. The likelihood of weak demand raised by 
commenters is as likely as the possibility that the agency is 
understating the demand for BEVs. In FRIA Chapter 9, NHTSA examined 
sensitivity cases in which it alternately imposed its EPCA standard 
setting year constraints on BEV adoption in each calendar year of its 
analysis, and in which it did not force compliance with other ZEV 
regulatory programs and found positive net benefits from the preferred 
alternative in each case. For these reasons, NHTSA believes that it is 
appropriate to continue to assume modeling BEVs and ICE vehicles as 
substitutes is reasonable.
a. Sales
    For the purposes of regulatory evaluation, the relevant metric is 
the difference in the number of new vehicles sold between the baseline 
and each alternative rather than the absolute number of sales under any 
alternative. Recognizing this, the agency's analysis of the response of 
new vehicle sales to requiring higher fuel economy includes three 
components: a forecast of sales under the baseline alternative (based 
exclusively on macroeconomic factors), a price elasticity of new 
vehicle demand that interacts with estimated price increases under each 
alternative to create differences in sales relative to the No-Action 
alternative in each year, and a fleet share model that projects 
differences in the passenger car and light truck market share under 
each alternative. For a more detailed description of these three 
components, see Chapter 4.2 of the TSD.
    The agency's baseline sales forecast reflects the idea that total 
new vehicle sales are primarily driven by conditions in the U.S. 
economy that are outside the influence of the automobile industry. Over 
time, new vehicle sales have been cyclical--rising when prevailing 
economic conditions are positive (periods of growth) and falling during 
periods of economic contraction. While changes to vehicles' designs and 
prices that occur as consequences of manufacturers' compliance with 
earlier standards (and with regulations on vehicles' features other 
than fuel economy) exert some influence on the volume of new vehicle 
sales, they are far less influential than macroeconomic conditions. 
Instead, they produce the marginal differences in sales among 
regulatory alternatives that the agency's sales module is designed to 
simulate, with increases in new models' prices reducing their sales, 
although only modestly.
    The first component of the sales response model is the nominal 
forecast, which is based on a small set of macroeconomic inputs that 
together determine the size of the new vehicle market in each future 
year under the baseline alternative. This statistically based model is 
intended only to project a baseline forecast of LDV sales; it does not 
incorporate the effect of prices on sales and is not intended to be 
used for analysis of the response to price changes in the new vehicle 
market. NHTSA's projection oscillates from model year to model year at 
the beginning of the analysis, before settling to follow a constant 
trend in the 2030s. This result seems consistent with the continued 
response to the pandemic and to supply chain challenges. NHTSA's 
projections of new light-duty vehicle sales during most future years 
fall between those reported in AEO 2023, and the 2022 final rule which 
were used as sensitivity cases. NHTSA will continue to monitor changes 
in macroeconomic conditions and their effects on new vehicle sales, and 
to update its baseline forecast as appropriate.
    NHTSA received several comments suggesting that EV adoption would 
weaken demand for new vehicles, leading to a decrease in the total 
amount of vehicles sold.\649\ As noted, NHTSA believes that total 
vehicle sales are largely driven by exogenous macroeconomic conditions. 
Some commenters also raised the fact that NHTSA does not account for 
the effects of higher EV prices in its baseline sales forecast. This is 
consistent with the agency's treatment of other technologies that it 
projects will be adopted under the No-Action Alternative, either 
because they prove to be cost-effective or are compelled by other 
government standards. In addition, we note that the value of tax 
credits and additional fuel savings are assumed not to affect new 
vehicle sales because the forecast of sales generated by the CAFE Model 
for that alternative does not incorporate a response to changes in 
their effective price.
---------------------------------------------------------------------------

    \649\ Heritage Foundation, Docket No. NHTSA-2023-0022-61952, at 
11.
---------------------------------------------------------------------------

    The baseline HDPUV fleet is modeled differently. NHTSA considered 
using a statistical model drawn from the LD specification to project 
new HDPUV sales but reasoned that the mix of HDPUV buyers and vehicles 
was sufficiently different that an alternative approach was required. 
Due to a lack of historical and future data on the changing customer 
base in the HDPUV market (e.g., the composition of commercial and 
personal users) and uncertainty around vehicle classification at the 
margin between the LDV and HDPUV categories, NHTSA chose to rely on an 
exogenous forecast of HDPUV sales from the AEO. To align with the 
technology used to create the model fleet, NHTSA used compliance data 
from multiple model years to estimate aggregate sales for MY 2022, and 
then applied year-over-year growth rates implicit in the AEO forecast 
to project aggregate sales for subsequent MYs. Since the first year of 
the analysis, MY 2022, was constructed using compliance data spanning 
nearly a decade, the aggregate number of sales for the simulated fleet 
in MY 2022 was lower than the MY 2022 AEO forecast. To align with the 
AEO projections, the agency adjusted the growth rate in HDPUV sales 
upward by 2 percent for MYs 2023-2025, and 2.5 percent for MYs 2026-
2028. Instead of adjusting the fleet size to match AEO's forecast for 
MY2022, the agency elected to phase-in the increase in growth rates 
over a span of years to reflect the likelihood that HDPUV production 
will continue to face supply constraints resulting from the COVID 
pandemic in the near future but should return to normal levels sometime 
later in the decade.
    TheXXXifferd component of the sales response model captures how 
price changes affect the number of vehicles sold; NHTSA estimates the 
change in sales from its baseline forecast during future years under 
each regulatory alternative by applying an assumed price elasticity of 
new vehicle demand to the percent difference in average price between 
that regulatory alternative and the baseline. This price change does 
not represent an increase or decrease from the previous year, but 
rather the percent difference in the average price of new vehicles 
between the baseline and each regulatory alternative for that year. In 
the baseline, the average new vehicle price is defined as the observed 
price in 2022 (the last historical year before the simulation begins) 
plus the average regulatory cost associated with the No-Action 
Alternative for each future model year.\650\ The central

[[Page 52665]]

analysis in this final rule simulates multiple programs simultaneously 
(CAFE fuel economy and HDPUV fuel efficiency final standards, EPA's 
2021 GHG standards, ZEV, and the California Framework Agreement), and 
the regulatory cost includes both technology costs and civil penalties 
paid for non-compliance with CAFE standards in a model year. We also 
subtract any IRA tax credits that a vehicle may qualify for from those 
regulatory costs to simulate sales.\651\ Because the elasticity assumes 
no perceived change in the quality of the product, and the vehicles 
produced under different regulatory scenarios have inherently different 
operating costs, the price metric must account for this difference. The 
price to which the elasticity is applied in this analysis represents 
the residual price difference between the baseline and each regulatory 
alternative after deducting the value of fuel savings over the first 
2.5 years of each model year's lifetime.
---------------------------------------------------------------------------

    \650\ The CAFE Model currently operates as if all costs incurred 
by the manufacturer as a consequence of meeting regulatory 
requirements, whether those are the cost of additional technology 
applied to vehicles in order to improve fleetwide fuel economy or 
civil penalties paid when fleets fail to achieve their standard, are 
``passed through'' to buyers of new vehicles in the form of price 
increases.
    \651\ For additional details about how we model tax credits, see 
Section II.C.5b above.
---------------------------------------------------------------------------

    The price elasticity is also specified as an input, and for the 
proposal, the agency assumed an elastic response of -0.4--meaning that 
a five percent increase in the average price of a new vehicle produces 
a two percent decrease in total sales. NHTSA sought comment on this 
assumption. Commenters were split over the magnitude of NHTSA's assumed 
elasticity value. NRDC suggested that more recent studies support a 
lower magnitude but agreed that NHTSA's choice was reasonable.\652\ 
NADA argued that NHTSA should consider an elasticity of -1 due to the 
alternatives available to consumers, like repairing used vehicles, 
XXXifferc transport, and ridesharing services.\653\ After reviewing 
these and other comments, however, NHTSA does not believe that there is 
a strong empirical case for changing its assumption. As commenters 
suggestions reveal, estimates of this parameter reported in published 
literature vary widely, and NHTSA continues to believe that its choice 
is a reasonable one within this range,\654\ but also includes 
sensitivity cases that explore higher and lower elasticities. Chapter 
4.2.1.2 of the TSD further presents the totality of present evidence 
that NHTSA believes supports its decision.
---------------------------------------------------------------------------

    \652\ Joint NGOs, Docket No. NHTSA-2023-0022-61944, at 71.
    \653\ NADA, Docket No. NHTSA-2023-0022-58200, at 8.
    \654\ Jacobsen et al. (2021) report a range of estimates, with a 
value of approximately -0.4 representing an upper bound of this 
range. We select this point estimate for the central case and 
explore alternative values in the sensitivity analysis. Jacobsen, M. 
et al. 2021. The Effects of New-Vehicle Price Changes on New- and 
Used-Vehicle Markets and Scrappage. EPA-420-R-21-019. Washington, 
DC. Available at: https://cfpub.epa.gov/si/si_public_record_Report.cfm?Lab=OTAQ&dirEntryId=352754. (Accessed: 
Feb. 13, 2024).
---------------------------------------------------------------------------

    NADA also asserted that NHTSA did not release the price data used 
to conduct its sales adjustment. MSRP data, price increase data, and 
tax credit value data are all available in NHTSA's vehicles report that 
accompanied both the proposal and final rule. NADA furthermore 
suggested that NHTSA did not correctly implement its sales 
adjustment.\655\ NADA submitted a similar comment to the agency's 2024-
2026 proposal and like there, NHTSA determined that NADA did not 
correctly determine the change in effective cost or accurately track 
the No-Action alternative's average effective cost of vehicles to which 
the regulatory alternative's average effective cost is compared.
---------------------------------------------------------------------------

    \655\ Id.
---------------------------------------------------------------------------

    Commenters also offered differing suggestions about whether and how 
NHTSA should incorporate fuel savings into its sales adjustment. NADA 
suggested that NHTSA should not include fuel savings in the calculation 
of sales effects since fuel savings do not affect the ability of 
consumers to obtain financing for new vehicles and argued that 
financing would act as a barrier to consumers looking to purchase more 
expensive vehicles that offer greater fuel savings. In support of their 
argument, NADA cited informal polls conducted by the American Financial 
Services Association (AFSA) and Consumer Bankers Association showing 
that approximately 85% of their surveyed members would not extend 
additional funds to finance more fuel-efficient vehicles.\656\ In 
contrast, NRDC and others argued that the agency's estimate of sales 
effects was likely to be too large if, as they suggest, consumers value 
more than 30 months of fuel savings.\657\
---------------------------------------------------------------------------

    \656\ Id. at 8-9.
    \657\ Joint NGOs, Docket No. NHTSA-2023-0022-61944, at71.
---------------------------------------------------------------------------

    NHTSA continues to believe that its approach is reasonable based on 
its analysis of consumer valuation of fuel savings. As noted in the 
FRIA Chapter 2.4, there are recent findings in the literature that show 
a wide range in the estimates of how consumers value fuel savings.
    While fuel savings may not influence the terms of a lease or 
financing offer, the lack of preferential financing for more fuel-
efficient vehicles would only prevent consumers for whom the vehicle's 
price is nearly prohibitive from purchasing the new vehicle in the 
event of a price increase (e.g., only the marginal consumer would be 
affected). The lack of preferential financing would not affect 
consumers' willingness to pay for fuel economy or the fuel savings 
realized by consumers who do purchase more fuel-efficient vehicles. New 
vehicle prices have grown significantly from 2020, largely due to 
supply constraints during and immediately following the COVID-19 
pandemic, as well as continued growth in demand for more expensive SUVs 
and trucks, and manufacturers removing some lower priced model lines 
from their fleets.\658\ The NY Federal Reserve's Survey of Consumer 
Expectations has found that rejection rates for auto loans did increase 
in 2023 to around 11 percent of auto loans.\659\ However, the share of 
consumers who reported that they are likely to apply for an auto loan 
in the next year declined only marginally from 2022. Higher rejection 
rates are in line with other forms of credit like credit cards, and 
mortgage refinance applications which also increased during this 
timeframe as interest rates have also increased significantly since 
2022.\660\ At the same time, new vehicle sales grew sharply from 2022 
to 2023. Higher prices and interest rates do not appear to be driving 
consumers out of the market altogether, but rather leading consumers to 
pursue longer term loans, as Experian reported that the average auto 
loan term had grown to 68 months in 2024.\661\ The effect of higher new 
vehicle prices on access to financing does not appear to be 
significantly driving consumers out of the market altogether. Interest 
rates are also cyclical and assuming interest rates continue to remain 
constant over the next decade is unrealistic. Thus, NHTSA believes that 
the rising prices that consumers would face as a result of higher 
compliance costs could still be financed by a large

[[Page 52666]]

share of Americans, allowing them to take advantage of fuel savings. As 
a result, NHTSA has not chosen to model access to financing as a 
constraint on sales that would be affected incrementally by changes to 
fuel economy standards. NHTSA believes that consumers are likely to be 
willing to pay more in financing costs, if the perceived benefits of 
the vehicle outweigh these costs. Indeed, Consumer Reports noted in its 
comments, 70 percent of Americans expressed willingness to pay more to 
lease or purchase a vehicle if its fuel savings outweighed the added 
cost.
---------------------------------------------------------------------------

    \658\ Bartlett, Jeff S., ``Cars Are Expensive. Here's Why and 
What You Can Do About It.'' Consumer Reports, Sep. 13, 2023, 
Available at: https://www.consumerreports.org/cars/buying-a-car/people-spending-more-on-new-cars-but-prices-not-necessarily-rising-a3134608893/ (Accessed: April 17, 2024).
    \659\ ``Consumers Expect Further Decline in Credit Applications 
and Rise in Rejection Rates'', Federal Reserve Bank of New York, 
Press Release, November 20, 2023, Available at: https://www.newyorkfed.org/newsevents/news/research/2023/20231120, 
(Accessed: April 5, 2024).
    \660\ Id.
    \661\ Horymski, Chris, ``Average Auto Loan Debt Grew 5.2% to 
$23,792 in 2023'', Experian, Feb. 13, 2024, Available at: https://www.experian.com/blogs/ask-experian/research/auto-loan-debt-study/, 
(Accessed: April 5, 2024).
---------------------------------------------------------------------------

    The third and final component of the sales model, which only 
applies to the light-duty fleet, is the dynamic fleet share module 
(DFS). For the 2020 and 2022 rulemakings, NHTSA used a DFS model that 
combines two functions from an earlier version of NEMS to estimate the 
sales shares of new passenger cars and light trucks based on their 
average fuel economy, horsepower, and curb weight, current fuel prices, 
and their prior year's market shares and attributes. The two 
independently estimated shares are then normalized to ensure that they 
sum to one. However, as the agency explained in the 2022 final 
rulemaking, that approach had several drawbacks including the model 
showing counterintuitive responses to changes in attributes, its 
exclusion of a price variable, and the observed tendency of the model 
to overestimate the share of total sales accounted for by passenger 
automobiles.\662\
---------------------------------------------------------------------------

    \662\ 84 FR 25861 (May 2, 2022).
---------------------------------------------------------------------------

    For this final rule, NHTSA has revised the inputs used to develop 
its DFS. The baseline fleet share projection is derived from the 
agency's own compliance data for the 2022 fleet, and the 2023 AEO 
projections for subsequent model years. To reconcile differences in the 
initial 2022 shares, NHTSA projected the fleet share forward using the 
annual changes from 2022 predicted by AEO and applied these to the 
agency's own compliance fleet shares for MY 2022.\663\ The fleet is 
distributed across two different body-types: ``cars'' and ``light 
trucks.'' While there are specific definitions of ``passenger cars'' 
and ``light trucks'' that determine a vehicle's regulatory class, the 
distinction used in this phase of the analysis is simpler: all body 
styles that are commonly considered cars, including sedans, coupes, 
convertibles, hatchbacks, and station wagons, are defined as ``cars'' 
for the purpose of determining their fleet share. Everything else--
SUVs, smaller SUVs (crossovers), vans, and pickup trucks--are defined 
as ``light trucks,'' even though some models included in this category 
may not be treated as such for compliance purposes.
---------------------------------------------------------------------------

    \663\ For example if AEO passenger car share grows from 40 
percent in one year to 50 percent in the next (25 percent growth), 
and our compliance passenger car share in that year is 44 percent 
then the predicted share in the next year would be 55 percent (11 
points or 25 percent higher).
---------------------------------------------------------------------------

    These shares are applied to the total industry sales derived in the 
first stage of the total sales model to estimate sales volumes of car 
and light truck body styles. Individual model sales are then determined 
using the following sequence: (1) individual manufacturer shares of 
each body style (either car or light truck) are multiplied by total 
industry sales of that body style, and then (2) each vehicle within a 
manufacturer's volume of that body-style is assigned the same 
percentage share of that manufacturer's sales as in model year 2022. 
This implicitly assumes that consumer preferences for particular styles 
of vehicles are determined in the aggregate (at the industry level), 
but that manufacturers' sales shares of those body styles are 
consistent with their MY 2022 sales. Within a given body style, a 
manufacturer's sales shares of individual models are also assumed to be 
constant over time.
    This approach also implicitly assumes that manufacturers are 
currently pricing individual vehicle models within market segments in a 
way that maximizes their profit. Without more information about each 
manufacturer's true cost of production, including its fixed and 
variable components, and its target profit margins for its individual 
vehicle models, there is no basis to assume that strategic shifts 
within a manufacturer's portfolio will occur in response to standards. 
In its comments, IPI noted that this could lead to overestimates of 
compliance costs, since manufacturers that can more cost-effectively 
comply with higher standards will be able to capture a larger market 
share through lower vehicle prices.\664\ IPI's assertion may be 
correct, however NHTSA believes that within its current model there is 
not a clear way to incorporate such an adjustment, since it would 
involve evaluating substitution patterns between individual models over 
a longtime horizon.
---------------------------------------------------------------------------

    \664\ IPI, Docket No. NHTSA-2023-0022-60485, at 21-22.
---------------------------------------------------------------------------

    Similar to the second component of the sales module, the DFS then 
applies an elasticity to the change in price between each regulatory 
alternative and the No-Action Alternative to determine the change in 
fleet share from its baseline value. NHTSA uses the net regulatory cost 
differential (costs minus fuel savings) in a logistic model to capture 
the changes in fleet share between passenger cars and light trucks, 
with a relative price coefficient of -0.000042. NHTSA selected this 
methodology and price coefficient based on a review of academic 
literature.\665\ When the total regulatory costs of meeting new 
standards for passenger automobiles minus the value of the resulting 
fuel savings exceeds that of light-trucks, the market share of light-
trucks will rise relative to passenger automobiles. For example, a $100 
net regulatory cost increase in passenger automobiles relative to light 
trucks would produce a ~.1% shift in market share towards light trucks, 
assuming the latter initially represent 60% of the fleet.
---------------------------------------------------------------------------

    \665\ The agency describes this literature review and the 
calibrated logit model in more detail in the accompanying docket 
memo ``Calibrated Estimates for Projecting Light-Duty Fleet Share in 
the CAFE Model''.
---------------------------------------------------------------------------

    The approach for this final rule to modeling changes in fleet share 
addresses several key concerns raised by NHTSA in its prior rulemaking. 
The model no longer produces counterintuitive effects, and now directly 
considers the impacts of changes in price. Because the model applies 
fuel savings in determining changes in relative prices between 
passenger cars and light trucks, the current approach does not require 
it to separately consider the utility of fuel economy when determining 
the respective market shares of passenger automobiles and light trucks. 
In prior rules, NHTSA has speculated that the rise in light-truck 
market share may be attributable to the increased utility that light-
trucks provide their operators, and as the fuel economy difference 
between those two categories diminished, light-trucks have become an 
even more attractive option. As explained in a docket memo accompanying 
this final rule, NHTSA has been unable to create a comprehensive model 
that includes vehicle prices, fuel economy, and other attributes that 
produces appropriate responses to changes in each of these factors, so 
the agency is considering applying an elasticity to the changes in fuel 
economy directly to capture this change in utility. Consumer Reports 
argued that NHTSA's dynamic fleet share model was too uncertain for use 
in the CAFE Model.\666\ While fleet share's response to changes in the 
standards is an uncertain factor to project, NHTSA based its model on 
peer reviewed results and a well-grounded

[[Page 52667]]

methodology described in a docket memo ``Calibrated Estimates for 
Projecting Light-Duty Fleet Share in the CAFE Model.'' Finally, some 
commenters expressed confusion about NHTSA's approach to modeling fleet 
share. NHTSA explains its approach using a combination of a fixed fleet 
share forecast for the No-Action alternative, and a dynamic fleet share 
model to adjust fleet share projections in the regulatory alternatives 
in TSD Chapter 4.2.
---------------------------------------------------------------------------

    \666\ Consumer Reports, Docket No. NHTSA-2023-0022-61098, at 18.
---------------------------------------------------------------------------

b. Scrappage
    New and used vehicles can substitute for each other within broad 
limits, and when the prices of substitutes for a good increase or 
decrease, demand for that good responds by rising or falling, causing 
its equilibrium price and quantity supplied to also rise or fall. Thus, 
increasing the quality-adjusted price of new vehicles will increase 
demand for used vehicles, and by doing so raise their equilibrium 
market value or price and the number that are kept in service. Because 
used vehicles are not being produced, their supply can only be 
increased by keeping more of those that would otherwise be retired in 
use longer, which corresponds to a reduction in their scrappage or 
retirement rates.
    When new vehicles become more expensive, demand for used vehicles 
increases, but meeting the increase in demand requires progressively 
more costly maintenance and repairs to keep more of them in working 
condition, in turn causing them to become more expensive. Because used 
vehicles are more valuable in such circumstances, they are scrapped at 
a lower rate, and just as rising new vehicle prices push some 
prospective buyers into the used vehicle market, rising prices for used 
vehicles force some prospective buyers to acquire even older vehicles 
or models with fewer desired attributes. The effect of fuel economy 
standards on scrappage is partially dependent on how consumers value 
future fuel savings and our assumption that consumers value only the 
first 30 months of fuel savings when making a purchasing decision.
    Many competing factors influence the decision to scrap a vehicle, 
including the cost to maintain and operate it, the household's demand 
for VMT, the cost of alternative means of transportation, and the value 
that can be attained through reselling or scrapping the vehicle for 
parts. In theory, a car owner will decide to scrap a vehicle when the 
value of the vehicle minus the cost to maintain or repair the vehicle 
is less than its value as scrap material; in other words, when the 
owner realizes more value from scrapping the vehicle than from 
continuing to drive it or from selling it. Typically, the owner that 
scraps the vehicle is not the original vehicle owner.
    While scrappage decisions are made at the household level, NHTSA is 
unaware of sufficiently detailed household data to sufficiently capture 
scrappage at that level. Instead, NHTSA uses aggregate data measures 
that capture broader market trends. Additionally, the aggregate results 
are consistent with the rest of the CAFE Model, as the model does not 
attempt to model how manufacturers will price new vehicles; the model 
instead assumes that all regulatory costs to make a particular vehicle 
compliant are passed onto the purchaser who buys the vehicle.
    The dominant source of vehicles' overall scrappage rates is 
``engineering scrappage,'' which is largely determined by the age of a 
vehicle and the durability of the specific model year or vintage it 
represents. NHTSA uses proprietary vehicle registration data from I/
Polk to estimate vehicle age and durability. Other factors affecting 
owners' decisions to retire used vehicles or retain them in service 
include fuel economy and new vehicle prices; for historical data on new 
vehicle transaction prices, NHTSA uses National Automobile Dealers 
Association (NADA) Data.\667\ The data consist of the average 
transaction price of all LDVs; since the transaction prices are not 
broken-down by body style, the model may miss unique trends within a 
particular vehicle body style. The transaction prices are the amount 
consumers paid for new vehicles and exclude any trade-in value credited 
towards the purchase. This may be particularly relevant for pickup 
trucks, which have experienced considerable changes in average price as 
luxury and high-end options entered the market over the past decade. 
Future versions of the agency's scrappage model may consider 
incorporating price series that consider the price trends for cars, 
SUVs and vans, and pickups separately. The final source of vehicle 
scrappage is from cyclical effects, which the model captures using 
forecasts of GDP and fuel prices.
---------------------------------------------------------------------------

    \667\ The data can be obtained from NADA. For reference, the 
data for MY 2020 may be found at https://www.nada.org/nadadata/.
---------------------------------------------------------------------------

    Vehicle scrappage follows a roughly logistic function with age--
that is, when a vintage is young, few vehicles in the cohort are 
scrapped; as they age, more and more of the cohort are retired each 
year and the annual rate at which vehicles are scrapped reaches a peak. 
Scrappage then declines as vehicles enter their later years as fewer 
and fewer of the cohort remains on the road. The analysis uses a 
logistic function to capture this trend of vehicle scrappage with age. 
The data show that the durability of successive MYs generally increases 
over time, or put another way, historically newer vehicles last longer 
than older vintages. However, this trend is not constant across all 
vehicle ages--the instantaneous scrappage rate of vehicles is generally 
lower for more recent vintages up to a certain age, but must increase 
thereafter so that the final share of vehicles remaining converges to a 
similar share remaining for historically observed vintages.\668\ 
NHTSA's model uses fixed effects to capture potential changes in 
durability across MYs, and to ensure that vehicles approaching the end 
of their life are scrapped in the analysis, NHTSA applies a decay 
function to vehicles after they reach age 30. The macroeconomic 
conditions variables discussed above are included in the logistic model 
to capture cyclical effects. Finally, the change in new vehicle prices 
projected in the model (technology costs minus 30 months of fuel 
savings and any tax credits passed through to the consumer) is 
included, and changes in this variable are the source of differing 
scrappage rates among regulatory alternatives.
---------------------------------------------------------------------------

    \668\ Examples of why durability may have changed are new 
automakers entering the market or general changes to manufacturing 
practices like switching some models from a car chassis to a truck 
chassis.
---------------------------------------------------------------------------

    For this final rule, NHTSA modeled the retirement of HDPUVs 
similarly to pick-up trucks. The amount of data for HDPUVs is 
significantly smaller than for the LD fleet and drawing meaningful 
conclusions from the small sample size is difficult. Furthermore, the 
two regulatory classes share similar vehicle characteristics and are 
likely used in similar fashions, so NHTSA believes that these vehicles 
will follow similar scrappage schedules. Commercial HDPUVs may endure 
harsher conditions during their useful life such as more miles in tough 
operating conditions, which may also affect their retirement schedules. 
We believe that many light-trucks likely endure the same rigor and are 
represented in the light-truck segment of the analysis; however, NHTSA 
recognizes that the intensity or proportionality of heavy use in the 
HDPUV fleet may exceed that of smaller light trucks.
    In addition to the variables included in the scrappage model, NHTSA 
considered several other variables that

[[Page 52668]]

likely either directly or indirectly influence scrappage in the real 
world, including maintenance and repair costs, the value of scrapped 
metal, vehicle characteristics, the quantity of new vehicles purchased, 
higher interest rates, and unemployment. These variables were excluded 
from the model either because of difficulties in obtaining data to 
measure them accurately or other modeling constraints. Their exclusion 
from the model is not intended to diminish their importance, but rather 
highlights the practical constraints of modeling intricate decisions 
like scrappage.
    NHTSA sought comment on its scrappage model, as well as on 
differences between scrappage for light trucks and HDPUVs. IPI 
suggested that NHTSA replace its reduced form model for scrappage with 
a structural model, or that it should incorporate the price of used 
vehicles and other omitted variables in its model to predict scrappage 
and change its estimation strategy to avoid threats to identification 
from endogeneity.\669\ NHTSA sees merit in the suggestion of a 
structural model for scrappage but believes it should be implemented as 
part of a larger change to the CAFE Model in a future rulemaking, since 
it would also require NHTSA to incorporate a more complex model of the 
used vehicle market. AFPM commented that increases in the new vehicle 
prices of ZEVs will also lead to increases in the prices of new ICE 
vehicles through cross subsidization.\670\ NHTSA notes that its 
scrappage model determines scrappage rates using the average price of 
new vehicles in each class. Thus, the manufacturers' pricing strategies 
assumed in the CAFE Model will not affect predicted scrappage rates, 
since this would only occur where manufacturers raise prices by more or 
less than the costs they incur to improve the fuel economy of 
individual models.
---------------------------------------------------------------------------

    \669\ IPI, Docket No. NHTSA-2023-0022-60485, at 26-27.
    \670\ AFPM, Docket No. NHTSA-2023-0022-61911, at 78.
---------------------------------------------------------------------------

    MEMA disagreed with NHTSA's approach of modeling HDPUV and light 
truck scrappage rates using the same function because of differences 
between fleetwide average use and the average use of the typical 
vehicle.\671\ MEMA noted that one manufacturer had told them that about 
one-quarter of its fleet remained active for more than 200 percent of 
the average vehicle's useful life. The maximum age NHTSA assumes for 
LDVs (40 years) is more than twice their average or ``expected'' 
lifetime (about 15 years), so this experience does not appear to be 
unusual. Indeed, in NHTSA's No-Action Alternative case, around 21 
percent of HDPUVs produced in model years 2030-2035 were still 
operating 30 years after entering the fleet. NHTSA thus continues to 
believe that it is properly estimating scrappage rates at the fleet 
level and using as much available data as possible to estimate its 
scrappage rates. For additional details on how NHTSA modeled scrappage, 
see Chapter 4.2.2 of the TSD.
---------------------------------------------------------------------------

    \671\ MEMA, Docket No. NHTSA-2023-0022-59204, at 8.
---------------------------------------------------------------------------

3. Changes in Vehicle Miles Traveled (VMT)
    In the CAFE Model, VMT is projected from average use of vehicles 
with different ages, the total number in use, and the composition of 
the fleet by age, which itself depends on new vehicle sales during each 
earlier year and vehicle retirement decisions. These three components--
average vehicle usage, new vehicle sales, and older vehicle scrappage--
jointly determine total VMT projections for each alternative. VMT 
directly influences many of the various effects of fuel economy 
standards that decision-makers consider in determining what levels of 
standards to set. For example, the value of fuel savings is a function 
of a vehicle's fuel efficiency, the number of miles it is driven, and 
fuel price. Similarly, factors like criteria pollutant emissions, 
congestion, and fatalities are direct functions of VMT. For a more 
detailed description of how NHTSA models VMT, see Chapter 4.3 of the 
TSD.
    NHTSA's perspective is that the total demand for VMT should not 
vary excessively across alternatives, because basic travel needs for a 
typical household are unlikely to be influenced by the stringency of 
the standards, so the daily need the services of vehicles to transport 
household members will remain the same. That said, it is reasonable to 
assume that fleets with differing age distributions and inherent cost 
of operation will have slightly different annual VMT (even without 
considering VMT associated with rebound miles). Because of the 
structure of the CAFE Model, the combined effect of the sales and 
scrappage responses can produce small differences in total VMT across 
the range of regulatory alternatives if steps are not taken to 
constrain VMT. Because VMT is related to many of the costs and benefits 
of the program, even small differences in VMT among alternatives can 
have meaningful impacts on their incremental net benefits. Furthermore, 
since decisions about alternative stringencies look at the incremental 
costs and benefits across alternatives, it is more important that the 
analysis capture the variation of VMT across alternatives--mainly how 
vehicles are distributed across vehicles and how many rebound miles may 
occur in any given alternative--than to accurately project total VMT 
for any single scenario.
    To ensure that travel demand remains consistent across the 
different regulatory scenarios for the LD fleet, the agency's analysis 
relies on a model of aggregate light-duty VMT developed by the Federal 
Highway Administration (FHWA) to produce that agency's official VMT 
projections. The annual forecasts of total VMT generated by this model 
when used in conjunction with the macroeconomic inputs described 
previously model are used to constrain the forecasts of annual VMT 
generated internally by the CAFE model to be identical among the 
regulatory alternatives during each year in the analysis period.
    NHTSA considered removing the constraint on VMT for the final rule 
after seeking comment from the public. IPI supported allowing VMT to 
vary with fleet size, arguing that if fleet size decreases some 
travelers would likely choose to use alternative forms of 
transportation like car-sharing, or mass transit rather than relying on 
older vehicles.\672\ Ultimately NHTSA did not choose to make this 
change in the absence of a tractable model for how this VMT would be 
redistributed across alternative forms of transportation (including 
additional miles driven by the legacy fleet), and the various costs and 
benefits this change would produce. NHTSA will continue to explore 
methods for modeling this kind of reallocation for future rulemakings, 
including estimating the cross price elasticities of demand for these 
alternative forms of travel as IPI recommended.
---------------------------------------------------------------------------

    \672\ IPI, Docket No. NHTSA-2023-0022-60485, at 24.
---------------------------------------------------------------------------

    Since vehicles of different ages and body styles have different 
costs to own and operate but also provide different benefits, to 
account properly for the average value of consumer and societal costs 
and benefits associated with vehicle usage under various alternatives, 
it is necessary to partition miles by age and body type. NHTSA created 
``mileage accumulation schedules'' usiIIHS-Polk odometer data to 
construct mileage accumulation schedules as an initial estimate of how 
much a vehicle expected to drive at each age throughout its life.\673\ 
NHTSA

[[Page 52669]]

uses simulated new vehicle sales, annual rates of retirement for used 
vehicles, and the mileage accumulation schedules to distribute VMT 
across the age distribution of registered vehicles in each calendar 
year to preserve the non-rebound VMT constraint.
---------------------------------------------------------------------------

    \673\ The mileage accumulations schedules are constructed with 
content supplied by IHS Markit; Copyright (copyright) R.L. Polk & 
Co., 2018. All rights reserved.
---------------------------------------------------------------------------

    FHWA does not produce an annual VMT forecast for HDPUVs. Without an 
annual forecast, NHTSA is unable to constrain VMT for HDPUVs as it does 
for the LD fleet. Instead, an estimate of total VMT for HDPUVs is 
developed from the estimates of annual use for vehicles of each age 
(the ``mileage accumulation'' schedules) and estimates of the number of 
HDPUVs of each model year and age that remain in use during each future 
calendar year. For the reasons described previously, we believe that 
this method produces reasonable estimates of the differences in total 
VMT and its distribution among vehicles of different ages that is 
implied by changes in fleet composition and size between the reference 
baseline and each regulatory alternative.
    The fuel economy rebound effect--a specific example of the well-
documented energy efficiency rebound effect for energy-consuming 
capital goods--refers to motorists who choose to increase vehicle use 
(as measured by VMT) when their fuel economy is improved and, as a 
result, the cost per mile (CPM) of driving declines. Establishing more 
stringent standards than the reference baseline level will lead to 
comparatively higher fuel economy for new cars and light trucks, and 
increase fuel efficiency for HDPUVs, thus decreasing the cost of fuel 
consumed by driving each mile and increasing the amount of travel in 
new vehicles. NHTSA recognizes that the value selected for the rebound 
effect influences overall costs and benefits associated with the 
regulatory alternatives under consideration as well as the estimates of 
lives saved under various regulatory alternatives, and that the rebound 
estimate, along with fuel prices, technology costs, and other 
analytical inputs, is part of the body of information that agency 
decision-makers have considered in determining the appropriate levels 
of the standards in this final rule. We also note that larger values 
for the rebound effect diminishes the economic and environmental 
benefits associated with increased fuel efficiency.
    NHTSA conducted a review of the literature related to the fuel 
economy rebound effect, which is extensive and covers multiple decades 
and geographic regions.\674\ The totality of evidence, without 
categorically excluding studies that fail to meet certain criteria and 
evaluating individual studies based on their particular strengths, 
suggests that a plausible range for the rebound effect is 10-50 
percent. This range implies that, for example, a 10 percent reduction 
in vehicles' fuel CPM would lead to an increase of 1-5 percent in the 
number of miles they are driven annually. The central tendency of this 
range appears to be at or slightly above its midpoint, which is 30 
percent. Considering only those studies that NHTSA believes are derived 
from extremely robust and reliable data, employ identification 
strategies that are likely to prove effective at isolating the rebound 
effect, and apply rigorous estimation methods, suggests a range of 
approximately 10-45 percent, with most of the estimates falling in the 
15-30 percent range.
---------------------------------------------------------------------------

    \674\ See TSD Chapter 4.3.
---------------------------------------------------------------------------

    However, published estimates of the rebound effect vary widely, as 
do the data and methodologies that underpin them. A strong case can 
also be made to support lower values. Both economic theory and 
empirical evidence suggest that the rebound effect has been declining 
over time due to factors such as increasing income (which raises the 
value of travelers' time), progressive smaller reductions in fuel costs 
in response to continuing increases in fuel economy, and slower growth 
in car ownership and the number of license holders. Lower estimates of 
the rebound effect estimates are associated with recently published 
studies that rely on U.S. data, measure vehicle use using actual 
odometer readings, control for the potential endogeneity of fuel 
economy, and--critically--estimate the response of vehicle use to 
variation in fuel economy itself rather than to fuel cost per distance 
driven or fuel prices. According greater weight to these studies 
suggests that the rebound effect is more likely to be in the 5-15 
percent range. For a more complete discussion of the rebound 
literature, see TSD Chapter 4.3.5.
    NHTSA selected a rebound effect of 10% for its analysis of both LD 
and HDPUV fleets because it was well-supported by the totality of the 
evidence.\675\ It is rarely possible to identify whether estimates of 
the rebound effect in academic literature apply specifically to 
household vehicles, LDVs, or another category, and different nations 
classify trucks included in NHTSA's HDPUV category in varying ways, so 
NHTSA has assumed the same value for LDVs and HDPUVs.
---------------------------------------------------------------------------

    \675\ The HDPUV and light trucks experience similar usage 
patterns (hence why we estimate technology effectiveness on 2-cycle 
tests similar to CAFE) and without a strong empirical evidence to 
suggest an alternative estimate, decided it was appropriate to use 
the same estimate.
---------------------------------------------------------------------------

    We also examine the sensitivity of estimated impacts to values of 
the rebound ranging from 5 percent to 15 percent to account for the 
uncertainty surrounding its exact value. NHTSA sought comment on the 
above discussion, and whether to consider a different value for the 
rebound effect for the final rule analysis for either the LD or HDPUV 
analyses. IPI agreed with NHTSA's choice, arguing that it was well 
supported in the literature.\676\
---------------------------------------------------------------------------

    \676\ IPI, Docket No. NHTSA-2023-0022-60485, at 26-28.
---------------------------------------------------------------------------

    AFPM disagreed with NHTSA's approach to modeling mileage for BEVs, 
suggesting that some studies find that these vehicles are driven less 
than ICE vehicles, and so NHTSA's assumption that any decrease in 
operating costs that these vehicles convey to their owner will not 
cause them to ultimately be used more overall.\677\ In response, NHTSA 
examined the VMT accumulation for BEVs relative to ICE counterparts. 
Preliminary results showed lower VMT for these vehicles than ICE 
vehicles, but the agency notes that given the lack of more recent data, 
this result is driven mostly by early iterations of mainstream BEVs 
which had shorter ranges, longer recharging times, and significantly 
fewer charging stations. NHTSA believes that these factors likely 
played a bigger role in determining their usage than consumers' innate 
preferences for EVs vs. ICE vehicles. and concluded that there were 
significant limitations that prevented the agency from being able to 
project forward these differences with confidence. First, historically, 
these vehicles have been limited to only a small subset of 
manufacturers, and segments of the overall market. According to NHTSA's 
analysis and publicly announced production plans, this is projected to 
change in the years prior to NHTSA's standard setting years considered 
in this rulemaking.\678\ This will make the owners of these vehicles, 
and their use patterns more representative of drivers as a whole. 
Second, the quality of the vehicle charging network is projected to 
improve significantly as programs like NEVI funded by the Bipartisan

[[Page 52670]]

Infrastructure Law continue to be implemented. This will enable drivers 
in areas without at-home charging to make more use of these vehicles 
and will enable all drivers to travel longer distances in BEVs. Based 
on these factors, NHTSA believes that projecting BEV use into the 
future based on differences in their usage in recent years would 
introduce more error into the model than maintaining its current 
assumption. NHTSA is continuing to study this issue and will monitor 
the evidence to determine if changes need to be made in future 
rulemakings.
---------------------------------------------------------------------------

    \677\ AFPM, Docket No. NHTSA-2023-0022-61911, at 52, 76.
    \678\ Miller, Caleb, ``Future Electric Vehicles: The EVs You'll 
Soon Be Able to Buy'', Car and Driver, Available at: https://www.caranddriver.com/news/g29994375/future-electric-cars-trucks/. 
(Accessed: April 5, 2024).
---------------------------------------------------------------------------

    In order to calculate total VMT after allowing for the rebound 
effect, the CAFE Model applies the price elasticity of VMT (taken from 
the FHWA forecasting model) to the change in fuel cost per mile 
resulting from higher fuel economy and uses the result to adjust the 
initial estimate of each model's annual use accordingly. The CAFE model 
applies this adjustment after the reallocation step described 
previously, since that adjustment is intended to ensure that total VMT 
is identical among alternatives before considering the contribution of 
increased driving due to the rebound effect. Its contribution differs 
among regulatory alternatives because those requiring higher fuel 
economy lead to larger reductions in the fuel cost of driving each 
mile, and thus to larger increases in vehicle use.
    The approach used in NHTSA's CAFE model is thus a combination of 
``top-down'' (relying on the FHWA forecasting model to determine total 
LD VMT in a given calendar year) and ``bottom-up'' (where the 
composition and utilization of the on-road fleet determines a base 
level of VMT in a calendar year, which is constrained to match the FHWA 
model) forecasting. See Chapter 4.3 of the TSD for a complete 
accounting of how NHTSA models VMT.
4. Changes to Fuel Consumption
    NHTSA uses the fuel economy and age and body-style VMT estimates to 
determine changes in fuel consumption. NHTSA divides the expected 
vehicle use by the anticipated mpg to calculate the gallons consumed by 
each simulated vehicle, and when aggregated, the total fuel consumed in 
each alternative.

F. Simulating Emissions Impacts of Regulatory Alternatives

    This final rule encourages manufacturers of light-duty vehicles and 
HDPUVs to employ various fuel-saving technologies to improve the fuel 
efficiency of some or all the models they produce, and in addition to 
reducing drivers' outlays for fuel, the resulting reductions in their 
fuel consumption will produce additional benefits. These benefits 
include reduced vehicle emissions during their operation, as well as 
lower ``upstream'' emissions from extracting petroleum, transporting, 
and refining it to produce transportation fuels, and finally 
transporting, storing, and distributing fuel. This section provides a 
detailed discussion of how the agency estimates the resulting 
reductions in emissions, particularly for the main standard-setting 
options, including the development and evolution of parameters to 
estimate emissions of criteria pollutants, GHGs, and air toxics, and 
the potential improvements in human health from reducing them.
    The rule implements an ``emissions inventory'' methodology for 
estimating its emissions impacts. Vehicle emissions inventories are 
often described as three-legged stools, comprised of vehicle activity 
(i.e., miles traveled, hours operated, or gallons of fuel burned), 
population (or number of vehicles), and emission factors.\679\ An 
emission factor is a representative rate that attempts to relate the 
quantity of a pollutant released to the atmosphere per unit of 
activity. For this rulemaking, like past rules, activity levels (both 
miles traveled and fuel consumption) are generated by the CAFE Model, 
while emission factors have been adapted from models developed and 
maintained by other Federal agencies.
---------------------------------------------------------------------------

    \679\ There seems to be misalignment in the scientific community 
as to the use of the term ``emission factor'' and ``emissions 
factor'' to refer to a singular emission factor, and the use of the 
term ``emission factors'' and ``emissions factors'' to refer to 
multiple emission factors; we endeavor to remain consistent in this 
section and implore the community to come to consensus on this 
important issue.
---------------------------------------------------------------------------

    The following section briefly discusses the methodology the CAFE 
Model uses to track vehicle activity and populations, and how we 
generate the emission factors that relate vehicle activity to emissions 
of criteria pollutants, GHGs, and air toxics. This section also details 
how we model the effects of these emissions on human health, especially 
in regard to criteria pollutants known to cause poor air quality. 
Further description of how the health impacts of criteria pollutant 
emissions can vary and how these emission damages have been monetized 
and incorporated into the rule can be found in Preamble Section III.G, 
Chapter 6.2.2 of the TSD, and the Final EIS accompanying this analysis.
    For transportation applications, emissions are generated at several 
stages between the initial point of energy feedstock extraction and 
delivering fuel to vehicles' fuel tanks or energy storage systems; in 
lifecycle analysis, these are often referred to ``upstream'' or ``well-
to-tank'' emissions. In contrast, ``downstream'' or ``tank-to-wheel'' 
emissions are primarily comprised of those emitted by vehicles' exhaust 
systems, but also include other emissions generated during vehicle 
refueling, use, and inactivity (called `soaking'), including 
hydrofluorocarbons leaked from vehicles' air conditioning (AC) systems. 
They also include particulate matter (PM) released into the atmosphere 
by brake and tire wear (BTW) as well as evaporation of volatile organic 
compounds (VOCs) from fuel pumps and vehicles' fuel storage systems 
during refueling and when parked. Cumulative emissions occurring 
throughout the fuel supply and use cycle are often called ``well-to-
wheel'' emissions in lifecycle analysis.
    The CAFE Model tracks vehicle populations and activity levels to 
produce estimates of the effects of different levels of CAFE standards 
on emissions and their consequences for human health and the global 
climate. Tracking vehicle populations begins with the reference 
baseline or analysis fleet, and estimates of each vehicle's fuel type 
(e.g., gasoline, diesel, electricity), fuel economy, and number of 
units sold in the U.S. As fuel economy-improving technology is added to 
vehicles in the reference baseline fleet in MYs subject to proposed new 
standards, the CAFE Model estimates annual rates at which new vehicles 
are purchased, driven,\680\ and subsequently scrapped. The model uses 
estimates of vehicles remaining in service in each year and the amount 
those vehicles are driven (i.e., activity levels) to calculate the 
quantities of each type of fuel or energy that vehicles in the fleet 
consume in each year, including gasoline, diesel, and electricity. The 
quantities of travel and fuel consumption estimated for the cross 
section of MYs comprising each CYs vehicle fleet represents the

[[Page 52671]]

``activity levels'' the CAFE model uses to calculate emissions. The 
model does so by multiplying each activity level by the relevant 
emission factor and summing the results of those calculations.
---------------------------------------------------------------------------

    \680\ The procedures the CAFE Model uses to estimate annual VMT 
for individual car and light truck models produced during each model 
year over their lifetimes and to combine these into estimates of 
annual fleet-wide travel during each future CY, together with the 
sources of its estimates of their survival rates and average use at 
each age, are described in detail in TSD Chapters 4.2 and 4.3. The 
data and procedures the CAFE Model employs to convert these 
estimates of VMT to fuel and energy consumption by individual model, 
and to aggregate the results to calculate total consumption and 
energy content of each fuel type during future CYs, are also 
described in detail in that section.
---------------------------------------------------------------------------

    Emission factors measure the mass of each greenhouse gas or 
criteria air pollutant emitted per unit of activity, which can be a 
vehicle-mile of travel, gallon of fuel consumed, or unit of fuel energy 
content. We generate emission factors for the following regulated 
criteria pollutants and GHGs: carbon monoxide (CO), VOCs, nitrogen 
oxides (NOX), sulfur oxides (SOX), particulate 
matter with a diameter of 2.5-micron ([mu]m) or less 
(PM2.5); CO2, methane (CH4), and 
nitrous oxide (N2O).\681\ In this rulemaking, upstream 
emission factors are based on the volume of each type of fuel supplied, 
while downstream emission factors are expressed on a distance-traveled 
(VMT) basis. Simply stated, the rulemaking's upstream emission 
inventory is the product of the per-gallon emission factor and the 
corresponding number of gallons of gasoline or diesel, or amount of 
electricity,\682\ produced and distributed. Similarly, the downstream 
emission inventory is the product of the per-mile emission factor and 
the appropriate miles traveled estimate. The only exceptions are that 
tailpipe emissions of SOX and CO2 are also 
calculated on a per-gallon emission basis using appropriate emission 
factors in the CAFE Model. EVs do not produce combustion-related 
(tailpipe) emissions,\683\ however, EV upstream electricity emissions 
are also accounted for in the CAFE Model inputs. Upstream and 
downstream emission factors and subsequent inventories were developed 
independently from separate data sources, as discussed in detail below.
---------------------------------------------------------------------------

    \681\ There is also HFC leakage from air conditioner systems, 
but these emissions are not captured in our analysis.
    \682\ The CAFE Model utilizes a single upstream electricity 
emission factor for each pollutant for transportation use and does 
not differentiate by process, based on GREET emission factors for 
electricity as a transportation fuel.
    \683\ BEVs do not produce any combustion-based emissions while 
PHEVs only produce combustion-based emissions during use of 
conventional fuels. Utilization factors typically define how much 
real-world operation occurs while using electricity versus 
conventional fuels.
---------------------------------------------------------------------------

    The analysis for the NPRM used upstream emission factors derived 
from GREET 2022, which is a lifecycle emissions model developed by the 
U.S. DOE's Argonne National Laboratory (Argonne). GREET 2022 projected 
a national mix of fuel sources used for electricity generation (often 
simply called the grid mix) for transportation from the latest AEO data 
available, in that case from 2022. For the final rule, we updated 
upstream petroleum (gasoline and diesel) and electricity emission 
factors using R&D GREET 2023.\684\ Petroleum emission factors are based 
on R&D GREET 2023 assumptions derived from AEO 2023, while electricity 
emission factors are derived from an electricity forecast from the 
National Renewable Energy Laboratory's 2022 Standard Scenarios 
report.\685\ A detailed description of how we used R&D GREET 2023 to 
generate upstream emission factors appears in Chapter 5 of the TSD, as 
well as in the Electricity Grid Forecasts docket memo accompanying this 
rule.
---------------------------------------------------------------------------

    \684\ ANL. 2023. The Greenhouse Gases, Regulated Emissions and 
Energy Use in Transportation (GREET) Model. Argonne National 
Laboratory. Last revised: December 2023. Available at: https://greet.es.anl.gov/. (Accessed: January 25, 2022).
    \685\ Gagnon, P., M. Brown, D. Steinberg, P. Brown, S. Awara, V. 
Carag, S. Cohen, W. Cole, J. Ho, S. Inskeep, N. Lee, T. Mai, M. 
Mowers, C. Murphy, and B. Sergi. 2022. 2022 Standard Scenarios 
Report: A U.S. Electricity Sector Outlook. Revised March 2023. 
National Renewable Energy Laboratory. NREL/TP-6A40-84327. Available 
at: https://www.nrel.gov/docs/fy23osti/84327.pdf (Accessed: February 
29, 2024).
---------------------------------------------------------------------------

    Other grid mixes with higher penetrations of renewables are 
presented as sensitivity cases in the FRIA and provide some context 
about how the results of our analysis would differ using a grid mix 
with a higher penetration of renewable energy sources. We sought 
comment on these sensitivity cases and which national grid mix forecast 
best represents the latest market conditions and policies, such as the 
Inflation Reduction Act. We also sought comments on other forecasts to 
consider, including EPA's Integrated Planning Model for the post-IRA 
2022 reference case for the final rulemaking,\686\ and the methodology 
used to generate alternate forecasts. We received no comments on our 
grid mix assumptions; however, to be consistent with DOE's projections 
in their Petroleum Equivalency Factor (PEF) final rule, we chose to use 
the 2022 Standard Scenarios report projections.\687\
---------------------------------------------------------------------------

    \686\ See EPA. 2023. Post-IRA 2022 Reference Case. Available at: 
https://www.epa.gov/power-sector-modeling/post-ira-2022-reference-case. (Accessed: Feb. 27, 2024).
    \687\ 89 FR 22041 (March 29, 2024).
---------------------------------------------------------------------------

    As in past CAFE analyses, we used GREET to derive emission factors 
for the following four upstream emission processes for gasoline, E85, 
and diesel: (1) petroleum extraction, (2) petroleum transportation and 
storage, (3) petroleum refining, and (4) fuel transportation, storage, 
and distribution (TS&D)). We calculated average emission factors for 
each fuel and upstream process during five-year intervals over the 
period from 2022 through 2050. We considered feedstocks including 
conventional crude oil, oil sands, and shale oils in the gasoline and 
diesel emission factor calculations and follow assumptions consistent 
with the GREET Model for ethanol blending.
    In the proposal, NHTSA assumed that any reduction in fuel 
consumption within the United States would lead to an equal increase in 
gasoline exports. As a consequence, we projected that domestic fuel 
production and the upstream emissions it generates would not change, 
although we did acknowledge that emissions from feedstock extraction 
and fuel production outside the U.S. were likely to be affected. NHTSA 
also noted that this assumption was strong and that it was considering 
how to project changes in domestic fuel production that were likely to 
result from changes in CAFE and fuel efficiency standards over the long 
run. NHTSA sought comments on how it should model the response of 
domestic fuel production to changes in fuel consumption. AFPM commented 
that the scale of reductions in domestic fuel consumption caused by the 
proposed standards was likely to cause changes in domestic fuel 
production, and that NHTSA should consider the rule's impact on biofuel 
production.\688\
---------------------------------------------------------------------------

    \688\ AFPM, Docket No. NHTSA-2023-0022-61911, at 12-14.
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    NHTSA re-analyzed projections of domestic fuel production from 
McKinsey & Company (2023),\689\ S&P Global (2023),\690\ and the 2023 
AEO, and concluded that there is a wide range of estimates about how 
domestic refining is likely to change over the coming decades, even 
without considering the potential effects of higher standards. Instead 
of relying on a single set of projections, NHTSA developed a simplified 
parameterized economic model for estimating the response of domestic 
fuel production to changes in U.S. fuel consumption. Using this model, 
for the final rule NHTSA estimates that 20 percent of the reduction in 
fuel consumption will be translated into reductions in domestic fuel 
production. See Chapters 5 and 6.2.4 of the TSD for a more detailed 
discussion of this process.
---------------------------------------------------------------------------

    \689\ Ding, Cherry, et. al, Refining in the energy transition 
through 2040, McKinsey & Company, October, 2022.
    \690\ Smith, Rob, ``Through the looking glass: Fuel retailing in 
an era of declining US gasoline demand'' S&P Global, Commodity 
Insights, September 27, 2023.
---------------------------------------------------------------------------

    We estimated non-CO2 downstream emission factors for 
gasoline, E85,

[[Page 52672]]

diesel, and CNG \691\ using EPA's Motor Vehicle Emission Simulator 
(MOVES4) model, a regulatory highway emissions inventory model 
developed by that agency's National Vehicle and Fuel Emissions 
Laboratory.\692\ We generated downstream CO2 emission 
factors based on the carbon content (i.e., the fraction of each fuel 
type's mass that is carbon) and mass density per unit of each specific 
type of fuel, under the assumption that each fuel's entire carbon 
content is converted to CO2 emissions during combustion. The 
CAFE Model calculates CO2 vehicle-based emissions associated 
with vehicle operation of the surviving on-road fleet by multiplying 
the number of gallons of each specific fuel consumed by the 
CO2 emission factor for that type of fuel. More 
specifically, the number of gallons of a particular fuel is multiplied 
by the carbon content and the mass density per unit of that fuel type, 
and then the ratio of CO2 emissions generated per unit of 
carbon consumed during the combustion process is applied.\693\ TSD 
Chapter 5.3 contains additional detail about how we generated the 
downstream emission factors used in this analysis.
---------------------------------------------------------------------------

    \691\ BEVs and FCEVs do not generate any combustion-related 
emissions.
    \692\ EPA. 2023. Motor Vehicle Emission Simulator: MOVES4. 
Office of Transportation and Air Quality. US Environmental 
Protection Agency. Ann Arbor, MI. August 2023. Available at: https://www.epa.gov/moves/latest-version-motor-vehicle-emission-simulator-moves (Accessed: February 2, 2024).
    \693\ Chapter 3, Section 4 of the CAFE Model Documentation 
provides additional description for calculation of CO2 
downstream emissions with the model.
---------------------------------------------------------------------------

    With stringent LDV standards already in place for PM from vehicle 
exhaust, particles from brake and tire wear (BTW) are becoming an 
increasingly important component of PM2.5 emission 
inventories. To put the magnitude of future BTW PM2.5 
emissions in perspective, NHTSA conducted MOVES4 analysis using default 
input values. This analysis indicates that BTW PM2.5 
represent approximately half of gasoline-fueled passenger car and light 
truck PM2.5 emissions (from vehicle exhaust, brake wear, and 
tire wear) after 2020.\694\ While previous CAFE rulemakings have not 
modeled the indirect impacts to BTW emissions due to changes in fuel 
economy and VMT, this rulemaking considers total PM2.5 
emissions from the vehicle's exhaust, brakes, and tires.
---------------------------------------------------------------------------

    \694\ For additional information, including figures presenting 
PM2.5 emissions by regulatory class from these MOVES 
runs, please see TSD 5.3.3.4.
---------------------------------------------------------------------------

    As with downstream emission factors, we generated BTW emission 
factors using EPA's MOVES4 model.\695\ Due to limited BTW measurements, 
MOVES does not estimate variation in BTW emission factors by vehicle 
MY, fuel type, or powertrain. Instead, MOVES' estimates of emissions 
from brake wear are based on weight-based vehicle regulatory classes 
and operating behavior derived primarily from vehicle speed and 
acceleration. On the other hand, MOVES' estimates of tire wear 
emissions depend on the same weight-based regulatory classes, but the 
effect of operations on emissions is represented only by vehicle speed. 
Unlike the CAFE Model's downstream emission factors, the BTW estimates 
were averaged over all vehicle MYs and ages to yield a single grams-
per-mile value by regulatory class.
---------------------------------------------------------------------------

    \695\ EPA. 2020. Brake and Tire Wear Emissions from Onroad 
Vehicles in MOVES3. Office of Transportation and Air Quality 
Assessment and Standards Division, at 1-48. Available at: https://nepis.epa.gov/Exe/ZyPDF.cgi?Dockey=P1010M43.pdf. (Accessed Feb. 27, 
2024).
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    There is some evidence that average vehicle weight will differ by 
fuel type and powertrain, particularly for longer-range EVs, which are 
often heavier than a comparable gasoline- or diesel-powered vehicle due 
to the weight of the battery.\696\ This weight increase may result in 
additional tire wear. While regenerative braking often extends braking 
systems' useful life and reduces emissions associated with brake 
wear,\697\ the effect of additional mass might be to increase overall 
BTW emissions.\698\ Further BTW field studies are needed to better 
understand how differences in vehicle fuel and powertrain type are 
likely to impact PM2.5 emissions from BTW. The CAFE Model's 
BTW inputs can be differentiated by fuel type, but for the time being 
are assumed to have equivalent values for gasoline, diesel, and 
electricity. Given the degree to which PM2.5 inventories are 
expected to shift from vehicle exhaust to BTW in the near future, we 
believe that it is better to have some BTW estimates--even if 
imperfect--than not to include them at all, as was the case in prior 
CAFE rulemakings.
---------------------------------------------------------------------------

    \696\ Cooley, B. 2022. America's New Weight Problem: Electric 
Vehicles. CNET. Published: Jan. 28, 2022. Available at: https://www.cnet.com/roadshow/news/americas-new-weight-problem-electric-cars. (Accessed: Feb. 27, 2024).
    \697\ Bondorf, L. et al. 2023. Airborne Brake Wear Emissions 
from a Battery Electric Vehicle. Atmosphere. Vol. 14(3): at 488. 
Available at: https://doi.org/10.3390/atmos14030488. (Accessed: Feb. 
27, 2024).
    \698\ EPA.2022 Brake Wear Particle Emission Rates and 
Characterization. Office of Transportation and Air Quality. 
Available at: https://nepis.epa.gov/Exe/ZyPURL.cgi?Dockey=P1013TSX.txt. (Accessed: Feb. 27, 2024); McTurk, 
E. 2022. Do Electric Vehicles Produce More Tyre and Brake Pollution 
Than Their Petrol and Diesel Equivalents? RAC. Available at: https://www.rac.co.uk/drive/electric-cars/running/do-electric-vehicles-produce-more-tyre-and-brake-pollution-than-petrol-and/. (Accessed: 
Feb. 27, 2024).
---------------------------------------------------------------------------

    In the NPRM, we sought comment on this updated approach and on 
additional data sources that could be used to update the BTW estimates. 
Commenters such as the Alliance for Automotive Innovation and 
Stellantis recommended that NHTSA refrain from including BTW in the 
analysis until SAE or another organization publishes a measurement 
methodology and testing procedures for quantifying BTW.\699\ Another 
commenter, the AFPM, stated that new ZEVs specifically would cause an 
increase in average vehicle weight in the U.S. fleet, and in turn cause 
more BTW emissions.\700\
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    \699\ The Alliance, Docket No. NHTSA-2023-0022-60652, at 65-66; 
Stellantis, Docket No. NHTSA-2023-0022-61107, at 14.
    \700\ AFPM, Docket No. NHTSA-2023-0022-61911-A2, at 79.
---------------------------------------------------------------------------

    With notable reductions in fine particulate matter 
(PM2.5) from tailpipe exhaust due to federal regulation, 
non-exhaust sources such as brake and tire wear (BTW) constitute a 
growing proportion of vehicles' PM2.5 emissions. Although we 
agree with commenters that EVs could cause disproportionate brake wear 
compared to internal combustion engine vehicles due to additional 
battery weight, it is unclear how this might affect LD and HDPUV PM 
emissions overall. Without any BEV tailpipe exhaust and some evidence 
to suggest reduced EV brake wear from regenerative braking, NHTSA has 
not yet been able to determine the relative PM contributions of BEVs, 
HEVs, and ICE vehicles. In addition, as discussed in more detail in 
Section III.D, it appears that the trend for manufacturers to produce 
large EVs may be declining as manufacturers start building smaller and 
more affordable EVs. While this final rule continues to project 
differences in BTW emissions among regulatory classes, there has not 
been enough new BTW data published since the proposal to update non-
exhaust PM emission factors by fuel type. That said, we continue to 
believe that including the best available data on BTW estimates is 
better than including no estimates.\701\ For further reading on BTW 
assumptions, please refer to TSD Chapter 5.3.3.4.
---------------------------------------------------------------------------

    \701\ Ctr. for Biological Diversity v. Nat'l Highway Traffic 
Safety Admin., 538 F.3d 1172 (9th Cir. 2008).
---------------------------------------------------------------------------

    The CAFE Model computes select health impacts resulting from 
population exposure to PM2.5. These health impacts include 
causing or aggravating several different respiratory

[[Page 52673]]

conditions and even premature death, each of which is measured by the 
number of instances predicted to result from exposure to each ton of 
PM2.5-related pollutant emitted (direct PM as well as 
NOX and SO2, both precursors to secondarily-
formed PM2.5). The CAFE Model reports total 
PM2.5-related health impacts by multiplying the estimated 
emissions of each PM2.5-related pollutant (in tons)--
generated using the process described above--by the corresponding 
health incidence per ton value. Broadly speaking, a health incidence 
per ton value is the morbidity and mortality estimate linked to an 
additional ton of an emitted pollutant; these can also be referred to 
as benefit per ton values where monetary measures of adverse health 
impacts avoided per ton by which emissions are reduced (discussed 
further in Section III.G).
    The American Lung Association commented on the limits of the health 
impacts analysis, stating that it ``does not include monetized health 
harms of ozone, ambient oxides of nitrogen or air toxics.'' \702\ We do 
not include monetized health harms of air toxics as they have not 
typically been monetized, and as such we currently have no basis for 
that valuation. The sources used in our health impacts analysis were 
chosen to best match the pollution source sector categories 
incorporated in the CAFE Model. For some pollution source sectors, only 
PM2.5 BPT values exist, and as such we chose to consistently 
measure the same damages across all pollution source sectors by 
focusing on PM2.5-related damages. We plan to revisit this 
portion of analysis when more source sector BPT values become available 
in the literature. We do note that these benefits (reduced health harms 
of ozone, ambient oxides of nitrogen, air toxics) are potentially 
significant despite not being quantified and have added language to our 
discussion of benefits of the rule to clarify this.
---------------------------------------------------------------------------

    \702\ ALA, Docket No. NHTSA-2023-0022-60091, at 2.
---------------------------------------------------------------------------

    The health incidence per ton values in this analysis reflect the 
differences in health impacts arising from the five upstream emission 
source sectors that we use to generate upstream emissions (petroleum 
extraction, petroleum transportation, refineries, fuel transportation, 
storage and distribution, and electricity generation). We carefully 
examined how each upstream source sector is defined in GREET to 
appropriately map the emissions estimates to data on health incidences 
from PM2.5-related pollutant emissions. As the health 
incidences for the different source sectors are all based on the 
emission of one ton of the same pollutants, NOX, 
SOX, and directly-emitted PM2.5, differences in 
the incidence per ton values arise from differences in the geographic 
distribution of each pollutant's emissions, which in turn affects the 
number of people exposed to potentially harmful concentrations of each 
pollutant.\703\
---------------------------------------------------------------------------

    \703\ EPA. 2018. Estimating the Benefit per Ton of Reducing 
PM2.5 Precursors from 17 Sectors. Office of Air and 
Radiation and Office of Air Quality Planning and Standards. Research 
Triangle Park, NC, at 1-108. Available at: https://www.epa.gov/sites/production/files/2018-02/documents/sourceapportionmentbpttsd_2018.pdf. (Accessed: Feb. 27, 2024).
---------------------------------------------------------------------------

    As in past CAFE analyses, we relied on publicly available 
scientific literature and reports from EPA and EPA-affiliated authors, 
to estimate per-ton PM2.5-related health damage costs for 
each upstream source of emissions. We used several EPA reports to 
generate the upstream health incidence per ton values, as different EPA 
reports provided more up-to-date estimates for different sectors based 
on newer air quality modeling. These EPA reports use a reduced-form 
benefit-per-ton (BPT) approach to assess health impacts; 
PM2.5-related BPT values are the total monetized human 
health benefits (the sum of the economic value of the reduced risk of 
premature death and illness) that are expected to result from avoiding 
one ton of directly-emitted PM2.5 or PM2.5 
precursor such as NOX or sulfur dioxide (SO2). We 
note, however, that the complex, non-linear photochemical processes 
that govern ozone formation prevent us from developing reduced-form 
ozone, ambient NOX, or other air toxic BPT values, an 
important limitation to recognize when using the BPT approach. We 
include additional discussion of uncertainties in the BPT approach in 
Chapter 5.4.3 of the TSD and also conduct full-scale photochemical 
modeling described in Appendix E of the FEIS. Nevertheless, we believe 
that the BPT approach provides reasonable estimates of how establishing 
more stringent CAFE standards is likely to affect public health, and of 
the value of reducing the health consequences of exposure to air 
pollution. The BPT methodology and data sources are unchanged from the 
2022 CAFE rule, and stakeholders generally agreed that estimates of the 
benefits of PM2.5 reductions were improved from prior 
analyses based on our emissions-related health impacts methodology 
updated for that rule.\704\
---------------------------------------------------------------------------

    \704\ CBD et al., Docket No. NHTSA-2021-0053-1572, at 5.
---------------------------------------------------------------------------

    The reports we relied on for health incidences and BPT estimates 
include EPA's 2018 technical support document titled Estimating the 
Benefit per Ton of Reducing PM2.5 Precursors from 17 Sectors 
(referred to here as the 2018 EPA source apportionment TSD),\705\ a 
2018 oil and natural gas sector paper (Fann et al.), which estimates 
health impacts for this sector in the year 2025,\706\ and a 2019 paper 
(Wolfe et al.) that computes monetized per ton damage costs for several 
categories of mobile sources, based on vehicle type and fuel type.\707\
---------------------------------------------------------------------------

    \705\ EPA. 2018. Estimating the Benefit per Ton of Reducing 
PM2.5 Precursors from 17 Sectors. Office of Air and 
Radiation and Office of Air Quality Planning and Standards. Research 
Triangle Park, NC, at 1-108. Available at: https://19january2017snapshot.epa.gov/benmap/estimating-benefit-ton-reducing-pm25-precursors-17-sectors_.html. (Accessed: Feb. 27, 
2024).
    \706\ Fann, N. et al. 2018. Assessing Human Health 
PM2.5 and Ozone Impacts from U.S. Oil and Natural Gas 
Sector Emissions in 2025. Environmental Science & Technology. Vol. 
52(15): at 8095-8103. Available at: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6718951/. (Accessed: Feb. 27, 2024) (hereinafter 
Fann et al.).
    \707\ Wolfe, P. et al. 2019. Monetized Health Benefits 
Attributable to Mobile Source Emission Reductions Across The United 
States In 2025. The Science of the Total Environment. Vol. 650(Pt 
2): at 2490-98. Available at: https://pubmed.ncbi.nlm.nih.gov/30296769/) (Accessed: Feb. 27, 2024) (hereinafter Wolfe et al.). 
Health incidence per ton values corresponding to this paper were 
sent by EPA staff.
---------------------------------------------------------------------------

    Some CAFE Model upstream emissions components do not correspond to 
any single EPA source sector identified in available literature, so we 
used a weighted average of different source sectors to generate those 
values. Data we used from each paper for each upstream source sector 
are discussed in detail in Chapter 5.4 of the TSD.
    The CAFE Model follows a similar process for computing health 
impacts resulting from downstream emissions. We used the Wolfe et al. 
paper to compute monetized damage costs per ton values for several on-
road mobile sources categories based on vehicle type and fuel type. 
Wolfe et al. did not report incidences per ton, but that information 
was obtained through communications with the study authors. Additional 
information about how we generated downstream health estimates is 
discussed in Chapter 5.4 of the TSD.
    We are aware that EPA recently updated its estimated benefits for 
reducing PM2.5 from several sources,\708\

[[Page 52674]]

but those do not include mobile sources (which include the vehicles 
subject to CAFE and HDPUV fuel efficiency standards). After discussion 
with EPA staff, we retained the PM2.5 incidence per ton 
values from the previous CAFE analysis for consistency with the current 
mobile source emissions estimates.
---------------------------------------------------------------------------

    \708\ EPA. 2023. Estimating the Benefit per Ton of Reducing 
Directly-Emitted PM2.5, PM2.5 Precursors and 
Ozone Precursors from 21 Sectors. Last updated: Jan. 2023. Available 
at: https://www.epa.gov/benmap/estimating-benefit-ton-reducing-directly-emitted-pm25-pm25-precursors-and-ozone-precursors. 
(Accessed: Feb. 27, 2024).
---------------------------------------------------------------------------

    Although we did not discuss doing a quantitative lifecycle analysis 
in the preamble of the NRPM, several commenters stressed the importance 
of lifecycle analysis, identified suitable methods for conducting such 
an analysis, and suggested how the results of such an analysis should 
factor into the finding that final standards indeed meet the ``maximum 
feasible'' test. The Agency understands the concern that many 
commenters have with the potential environmental impacts of vehicle 
production, including battery material extraction, manufacturing, and 
end-vehicle and battery disposal. With rapidly expanding EV production, 
this is a fast-evolving area of research and not one that can be fully 
addressed in this rule. While some evidence suggests that emissions 
from vehicle production would likely be greater for EVs than 
conventionally fueled vehicles, there is also evidence that ICEs 
continue to have greater total lifecycle emissions than EVs, depending 
on where the EV is charged. NHTSA is not yet prepared to quantify these 
relative vehicle cycle impacts. Further investigation across different 
fuels and vehicle powertrains is warranted and is currently underway 
with Argonne National Laboratory. For a review of relevant research and 
additional qualitative discussion on the vehicle cycle and its impacts, 
readers should refer to FEIS Chapter 6 (Lifecycle Analysis).

G. Simulating Economic Impacts of Regulatory Alternatives

    The following sections describe NHTSA's approach for measuring the 
economic costs and benefits that would result from establishing 
alternative standards for future MYs. The measures that NHTSA uses are 
important considerations, because as OMB Circular A-4 states, benefits 
and costs reported in regulatory analyses must be defined and measured 
consistently with economic theory and should also reflect how 
alternative regulations are anticipated to change the behavior of 
producers and consumers from a baseline scenario. For both the fuel 
economy and fuel efficiency standards, those include vehicle 
manufacturers, buyers of new vehicles, owners of used vehicles, and 
suppliers of fuel, all of whose behavior is likely to respond in 
complex ways to the level of standards that DOT establishes for future 
MYs.
    A number of commenters asked the agency to more explicitly account 
for effects that occur in the analytical baseline in the agency's 
incremental cost-benefit analysis. The agency responds substantively to 
those comments below. The typical approach to quantifying the impacts 
of regulations implies that these costs and benefits should be excluded 
from the incremental cost-benefit analysis given these effects are 
assumed to occur absent the regulation. Thus, quantifying them in the 
incremental cost-benefit analysis would obscure the effects the agency 
needs to isolate in order to analyze the effects of the regulation. For 
these reasons, the agency does not explicitly account for some of the 
costs and benefits requested by commenters that accrue in the baseline, 
and instead focuses on the costs and benefits that may change in 
response to the final rule.
    It is also important to report the benefits and costs of this final 
rule in a format that conveys useful information about how those 
impacts are generated, while also distinguishing the economic 
consequences for private businesses and households from the action's 
effects on the remainder of the U.S. economy. A reporting format will 
accomplish this objective to the extent that it clarifies who incurs 
the benefits and costs of the final rule, while also showing how the 
economy-wide or ``social'' benefits and costs of the final rule are 
composed of direct effects on vehicle producers, buyers, and users, 
plus the indirect or ``external'' benefits and costs it creates for the 
general public. NHTSA does not attempt to distinguish benefits and 
costs into co-benefits or secondary costs.
    Table III-7 lists the economic benefits and costs analyzed in 
conjunction with this final rule, and where to find explanations for 
what we measure, why we include it, how we estimate it, and the 
estimated value for that specific line item. The table also shows how 
the different elements of the analysis piece together to inform NHTSA's 
estimates of private and external costs and benefits.\709\
---------------------------------------------------------------------------

    \709\ Changes in tax revenues are a transfer and not an economic 
externality as traditionally defined, but we group these with 
external costs instead of private costs since that loss in revenue 
affects society as a whole as opposed to impacting only consumers or 
manufacturers.
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BILLING CODE 4910-59-P

[[Page 52675]]

[GRAPHIC] [TIFF OMITTED] TR24JN24.062

BILLING CODE 4910-59-C
    NHTSA reports the costs and benefits of standards for LDVs and 
HDPUVs separately. While the effects are largely the same for the two 
fleets, our fuel economy and fuel efficiency programs are separate, and 
NHTSA makes independent determinations of the maximum feasible 
standards for each fleet.
---------------------------------------------------------------------------

    \710\ This table presents the societal costs and benefits. Costs 
and benefits that affect only the consumer analysis, such as sales 
taxes, insurance costs, and reallocated VMT, are purposely ommited 
from this table. See Chapters 8.2.3 and 8.3.3 of the FRIA for 
consumer-specific costs and benefits.
    \711\ Since taxes are transfers from consumers to governments, a 
portion of the Savings in Retail Fuel Costs includes taxes avoided. 
The Loss in Fuel Tax Revenue is completely offset within the Savings 
in Retail Fuel Costs.
---------------------------------------------------------------------------

    A standard function of regulatory analysis is to evaluate tradeoffs 
between impacts that occur at different points in time. Many Federal 
regulations involve costly upfront investments that generate future 
benefits in the form of reductions in health, safety, or environmental 
damages. To evaluate these tradeoffs, the analysis must account for the 
social rate of time preference--the broadly observed social preference 
for benefits that occur sooner versus those that

[[Page 52676]]

occur further in the future. This is accomplished by discounting 
impacts that occur further in the future more than impacts that occur 
sooner.
    OMB Circular A-4 (2003) affirms the appropriateness of accounting 
for the social rate of time preference in regulatory analyses and 
recommends discount rates of 3 and 7 percent for doing so. The 
recommended 3 percent discount rate was chosen to represent the 
``consumption rate of interest'' approach, which discounts future costs 
and benefits to their present values using the rate at which consumers 
appear to make tradeoffs between current consumption and equal 
consumption opportunities when deferred to the future. OMB Circular A-4 
(2003) reports an inflation-adjusted or ``real'' rate of return on 10-
year Treasury notes of 3.1 percent between 1973 and its 2003 
publication date and interprets this as approximating the rate at which 
society is indifferent between consumption today and in the future. The 
7 percent rate reflects the opportunity cost of capital approach to 
discounting, where the discount rate approximates the forgone return on 
private investment if the regulation were to divert resources from 
capital formation. Fuel savings and most other benefits from tightening 
standards will be experienced directly by owners of vehicles that offer 
higher fuel economy and thus affect their future consumption 
opportunities, while benefits or costs that are experienced more widely 
throughout the economy will also primarily affect future consumption. 
Circular A-4 indicates that discounting at the consumption rate of 
interest is the ``analytically preferred method'' when effects are 
presented in consumption-equivalent units. Thus, applying OMB's 
guidance to NHTSA's final rule suggests the 3 percent rate is the 
appropriate rate. However, NHTSA reports both the 3 and 7 percent rates 
for transparency and completeness. It should be noted that the OMB 
finalized a revision to Circular A-4 on November 9th, 2023. The 2023 
Circular A-4 is effective for NPRMs, IFRs, and direct final rules 
submitted to OMB on or after March 1st, 2024, while the effective date 
for other final rules is January 1st, 2025. Thus, while NHTSA has 
considered the guidance in the revised circular for the final rule, as 
this final rule will be published before January 1, 2025, the agency 
will continue to use the discount rates in the prior version for the 
primary analysis.\712\ The agency performed a sensitivity case using a 
2 percent social discount rate consisted with the guidance of revised 
Circular A-4 (2023) which can be found in Chapter 9 of the RIA.
---------------------------------------------------------------------------

    \712\ That is, NHTSA did not incorporate the new recommendations 
about social discounting at 2 percent into the primary analysis but 
has included a senstivity with this discount rate.
---------------------------------------------------------------------------

    A key exception to Circular A-4's guidance on social discounting 
implicates the case of discounting climate related impacts. Because 
some GHGs emitted today can remain in the atmosphere for hundreds of 
years, burning fossil fuels today not only imposes uncompensated costs 
on others around the globe today, but also imposes uncompensated 
damages on future generations. As OMB Circular A-4 (2003) indicates 
``special ethical considerations arise when comparing benefits and 
costs across generations'' and that future citizens impacted by a 
regulatory choice ``cannot take part in making them, and today's 
society must act with some consideration of their interest.'' \713\ 
Thus, NHTSA has elected to discount these effects from the year of 
abatement back to the present value with lower rates. For further 
discussion, see Section III.G.2.b(1) of the Preamble.
---------------------------------------------------------------------------

    \713\ The Executive Office of the President's Office of 
Management and Budget. 2003. Circular No. A-4. Regulatory Analysis. 
Available at: https://www.whitehouse.gov/wp-content/uploades/legacy_drupal_files/omb/circulars/A4/a-4.pdf.
---------------------------------------------------------------------------

    For a complete discussion of the methodology employed and the 
results, see Chapter 6 of the TSD and Chapter 8 of the RIA, 
respectively. The safety implications of the final rule--including the 
monetary impacts--are reserved for Section III.H.
1. Private Costs and Benefits
a. Costs to Consumers
(1) Technology Costs
    The technology applied to meet the standards would increase the 
cost to produce new cars, light trucks and HDPUVs. Within this 
analysis, manufacturers are assumed to transfer these costs to the 
consumers who purchase vehicles offering higher fuel economy. While 
NHTSA recognizes that some manufacturers may defray their regulatory 
costs for meeting increased fuel economy and fuel efficiency standards 
through more complex pricing strategies or by accepting lower profits, 
NHTSA lacks sufficient insight into manufacturers' pricing strategies 
to confidently model alternative approaches. Thus, we simply assume 
that manufacturers raise the prices of models whose fuel economy they 
elect to improve sufficiently to recover their increased costs for 
doing so. The technology costs are incurred by manufacturers and then 
passed onto consumers. While we include the effects of IRA tax credits 
in our modeling of consumer responses to the standards, the effect of 
the tax credit is an economic transfer where the costs to one party are 
exactly offset by benefits to another and have no impact on the net 
benefits of the final rule. While NHTSA could include IRA tax credits 
as a reduction in the technology costs for manufacturers and purchasing 
prices in our cost-benefit accounting, tax credits are a transfer from 
the government to private parties, and as such have no net effect on 
the benefits or costs of the final rule. As such, the line item 
included in the tables summarizing the cost of technology throughout 
this final rule should be considered pre-tax unless otherwise noted.
    NHTSA did not receive comments pertaining to this topic. See 
Section III.C.6 of this preamble and Chapter 2.5 of the TSD for more 
details.
(2) Consumer Sales Surplus
    Consumers who forgo purchasing a new vehicle because of the 
increase in the price of new vehicles' prices caused by more stringent 
standards will experience a decrease in welfare. The collective welfare 
loss to these ``potential'' new vehicle buyers is measured by their 
foregone consumer surplus.
    Consumer surplus is a fundamental economic concept and represents 
the net value (or net benefit) a good or service provides to consumers. 
It is measured as the difference between what a consumer is willing to 
pay for a good or service and its market price. OMB Circular A-4 
explicitly identifies consumer surplus as a benefit that should be 
accounted for in cost-benefit analysis. For instance, OMB Circular A-4 
states the ``net reduction in total surplus (consumer plus producer) is 
a real cost to society,'' and elsewhere recommends that consumer 
surplus values be monetized ``when they are significant.''
    Accounting for the limited portion of lifetime fuel savings that 
the average new vehicle buyer values, and holding all else equal, 
higher average prices should depress new vehicle sales and by extension 
reduce consumer surplus. The inclusion of the effects on the final rule 
on consumer surplus is not only consistent with OMB guidance, but with 
other parts of this regulatory analysis. For instance, we calculate the 
increase in consumer surplus associated with increased driving that 
results from the lower CPM of driving under more stringent regulatory 
alternatives, as discussed in Section II.G.1.b(3). The

[[Page 52677]]

surpluses associated with sales and additional mobility are 
inextricably linked, as they capture the direct costs and benefits to 
purchasers of new vehicles. The sales surplus captures the welfare loss 
to consumers when they forego purchasing new vehicles because of higher 
prices, while the consumer surplus associated with additional driving 
measures the benefit of the increased mobility it provides.
    NHTSA estimates the loss of sales surplus based on the change in 
quantity of vehicles projected to be sold, after adjusting for quality 
improvements attributable to higher fuel economy or fuel efficiency. 
Several commenters mention that there may be distributional impacts in 
terms of the less financially privileged not being able to afford 
higher priced vehicles.\714\ Consumers in rural areas are specifically 
mentioned as being adversely affected due to the higher cost of 
charging an EV in rural areas which would presumably act as a barrier 
to purchasing one of these vehicles.\715\
---------------------------------------------------------------------------

    \714\ AFPM, Docket No. NHTSA-2023-0022-61911, at 61-63; Heritage 
Foundation-Mario Loyola, Docket No. NHTSA-2023-0022-61952, at 7-13; 
American Consumer Institute, Docket No. NHTSA-2023-0022-50765, at 2.
    \715\ NCB, Docket No. NHTSA-2023-0022-53876, at 2.
---------------------------------------------------------------------------

    While these commenters allege that consumers will be harmed by the 
inability to purchase new vehicles because of the regulations, 
commenters did not provide any evidence to support that these effects 
will, or even likely to occur, and seemingly ignored how these 
communities may value and benefit from reduced operational costs. 
Regardless, NHTSA accounted for the possibility that there would be a 
change in welfare associated with decreased sales, but NHTSA did not 
receive any comments suggesting that its estimation of the consumer 
sales surplus was inadequate. Nor did any commenters suggest changes to 
the agency's methodology. As such, the agency has elected to use the 
same methodology as the proposal and feels that the lost welfare from 
the consumer sales surplus adequately captures the effects raised by 
commenters. Furthermore, the IRA provides a 30% tax credit for 
qualified alternative fuel vehicle refueling property supporting the 
installation of charging infrastructure in low-income and non-urban 
areas.\716\ For additional information about consumer sales surplus, 
see Chapter 6.1.2 of the TSD.
---------------------------------------------------------------------------

    \716\ Internal Revenue Service, Alternative Fuel Vehicle 
Refueling Property Credit, May 9, 2024. https://www.irs.gov/credits-deductions/alternative-fuel-vehicle-refueling-property-credit.
---------------------------------------------------------------------------

(3) Ancillary Costs of Higher Vehicle Prices
    Some costs of purchasing and owning a new or used vehicle increase 
in proportion to its purchase price or market value. At the time of 
purchase, the price of the vehicle combined with the state-specific tax 
rate determine the sales tax paid. Throughout the lifetime of the 
vehicle, the residual value of the vehicle--which is determined by its 
initial purchase price, age, and accumulated usage--determine value-
related registration fees and insurance premiums. The analysis assumes 
that the transaction price is a fixed share of the MSRP, which allows 
calculation of these factors as shares of MSRP. As the standards 
influence the price of vehicles, these ancillary costs will also 
increase. For a detailed explanation of how NHTSA estimates these 
costs, see Chapter 6.1.1 of the TSD. These costs are included in the 
consumer per-vehicle cost-benefit analysis but not in the societal 
cost-benefit analysis, because they are assumed to be transfers from 
consumers to government agencies or to reflect actuarially ``fair'' 
insurance premiums. NHTSA did not receive any comments about its 
treatment of state sales taxes or changes to insurance premiums.
    In previous proposals and final rules, NHTSA also included the 
costs of financing vehicle purchases as an ancillary cost to consumers. 
However, as we noted in the 2022 final rule, the availability of 
vehicle financing offers a benefit to consumers by spreading out the 
costs of additional fuel economy technology over time. Thus, we no 
longer include financing as a cost to consumers. Lucid supports NHTSA's 
decision to exclude financing as an ancillary cost,\717\ recognizing 
the benefit of smoothing out consumer costs over time. NADA and MEMA 
have mentioned that the majority of prospective new vehicle purchasers 
finance their transactions, and expressed concern that higher interest 
rates may be impacting the affordability of financing and that consumer 
credit may not reach to meet changing vehicle prices.\718\ NHTSA has 
determined it is appropriate to continue to exclude these costs from 
the analysis for the following reasons. With regards to the impact of 
increasing vehicle purchasing costs, as previously mentioned, NHTSA 
calculates and includes the change in consumer surplus of those who 
choose not to purchase a new vehicle as a result of higher vehicle 
prices due to the stringency of the standards. In addition, explicitly 
modeling future long-run changes in financing costs due to changes in 
interest rates is a technically uncertain undertaking and outside the 
current bounds of this work. Forecasting long-run interest rates 
includes making a variety of assumptions on the structure that these 
rates might take, such as a random walk or equivalence to a forward 
rate and are subject to numerous exogenous macroeconomic factors and 
uncertainties. Commenters did not identify any long-run projections 
that supported their conclusions pertaining to this aspect of consumer 
costs. Therefore, it is inaccurate to assume that high interest rates 
at one point in time will lead to higher rates (and therefore higher 
costs) for all consumers during the regulatory period.
---------------------------------------------------------------------------

    \717\ Lucid, Docket No. NHTSA-2023-0022-50594, at 6.
    \718\ NADA, Docket No. NHTSA-2023-0022-58200, at 6-8; MEMA, 
Docket No. NHTSA-2023-0022-59204, at 9.
---------------------------------------------------------------------------

b. Benefits to Consumers
(1) Fuel Savings
    The primary benefit to consumers of increasing standards is the 
savings in future fuel costs that accrue to buyers and subsequent 
owners of new vehicles. The value of fuel savings is calculated by 
multiplying avoided fuel consumption by retail fuel prices. Each 
vehicle of a given body style is assumed to be driven the same amount 
in each year of its lifetime as all those of comparable age and body 
style. The ratio of that cohort's annual VMT to its fuel efficiency 
produces an estimate of its yearly fuel consumption. The difference 
between fuel consumption in the No-Action Alternative, and in each 
regulatory alternative, represents the gallons (or energy content) of 
fuel saved.
    Under this assumption, our estimates of fuel consumption from 
increasing the fuel economy or fuel efficiency of each individual model 
depend only on how much its fuel economy or efficiency is increased, 
and do not reflect whether its actual use differs from other models of 
the same body type. Neither do our estimates of fuel consumption 
account for variation in how much vehicles of the same body type and 
age are driven each year, which appears to be significant (see Chapter 
4.3.1.2 of the TSD). Consumers save money on fuel expenditures at the 
average retail fuel price (fuel price assumptions are discussed in 
detail in Chapter 4.1.2 of the TSD), which includes all taxes and 
represents an average across octane blends. For gasoline and diesel, 
the included taxes reflect both the Federal tax and a calculated 
average state fuel tax. Expenditures on alternative fuels

[[Page 52678]]

(E85 and electricity, primarily) are also included in the calculation 
of fuel expenditures, on which fuel savings are based. However, since 
alternative fuel technology is not applied to meet the standards, the 
majority of the costs associated with operating alternative fuels net 
to zero between the reference baseline and action alternatives. And 
while the included taxes net out of the social benefit cost analysis 
(as they are a transfer), consumers value each gallon saved at retail 
fuel prices including any additional fees or taxes they pay.
    Chapter 6.1.3 of the TSD provides additional details. As explained 
in the TSD, NHTSA considers the possibility that several of the 
assumptions made about vehicle use could lead to misstating the 
benefits of fuel savings. NHTSA notes that these assumptions are 
necessary to model fuel savings and likely have minimal impact to the 
accuracy of the analysis for this final rule.
    A variety of commenters discussed how fuel savings are valued by 
both manufacturers and consumers, with some discussion on whether NHTSA 
has under or over-valued the benefits to consumers, the appropriate use 
of discount rate to apply to fuel savings, and the source of data used 
to project fuel savings. AEI commented that the ``inclusion of fuel 
savings is illegitimate as a component of the `benefits' the [rule] 
because the economic benefits of fuel savings are captured fully by 
consumers of the fuel.'' \719\ Conversely, IPI commented that including 
all fuel savings as a benefit of the rule is appropriate because the 
rule is addressing the energy efficiency gap.
---------------------------------------------------------------------------

    \719\ AEI, Docket No. NHTSA-2023-0022-54786, at 9-10.
---------------------------------------------------------------------------

    NHTSA agrees with IPI that fuel savings should be accounted for 
within the rule. AEI's comment is premised on the theory that the 
vehicle market is efficient and therefore consumers must not value fuel 
savings, and NHTSA's regulations may only address market failures that 
address externalities. As discussed in III.E, the energy efficiency gap 
has long been recognized as a market failure that may impact the 
ability of consumers to realize fuel savings. Furthermore, the notion 
that only externalities may be counted as a benefit is unfounded. 
Executive Order 12866 and Circular A-4 (2003) have long required 
agencies to attempt to quantify as many benefits as possible and costs 
that can reasonably be ascertained and quantified into its analysis, 
and courts have frowned upon federal agencies ignoring known and 
quantifiable costs or benefits.\720\ In addition, how the agency 
quantifies and monetizes this benefit is not the same as how the agency 
considers it in making its determination of what standards are 
``maximum feasible,'' and thus the extent to which the agency should 
consider consumer fuel savings is addressed in that discussion.
---------------------------------------------------------------------------

    \720\ E.O. 12866 at 2, 7; Circular A4 (2003) under D. Analytical 
Approaches (Benefit-Cost Analysis); CBD v. NHTA, 538 F.3d 1172, 1198 
(9th Cir. 2008).
---------------------------------------------------------------------------

    NADA commented that ``NHTSA correctly noted that EV owners will 
save refueling time by charging at home, but the analysis is flawed in 
that it does not account for the impact of increased electricity 
consumption and related expenditures for those who charge at home.'' 
\721\ NADA is incorrect in their assertion that NHTSA ignores the cost 
of recharging at home. The fuel savings benefit is derived from all 
fuel sources consumed--including electricity--and is intended to 
capture the total cost spent to refuel and recharge in each 
alternative.
---------------------------------------------------------------------------

    \721\ NADA, Docket No. NHTSA-2023-0022-58200-A1, at 10.
---------------------------------------------------------------------------

    Some commenters argued that NHTSA's use of static electricity price 
projections could lead to an underestimate of the operating costs of 
BEVs. The Heritage Foundation and NADA both argued that increased 
demand for electricity induced by BEV adoption--which happens solely in 
the analytical reference baseline through the end of the standard 
setting years--would necessitate increased investment in the 
electricity grid and thus lead to higher electricity prices to recover 
the costs of these investments.\722\ The Heritage Foundation also 
suggested that NHTSA's cost-benefit analysis should account for 
incremental infrastructure costs required to comply with changes to the 
standards. NHTSA believes it is properly accounting for the impact of 
greater penetration of BEVs on electricity prices in its regulatory 
analysis. The electricity prices used in its analysis are taken from 
AEO 2023 and represent EIA's best projection of how greater 
electrification in the automobile market will impact electricity 
prices. Due to its statutory constraints under EPCA, NHTSA does not 
permit production of BEVs as a compliance strategy during model years 
for which it is establishing standards, which restricts BEV adoption to 
the reference baseline. NHTSA believes that the modest difference in 
projected adoption of BEVs between even the most stringent alternatives 
and the reference baseline is unlikely to necessitate significant 
additional investment in the electricity generation and distribution 
grid beyond the No-Action Alternative, and thus will have only minimal 
effects on electricity prices. NHTSA's choice not to account for 
potential effects of its standards on future electricity prices in its 
analysis of costs and benefits is consistent with the agency's 
treatment of fuel prices, which is discussed in TSD Chapter 6.2.4.
---------------------------------------------------------------------------

    \722\ Heritage Foundation-Mario Loyola, Docket No. NHTSA-2023-
0022-61952, at 13-14; NADA, Docket No. NHTSA-2023-0022-58200, at 9-
11.
---------------------------------------------------------------------------

    Some commenters, such as the Center for Environmental 
Accountability, argued that electricity prices charged to users of 
public charging stations are somewhat higher on average than those of 
at home charging.\723\ NHTSA believes that at-home charging will 
continue to be the primary charging method during the time period 
relevant to this rulemaking, and thus residential electricity rates are 
the most representative electricity prices to use in our analysis. 
However, the agency notes again that electrification is restricted to 
the reference baseline through the standard setting years, accounting 
for the price difference between at-home versus public charging would 
result in minor differences between the alternatives that would have 
little impact in changing the net benefits of any of the scenarios.
---------------------------------------------------------------------------

    \723\ NATSO et al, Docket No. NHTSA-2023-0022-61070, at 7-8.
---------------------------------------------------------------------------

    Finally, there is some discussion among the commenters related to 
the appropriate choice of discount rate to apply to fuel savings. 
Valero suggests that valuing medium-term impacts at a discount rate of 
3 percent is inappropriate due to the consumer's investment 
perspective,\724\ while CEA suggests that a 7 percent discount rate is 
a more appropriate choice over 3 percent due to differences paid for 
risk-free versus risky assets.\725\ Consumer Reports supports the use 
of a 3 percent discount rate in its calculation of discounted net 
savings for the consumer in the medium term.\726\
---------------------------------------------------------------------------

    \724\ Valero, Docket No. NHTSA-2023-0022-58547, Attachment F, at 
1.
    \725\ CEA, Docket No. NHTSA-2023-0022-61918, at 23.
    \726\ Consumer Reports, Docket No. NHTSA-2023-0022-61098, at 11.
---------------------------------------------------------------------------

    NHTSA believes that is appropriate to account for fuel savings with 
the same 3 and 7 percent discount rates used for other costs and 
benefits, such as technology costs which are also accrued by consumers. 
This approach, as explained in Circular A-4,\727\ captures

[[Page 52679]]

discount rates that reflect different preferences, and looking at both 
rates provides policy makers a more well-informed perspective. It is 
important to note that NHTSA's assumptions regarding how consumers 
value fuel savings at the time of new vehicle purchase do not apply to 
how NHTSA values fuel savings in its benefit-cost analysis. The prior 
discussion of the energy efficiency gap and consumer's undervaluation 
of lifetime fuel savings relates to the consumer decision in the 
vehicle market. NHTSA's societal-level benefit cost analysis includes 
the full lifetime fuel savings discounted using both 3 and 7 percent 
discount rates. Additional detail can be found in Chapter 4.2.1.1 of 
the TSD.
---------------------------------------------------------------------------

    \727\ The Executive Office of the Present's Office of Management 
and Budget. 2003. Circular No. A-4. Regulatory Analysis. Available 
at: https://www.whitehouse.gov/wp-content/uploads/legacy_drupal_files/omb/circulars/A4/a-4.pdf (Accessed: Mar. 11, 
2024).
---------------------------------------------------------------------------

(2) Refueling Benefit
    Increasing standards affects the amount of time drivers spend 
refueling their vehicles in several ways. First, higher standards 
increase the fuel efficiency of ICE vehicles produced in the future, 
which may increase their driving range and decrease the number of 
refueling events. Conversely, to the extent that more stringent 
standards increase the purchase price of new vehicles, they may reduce 
sales of new vehicles and scrappage of existing ones, causing more VMT 
to be driven by older and less efficient vehicles that require more 
refueling events for the same amount of driving. Finally, as the number 
of EVs in the fleet increases, some of the time spent previously 
refueling ICE vehicles at the pump will be replaced with recharging EVs 
at public charging stations. While the analysis does not allow 
electrification to be chosen as a compliance pathway with the standards 
for LDVs, it is still important to model recharging since excluding 
these costs would underestimate scenarios with additional BEVs, such as 
our sensitivity cases that examine lower battery costs.
    NHTSA estimates these savings by calculating the amount of 
refueling time avoided--including the time it takes to locate a retail 
outlet, refuel one's vehicle, and pay--and multiplying it by DOT's 
estimated value of travel time. For a full description of the 
methodology, refer to Chapter 6.1.4 of the TSD. An alternative 
hypothesis NHTSA is still considering, but not adopting for the final 
rule, is whether manufacturers maintain vehicle range by lowering tank 
size as vehicle efficiency improves without, therefore, reducing 
refueling time.
    NADA commented that the agency's assumption that EVs will only be 
recharged when necessary mid-trip is inaccurate. NADA noted that ``many 
BEV owners and operators, particularly those living in urban areas, 
will not charge at home.'' \728\ As noted earlier, NHTSA believes that 
most charging will occur in the home during time period relevant to 
this rulemaking, but NHTSA agrees with NADA that not all EV owners may 
have access to home charging.\729\ Commenters did not come forward with 
any specifics of how to best quantify these costs, but we may revisit 
these assumptions in the future when more information is available. For 
the time being, the agency believes that, even if it were to quantify 
the recharging time of EVs for non-mid-trip refuelings, the differences 
between the alternatives would be negligible given most of those costs 
would be incurred in the reference baseline.
---------------------------------------------------------------------------

    \728\ NADA, Docket No. NHTSA-2023-0022-58200, at 10.
    \729\ NHTSA disagrees with NADA's ancillary comment that public 
infrastructure is insufficient, and the agency believes it is more 
than likely that some of who do not have access to home charging may 
have charging options while at work or some other routine public 
destination.
---------------------------------------------------------------------------

(3) Additional Mobility
    Any increase in travel demand provides benefits that reflect the 
value to drivers and passengers of the added--or more desirable--social 
and economic opportunities that additional travel makes available. 
Under each of the alternatives considered in this analysis, the fuel 
CPM of driving would decrease as a consequence of higher fuel economy 
and efficiency levels, thus increasing the number of miles that buyers 
of new cars, light trucks, and HDPUVs would drive as a consequence of 
the well-documented fuel economy rebound effect.
    In theory, the decision by drivers and their passengers to make 
more frequent or longer trips when the cost of driving declines 
demonstrates that the benefits that they gain by doing so must exceed 
the costs they incur. At a minimum, one would expect the benefits of 
additional travel to equal the cost of the fuel consumed to travel 
additional miles (or they would not have occurred). Because the cost of 
that additional fuel is reflected in the simulated fuel expenditures, 
it is also necessary to account for the benefits associated with those 
extra miles traveled. But those benefits arguably should also offset 
the economic value of their (and their passengers') travel time, other 
vehicle operating costs, and the economic cost of safety risks due to 
the increase in exposure to crash risks that occurs with additional 
travel. The amount by which the benefit of this additional travel 
exceeds its economic costs measures the net benefits drivers and their 
passengers experience, usually referred to as increased consumer 
surplus.
    Chapter 6.1.5 of the TSD explains NHTSA's methodology for 
calculating benefits from additional mobility. The benefit of 
additional mobility over and above its costs is measured by the change 
in consumers' surplus, which NHTSA approximates as one-half of the 
change in fuel CPM times the increase in VMT due to the rebound effect. 
In the proposal, NHTSA sought comments on the assumptions and methods 
used to calculate benefits derived from additional mobility. NHTSA 
received several comments addressing its approach for estimating the 
total change in VMT caused by changes in the standard. These comments 
are addressed in section III.E. However, NHTSA did not receive comments 
on its methodology for quantifying the related change in benefits from 
additional mobility.
    When the size of the vehicle stock decreases in the LD alternative 
cases, VMT and fuel cost per-vehicle increase. Because maintaining 
constant non-rebound VMT assumes consumers are willing to pay the full 
cost of the reallocated vehicle miles, we offset the increase in fuel 
cost per-vehicle in the LD analysis by adding the product of the 
reallocated VMT and fuel CPM to the mobility value in the per-vehicle 
consumer analysis. Because we do not estimate other changes in cost 
per-vehicle that could result from the reallocated miles (e.g., 
maintenance, depreciation, etc.) we do not estimate the portion of the 
transferred mobility benefits that would correspond to con'umers' 
willingness to pay for those costs. We do not estimate the con'umers' 
surplus associated with the reallocated miles because there is no 
change in total non-rebound VMT and thus no change in con'umers' 
surplus per consumer. Chapter 6.1.5 of the TSD explains NHTSA's 
methodology for calculating the benefits of reallocated miles. NHTSA 
sought comment in the proposal on its methodology for calculating the 
benefits from reallocated milage. NHTSA did not receive comments on 
this subject.
2. External Costs and Benefits
a. Costs
(1) Congestion and Noise
    Increased vehicle use associated with the rebound effect also 
contributes to increased traffic congestion and

[[Page 52680]]

highway noise. Although drivers obviously experience these impacts, 
they do not fully value their effects on other travelers or bystanders, 
just as they do not fully value the emissions impacts of their own 
driving. Congestion and noise costs are thus ``external'' to the 
vehicle owners whose decisions about how much, where, and when to drive 
more in response to changes in fuel economy result in these costs. 
Thus, unlike changes in the costs incurred by drivers for fuel 
consumption or safety risks they willingly assume, changes in 
congestion and noise costs are not offset by corresponding changes in 
the travel benefits drivers experience.
    Congestion costs are limited to road users; however, since road 
users include a significant fraction of the U.S. population, changes in 
congestion costs are treated as part of the final rule's external 
economic impact on society as a whole instead of as a cost to private 
parties. Costs resulting from road and highway noise are even more 
widely dispersed because they are borne partly by surrounding 
residents, pedestrians, and other non-road users, and for this reason 
are also considered as costs that drivers impose on society as a whole.
    To estimate the economic costs associated with changes in 
congestion and noise caused by increases in driving, NHTSA updated the 
estimates of per-mile congestion and noise costs from increased 
automobile and light truck use reported in FHWA's 1997 Highway Cost 
Allocation Study to account for changes in travel activity and economic 
conditions since they were originally developed, as well as to express 
them in 2021 dollars for consistency with other economic inputs. NHTSA 
employed a similar approach for the 2022 final rule. Because HDPUVs and 
light-trucks share similar operating characteristics, we also apply the 
noise and congestion cost estimates for light-trucks to HDPUVs.
    See Chapter 6.2 of the TSD for details on how NHTSA calculated 
estimates of the economic costs associated with changes in congestion 
and noise caused by differences in miles driven. In the NPRM, NHTSA 
requested comment on the congestion costs employed in this analysis, 
but we did not receive any and have not changed our methodology from 
the NPRM for this final rule.
(2) Fuel Tax Revenue
    As mentioned in Section II.G.1.b(1), a portion of the fuel savings 
experienced by consumers includes avoided fuel taxes. While fuel taxes 
are a transfer and do not affect net benefits, NHTSA reports an 
estimate of changes in fuel tax revenues together with external costs 
to show the potential impact on state and local government finances.
    Several commenters, including AHUA and the ID, MT, ND, SD, and WY 
DOTs, discussed changes in the Highway Trust Fund as a result of 
changes in gasoline tax payment by consumers, and mentioned concern in 
funding for highway infrastructure, a potential cost that was not 
incorporated or accounted for in the rule.\730\ NHTSA reports changes 
in gasoline tax payments by consumers and in revenues to government 
agencies, and NHTSA's proposal explained in multiple places that 
gasoline taxes are considered a transfer--a cost to governments and an 
identical benefit to consumers that has already been accounted for in 
reported fuel savings--and have no impact on net benefits. As indicated 
above, any reduction in tax revenue received by governments that levy 
taxes on fuel is exactly offset by lower fuel tax payments by 
consumers, so from an economy-wide standpoint reductions in gasoline 
tax revenues are simply a transfer of economic resources and has no 
effect on net benefits. The agency notes that a decrease in revenue 
from gasoline taxes does not preclude alternative methods from funding 
the Highway Trust Fund or infrastructure,\731\ and--while fiscal policy 
is outside the scope of this rulemaking--some of the more hyperbolic 
claims that less fuel taxes ``would threaten the viability of the 
national highway system'' are clearly unfounded.\732\
---------------------------------------------------------------------------

    \730\ AHUA, Docket No. NHTSA-2023-0022-58180, at 8; State DOTs, 
Docket No. NHTSA-2023-0022-60034, at 1-2.
    \731\ See, e.g., the Bipartisan Infrasctructure Bill, Public Law 
117-58, which provided over 300 billion to repair and rebuild 
American roads.
    \732\ Heritage Foundation-Mario Loyola, Docket No. NHTSA-2023-
0022-61952, at 14.
---------------------------------------------------------------------------

b. Benefits
(1) Climate Benefits
    The combustion of petroleum-based fuels to power cars, light 
trucks, and HDPUVs generates emissions of various GHGs, which 
contribute to changes in the global climate and resulting economic 
damages. Extracting and transporting crude petroleum, refining it to 
produce transportation fuels, and distributing fuel all generate 
additional emissions of GHGs and criteria air pollutants beyond those 
from vehicle usage. By reducing the volume of petroleum-based fuel 
produced and consumed, adopting standards will thus mitigate global 
climate-related economic damages caused by accumulation of GHGs in the 
atmosphere, as well as the more immediate and localized health damages 
caused by exposure to criteria pollutants. Because they fall broadly on 
the U.S. population, and on the global population as a whole in the 
case of climate damages, reducing GHG emissions and criteria pollutants 
represents an external benefit from requiring higher fuel economy.
(a) Social Cost of Greenhouse Gases Estimates
    NHTSA estimated the climate benefits of CO2, 
CH4, and N2O emission reductions expected from 
the proposed rule using the Interagency Working Group's (IWG) interim 
SC-GHG estimates presented in the Technical Support Document: SC of 
Carbon (SCC), Methane, and Nitrous Oxide Interim Estimates (``February 
2021 TSD''). NHTSA noted in the proposal that E.O. 13990 envisioned 
these estimates to act as a temporary surrogate until the IWG could 
finalize new estimates. NHTSA acknowledged in the proposal that our 
understanding of the SC-GHG is still evolving and that the agency would 
continue to track developments in the economic and environmental 
sciences literature regarding the SC of GHG emissions, including 
research from Federal sources like the EPA.\733\ NHTSA sought comment 
on whether an alternative approach should be considered for the final 
rule.
---------------------------------------------------------------------------

    \733\ See 88 FR 56251.
---------------------------------------------------------------------------

    On December 22, 2023, the IWG issued a memorandum to Federal 
agencies, directing them to ``use their professional judgment to 
determine which estimates of the SC-GHG reflect the best available 
evidence, are most appropriate for particular analytical contexts, and 
best facilitate sound decision-making.'' \734\ NHTSA determined that 
the 2023 EPA SC-GHG Report for the final rule would be the most 
appropriate estimate to use for the final rule.\735\
---------------------------------------------------------------------------

    \734\ Memorandum from the Interagency Working Group on Social 
Cost of Greenhouse Gases, avalaible at https://www.whitehouse.gov/wp-content/uploads/2023/12/IWG-Memo-12.22.23.pdf (Accessed: April 
16, 2024).
    \735\ US Environmental Protection Agency (EPA) ``Report on the 
Social Cost of Greenhouse Gases Estimates Incorporating Recent 
Scientific Advances'' (2023) (Final 2023 Report), https://www.epa.gov/system/files/documents/2023-12/epa_scghg_2023_report_final.pdf (Accessed: March 22, 2024) 
(hereinafter 2023 EPA SC-GHG Report).
---------------------------------------------------------------------------

    NHTSA arrived at this decision for several reasons. E.O. 13990 
tasked the IWG with devising long-term recommendations to update the 
methodologies used in calculating these SC-GHG values, based on ``the 
best available economics and science,'' and incorporating principles of 
``climate

[[Page 52681]]

risk, environmental justice (EJ), and intergenerational equity.'' The 
E.O. also instructed the IWG to take into account recommendations from 
the National Academies of the Sciences (NAS) committee convened on this 
topic, which were published in 2017.\736\ Specifically, the National 
Academies recommended that the SC-GHG should be developed using a 
modular approach, where the separate modules address socioeconomic 
projections, climate science, economic damages, and discounting. The 
NAS recommended that the methodology underlying each of the four 
modules be updated by drawing on the latest research and expertise from 
the scientific disciplines relevant to that module.
---------------------------------------------------------------------------

    \736\ National Academies of Sciences, Engineering, and Medicine. 
2017. Valuing Climate Damages: Updating Estimation of the Social 
Cost of Carbon Dioxide. Washington, DC: The National Academies 
Press. https://nap.nationalacademies.org/catalog/24651/valuing-climate-damages-updating-estimation-of-the-social-cost-of (Accessed: 
April 1, 2024).
---------------------------------------------------------------------------

    The 2023 EPA SC-GHG Report presents a set of SC-GHG estimates that 
incorporate the National Academies' near-term recommendations and 
reflects the most recent scientific evidence. The report was also 
subject to notice, comment, and a peer review to ensure the quality and 
integrity of the information it contains and concluded after NHTSA 
issued its proposal.\737\ NHTSA specifically cited EPA's proposed 
estimates and final external peer review report on EPA's draft 
methodology in its proposal, as that was the most up-to-date version of 
the estimates available as of the date of NHTSA's proposal.\738\ 
Several commenters, including IPI, suggested that the agency use EPA's 
estimates for the final rule. This is further discussed in subsection 
(c) of this Climate Benefits section. NHTSA believes the 2023 EPA SC-
GHG Report represent the most comprehensive SC-GHGs estimates currently 
available. For additional details, see Chapter 6.2.1.1 of the TSD.
---------------------------------------------------------------------------

    \737\ See page 3 of the 2023 EPA SC-GHG Report for more details 
on public notice and comment and peer review.
    \738\ 88 FR 56251 (Aug. 17, 2023).
---------------------------------------------------------------------------

(b) Discount Rates for Climate Related Benefits
    As mentioned earlier, NHTSA discounts non-climate benefits and 
costs at both the 3% consumption rate of interest and the 7% 
opportunity cost of capital, in accordance with OMB Circular A-4 
(2003). Because GHGs degrade slowly and accumulate in the earth's 
atmosphere, the economic damages they cause increase as their 
atmospheric concentration accumulates. Some GHGs emitted today will 
remain in the atmosphere for hundreds of years, therefore, burning 
fossil fuels today not only imposes uncompensated costs on others 
around the globe today, but also imposes uncompensated damages on 
future generations. As OMB Circular A-4 (2003) indicates ``special 
ethical considerations arise when comparing benefits and costs across 
generations'' and that future citizens impacted by a regulatory choice 
``cannot take part in making them, and today's society must act with 
some consideration of their interest.'' \739\ As the EPA's report 
states, ``GHG emissions are stock pollutants, in which damages result 
from the accumulation of the pollutants in the atmosphere over time. 
Because GHGs are long-lived, subsequent damages resulting from 
emissions today occur over many decades or centuries, depending on the 
specific GHG under consideration.'' \740\ NHTSA's analysis is 
consistent with the notion that intergenerational considerations merit 
lower discount rates for rules such as CAFE with impacts over very 
long-time horizons.
---------------------------------------------------------------------------

    \739\ The Executive Office of the Present's Office of Management 
and Budget. 2003. Circular No. A-4. Regulatory Analysis. Available 
at: https://www.whitehouse.gov/wp-content/uploads/legacy_drupal_files/omb/circulars/A4/a-4.pdf (Accessed: Mar. 11, 
2024).
    \740\ 2023 EPA SC-GHG Report, pp 62.
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    In addition to the ethical considerations, Circular A-4 also 
identifies uncertainty in long-run interest rates as another reason why 
it is appropriate to use lower rates to discount intergenerational 
impacts, since recognizing such uncertainty causes the appropriate 
discount rate to decline gradually over progressively longer time 
horizons. The social costs of distant future climate damages--and by 
implication, the value of reducing them by lowering emissions of GHGs--
are highly sensitive to the discount rate, and the present value of 
reducing future climate damages grows at an increasing rate as the 
discount rate used in the analysis declines. This ``non-linearity'' 
means that even if uncertainty about the exact value of the long-run 
interest rate is equally distributed between values above and below the 
3 percent consumption rate of interest, the probability-weighted (or 
``expected'') present value of a unit reduction in climate damages will 
be higher than the value calculated using a 3 percent discount rate. 
The effect of such uncertainty about the correct discount rate can be 
accounted for by using a lower ``certainty-equivalent'' rate to 
discount distant future damages, defined as the rate that produces the 
same expected present value of a reduction in future damages implied by 
the distribution of possible discount rates around what is believed to 
be the most likely single value.
    For the final rule, NHTSA is updating its discount rates from the 
IWG recommendations to those found in the 2023 EPA SC-GHG Report. The 
EPA's discounting module represents an advancement on the work of the 
IWG in a number of ways. First, the EPA report uses the most recent 
evidence on the ``consumption rate of interest''--the rate at which we 
observe consumers trading off consumption today for consumption in the 
future. Second, EPA's approach incorporates the uncertainty in the 
consumption rate of interest over time, specifically by using 
certainty-equivalent discount factors which effectively reduce the 
discount rate progressively over time, so that the rate applied to 
near-term avoided climate damages will be higher than the rate applied 
to damages anticipated to occur further in the future. Finally, EPA's 
revised approach incorporates risk aversion into its modeling 
framework,, to recognize that individuals are likely to be willing to 
pay some additional amount to avoid the risk that the actual damages 
they experience might exceed their expected level. This gives some 
consideration to the insurance against low-probability but high-
consequence climate damages that interventions to reduce GHG emissions 
offer. For more detail, see the 2023 EPA SC-GHG Report.\741\
---------------------------------------------------------------------------

    \741\ See page 64 of 2023 EPA SC-GHG Report.
---------------------------------------------------------------------------

    When the streams of future emissions reductions being evaluated are 
moderate in terms of time (30 years or less), the EPA suggests to 
discount from the year of abatement to the present using the 
corresponding constant near-term target rates of 2.5, 2.0, and 1.5 
percent. NHTSA's calendar year analysis includes fewer than 30 years of 
impacts (the calendar year captures emissions of all model years on the 
road through 2050), and the majority of emissions impacts considered in 
NHTSA's model year analysis also occur within this timeframe (vehicles 
in the MY analysis will continue to be on the road past 30 years, 
however nearly 97 percent of their lifetime emissions will occur during 
the first 30 years of their service given vehicles are used less as 
they age on average and a majority of the vehicles in this cohort will 
have already been retired completely from the fleet). Thus, NHTSA has 
elected to discount from the year of abatement back to the present 
value using constant near-term discount rates of 2.5, 2.0, and 1.5

[[Page 52682]]

percent.\742\ The 2023 EPA SC-GHG Report's central SC-GHG values are 
based on a 2 percent discount rate,\743\ and for this reason NHTSA 
presents SC-GHG estimates discounted at 2 percent alongside its primary 
estimates of other costs and benefits wherever NHTSA does not report 
the full range of SC-GHG estimates. The agency's analysis showing our 
primary non-GHG impacts at 3 and 7 percent alongside climate-related 
benefits may be found in Chapter 8 of the FRIA for both LDVs and 
HDPUVs. We believe that this approach provides policymakers with a 
range of costs and benefits associated with the rule using a reasonable 
range of discounting approaches and associated climate benefits.
---------------------------------------------------------------------------

    \742\ As discussed in EPA SC-GHG Report, the error associated 
with using a constant discount rate rather than a certainty-
equivalent rate path to calculate the present value of a future 
stream of monetized climate benefits is small for analyses with 
moderate time frames (e.g., 30 years or less). The EPA SC-GHG Report 
also provides an illustration of the amount of climate benefits from 
reductions in future emissions that would be underestimated by using 
a constant discount rate relative to the more complicated certainty-
equivalent rate path.
    \743\ See page 101 of the EPA SC-GHG Report (2023).
---------------------------------------------------------------------------

    NHTSA has also produced sensitivity analyses that vary the SC-GHG 
values, as discussed in Section V.D, by applying the IWG SC-GHG values. 
NHTSA finds net benefits in each of these sensitivity cases. 
Accordingly, NHTSA's conclusion that this rule produces net benefits is 
consistent across a range of SC-GHG choices.
    For additional details, see Chapter 6.2.1.2 of the TSD. For costs 
and benefits calculated with SC-GHG values and corresponding discount 
rates of 2.5 percent and 1.5 percent, see Chapter 9 of tIRIA.
(c) Comments and Responses About the Agency's Choice of Social Cost of 
Carbon Estimates and Discount Rates
    A wide variety of comments were received regarding the social cost 
of greenhouse gas emissions. The first category pertains to the 
inclusion of a SC-GHG value in cost-benefit analysis calculations. 
Commenters including IPI and NRDC proposed that NHTSA incorporates the 
updated SC-GHG values from EPA's 2023 Report in the final rule.\744\ 
Valero and others suggested that climate benefits, should they be 
included, be valued at discount rate above 7 percent.\745\ Other 
commenters mention that research in this area is ongoing, has a degree 
of uncertainty regarding the choice of underlying parameters and 
models, and that a global consensus value has not been reached, 
therefore such a measure should not be incorporated in the 
analysis.\746\
---------------------------------------------------------------------------

    \744\ CBD, EDF, IPI, Montana Environmental Information Center, 
Joint NGOs, Sierra Club, and Western Environmental Law Center, 
Docket No. NHTSA-2023-0022-60439, at 1.
    \745\ Valero, Docket No. NHTSA-2023-0022-58547, Attachment A, at 
9.
    \746\ MEMA, Docket No. NHTSA-2023-0022-59204, Attachment A1, at 
9; West Virginia Attorney General's Office, Docket No. NHTSA-2023-
0022-63056, at 10; Landmark, Docket No. NHTSA-2023-0022-48725, at 3-
5.
---------------------------------------------------------------------------

    Estimating the social costs of future climate damages caused by 
emissions of greenhouse gases, or SC-GHG, requires analysts to make a 
number of projections that necessarily involve uncertainty--for 
example, about the likely future pattern of global emissions of GHGs--
and to model multifaceted scientific phenomena, including the effect of 
cumulative emissions and atmospheric concentrations of GHGs on climate 
measures including global surface temperatures and precipitation 
patterns. Each of these entail critical judgements about complex 
scientific and modeling questions. Doing so requires specialized 
technical expertise, accumulated experience, and expert judgment, and 
highly trained, experienced, and informed analysts can reasonably 
differ in their judgements. Further, in CBD v. \NH\TSA, the 9th Circuit 
concluded that uncertainty in SC-GHG estimates is not a reasonable 
excuse for excluding any estimate of the SC-GHG in the analysis of CAFE 
standards.\747\
---------------------------------------------------------------------------

    \747\ CBD v. NHTSA, 538 F.3d 1172, 1197 (9th Cir. 2008).
---------------------------------------------------------------------------

    Commenters raise questions about the specific assumptions and 
parameter values used to produce the estimates of the social costs of 
various GHGs that NHTSA relied upon in the proposed regulatory analysis 
and contend that using alternative assumptions and values would reduce 
the recommended values significantly. The agency notes EPA's analysis, 
like the IWG's, includes experts in climate science, estimation of 
climate-related damages, and economic valuation of those impacts, and 
that these individuals applied their collective expertise to review and 
evaluate available empirical evidence and alternative projections of 
important measures affecting the magnitude and cost of such damages. We 
believe that EPA's update, which builds on the IWG's work, represents 
the best current culmination in the field and has been vetted by both 
the public and experts in the field during the peer review. As such, we 
believe that EPA's estimates best represent the culminative impact of 
GHGs analyzed by this rule.\748\
---------------------------------------------------------------------------

    \748\ See page 3 of 2023 EPA SC-GHG Report for more details on 
public notice and comment and peer review.
---------------------------------------------------------------------------

    DOT uses its own judgment in applying the estimates in this 
analysis. As a consequence, NHTSA views the chosen SC-GHG values as the 
most reliable among those that were available for it to use in its 
analysis. We feel that commenters did not address the inherent 
uncertainty in estimating the SC-GHG. Specifically, we note that any 
alternative model that attempts to project the costs of GHGs over the 
coming decades--and centuries--will be subject to the same uncertainty 
and criticisms raised by commenters.
    A greater number of commenters mention the global scope involved in 
the calculation of the social cost of greenhouse gas emissions. Some 
contend that NHTSA should not consider any valuation which includes 
global benefits of reduced emissions, as the costs are incurred by 
manufacturers and consumers within the United States.\749\ In contrast, 
the Center for Biological Diversity, Environmental Defense Fund, and 
others comment that,
---------------------------------------------------------------------------

    \749\ Valero, Docket No. NHTSA-2023-0022-58547, Attachment A, at 
9; American Highway Users Alliance, Docket No. NHTSA-2023-0022-
58180, at 8; The American Free Enterprise Chamber of Commerce, 
Docket No. NHTSA-2023-0022-62353, at 5; West Virginia Attorney 
General's Office, Docket No. NHTSA-2023-0022-63056, at 12; AmFree, 
Docket No. NHTSA-2023-0022-62353, at 5.

    NHTSA appropriately focuses on a global estimate of climate 
benefits . . . While NHTSA offers persuasive justifications for this 
decision, many additional justifications further support this 
approach . . . The Energy Policy and Conservation Act (``EPCA''), 
National Environmental Policy Act, Administrative Procedure Act, and 
other key sources of law permit, if not require, NHTSA to consider 
the effects of U.S. pollution on foreign nations . . . Executive 
Order 13,990 instructs agencies to ``tak[e] global damages into 
account'' when assessing climate impacts because ``[d]oing so 
facilitates sound decision-making, recognizes the breadth of climate 
impacts, and support the international leadership of the United 
States on climate issues.\750\
---------------------------------------------------------------------------

    \750\ CBD, EDF, IPI, Montana Environmental Information Center, 
Joint NGOs, and Western Environmental Law Center, Docket No. NHTSA-
2023-0022-60439, at 3-6.

    NHTSA agrees that climate change is a global problem and that the 
global SC-GHG values are appropriate for this analysis. Emitting 
greenhouse gases creates a global externality, in that GHG emitted in 
one country mix uniformly with other gases in the atmosphere and the 
consequences of the resulting increased concentration of GHG are felt 
all over the world. The IWG concluded

[[Page 52683]]

that a global analysis is essential for SC-GHG estimates because 
climate impacts directly and indirectly affect the welfare of U.S. 
citizens and residents through complex pathways that spill across 
national borders. These include direct effects on U.S. citizens and 
assets, investments located abroad, international trade, and tourism, 
and spillover pathways such as economic and political destabilization 
and global migration that can lead to adverse impacts on U.S. national 
security, public health, and humanitarian concerns. Those impacts are 
more fully captured within global measures of the social cost of 
greenhouse gases.
    In addition, assessing the benefits of U.S. GHG mitigation 
activities requires consideration of how those actions may affect 
mitigation activities by other countries, as those international 
actions will provide a benefit to U.S. citizens and residents. A wide 
range of scientific and economic experts have emphasized the issue of 
reciprocity as support for considering global damages of GHG emissions. 
Using a global estimate of damages in U.S. analyses of regulatory 
actions allows the U.S. to continue to actively encourage other 
nations, including emerging major economies, to take significant steps 
to reduce emissions. The only way to achieve an efficient allocation of 
resources for emissions reduction on a global basis--and so benefit the 
U.S. and its citizens--is for all countries to base their policies on 
global estimates of damages.\751\
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    \751\ For more information about the appropriateness of using 
global estimates of SC-GHGs, which NHTSA endorses, see discussion 
beginning on pg 3-20 of U.S. Environmental Protection Agency. 
Regulatory Impact Analysis of the Standards of Performance for New, 
Reconstructed, and Modified Sources and Emissions Guidelines for 
Existing Sources: Oil and Natural Gas Sector Climate Review. EPA-
452/R-23-013, Office of Air Quality Planning and Standards, Health 
and Environmental Impacts Division, Research Triangle Park, NC, 
December 2023 (hereinafter, ``2023 EPA Oil and Gas Rule RIA'').
---------------------------------------------------------------------------

    The SC-GHG values reported in EPA's 2023 Report provide a global 
measure of monetized damages from GHG reductions. EPA's report explains 
that ``The US economy is . . . inextricably linked to the rest of the 
world'' and that ``over 20% of American firms' profits are earned on 
activities outside of the country.'' On this basis EPA concludes 
``Climate impacts that occur outside U.S. borders will impact the 
welfare of individuals and the profits of firms that reside in the US 
because of the connection to the global economy . . . through 
international markets, trade, tourism, and other activities.'' \752\ 
Like the IWG, EPA also concluded that climate damages that originate in 
other nations can produce ``economic and political destabilization, and 
global migration that can lead to adverse impacts on U.S. national 
security, public health, and humanitarian concerns.'' NHTSA is aligned 
with EPA that climate damages to the rest of the world will result in 
damages that will be felt domestically, and thus concludes that SC-GHG 
values that incorporate both domestic and international damages are 
appropriate for its analyses.
---------------------------------------------------------------------------

    \752\ See Section 1.3, 2023 EPA SC-GHG Report.
---------------------------------------------------------------------------

    While global estimates of the SC-GHG are the most appropriate 
values to use for the above stated reasons, new modeling efforts 
suggest that U.S.-specific damages are very likely higher than 
previously estimated. For instance, the EPA's Framework for Evaluating 
Damages and Impacts (FrEDI) is a ``reduced complexity model that 
projects impacts of climate change within the United States through the 
21st century'' that offers insights on some omitted impacts that are 
not yet captured in global models.\753\ Results from FrEDI suggest that 
damages due to climate change within the contiguous United States are 
expected to be substantial. EPA's recent tailpipe emissions standards 
cite a FrEDI-produced partial SC-CO2 estimate of $41 per 
metric ton.\754\ This U.S.-specific value is comparable to SC-
CO2 estimates NHTSA has used for prior rulemakings and used 
in sensitivity analyses for this rulemaking.\755\ NHTSA notes both that 
the FrEDI estimates do not include many climate impacts and thus are 
underestimates of harm, and that the FrEDI estimates include impact 
categories that are not available for the rest of the world. and thus, 
are missing from the global estimates used here. The damage models 
applied to generate EPA's estimates of the global SC-CO2 
estimates used in this final rule (the Data-driven Spatial Climate 
Impact Model (DSCIM) and the Greenhouse Gas Impact Value Estimator 
(GIVE)), which as noted do not reflect many important climate impacts, 
provide estimates of climate change impacts physically occurring within 
the United States of $16-$18 per metric ton for 2030 emissions. EPA 
notes that ``[w]hile the FrEDI results help to illustrate how monetized 
damages physically occurring within the [continental US] increase as 
more impacts are reflected in the modeling framework, they are still 
subject to many of the same limitations associated with the DSCIM and 
GIVE damaIules, including the omission or partial modeling of important 
damage categories.'' \756\ EPA also notes that the DSCIM and GIVE 
estimates of climate change impacts physically occurring within the 
United States are, like FrEDI, ``not equivalent to an estimate of the 
benefits of marginal GHG mitigation accruing to U.S. citizens and 
residents'' in part because they ``exclude the myriad of pathways 
through which global climate impacts directly and indirectly affect the 
interests of U.S. citizens and residents.'' \757\
---------------------------------------------------------------------------

    \753\ EPA. 2021. Technical Documentation on the Framework for 
Evaluating Damages and Impacts (FrEDI). U.S. Environmental 
Protection Agency, EPA 430-R-21-004. Summary information at https://www.epa.gov/cira/fredi. Accessed 5/22/2024.
    \754\ See 9-16 of U.S. Environmental Protection Agency. Multi-
Pollutant Emissions Standards for Model Years 2027 and Later Light-
Duty and Medium-Duty Vehicles Regulatory Impact Analysis. EPA-420-R-
24-004, Assessment and Standards Division, Office of Transportation 
and Air Quality, March 2024.
    \755\ For instance, NHTSA's previous final rule used a global 
SC-CO2 value of $50 in calendar year 2020. See Section 
6.2 of National Highway Traffic Safety Administration. Technical 
Support Document: Final Rulemaking for Model Years 2024-2026 Light-
Duty Vehicle Corporate Average Fuel Economy Standards. March 2022.
    \756\ See p. 9-16 of U.S. Environmental Protection Agency. 
Multi-Pollutant Emissions Standards for Model Years 2027 and Later 
Light-Duty and Medium-Duty Vehicles Regulatory Impact Analysis. EPA-
420-R-24-004, Assessment and Standards Division, Office of 
Transportation and Air Quality, March 2024.
    \757\ 2023 EPA SC-GHG Report.
---------------------------------------------------------------------------

    Taken together, applying the U.S.-specific partial SC-GHG estimates 
derived from the multiple lines of evidence described above to the GHG 
emissions reduction expected under the final rule would yield 
substantial benefits. For example, the present value of the climate 
benefits as measured by FrEDI (under a 2 percent near-term Ramsey 
discount rate) from climate change impacts in the contiguous United 
States for the preferred alternative for passenger cars and light 
trucks (CY perspective), for passenger cars and light trucks (MY 
perspective), and for HDPUVs, are estimated to be $19.6 billion, $4.7 
billion, and $1.5 billion, respectively.\758\ However, the numerous 
explicitly omitted damage categories and other modeling limitations 
discussed above and throughout the EPA's 2023 Report make it likely 
that these estimates significantly underestimate the benefits to U.S. 
citizens and residents of the GHG reductions from the final rule; the 
limitations in developing a U.S.-specific

[[Page 52684]]

estimate that accurately captures direct and spillover effects on U.S. 
citizens and residents further demonstrates that it is more appropriate 
to use a global measure of climate benefits from GHG reductions.
---------------------------------------------------------------------------

    \758\ DCIM and GIVE use global damage functions. Damage 
functions based on only U.S.-data and research, but not for other 
parts of the world, were not included in those models. FrEDI does 
make use of some of this U.S.-specific data and research and as a 
result has a broader coverage of climate impact categories.
---------------------------------------------------------------------------

    Finally, the last major category of comments pertained to the 
choice of discount rate applied to climate-related benefits and costs. 
Valero contends that the appropriate choice of discount rate in this 
case is an unsettled issue and that if global climate benefits are 
considered, a global discount rate above 8 percent should be used.\759\ 
Our Children's Trust commented that NHTSA should consider 
intergenerational equity and calculate climate benefits using negative, 
zero, or near-zero percent discount rates.\760\ Several commenters, 
including CBD and IPI,761 762 support the usage of the 
discount rates included in the EPA's SC-GHG update, mention that 
Executive Order 13990 instructs agencies to ensure that the social cost 
of greenhouse gas values adequately account for intergenerational 
equity, and argue that a capital-based discount rate is inappropriate 
for these multigenerational climate effects.
---------------------------------------------------------------------------

    \759\ Valero, Docket No. NHTSA-2023-0022-58547, Attachment A, at 
9.
    \760\ OCT, Docket No. NHTSA-2023-0022-51242, at 3.
    \761\ CBD, EDF, IPI, Montana Environmental Information Center, 
Joint NGOs, Sierra Club, and Western Environmental Law Center, 
Docket No. NHTSA-2023-0022-60439, at 17-22.
    \762\ IPI, Docket No. NHTSA-2023-0022-60485, at 17-20.
---------------------------------------------------------------------------

    As previously noted, NHTSA presents and considers a range of 
discount rates for climate-related benefits and costs, including 2.5, 
2.0, and 1.5 percent. Contrary to the position put forward by 
Children's Trust that it is unlawful to discount the estimated costs of 
SC-GHG, we also believe that discounting the stream of climate benefits 
from reduced emissions from the rule in order to develop a present 
value of the benefits of reducing GHG emissions is consistent with the 
law, and that the discounting approach used by the EPA is reasonable. 
Courts have previously reviewed and affirmed rules that discount 
climate-related costs.\763\ Courts have likewise advised agencies to 
approach cost-benefit analyses with impartiality, to ensure that 
important factors are captured in the analysis, including climate 
benefits,\764\ and to ensure that the decision rests ``on a 
consideration of the relevant factors.'' \765\ NHTSA has followed these 
principles here. In addition, NHTSA believes that discount rates at or 
above the opportunity cost of capital (7 percent) are inappropriate to 
use for GHG emissions that have intergenerational impacts. As discussed 
at length above, the consumption rate of interest is a more appropriate 
choice as it is the rate at which we observe consumers trading off 
consumption today for consumption in the future. Circular A-4 also 
identifies uncertainty in long-run interest rates as another reason why 
it is appropriate to use lower rates to discount intergenerational 
impacts, since recognizing such uncertainty causes the appropriate 
discount rate to decline gradually over progressively longer time 
horizons. In addition, the approach used incorporates rIrsion into its 
the modeling framework, which recognizes that individuals are likely 
willing to pay some additional amount to avoid the risk that the actual 
damages they experience might exceed their expected level. This gives 
some consideration to the insurance against low-probability but high-
consequence climate damages that interventions to reduce GHG emissions 
offer.\766\ The impacts on future generations, uncertainty, and risk 
aversion are reflected in the estimates used in this analysis. The 2023 
EPA SC-GHG Report's central SC-GHG values are based on a 2 percent 
discount rate,\767\ and for this reason NHTSA presents in its analysis 
of this Final Rule SC-GHG estimates discounted at 2 percent together 
with its primary estimates of other costs and benefits wherever NHTSA 
does not report the full range of SC-GHG estimates. For additional 
details regarding the choice of discount rates for climate related 
benefits, see Chapter 6.2.1.2 of the TSD.
---------------------------------------------------------------------------

    \763\ See, e.g., E.P.A. v. EME Homer City Generation, L.P., 572 
U.S. 489 (2015).
    \764\ CBD v. NHTSA, 538 F.3d 1172, 1197 (9th Cir. 2008).
    \765\ State Farm, 463 U.S. 29, 43 (1983) (internal quotation 
marks omitted).
    \766\ In addition to the extensive discussion found in the 2023 
EPA SC-GHG Report, a brief summary of the merits of the revised 
discounting approach may be found on pages 3-14 and 3-15 of 2023 EPA 
Oil and Gas Rule RIA.
    \767\ See page 101 of the EPA SC-GHG Report (2023).
---------------------------------------------------------------------------

(2) Reduced Health Damages
    The CAFE Model estimates monetized health effects associated with 
emissions from directly emitted particulate matter 2.5 microns or less 
in diameter (PM2.5) and two precursors to PM2.5 
(NOX and SO2). As discussed in Section III.F 
above, although other criteria pollutants are currently regulated, only 
impacts from these three pollutants are calculated since they are known 
to be emitted regularly from mobile sources, have the most adverse 
effects on human health, and have been the subject of extensive 
research by EPA to estimate the benefits of reducing these pollutants. 
The CAFE Model computes the monetized PM2.5-related health 
damages from each of the three pollutants by multiplying the monetized 
health impact per ton by the total tons of each pollutant emitted, 
including from both upstream and downstream sources. Reductions in 
these costs from their level under the reference baseline alternative 
that are projected to result from adopting alternative standards are 
treated as external benefits of those alternatives. Chapter 5 of the 
TSD accompanying this final rule includes a detailed description of the 
emission factors that inform the CAFE Model's calculation of the total 
tons of each pollutant associated with upstream and downstream 
emissions.
    These monetized health benefit per ton values are closely related 
to the health incidence per ton values described above in Section III.F 
and in detail in Chapter 5.4 of the TSD. We use the same EPA sources 
that provided health incidence values to determine which monetized 
health impacts per ton values to use as inputs in the CAFE Model. Like 
the estimates associated with health incidences per ton of criteria 
pollutant emissions, we used an EPA TSD, multiple papers written by EPA 
staff and conversations with EPA staff to appropriately account for 
monetized damages for each pollutant associated with the source sectors 
included in the CAFE Model. The various emission source sectors 
included in the EPA papers do not always correspond exactly to the 
emission source categories used in the CAFE Model. In those cases, we 
mapped multiple EPA sectors to a single source category and computed a 
weighted average of the health impact per ton values.
    The EPA uses the value of a statistical life (VSL) to estimate 
premature mortality impacts, and a combination of willingness to pay 
estimates and costs of treating the health impact for estimating the 
morbidity impacts. EPA's 2018 technical support document, ``Estimating 
the Benefit per Ton of Reducing PM2.5 Precursors from 17 
Sectors,'' (referred to here as the 2018 EPA source apportionment TSD) 
contains a more detailed account of how health incidences are 
monetized. It is important to note that the EPA sources cited 
frequently refer to these monetized health impacts per ton as 
``benefits per ton,'' since they describe these estimates in terms of 
emissions avoided. In the CAFE Model input structure, these are

[[Page 52685]]

generally referred to as monetized health impacts or damage costs 
associated with pollutants emitted (rather than avoided), unless the 
context states otherwise.
    The CAFE Model health impacts inputs are based partially on the 
structure of the 2018 EPA source apportionment TSD, which reported 
benefits per ton values for the years 2020, 2025, and 2030. For the 
years in between the source years used in the input structure, the CAFE 
Model applies values from the closest source year. For example, the 
model applies 2020 monetized health impact per ton values for calendar 
years 2020-2022 and applies 2025 values for calendar years 2023-2027. 
In order for some of the monetized health damage values to match the 
structure of other impacts costs, DOT staff developed proxies for 7% 
discounted values for specific source sectors by using the ratio 
between a comparable sector's 3% and 7% discounted values. In addition, 
we used implicit price deflators from the Bureau of Economic Analysis 
(BEA) to convert different monetized estimates to 2021 dollars, in 
order to be consistent with the rest of the CAFE Model inputs.
    This process is described in more detail in Chapter 6.2.2 of the 
TSD accompanying this final rule. In addition, the CAFE Model 
documentation contains more details of the model's computation of 
monetized health impacts. All resulting emission damage costs for 
PM2.5-related pollutants are located in the Criteria 
Emissions Cost worksheet of the Parameters file. The States and Cities 
commented that NHTSA should emphasize that although only 
NOX, SOX, and PM2.5 reductions are 
monetized (in terms of their contribution to ambient PM2.5 
formation), total benefits of reduced pollution are larger although 
they do not appear in the benefit-cost-analysis. NHTSA agrees, and 
notes that although we do not have a basis for valuing other 
pollutants, we acknowledge that they form part of the unquantified 
benefits that likely arise from this rule.
    One specific category of benefits that is not monetized in our 
analysis is the health harms of air toxics and ozone. ALA brought 
forward the absence of the health harms of air toxics in their comments 
on the NPRM, stating that the missing health harms of air toxics are a 
limit of the health impacts analysis.\768\ Historically, these 
pollutants have not typically been monetized, and as such we currently 
have no basis for that valuation. In the case of ozone, monetized BPT 
values that exist in the literature do not correspond to the source 
sectors we need for our analysis (namely NHTSA notes that these 
benefits are important although they have not been quantified.
---------------------------------------------------------------------------

    \768\ ALA, Docket No. NHTSA-2023-0022-60091, at 2.
---------------------------------------------------------------------------

(3) Reduction in Petroleum Market Externalities
    The standards would decrease domestic consumption of gasoline, 
producing a corresponding decrease in the Nation's demand for crude 
petroleum, a commodity that is traded actively in a worldwide market. 
Because the U.S. accounts for a significant share of global oil 
consumption, the resulting decrease in global petroleum demand will 
exert some downward pressure on worldwide prices.
    U.S. consumption and imports of petroleum products have three 
potential effects on the domestic economy that are often referred to 
collectively as ``energy security externalities,'' and increases in 
their magnitude are sometimes cited as possible social costs of 
increased U.S. demand for petroleum. Symmetrically, reducing U.S. 
petroleum consumption and imports can reduce these costs, and by doing 
so provide additional external benefits from establishing higher CAFE 
and fuel efficiency standards.
    First, any increase in global petroleum prices that results from 
higher U.S. gasoline demand will cause a transfer of revenue to oil 
producers worldwide from consumers of petroleum, because consumers 
throughout the world are ultimately subject to the higher global price 
that results. Under competitive market assumptions, this transfer is 
simply a shift of resources that produces no change in global economic 
output or welfare. Since the financial drain it produces on the U.S. 
economy may not be considered by individual consumers of petroleum 
products, it is sometimes cited as an external cost of increased U.S. 
petroleum consumption.
    As the U.S. has transitioned towards self-sufficiency in petroleum 
production (the nation became a net exporter of petroleum in 2020), 
this transfer is increasingly from U.S. consumers of refined petroleum 
products to U.S. petroleum producers, so it not only leaves welfare 
unaffected but even ceases to be a financial burden on the U.S. 
economy. In fact, to the extent that the U.S. becomes a larger net 
petroleum exporter, any transfer from global consumers to petroleum 
producers becomes a financial benefit to the U.S. economy. 
Nevertheless, uncertainty in the nation's long-term import-export 
balance makes it difficult to project precisely how these effects might 
change in response to increased consumption.
    The loss of potential GDP from this externality will depend on the 
degree that global petroleum suppliers like the Organization of 
Petroleum Exporting Countries (OPEC) and Russia exercise market power 
which raise oil market prices above competitive market levels. In that 
situation, increases in U.S. gasoline demand will drive petroleum 
prices further above competitive levels, thus exacerbating this 
deadweight loss. More stringent standards lower gasoline demand and 
hence reduce these losses.
    Over most of the period spanned by NHTSA's analysis, any decrease 
in domestic spending for petroleum caused by the effect of lower U.S. 
fuel consumption and petroleum demand on world oil prices is expected 
to remain entirely a transfer within the U.S. economy. In the case in 
which large producers are able to exercise market power to keep global 
prices for petroleum above competitive levels, this reduction in price 
should also increase potential GDP in the U.S. However, the degree to 
which OPEC and other producers like Russia are able to act as a cartel 
depends on a variety of economic and political factors and has varied 
widely over recent history, so there is significant uncertainty over 
how this will evolve over the horizon that NHTSA models. For these 
reasons, lower U.S. spending on petroleum products that results from 
raising standards, reducing U.S. gasoline demand, and the downward 
pressure it places on global petroleum prices is not included among the 
economic benefits accounted for in the agency's evaluation of this 
final rule.
    Second, higher U.S. petroleum consumption can also increase 
domestic consumers' exposure to oil price shocks and thus increase 
potential costs to all U.S. petroleum users from possible interruptions 
in the global supply of petroleum or rapid increases in global oil 
prices. Because users of petroleum products are unlikely to consider 
the effect of their increased purchases on these risks, their economic 
value is often cited as an external cost of increased U.S. consumption. 
Decreased consumption, which we expect as a result of the standards, 
decreases this cost. We include an estimate of this impact of the 
standards, and an explanation of our methodology can be found in 
Chapter 6.2.4.4 of the TSD.
    Finally, some analysts argue that domestic demand for imported 
petroleum may also influence U.S. military spending; because the 
increased cost of military activities

[[Page 52686]]

would not be reflected in the price paid at the gas pump, this is often 
suggested as a third category of external costs from increased U.S. 
petroleum consumption. For example, NHTSA has received extensive 
comments to past rulemakings about exactly this effect on its past 
actions from the group Securing America's Energy Future. Most recent 
studies of military-related costs to protect U.S. oil imports conclude 
that significant savings in military spending are unlikely to result 
from incremental reductions in U.S. consumption of petroleum products 
on the scale that would result from adopting higher standards. While 
the cumulative effects of increasing fuel economy over the long-term 
likely have reduced the amount the U.S. has to spend to protect its 
interest in energy sources globally--avoid being beholden to geo-
political forces that could disrupt oil supplies--it is extremely 
difficult to quantify the impacts and even further to identify how much 
a single fuel economy rule contributes. As such NHTSA does not estimate 
the impact of the standards on military spending. See Chapter 6.2.4.5 
of the TSD for additional details.
    Each of these three factors would be expected to decrease 
incrementally as a consequence of a decrease in U.S. petroleum 
consumption resulting from the standards. Chapter 6.2.4 of the TSD 
provides a comprehensive explanation of NHTSA's analysis of these three 
impacts.
    NHTSA sought comment on its accounting of energy security in the 
proposal. The Institute for Energy Research and AFPM both noted that 
the United States is now a net-exporter of crude oil, and that a 
significant share of imported crude oil is sourced from other North 
American countries.\769\ The American Enterprise Institute suggested 
that the macroeconomic risks associated with oil supply shocks like 
those described by NHTSA in its proposal are reflected in the price of 
oil since it is a globally traded commodity.\770\ As a result, they 
argue that since all countries face common international prices for 
these products (outside of transportation costs and other second order 
differences), the energy security of countries does not depend on its 
overall level of imports. Several commenters also argued that 
increasing reliance on domestically produced ethanol rather than 
battery electric vehicles represents a superior method for improving 
energy security.\771\
---------------------------------------------------------------------------

    \769\ Institue for Energy Research, Docket No. NHTSA-2023-0022-
63063, at 3; AFPM, Docket No. NHTSA-2023-0022-61911, at 22.
    \770\ AEI, Docket No. NHTSA-2023-0022-54786, at 22-24.
    \771\ CFDC et al., Docket No. NHTSA-2023-0022-62242, at 22-23; 
Institute for Energy Research, Docket No. NHTSA-2023-0022-63063, at 
3-4.
---------------------------------------------------------------------------

    NHTSA noted in its proposal the importance of the United States' 
role as a net exporter in its quantification of energy security related 
benefits. For example, NHTSA discussed the so-called ``monopsony 
effect'' or the effect of reduced consumption on global oil prices. 
NHTSA noted that this represents a transfer between oil producers and 
consumers, rather than a real change in domestic welfare, and since the 
United States is no longer a net importer the monopsony effect on 
global prices no longer represents a transfer from producers in other 
countries. However, NHTSA disagrees with the suggestion that this 
status eliminates the energy security externalities that NHTSA 
quantified in its analysis. As described in TSD Chapter 6, NHTSA 
considered the effect of reductions in domestic consumption on the 
expected value of U.S. macroeconomic losses due to foreign oil supply 
shocks in future years. The expected magnitude of the effect of these 
shocks on overall domestic economic activity is determined by the 
probability of these shocks, the overall exposure of the global oil 
supply to these shocks, (which depends upon the size of U.S. gross oil 
imports), the short run elasticities of supply and demand for oil, and 
the sensitivity of the U.S. economy to changes in oil prices.
    NHTSA analyzed these drivers of energy security costs in its 
proposal and concluded that there were still strong reasons to believe 
that changes in fuel economy standards could produce economic benefits 
by reducing them. As can be seen through the events NHTSA listed in its 
discussion of energy security in Chapter 6 of the TSD, foreign oil 
shocks like the one caused by Russia's invasion of Ukraine remain a 
risk that can at least in the short-term influence global oil supply 
and prices, which adversely affect consumers and disrupt economic 
growth, although no recent example of oil supply shocks has reached the 
magnitude of the OPEC oil embargo or Iranian Revolution during the 
1970s. NHTSA will continue to monitor the literature for updated 
estimates of the probability and size foreign oil shocks and update its 
estimates accordingly. As noted in the TSD, the U.S. has in recent 
years become a net exporter of oil. However, the U.S. still only 
accounts for about 14.7 percent of global oil production, and the U.S., 
Canada, and Mexico together account for less than a quarter of global 
oil production according to the U.S. EIA.\772\ By contrast, seven 
countries in the Persian Gulf region account for about one-third of 
production and held about half of the world's proven reserves. Russia 
alone accounted for 12.7 percent of production in 2022, and the global 
supply shock caused by Russia's invasion of Ukraine was followed by a 
surge of more than 20 percent in crude oil prices.\773\ Clearly 
substantial shares of the global oil supply remain in regions that have 
proven vulnerable to the exact supply shocks described by NHTSA in its 
rulemaking documents. Furthermore, the U.S., while on balance a net-
exporter, continues to import substantial quantities of oil from 
countries at risk of shocks. In 2022, Iraq, Saudi Arabia, and Colombia 
accounted for 14 percent of oil imports in the U.S., or about 1.1 
million barrels per day.\774\ On net, the U.S. still imports just under 
3 million barrels of crude oil per day.\775\ Due to refinery 
configurations, many refiners in the U.S., especially in the Midwest 
and Gulf Coast still most profitably refine heavy, sour crude oil from 
abroad. Indeed, in its 2023 AEO the EIA still projects that the U.S. 
will import 6.65 million barrels per day of oil in 2050.\776\ Moreover, 
U.S. consumers are also exposed to foreign oil shocks through other 
imported goods that use petroleum as an input. Thus, NHTSA still 
believes that it is correct to assume that changes in domestic 
consumption are likely to affect demand for foreign oil.
---------------------------------------------------------------------------

    \772\ U.S. Energy Information Agency, International Energy 
Statistics, Crude oil production including lease condensate, as of 
September 6, 2023. Available at: https://www.eia.gov/energyexplained/oil-and-petroleum-products/where-our-oil-comes-from.php. (Accessed: March 25, 2024).
    \773\ WTI spot prices rose from $93/barrel the week of February 
18, 2022, the week before Russia's invasion of Ukraine. The price 
rose to $113/barrel the week of March 11, 2022, and eventually 
reached a high of around $120/barrel in June 2022. Data available 
at: https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=RWTC&f=W, (Accessed: April 29, 2024).
    \774\ U.S. Energy Information Agency, ``Oil and petroleum 
products explained: Oil imports and exports'', Available at: https://www.eia.gov/energyexplained/oil-and-petroleum-products/imports-and-exports.php, (Accessed: April 29, 2024).
    \775\ Id.
    \776\ U.S. Energy Information Agency, Annual Energy Outlook 
2023, Table 11. Petroleum and Other Liquids Supply and Disposition, 
Available at: https://www.eia.gov/outlooks/aeo/data/browser/#/?id=11-AEO2023&cases=ref2023&sourcekey=0, (Accessed: March 25, 
2024).
---------------------------------------------------------------------------

    NHTSA also disagrees with the conclusion that these energy security 
risks are efficiently priced by global markets. Traded oil prices 
represent equilibrium outcomes determined by

[[Page 52687]]

global supply and demand for oil. Global demand is determined by the 
aggregation of global consumers' willingness to pay for oil and the 
products it produces. This willingness to pay depends on the private 
benefits derived from oil products. The macroeconomic disruption costs 
described by NHTSA are borne across the economy, meaning that they are 
unlikely to be considered by individual consumers in their decision-
making calculus. For this reason, economists have classified them as 
externalities, and thus a potential source of socially inefficient 
outcomes.\777\ The magnitude of these macroeconomic disruptions from 
oil supply shocks depends directly on the overall oil intensity of the 
economy. A more fuel-efficient fleet of vehicles is expected to lower 
the economy's oil intensity. Furthermore, EPCA, the statute that 
confers the agency with the authority to set standards, was enacted 
with the stated purpose to increase energy independence and security, 
and set out to accomplish these goals through increasing the efficiency 
of energy consuming goods such as automobiles.\778\ Congress explicitly 
directed the agency to consider the need of the United States to 
conserve energy when setting maximum feasible standards.\779\ The 
suggestion that NHTSA should forgo the potential impacts to energy 
security of setting standards cuts against the very fabric of public 
policy underlying EPCA.
---------------------------------------------------------------------------

    \777\ See Brown, S.P., New estimates of the security costs of 
U.S. oil consumption, Energy Policy, 113, (2018) page 172.
    \778\ Public Law 110-140.
    \779\ 42 U.S.C. 32902(f).
---------------------------------------------------------------------------

    NHTSA is also monitoring the availability of critical minerals used 
in electrified powertrains and whether any shortage of such materials 
could emerge as an additional energy security concern. While nearly all 
electricity in the United States is generated through the conversion of 
domestic energy sources and thus its supply does not raise security 
concerns, EVs also require batteries to store and deliver that 
electricity. Currently, the most commonly used electric vehicle battery 
chemistries include relatively scarce materials (compared to other 
automotive parts) which are sourced, in part, from potentially insecure 
or unstable overseas sites and like all mined materials (including 
those in internal combustion engine vehicles) can pose environmental 
challenges during extraction and conversion to usable material. Known 
supplies of some of these critical minerals are also highly 
concentrated in a few countries and therefore face similar market power 
concerns to petroleum products.
    NHTSA is restricted from considering the fuel economy of 
alternative fuel sources in determining CAFE standards, and as such, 
the CAFE Model restricts the application of BEV pathways and PHEV 
electric efficiency in simulating compliance with fuel economy 
regulatory alternatives. While the cost of critical minerals may affect 
the cost to supply both plug-in and non-plug-in hybrids that require 
larger batteries, this would apply primarily to manufacturers whose 
voluntary compliance strategy includes electrification given the 
greater mineral requirements of battery electric vehicles and plug-in 
hybrid-electric vehicles compared with non-plug-in hybrids. NHTSA did 
not include costs or benefits related to these emerging energy security 
considerations in its analysis for its proposal and sought comment on 
whether it is appropriate to include an estimate in the analysis and, 
if so, which data sources and methodologies it should employ.
    NHTSA received a number of comments suggesting that it should 
include costs and benefits related to these emerging energy security 
considerations. Several commenters noted that politically unstable 
countries or countries with which the U.S. does not have friendly trade 
relations, including China, mine or process a significant share of the 
minerals used in battery production, including lithium, cobalt, 
graphite and nickel.\780\ AFPM also argued that the penetration rate of 
BEVs in NHTSA's No-Action alternative would require supply chain 
improvements that they contend are highly uncertain to occur, or that 
the battery chemistry technologies necessary to alleviate these 
concerns were not likely to be available in the timeframe suggested by 
NHTSA's analysis.\781\ Some of these commenters suggested that mineral 
security should be included in NHTSA's analysis as a cost associated 
with adoption of technologies that require these minerals, and that the 
failure to include this as a cost was arbitrary and capricious.\782\ 
ZETA on the other hand suggested that the demands for critical minerals 
could be met through reserves in friendly countries, and noted the 
steps taken by both the public and private sector to expand domestic 
critical mineral production.\783\ The National Association of 
Manufacturers and the U.S. Chamber of Commerce both suggested that 
expanding domestic supply of critical minerals required the 
Administration and Congress to expedite permitting.\784\
---------------------------------------------------------------------------

    \780\ American Consumer Institute, Docket No. NHTSA-2023-0022-
50765, at 6-7; AHUA, Docket No. NHTSA-2023-0022-58180, at 7; U.S. 
Chamber of Commerce, Docket No. NHTSA-2023-0022-61069, at 5; West 
Virginia Attorney General's Office, Docket No. NHTSA-2023-0022-
63056, at 14; CFDC et al., Docket No. NHTSA-2023-0022-62242, at 22-
23; Institute for Energy Research, Docket No. NHTSA-2023-0022-63063, 
at 3.
    \781\ AFPM, Docket No. NHTSA-2023-0022-61911, at 13-14.
    \782\ AFPM, Docket No. NHTSA-2023-0022-61911, at 19; West 
Virginia Attorney General's Office, Docket No. NHTSA-2023-0022-
63056, at 14-15.
    \783\ ZETA, Docket No. NHTSA-2023-0022-60508, at 29-46.
    \784\ National Association of Manufacturers, Docket No. NHTSA-
2023-0022-59289, at 3; U.S. Chamber of Commerce, Docket No. NHTSA-
2023-0022-61069, at 5.
---------------------------------------------------------------------------

    NHTSA agrees with commenters that the increase in battery demand 
likely will require significant expansion of production of certain 
critical minerals, although critical minerals have long been a 
component of vehicles and many other goods consumed in the United 
States. NHTSA also notes the concerted efforts across the federal 
government to shift supply chains to ensure that a larger share of 
critical mineral production comes from politically stable sources. 
Between the publication of NHTSA's proposal and the final rule, ANL 
produced a study of the prospective supply of upstream critical 
materials used to meet the U.S.'s EV and Energy Storage System 
deployment targets for 2035.\785\ According to ANL, the U.S. is 
positioned to meet lithium demand through a combination of domestic 
production as well as imports from FTA countries.\786\ The U.S. will 
need to source graphite, nickel, and cobalt from partner countries 
(including those with and without FTAs) in the near and medium 
term.\787\ Thus, NHTSA believes that there is strong evidence that the 
U.S. has significant opportunities to diversify supply chains away from 
current suppliers like China.
---------------------------------------------------------------------------

    \785\ Barlock, Tsisilile A. et al., ``Securing Critical Minerals 
for the U.S. Electric Vehicle Industry'', Argonne National 
Laboratory, Nuclear Technologies and National Security Directorate, 
ANL-24/06, Feb. 2024, Available at: https://publications.anl.gov/anlpubs/2024/03/187907.pdf. (Accessed: April 5, 2024).
    \786\ Id. at viii.
    \787\ Id. at viii.
---------------------------------------------------------------------------

    Further, NHTSA notes that considering mineral security in its 
analysis of incremental societal costs and benefits would be unlikely 
to materially impact the ranking of its regulatory alternatives. EPCA 
constrains NHTSA from considering BEV adoption as a compliance strategy 
during standard setting years in its light duty analysis. As a result, 
there will be

[[Page 52688]]

minimal incremental demand for batteries and critical minerals in 
regulatory alternatives, and thus minimal incremental societal costs 
related to mineral security. While BEV adoption--including compliance 
with ZEV regulatory programs--is considered in the No-Action 
Alternative, mineral security costs associated with the adoption of 
BEVs in these cases are (1) not incremental costs associated with 
changes in CAFE standards, and (2) not considered by consumers and 
manufacturers outside of how they impact technology costs and vehicle 
prices, both of which are considered in NHTSA's analysis. In the HDPUV 
fleet, a similar pattern emerges even in the absence of similar 
constraints; the overwhelming majority of electrification takes place 
in the reference baseline. Further, given the relatively small volume 
of HDPUVs, the incremental demand for any critical minerals is minimal 
compared to the total global supply.
    Finally, NHTSA notes that while commenters suggested that NHTSA 
include mineral security in its analysis, they did not recommend a 
specific methodology for how to do so. During its analysis NHTSA 
surveyed the economics literature and did not find a comparable 
existing set of methods for analyzing mineral security as it did for 
petroleum market externalities. This is largely due to the relatively 
recent emergence of this topic. Several of the inputs used in NHTSA's 
energy security analysis (distributions of estimates of its elasticity 
parameters, supply shock probability distributions, long term 
projections of supply and demand for petroleum) rely on decades of 
research which do not exist for the emerging topic of mineral security. 
NHTSA is continuing to monitor research in this field and is 
considering implementing estimates of these costs in future rulemakings 
but did not include them in this final rule.
(4) Changes in Labor Use and Employment
    As vehicle prices rise, we expect consumers to purchase fewer 
vehicles than they would have at lower prices. If manufacturers produce 
fewer vehicles as a consequence of lower demand, they may need less 
labor to produce and assemble vehicles, while dealers may need less 
labor to sell the vehicles. Conversely, as manufacturers add equipment 
to each new vehicle, the industry will require labor resources to 
develop, sell, and produce additional fuel-saving technologies. We also 
account for the possibility that new standards could shift the relative 
shares of passenger cars and light trucks in the overall fleet. Since 
the production of different vehicles involves different amounts of 
labor, this shift affects the required quantity of labor.
    The analysis considers the direct labor effects that the standards 
have across the automotive sector. The effects include (1) dealership 
labor related to new light-duty and HDPUV unit sales; (2) assembly 
labor for vehicles, engines, and transmissions related to new vehicle 
unit sales; and (3) labor related to mandated additional fuel savings 
technologies, accounting for new vehicle unit sales. NHTSA has now used 
this methodology across several rulemakings but has generally not 
emphasized its results, largely because NHTSA found that attempting to 
quantify the overall labor or economic effects was too uncertain and 
difficult. We have also excluded any analysis of how changes in direct 
labor requirements could change employment in adjacent industries.
    NHTSA still believes that such an expanded analysis may be outside 
the effects that are reasonably traceable to the final rule; however, 
NHTSA has identified an exogenous model that can capture both the labor 
impacts contained in the CAFE Model and the secondary macroeconomic 
impacts due to changes in sales, vehicle prices, and fuel savings. 
Accompanying this final rule is a docket memo explaining how the CAFE 
Model's outputs may be used within Regional Economic Models, Inc. 
(REMI)'s PI + employment model to quantify the impacts of this final 
rule. We received comment from the Joint NGOs regarding the proposal 
for additional analysis in the docket memo stating that NHTSA should 
not include this additional analysis since the public was not given the 
opportunity to comment on results.\788\ Although we were unable to 
fully implement the side analysis with finalized results for this rule, 
we are continuing to explore the possibility of including these impacts 
in future analyses.
---------------------------------------------------------------------------

    \788\ Joint NGOs, Docket No. NHTSA-2023-0022-61944-A2, at 66.
---------------------------------------------------------------------------

    The United Auto Workers (UAW) commented that NHTSA should perform 
additional analysis of the impacts of the standards on employment, with 
a particular focus on union jobs and new EV jobs.\789\ Although we do 
not currently look at labor impacts by specific technologies, we may 
consider including it in future analyses. All labor effects are 
estimated and reported at a national aggregate level, in person-years, 
assuming 2,000 hours of labor per person-year. These labor hours are 
not converted to monetized values because we assume that the labor 
costs are included into a new vehicle's purchasing price. The analysis 
estimates labor effects from the forecasted CAFE Model technology costs 
and from review of automotive labor for the MY 2022 fleet. NHTSA uses 
information about the locations of vehicle assembly, engine assembly, 
and transmission assembly, and the percent of U.S. content of vehicles 
collected from American Automotive Labeling Act (AALA) submissions for 
each vehicle in the reference fleet. The analysis assumes that the 
fractions of parts that are currently made in the U.S. will remain 
constant for each vehicle as manufacturers add fuel-savings 
technologies. This should not be construed as a prediction that the 
percentage of U.S.-made parts--and by extension U.S. labor-- will 
remain constant, but rather as an acknowledgement that NHTSA does not 
have a clear basis to project where future production may shift. The 
analysis also uses data from the NADA annual report to derive 
dealership labor estimates.
---------------------------------------------------------------------------

    \789\ UAW, Docket No. NHTSA-2023-0022-63061-A1, at 2-3.
---------------------------------------------------------------------------

    While the IRA tax credit eligibility is not dependent on our labor 
assumptions here, if NHTSA were able to dynamically model changes in 
parts content with enough confidence in its precision, NHTSA could 
potentially employ those results to dynamically model a portion of tax 
credit eligibility.
    Some commenters argued that culmination of the standards and the 
further adoption of BEVs would significantly impair the automotive 
industry through dramatically reduced sales, leading to a substantial 
number of layoffs, and accused the agency of improperly ignoring this 
unintended consequence.\790\ The agency disagrees. First, the agency 
notes that the premise in these comments is unsupported. As noted in 
sales, we believe that sales are largely determined by exogenous market 
factors, and our standards will have a marginal impact. Second, 
electrification is not a compliance pathway for CAFE, so any impacts 
would be contained to the reference baseline fleet through standard 
setting years. Finally, commenters did not provide any evidence that 
BEV adoption would harm domestic jobs and sales and relied solely on 
speculation.
---------------------------------------------------------------------------

    \790\ Heritage Foundation-Mario Loyola, Docket No. NHTSA-2023-
0022-61952, at 7-8.
---------------------------------------------------------------------------

    In sum, the analysis shows that the increased labor from producing 
additional technology necessary to meet

[[Page 52689]]

the preferred alternative will outweigh any decreases attributable to 
the change in new vehicle sales. For a full description of the process 
NHTSA uses to estimate labor impacts, see Chapter 6.2.5 of the TSD.
3. Costs and Benefits Not Quantified
    In addition to the costs and benefits described above, Table III-7 
includes two-line items without values. The first is maintenance and 
repair costs. Many of the technologies manufacturers apply to vehicles 
to meet the standards are sophisticated and costly. The technology 
costs capture only the initial or ``upfront'' costs to incorporate this 
equipment into new vehicles; however, if the equipment is costlier to 
maintain or repair--as seems likely for at least more conventional 
technology because the materials used to produce the equipment are more 
expensive and the equipment itself is significantly more complex and 
requires more time and labor to maintain or repair--, then consumers 
will also experience increased costs throughout the lifetime of the 
vehicle to keep it operational. Conversely, electrification 
technologies offer the potential to lower repair and maintenance costs. 
For example, BEVs do not have engines that are costly to maintain, and 
all electric pathways with regenerative braking may reduce the strain 
on braking equipment and consequentially extend the useful life of 
braking equipment. We received several comments concerned with electric 
vehicle battery replacement costs and maintenance/repair cost 
differences between EVs and ICEs. The Heritage Foundation and the 
American Consumer Institute noted that EV battery replacement costs are 
expensive, and AFPM commented that these battery replacement costs will 
impact lower-income households.\791\
---------------------------------------------------------------------------

    \791\ Heritage Foundation-Mario Loyola, Docket No. NHTSA-2023-
0022-61952; American Consumer Institute, Docket No. NHTSA-2023-0022-
50765; AFPM, Docket No. NHTSA-2023-0022-61911.
---------------------------------------------------------------------------

    The West Virginia Attorney General's Office commented that NHTSA 
should include a life-cycle analysis, emphasizing that EVs' complicated 
powertrains could lead to higher maintenance and repair costs.\792\ We 
do not currently include a life-cycle analysis as part of the CAFE 
Model but may consider incorporating some aspects of this into future 
rules. For a literature review and additional qualitative discussion on 
the vehicle cycle and its impacts, readers should refer to FEIS Chapter 
6 (Lifecycle Analysis) (See III.F as well). Other commenters have been 
just as adamant that BEVs offer lifetime maintenance and repair 
benefits.
---------------------------------------------------------------------------

    \792\ West Virginia Attorney General's Office, Docket No. NHTSA-
2023-0022-63056-A1, at 11.
---------------------------------------------------------------------------

    NHTSA notes that due to statutory constraints on considering the 
fuel economy of BEVs and the full fuel economy of PHEVs in determining 
maximum feasible CAFE standards, any change in maintenance and repair 
costs due to electrification would have a limited impact on NHTSA's 
analysis comparing alternatives. Given that this topic is still 
emerging, and that the results would not affect the agency's decision 
given the statutory constraint on consideration of BEV fuel economy in 
determining maximum feasible CAFE standards, the agency believes it is 
reasonable not to attempt to model these benefits or costs in this 
final rule. See Section VI.A on economic practicability for discussion 
on affordability impacts more generally.
    Consumer Reports commented that hybrid-cost effectiveness is, on 
average, better than that of non-hybrids due to maintenance and repair 
cost savings over time, citing their 2023 analysis focusing on ten 
bestselling hybrids and their ICE counterparts.\793\ NHTSA is 
continuing to study the relative maintenance and repair costs 
associated with adopting fuel saving technologies. In order to conduct 
this analysis properly NHTSA would require more granular data on a 
larger set of technologies than what is included in Consumer Reports' 
study and would also need to estimate the effects of changes in vehicle 
usage on these costs. NHTSA will continue to consider these costs in 
the future as more information becomes available.
---------------------------------------------------------------------------

    \793\ Consumer Reports, Docket No. NHTSA-2023-0022-61098-A1, at 
1-2.
---------------------------------------------------------------------------

    The second empty line item in the table is the value of potential 
sacrifices in other vehicle attributes. Some technologies that are used 
to improve fuel economy could have also been used to increase other 
vehicle attributes, especially performance, carrying capacity, comfort, 
and energy-using accessories, though some technologies can also 
increase both fuel economy and performance simultaneously. While this 
is most obvious for technologies that improve the efficiency of engines 
and transmissions, it may also be true of technologies that reduce 
mass, aerodynamic drag, rolling resistance or any road or accessory 
load. The exact nature of the potential to trade-off attributes for 
fuel economy varies with specific technologies, but at a minimum, 
increasing vehicle efficiency or reducing loads allows a more powerful 
engine to be used while achieving the same level of fuel economy. 
Performance is held constant in our analysis. However, if a consumer 
values a performance attribute that cannot be added to a vehicle 
because fuel economy improvements have ``used up'' the relevant 
technologies, or if vehicle prices become too high wherein either a 
consumer cannot obtain additional financing or afford to pay more for a 
vehicle within their household budget that consumers may opt to 
purchase vehicles that are smaller or lack features such as heated 
seats, advanced entertainment or convenience systems, advance safety 
systems, or panoramic sunroofs, that the consumer values but are 
unrelated to the performance of the drivetrain.\794\ Alternatively, 
manufacturers may voluntarily preclude these features from certain 
models or limit the development of other new features in anticipation 
that new vehicle price affordability will limit the amount they may be 
able to charge for these new features. How consumers value increased 
fuel economy and how fuel economy regulations affect manufacturers' 
decisions about using efficiency-improving technologies can have 
important effects on the estimated costs, benefits, and indirect 
impacts of fuel economy standards. Nevertheless, any sacrifice in 
potential improvements to vehicles' other attributes could represent a 
net opportunity cost to their buyers (though performance-efficiency 
tradeoffs could also lower compliance costs, and some additional 
attributes, like acceleration, could come with their own countervailing 
social costs).\795\
---------------------------------------------------------------------------

    \794\ NHTSA notes that if consumers simply take out a larger 
loan, then some future consumption is replaced by higher principle 
and interest payments in the future.
    \795\ This is similar to the phenomena described in The Bernie 
Mac Show: My Privacy (Fox Broadcasting Company Jan. 14, 2005). After 
an embarrassing incident caused by too few bedrooms, Bernie Mac 
decides to renovate his house. A contractor tells Mr. Mack that he 
can have the renovations performed ``good and fast,'' ``good and 
cheap,'' or ``fast and cheap,'' but it was impossible to have 
``good, fast, and cheap.''
---------------------------------------------------------------------------

    NHTSA has previously attempted to model the potential sacrifice in 
other vehicle attributes in sensitivity analyses by assuming the 
opportunity cost must be greater than some percentage of the fuel 
savings they seemingly voluntarily forego. In those previous 
rulemakings, NHTSA acknowledged that it is extremely difficult to 
quantify the potential loss of other vehicle attributes, and therefore 
included the value of other vehicle attributes only in sensitivity 
analyses. This approach is used as a sensitivity analysis for the final 
rule and is discussed in RIA 9.2.3. This approach is only relevant if 
the

[[Page 52690]]

foregone fuel savings cannot be explained by the energy paradox.
    The results of NHTSA's analysis of the HDPUV standards suggest that 
buyer's perceived reluctance to purchasing higher-mpg models is due to 
undervaluation of the expected fuel savings due to market failures, 
including short-termism, principal-agent split incentives, uncertainty 
about the performance and service needs of new technologies and first-
mover disadvantages for consumers, uncertainty about the resale market, 
and market power and first-mover disadvantages among manufacturers. 
This result is the same for vehicles purchased by individual consumers 
and those bought for commercial purposes. NHTSA tested the sensitivity 
of the analysis to the potential that the market failures listed do not 
apply to the commercial side of the HDPUV market. In this sensitivity 
analysis, commercial operators are modeled as profit maximizers who 
would not be made more or less profitable by more stringent standards 
by offsetting the estimated net private benefit to commercial 
operators.\796\ NHTSA decided against including this alternative in the 
primary analysis to align with its approach to market failures in the 
light-duty analysis. Furthermore, there is insufficient data on the 
size and composition of the commercial share of the HDPUV market to 
develop a precise estimate of a commercial operator opportunity cost. 
For additional details, see Chapter 9.2.3.10 of the FRIA.
---------------------------------------------------------------------------

    \796\ Relevant sensitivity cases are labeled ``Commercial 
Operator Sales Share'' and denote the percent of the fleet assumed 
owned by commercial operators. NHTSA calculates net private benefits 
as the sum of technology costs, lost consumer surplus from reduced 
new vehicle sales, and safety costs internalized by drivers minus 
fuel savings, benefits from additional driving, and savings from 
less frequent refueling.
---------------------------------------------------------------------------

    Several commenters argued that NHTSA's assumption that increases in 
fuel economy to meet the new standards are not accompanied by foregone 
vehicle performance leads to an overestimate of net-benefits from 
increasing standards.797 798 For example Valero commented 
that ``NHTSA offer[ed] no convincing rationale for omitting foregone 
performance gains from the central-case analysis'' and claimed ``NHTSA 
does its best to completely avoid the performance issue.'' \799\ IPI 
shared a similar belief and commented that ``NHTSA should further 
highlight [the implicit opportunity cost] sensitivity results.'' \800\ 
NHTSA agrees with IPI that it could do a better job highlighting the 
results of sensitivities that stakeholders considered, especially ones 
like the implicit opportunity cost which some commenters felt were 
either missing or underrepresented.
---------------------------------------------------------------------------

    \797\ Examples of performance related attributes listed by 
commenters included: horsepower, horsepower per pound of vehicle 
weight, acceleration, towing capacity, and torque.
    \798\ Landmark, Docket No. NHTSA-2023-0022-48725, at 4; Valero, 
Docket No. NHTSA-2023-0022-58547, Attachment E, at 1-4; KCBA, Docket 
No. NHTSA-2023-0022-59007, at 4; AmFree, Docket No. NHTSA-2023-0022-
62353, at. 5.
    \799\ Valero, Docket No. NHTSA-2023-0022-58547, Attachment E, at 
3, 5.
    \800\ IPI, Docket No. NHTSA-2023-0022-60485, at 31-32.
---------------------------------------------------------------------------

    More specifically, Landmark argued that improvements in fuel 
economy necessitate performance tradeoffs to reduce the weight of 
vehicles.\801\ Other commenters argued that there is evidence that in 
the absence of changes to standards manufacturers have chosen to make 
further improvements to performance features of vehicles, and that 
similar future improvements to performance would be sacrificed by 
manufacturers in order to comply with the standards NHTSA proposed, and 
thus should be counted as incremental consumer costs.\802\
---------------------------------------------------------------------------

    \801\ Landmark, Docket No. NHTSA-2023-0022-48725, at 4.
    \802\ Valero, Docket No. NHTSA-2023-0022-58547, Attachment E, at 
1, 3.
---------------------------------------------------------------------------

    Valero, CEA, and NADA referenced a recent paper from Leard, Linn, 
and Zhou (2023), who estimate that this opportunity cost of fuel 
economy improvement could offset much of the private fuel cost savings 
benefits that consumers receive from the increase in stringency of 
standards. The authors of this paper estimate that consumers value 
improvements in acceleration much more highly than the fuel economy 
improvements that manufacturers trade them off for in an effort to 
comply with higher standards. However, the authors of this paper note 
that their study does not account for the potential induced innovations 
from tightened standards, or market failures associated with imperfect 
competition in the new vehicle market. NHTSA discussed this paper in 
its proposal, but recognized the limitations that the authors noted, as 
well as the degree of uncertainty in the literature regarding the 
implicit opportunity cost of fuel economy standards.
    Valero suggests that in the absence of higher standards, 
manufacturers would channel investment into improvements in vehicle 
performance, which is foregone when standards are raised. As a result, 
Valero commented that fuel economy standards cause performance to 
increase less than it would in the absence of standards and referenced 
the findings of Klier and Linn (2016).\803\ NHTSA also discussed this 
paper in its proposal (see PRIA Chapter 9). The authors of the paper 
note that during the period they examined, for passenger cars in the 
United States there was no statistically significant evidence that 
stringency affected the direction of technology adoption between fuel 
efficiency and either horsepower or weight (the two attributes 
considered). While the authors do find evidence of an effect on this 
tradeoff for light trucks, they admit that there is significant 
uncertainty over the consumer's willingness to pay for this foregone 
performance (indeed they do not quantify the dollar value of the effect 
on vehicle weight due to this uncertainty). Recent data also casts 
doubt on Valero's deterministic understanding of the relationship 
between tightening standards and vehicle performance. Between 2000 and 
2010 CAFE standards for passenger cars were unchanged. According to the 
2023 EPA Automotive Trends report, real world fuel economy for vehicles 
rose at a rate of about 1.3 percent per year during this period, while 
horsepower rose at a rate of 1.2 percent, weight increased at a rate of 
0.4 percent, and acceleration as measured by 0 to 60 miles per hour 
time declined at an average rate of 0.8 percent.\804\ Between 2010 and 
2023, standards increased substantially and the fuel economy of these 
vehicles has improved at a rate of around 2.4 percent per year over 
this period. However, this has not caused improvements in other 
attributes to slow down. Instead, weight (0.5 percent), horsepower (1.7 
percent), and 0 to 60 time (-1.4 percent) all improved at faster rates 
than the previous period. While these attributes could have potentially 
improved at still greater rates in the absence of standards, these 
headline values suggest that standards have at least not caused a 
significant slow-down relative to prior trends. Also, as noted in FRIA 
Chapter 9, other research suggests that consumers have not had to 
tradeoff performance for fuel economy improvements, and should not be 
expected to in the future, due to fuel saving technologies whose 
adoption does not lead to adverse effects on the performance of 
vehicles (Huang, Helfand, et al. 2018; Watten, Helfand and Anderson 
2021; Helfand and Dorsey-Palmateer 2015). Indeed, there are 
technologies that exist that provide

[[Page 52691]]

improved fuel economy without hindering performance, and in some cases, 
also improve performance (such as high-strength aluminum alloy bodies, 
turbocharging, and increasing the number of gear ratios in new 
transmissions). Even as the availability of more fuel-efficient 
vehicles has increased steadily over time, research has shown that the 
attitudes of drivers towards those vehicles with improved fuel economy 
has not been affected negatively. To the extent some performance-
efficiency tradeoffs may have occurred in the past, such tradeoffs may 
decline over time, with technological advancements and manufacturer 
learning over longer vehicle design periods (Bento 2018; Helfand & 
Wolverton 2011).
---------------------------------------------------------------------------

    \803\ Valero, Docket No. NHTSA-2023-0022-58547, Attachment E, at 
1.
    \804\ 2023 EPA Automotive Trends Report, Available at: https://www.epa.gov/automotive-trends/explore-automotive-trends-data#DetailedData, (Accessed: April 18, 2024).
---------------------------------------------------------------------------

    NHTSA thus maintains that there is significant uncertainty in the 
literature over the degree to which changes in fuel economy standards 
will cause manufacturers to lower the performance of vehicles, and how 
much this will be valued by consumers. Indeed, the possibility that 
there are ancillary benefits to adopting fuel saving technology means 
that the directionality of the effect of excluding these additional 
attributes from the central analysis is unknown. In its analysis, NHTSA 
assumes that the performance features listed by commenters remain fixed 
across alternatives, and that manufacturers instead adopt fuel economy 
improving technology in order to comply with standards without reducing 
the quality of those features. NHTSA assumes that manufacturers are 
aware of consumers' willingness to pay for performance features like 
those noted by the commenters and would be reluctant to make sacrifices 
to them as part of their compliance strategies. This, of course, is not 
the only path to compliance for manufacturers. However, given 
uncertainty over consumer willingness to pay for the full set of 
potentially affected attributes, the long-term pricing strategies of 
firms, and firm specific costs, it is a reasonable approach for NHTSA 
to use when modeling the behavior of all manufacturers in the market. 
Modeling the decisions of all manufacturers over the complete set of 
attributes and technologies available would lead to a computationally 
infeasible model of compliance. Moreover, without highly detailed data 
about the manufacturing process of each manufacturer and vehicle model, 
it could introduce significant opportunities for errors in the agency's 
measurements of compliance costs. Omitting ancillary benefits and only 
including the attributes that could be traded off for fuel savings 
improvements by firms could bias the agency's analysis. Absent a better 
understanding of consumer willingness to pay for these other 
attributes, including them would create a misleading model of how firms 
would choose to comply with the standards as well as how consumer 
welfare would be affected. While commenters suggested that the 
performance neutrality assumption in NHTSA's analysis is unrealistic, 
they did not propose an alternative methodology for modeling how 
manufacturers would adjust performance attributes in response to 
changes in CAFE Standards.\805\ This performance neutrality assumption 
is intended to isolate the impacts of the standards and is necessary 
with or without a separate estimation of a potential implicit 
opportunity cost. Since NHTSA believes that its assumption of 
performance neutrality is a reasonable approach to modeling compliance, 
and since alternative approaches would introduce highly uncertain 
effects (with unknown directionality) and are currently infeasible, 
NHTSA has chosen to maintain its assumption of performance 
neutrality.\806\
---------------------------------------------------------------------------

    \805\ Valero, Docket No. NHTSA-2023-0022-58547, Attachment E, at 
3-4; CEA, Docket No. NHTSA-2023-0022-61918, at 20.
    \806\ See Section II.C.6 for further details.
---------------------------------------------------------------------------

    NHTSA does take seriously the possibility of opportunity costs as 
described by these commenters. For this reason, the agency included 
sensitivity cases in its analysis for both light duty and HDPUV in 
Chapter 9 of the PRIA and FRIA. In this sensitivity case, the 
opportunity cost of fuel economy for light duty vehicles is assumed to 
be equal to the discounted fuel cost savings for a vehicle over its 
first 72 months of use (roughly how long they are held, on average, by 
their first owner), less the undiscounted fuel cost savings over the 
first 30 months of use. NHTSA believes that this is a reasonable 
approach, since this value is equivalent to the value of fuel savings 
that new vehicle owners are assumed to not value in their purchase 
decision.\807\ If consumers are not myopic and value fuel savings 
fully, and assuming perfect information and no market distortions, then 
offsetting losses in performance would be at least this high. For 
HDPUVs, NHTSA also considered two additional sensitivity cases in which 
it assumed that this opportunity cost fully offset any net private 
benefits of fuel economy improvements for commercial buyers.\808\ This 
higher value for opportunity cost for commercial buyers was based on 
the assumption that commercial buyers are more likely to fully value 
the lifetime fuel savings of their fleet vehicles, since these buyers 
are profit maximizing businesses. As noted by IPI in its comments, 
NHTSA found in the proposal that while net social benefits under the 
preferred alternative are lower under these alternative assumptions, 
under 3 percent discounting they remain positive in all cases.\809\ 
This is caused by reductions in emissions externalities offsetting 
increases in safety externalities. NHTSA conducted similar sensitivity 
exercises in its final rule and found that societal net benefits 
remained positive in the preferred alternative regardless of discount 
rate. Since neither of these cases include the potential ancillary 
benefits of fuel saving technology adoption, and do not take into 
account the full set of compliance methods that manufacturers could 
employ to meet the standards in a cost effective way, NHTSA views these 
cases as bounding exercises that allow the agency to see whether a 
relatively high estimate of the potential opportunity costs of the 
standards outweigh the other net societal benefits included in NHTSA's 
analysis. Valero suggested that the agency's analysis of the implicit 
opportunity cost should equal to all private fuel savings.\810\ We 
disagree for several reasons. First, the average consumer will not hold 
onto new vehicles for a vehicle's entire lifetime, and even if the 
first owner valued all of the forgone attributes at the price of fuel 
savings, the second or third owner would have her own set of 
preferences that likely do not overlap the first owner's perfectly. 
Second, assigning a specific dollar value on vehicle luxuries is likely 
difficult for consumers, and there is a tendency for vehicle buyers to 
splurge at the dealership only to regret overspending when the monthly 
payments become due. For example, a Lending Tree survey found that 14 
percent of car buyers wish ex post that they had chosen a different 
make or model, 10

[[Page 52692]]

percent bought too expensive of a car, 4 percent bought a more 
expensive car than they planned, and 3 percent noted they regretted 
buying features they did not need.\811\ Similarly, not all vehicle 
attributes are offered [agrave] la carte (some vehicle attributes are 
sometimes only available in packages with other additions or require 
consumers to purchase higher trims) and consumers may only value one or 
two items in a larger package and are stuck buying as a bundle.
---------------------------------------------------------------------------

    \807\ Kelly Blue Book, ``Average length of U.S. vehicle 
ownership hit an all-time high'', Feb. 23, 2012, Available at: 
https://www.kbb.com/car-news/average-length-of-us-vehicle-ownership-
hit-an-all_time-high/
#:~:text=The%20latest%20data%20compiled%20by%20global%20market%20inte
lligence,figure%20that%20also%20represents%20a%20new%20high%20mark. 
(Accessed: April 29, 2024).
    \808\ NHTSA simulated a case in which half of HDPUV buyers were 
commercial buyers, and a cases in which all HDPUV buyers were 
commercial buyers.
    \809\ IPI, Docket No. NHTSA-2023-0022-60485, at 34.
    \810\ Valero, Docket No. NHTSA-2023-0022-58547, Attachment E, at 
4.
    \811\ J. Jones, D. Shepard, X. Martinez-White. Lending Tree. 
Nearly Half Who Bought a Car in the Past Year Have Regrets. Jan 24, 
2022. Available at https://www.lendingtree.com/auto/car-regrets-survey/ (Accessed: April 18, 2024).
---------------------------------------------------------------------------

H. Simulating Safety Effects of Regulatory Alternatives

    The primary objective of the standards is to achieve maximum 
feasible fuel economy and fuel efficiency, thereby reducing fuel 
consumption. In setting standards to achieve this intended effect, the 
potential of the standards to affect vehicle safety is also considered. 
As a safety agency, NHTSA has long considered the potential for adverse 
or positive safety consequences when establishing fuel economy and fuel 
efficiency standards.
    This safety analysis includes the comprehensive measure of safety 
impacts of the light-duty and HDPUV standards from three sources:
 Changes in Vehicle Mass
    Similar to previous analyses, NHTSA calculates the safety impact of 
changes in vehicle mass made to reduce fuel consumption to comply with 
the standards. Statistical analysis of historical crash data indicates 
reducing mass in heavier vehicles generally improves safety for 
occupants in lighter vehicles and other road users like pedestrians and 
cyclists, while reducing mass in lighter vehicles generally reduces 
safety. NHTSA's crash simulation modeling of vehicle design concepts 
for reducing mass revealed similar effects. These observations align 
with the role of mass disparity in crashes; when vehicles of different 
masses collide, the smaller vehicle will experience a larger change in 
velocity (and, by extension, force), which increases the risk to its 
occupants. NHTSA believes the most recent analysis represents the best 
estimate of the impacts of mass reduction (MR) on crash fatalities 
attributable to changes in mass disparities., One caveat to note is 
that the best estimates are not significantly different from zero and 
are not statistically significant at the 95th confidence level. In 
other words, the effects of changes in mass due to this rule cannot be 
distinguished from zero.
    Two individuals, Mario Loyola and Steven G. Bradbury, submitted a 
joint comment (referred to herein as ``Loyola and Bradbury''), 
speculating that the agency is ``downplay[ing] and minimize[ing] the 
loss of lives and serious injuries [the] standards [caused] by 
attributing many of these deaths and injuries to other regulators.'' 
\812\ The commentors would have the agency include fatalities that are 
projected to occur in the reference baseline as attributable t' this 
rule. While NHTSA's analysis includes the impacts of other regulations 
in the reference baseline, it does not separate the safety impacts 
attributable to individual regulations. Instead, the analysis considers 
the aggregate impact of these other regulations for comparison with the 
impacts of CAFE standards. NHTSA does not have information, nor do the 
commenters provide any specific information, indicating that the 
inclusion of the impacts of these other regulations results in 
undercounting of safety impacts attributable to the Preferred 
Alternative. The purpose of calculating a reference baseline is to show 
the world in the absence of further government action. If NHTSA chose 
not to finalize the standards, the agency believes that the reference 
baseline fatalities would still occur. As such, we disagree with the 
authors' proposed suggestion.
---------------------------------------------------------------------------

    \812\ Heritage Foundation, Docket No. NHTSA-2023-0022-61952, at 
8.
---------------------------------------------------------------------------

 Impacts of Vehicle Prices on Fleet Turnover
    Vehicles have become safer over time through a combination of new 
safety regulations and voluntary safety improvements. NHTSA expects 
this trend to continue as emerging technologies, such as advanced 
driver assistance systems, are incorporated into new vehicles. Safety 
improvements will likely continue regardless of changes in the 
standards.
    As discussed in Section III.E.2, technologies added to comply with 
fuel economy and efficiency standards have an impact on vehicle prices, 
therefore slowing the acquisition of newer vehicles and retirement of 
older ones. The delay in fleet turnover caused by the effect of new 
vehicle prices affect safety by slowing the penetration of new safety 
technologies into the fleet.
    The standards also influence the composition of the light-duty 
fleet. As the safety provided by light trucks, SUVs and passenger cars 
responds differently to technology that manufacturers employ to meet 
the standards--particularly mass reduction--fleets with different 
compositions of body styles will have varying numbers of fatalities, so 
changing the share of each type of light-duty vehicles in the projected 
future fleet impacts safety outcomes.
 Increased Driving Because of Better Fuel Economy
    The ``rebound effect'' predicts consumers will drive more when the 
cost of driving declines. More stringent standards reduce vehicle 
operating costs, and in response, some consumers may choose to drive 
more. Additional driving increases exposure to risks associated with 
motor vehicle travel, and this added exposure translates into higher 
fatalities and injuries. However, most fatalities associated with 
rebound driving are the result of consumers choosing to drive more. 
Therefore, most of the societal safety costs of rebound vehicle travel 
are offset in our net benefits analysis.
    The contributions of the three factors described above generate the 
differences in safety outcomes among regulatory alternatives. NHTSA's 
analysis makes extensive efforts to allocate the differences in safety 
outcomes between the three factors. Fatalities expected during future 
years under each alternative are projected by deriving a fleet-wide 
fatality rate (fatalities per vehicle mile of travel) that incorporates 
the effects of differences in each of the three factors from reference 
baseline conditions and multiplying it by that alternative's expected 
VMT. Fatalities are converted into a societal cost by multiplying 
fatalities with the DOT-recommended value of a statistical life (VSL) 
supplemented by economic impacts that are external to VSL measurements. 
Traffic injuries and property damage are also modeled directly using 
the same process and valued using costs that are specific to each 
injury severity level.
    All three factors influence predicted fatalities, but only two of 
them--changes in vehicle mass and in the composition of the light-duty 
fleet in response to changes in vehicle prices--impose increased risks 
on drivers and passengers that are not compensated for by accompanying 
benefits. In contrast, increased driving associated with the rebound 
effect is a consumer choice that reveals the benefits of additional 
travel. Consumers who choose to drive more have apparently concluded 
that the utility of additional driving exceeds the additional costs for 
doing so, including the crash risk that they perceive

[[Page 52693]]

additional driving involves. As discussed in Chapter 7 of the final 
TSD, the benefits of rebound driving are accounted for by offsetting a 
portion of the added safety costs.
    For the safety component of the analysis for this final rule, NHTSA 
assumed that HDPUVs have the same risk exposure as light trucks. Given 
that the HDPUV fleet is significantly smaller than the light-duty 
fleet, the sample size to derive safety coefficients separately for 
HDPUVs is challenging. We believe that HDPUVs share many physical 
commonalities with light trucks and the incidence and crash severity 
are likely to be similar. As such, we concluded it was appropriate to 
use the light truck safety coefficients for HDPUVs.
    NHTSA is continuing to use the proposal's approach of including 
non-occupants in the analysis. The agency categorizes safety outcome 
through three measures of light-duty and HDPUV vehicle safety: 
fatalities occurring in crashes, serious injuries, and the amount of 
property damage incurred in crashes with no injuries. Counts of 
fatalities to occupants of automobiles and non-occupants are obtained 
from NHTSA's Fatal Accident Reporting System. Estimates of the number 
of serious injuries to drivers and passengers of light-duty and HDPUV 
vehicles are tabulated from NHTSA's General Estimates System (GES) for 
1990-2015, and from its Crash Report Sampling System (CRSS) for 2016-
2019. Both GES and CRSS include annual samples of motor vehicle crashes 
occurring throughout the United States. Weights for different types of 
crashes were used to expand the samples of each type to estimates of 
the total number of crashes occurring during each year. Finally, 
estimates of the number of automobiles involved in property damage-only 
crashes each year were also developed using GES.
    NHTSA sought comment on its safety assumptions and methodology in 
the proposal.
1. Mass Reduction Impacts
    Vehicle mass reduction can be one of the more cost-effective means 
of improving efficiency, particularly for makes and models not already 
built with much high-strength steel or aluminum closures or low-mass 
components. Manufacturers have stated that they will continue to reduce 
mass of some of their models to meet more stringent standards, and 
therefore, this expectation is incorporated into the modeling analysis 
supporting the standards. Safety trade-offs associated with mass-
reduction have occurred in the past, particularly before standards were 
attribute-based because manufacturers chose, in response to standards, 
to build smaller and lighter vehicles; these smaller, lighter vehicles 
did not fare as well in crashes as larger, heavier vehicles, on 
average. Although NHTSA now uses attribute-based standards, in part to 
reduce or eliminate the incentive to downsize vehicles to comply with 
the standards, NHTSA must be mindful of the possibility of related 
safety trade-offs. For this reason, NHTSA accounts for how the 
application of MR to meet standards affects the safety of a specific 
vehicle given changes in GVWR.
    For this final rule, the agency employed the modeling technique, 
which was developed in the 2016 Puckett and Kindelberger report and 
used in the proposal, to analyze the updated crash and exposure data by 
examining the cross sections of the societal fatality rate per billion 
vehicle miles of travel (VMT) by mass and footprint, while controlling 
for driver age, gender, and other factors, in separate logistic 
regressions for five vehicle groups and nine crash types. NHTSA 
utilized the relationships between weight and safety from this 
analysis, expressed as percentage increases in fatalities per 100-pound 
weight reduction (which is how MR is applied in the technology 
analysis; see Section III.D.4), to examine the weight impacts applied 
in this analysis. The effects of MR on safety were estimated relative 
to (incremental to) the regulatory reference baseline in the analysis, 
across all vehicles for MY 2021 and beyond. The analysis of MR includes 
two opposing impacts. Research has consistently shown that MR affects 
``lighter'' and ``heavier'' vehicles differently across crash types. 
The 2016 Puckett and Kindelberger report found MR concentrated among 
the heaviest vehicles is likely to have a beneficial effect on overall 
societal fatalities, while MR concentrated among the lightest vehicles 
is likely to have a detrimental effect on occupant fatalities but a 
slight benefit to pedestrians and cyclists. This represents a 
relationship between the dispersion of mass across vehicles in the 
fleet and societal fatalities: decreasing dispersion is associated with 
a decrease in fatalities. MR in heavier vehicles is more beneficial to 
the occupants of lighter vehicles than it is harmful to the occupants 
of the heavier vehicles. MR in lighter vehicles is more harmful to the 
occupants of lighter vehicles than it is beneficial to the occupants of 
the heavier vehicles.
    To accurately capture the differing effect on lighter and heavier 
vehicles, NHTSA splits vehicles into lighter and heavier vehicle 
classifications in the analysis. However, this poses a challenge of 
creating statistically meaningful results. There is limited relevant 
crash data to use for the analysis. Each partition of the data reduces 
the number of observations per vehicle classification and crash type, 
and thus reduces the statistical robustness of the results. The 
methodology employed by NHTSA was designed to balance these competing 
forces as an optimal trade-off to accurately capture the impact of 
mass-reduction across vehicle curb weights and crash types while 
preserving the potential to identify robust estimates.
    Loyola and Bradbury commented that smaller and lighter vehicles 
built in response to the standards will increase the number of 
fatalities but did not note any deficiencies in the agency's analysis 
or consideration of mass-safety impacts.\813\ ACC and the Joint NGOs 
commented that changes in vehicle design and materials technology may 
lead to changes in relationships among vehicle mass and safety 
outcomes.\814\ NHTSA has acknowledged this potential outcome across 
multiple rulemakings and has continued to keep abreast of any new 
developments; however, for the time being, NHTSA feels there is 
insufficient data to support alternative estimates. NRDC further 
commented that manufacturers are capable of applying MR to a greater 
degree in heavier vehicles, yielding a net safety benefit to society. 
The CAFE Model incorporates the relationship raised by NRDC and the 
mass-size-safety coefficients applied in the model yield results 
consistent with this relationship when MR is applied to heavier 
vehicles more than lighter vehicles.
---------------------------------------------------------------------------

    \813\ Heritage Foundation, Docket No. NHTSA-2023-0022-61952, at 
8.
    \814\ ACC, Docket No. NHTSA-2023-0022-60215, at 6 and 8-9; Joint 
NGOs, Docket No. NHTSA-2023-0022-61944-2, at 72-3.
---------------------------------------------------------------------------

    Multiple stakeholders commented that NHTSA failed to adequately 
account for changes in vehicle mass associated with changing from ICE 
to BEV platforms for a given vehicle model in the analysis of the 
reference baseline.\815\ In related comments, ACC and the Aluminum 
Association noted that BEVs are likely to have different safety 
profiles than ICE vehicles. We note, however, that there are no safety 
impacts resulting from a shift from ICE

[[Page 52694]]

to BEV platforms in NHTSA's central analysis of the impact of CAFE 
standards because NHTSA's model is constrained such that no BEVs are 
added to the fleet during standard-setting years as a result of an 
increase in the stringency of CAFE standards. That is, any shift from 
ICE vehicles to BEVs in the standard setting years is limited to 
actions occurring in the reference baseline. In our analysis of the 
reference baseline, we account for an expected increase in BEVs as a 
result of market forces (like manufacturers' expected deployment of 
electric vehicles consistent with levels required by California's ACC 
II program) and regulatory requirements. However, while we acknowledge 
that, all else equal, vehicle masses likely increase when shifting from 
ICE to BEV platforms and BEVs may have distinct safety characteristics 
relative to ICE vehicles across crash types, we have insufficient data 
to account for how safety outcomes would be affected by shifting from 
ICE to BEV platforms in the analysis of the reference baseline, 
including insufficient information to justify an assumption that 
changes in mass associated with BEV structural differences are 
equivalent to changes in mass within ICE platforms. The CAFE Model is 
not currently designed to account for differences in vehicle mass 
associated with changes from ICE to BEV platforms. We are conducting 
research to address this lack of data in future rulemakings, but for 
this rule in the absence of sufficient data we have chosen to assume a 
neutral net safety effect for mass (and center of gravity) changes 
associated with shifts from ICE to BEV platforms for a given vehicle 
model in the baseline analysis. We acknowledge that ICE and BEV 
platforms for otherwise equivalent vehicles may differ in center of 
gravity, frontal crush characteristics, and acceleration. This creates 
uncertainty as to the validity of extrapolating observed mass-safety 
relationships from ICE vehicles to BEVs, however, until there is 
sufficient data and research to uncover an alternative relationship for 
BEVs, we believe that our current approach is reasonable.
---------------------------------------------------------------------------

    \815\ See, e.g., ACC, Docket No. NHTSA-2023-0022-60215, at 8-9; 
Valero, Docket No. NHTSA-2023-0022-58547-2, at 7-8; KCGA, Docket No. 
NHTSA-2023-0022-59007, at 4-5; The Aluminum Association, Docket No. 
NHTSA-2023-0022-58486, at 4; Arconic, Docket No. NHTSA-2023-0022-
48374, at 2.
---------------------------------------------------------------------------

    The Joint NGOs and Consumer Reports also commented that the 
estimated mass-size-safety coefficients are statistically 
insignificant.816 817 We have acknowledged this relationship 
in this rulemaking along with previous rulemakings where the estimated 
coefficients are not statistically significant at the 95 percent 
confidence level. In this rulemaking, the distinction between using 
insignificant estimates and zeroes is functionally moot because the 
estimated societal safety impacts associated with changes in vehicle 
mass associated with the rule are estimated to be zero in the Preferred 
Alternative. Furthermore, courts have discouraged agencies from 
excluding specific costs or benefits because the magnitude is 
uncertain.\818\ Given the agency believes that the point estimates 
still represent the best available data, NHTSA continues to include a 
measurement of mass-safety impacts in its analysis.
---------------------------------------------------------------------------

    \816\ Joint NGOs, Docket No. NHTSA-2023-0022-61944-2, at 72-3.
    \817\ Consumer Reports, Docket No. NHTSA-2023-0022-61098, at 18.
    \818\ CBD v. NHTSA, 538 F.3d 1172, 1198 (9th Cir. 2008).
---------------------------------------------------------------------------

    A more detailed description of the mass-safety analysis can be 
found in Chapter 7.2 of the Final TSD.
2. Sales/Scrappage Impacts
    The sales and scrappage responses to higher vehicle prices 
discussed in Section III.E.2 have important safety consequences and 
influence safety through the same basic mechanism, fleet turnover. In 
the case of the scrappage response, delaying fleet turnover keeps 
drivers in older vehicles which tend to be less safe than newer 
vehicles. Similarly, the sales response slows the rate at which newer 
vehicles, and their associated safety improvements, enter the on-road 
population. The sales response also influences the mix of vehicles on 
the road-with more stringent CAFE standards leading to a higher share 
of light trucks sold in the new vehicle market, assuming all else is 
equal. Light trucks have higher rates of fatal crashes when interacting 
with passenger cars and as earlier discussed, different directional 
responses to MR technology based on the existing mass and body style of 
the vehicle.
    Any effect on fleet turnover (either from delayed vehicle 
retirement or deferred sales of new vehicles) will affect the 
distribution of both ages and MYs present in the on-road light duty and 
HDPUV fleets. Because each of these vintages carries with it inherent 
rates of fatal crashes, and newer vintages are generally safer than 
older ones, changing that distribution will change the total number of 
on-road fatalities under each regulatory alternative. Similarly, the 
Dynamic Fleet Share (DFS) model captures the changes in the light-duty 
fleet's composition of cars and trucks. As cars and trucks have 
different fatality rates, differences in fleet composition across the 
alternatives will affect fatalities.
    At the highest level, NHTSA calculates the impact of the sales and 
scrappage effects by multiplying the VMT of a vehicle by the fatality 
risk of that vehicle. For this analysis, calculating VMT is rather 
simple: NHTSA uses the distribution of miles calculated in Chapter 4.3 
of the Final TSD. The trickier aspect of the analysis is creating 
fatality rate coefficients. The fatality risk measures the likelihood 
that a vehicle will be involved in a fatal accident per mile driven. 
NHTSA calculates the fatality risk of a vehicle based on the vehicle's 
MY, age, and style, while controlling for factors that are independent 
of the intrinsic nature of the vehicle, such as behavioral 
characteristics. Using this same approach, NHTSA designed separate 
models for fatalities, non-fatal injuries, and property damaged 
vehicles.
    The vehicle fatality risk described above captures the historical 
evolution of safety. Given that modern technologies are proliferating 
faster than ever and offer greater safety benefits than traditional 
safety improvements, NHTSA augmented the fatality risk projections with 
knowledge about forthcoming safety improvements. NHTSA applied 
estimates of the market uptake and improving effectiveness of crash 
avoidance technologies to estimate their effect on the fleet-wide 
fatality rate, including explicitly incorporating both the direct 
effect of those technologies on the crash involvement rates of new 
vehicles equipped with them, as well as the ``spillover'' effect of 
those technologies on improving the safety of occupants of vehicles 
that are not equipped with these technologies.
    NHTSA's approach to measuring these impacts is to derive 
effectiveness rates for these advanced crash-avoidance technologies 
from safety technology literature. NHTSA then applies these 
effectiveness rates to specific crash target populations for which the 
crash avoidance technology is designed to mitigate, which are then 
adjusted to reflect the current pace of adoption of the technology, 
including any public commitment by manufacturers to install these 
technologies. These technologies include Forward Collision Warning, 
Automatic Emergency Braking, Lane Departure Warning, Lane Keep Assist, 
Blind Spot Detection, Lane Change Assist, and Pedestrian Automatic 
Emergency Braking. The products of these factors, combined across all 7 
advanced technologies, produce a fatality rate reduction percentage 
that is applied to the fatality rate trend model discussed above, which 
projects both

[[Page 52695]]

vehicle and non-vehicle safety trends. The combined model produces a 
projection of impacts of changes in vehicle safety technology as well 
as behavioral and infrastructural trends. A much more detailed 
discussion of the methods and inputs used to make these projections of 
safety impacts from advanced technologies is included in Chapter 7.1 of 
the Final TSD.
    Loyola and Bradbury commented that the slowing of fleet turnover in 
response to the standards will increase fatalities but did not note any 
deficiencies in the agency's analysis or consideration of fleet 
turnover impacts.\819\ As such, the agency believes it has 
appropriately considered the issue the commenters raised.
---------------------------------------------------------------------------

    \819\ Heritage Foundation, Docket No. NHTSA-2023-0022-61952, at 
8.
---------------------------------------------------------------------------

    Consumer Reports cited the sensitivity and uncertainty of NHTSA's 
sales module, including the dynamic fleet share component and scrappage 
model, and questioned the astuteness of including the safety impacts 
from these effects. Consumer Reports also noted that they have not 
observed these effects in practice. NHTSA thanks Consumer Reports for 
providing their research in their comments. While the agency believes 
their research is valuable, we were unable to arrive at the same 
conclusions.\820\
---------------------------------------------------------------------------

    \820\ The survey data collected by Consumer Reports on 
consumers' willigness to pay is invalauble, but taking that survey 
data and extrapolating about its potential impacts on fleet turnover 
is too inferential for the agency's current rulemaking.
---------------------------------------------------------------------------

3. Rebound Effect Impacts
    The additional VMT demanded due to the rebound effect is 
accompanied by more exposure to risk, however, rebound miles are not 
imposed on consumers by regulation. They are a freely chosen activity 
resulting from reduced vehicle operational costs. As such, NHTSA 
believes a large portion of the safety risks associated with additional 
driving are offset by the benefits drivers gain from added driving. The 
level of risk internalized by drivers is uncertain. This analysis 
assumes that drivers of both HDPUV and light duty vehicles internalize 
90 percent of this risk, which mostly offsets the societal impact of 
any added fatalities from this voluntary consumer choice. Additional 
discussion of internalized risk is contained in Chapter 7.5 of the TSD.
    Consumer Reports commented that there is ``no evidence whatsoever 
to support NHTSA's assumption that consumers internalize only 90% of 
the safety risk'' and asks the agency to offset the entirety of rebound 
fatalities.\821\ Alternatively, Consumer Reports suggests that even 
though the agency's logic is sound for offsetting externality risks, if 
the risk were not internalized, because rebound driving is voluntary, 
it is still inappropriate to account for the increased fatality risks. 
Consumer Reports also expressed concern about the precedent of 
accounting for additional driving when consumers save money. The agency 
appreciates Consumer Reports comment but has chosen not to adjust its 
approach to offsetting rebound safety for the final rule. We agree with 
Consumer Reports that there is a dearth of evidence to support a 90 
percent offset, but the agency also notes that there is no evidence to 
support a higher offset either. Accounting for rebound effects does not 
set a broader precedent beyond fuel efficiency rules. The rebound 
effect is generally recognized to be the phenomena of using more of an 
energy consuming product when its operating costs decline rather than 
how consumers will use energy consuming products as their income 
increases.
---------------------------------------------------------------------------

    \821\ Consumer Reports, Docket No. NHTSA-2023-0022-61098, at 18.
---------------------------------------------------------------------------

4. Value of Safety Impacts
    Fatalities, nonfatal injuries, and property damage crashes are 
valued as a societal cost within the CAFE Model's cost and benefit 
accounting. Their value is based on the comprehensive value of a 
fatality, which includes lost quality of life and is quantified in the 
VSL as well as economic consequences such as medical and emergency 
care, insurance administrative costs, legal costs, and other economic 
impacts not captured in the VSL alone. These values were first derived 
from data in Blincoe et al. (2015), updated in Blincoe et al. (2023), 
and adjusted to 2021 dollars, and updated to reflect the official DOT 
guidance on the VSL.
    Nonfatal injury costs, which differ by severity, were weighted 
according to the relative incidence of injuries across the Abbreviated 
Injury Scale (AIS). To determine this incidence, NHTSA applied a KABCO/
MAIS translator to CRSS KABCO based injury counts from 2017 through 
2019. This produced the MAIS-based injury profile. This profile was 
used to weight nonfatal injury unit costs derived from Blincoe et al. 
(2023), adjusted to 2021 economics and updated to reflect the official 
DOT guidance on the VSL. Property-damaged vehicle costs were also taken 
from Blincoe et al (2023). and adjusted to 2021 economics.
    For the analysis, NHTSA assigns a societal value of $12.2 million 
for each fatality, $181,000 for each nonfatal injury, and $8,400 for 
each property damaged vehicle. As discussed in the previous section, 
NHTSA discounts 90% of the safety costs associated with the rebound 
effect. The remaining 10% of those safety costs are not considered to 
be internalized by drivers and appear as a cost of the standards that 
influence net benefits. Similarly, the effects on safety attributable 
to changes in mass and fleet turnover are not considered costs 
internalized by drivers since manufacturers are responsible for 
deciding how to design and price vehicles. The costs not internalized 
by drivers is therefore the summation of the mass-safety effects, fleet 
turnover effects, and the remaining 10% of rebound-related safety 
effects.

IV. Regulatory Alternatives Considered in This Final Rule

A. General Basis for Alternatives Considered

    Agencies typically consider regulatory alternatives in order to 
evaluate the comparative effects of different potential ways of 
implementing their statutory authority to achieve their intended policy 
goals. NEPA requires agencies to compare the potential environmental 
impacts of their actions to a reasonable range of alternatives. E.O. 
12866 and E.O. 13563, as well as OMB Circular A-4, also request that 
agencies evaluate regulatory alternatives in their rulemaking analyses.
    Alternatives analysis begins with a ``No-Action'' Alternative, 
typically described as what would occur in the absence of any further 
regulatory action by the agency. OMB Circular A-4 states that ``the 
choice of an appropriate baseline may require consideration of a wide 
range of potential factors, including:
     evolution of markets;
     changes in regulations promulgated by the agency or other 
government entities;
     other external factors affecting markets;
     the degree of compliance by regulated entities with other 
regulations; and
     the scale and number of entities or individuals that will 
be subject to, or experience the benefits or costs of, the 
regulation.'' \822\
---------------------------------------------------------------------------

    \822\ See Office of Management and Budget. 2023. Circular A-4. 
General Issues, 4. Developing an Analytic Baseline. Available at: 
https://www.whitehouse.gov/wp-content/uploads/2023/11/CircularA-4.pdf. (Accessed: Apr. 4, 2024).

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

[[Page 52696]]

    This final rule includes a No-Action Alternative for passenger cars 
and light trucks and a No-Action alternative for HDPUVs, both described 
below; five ``action alternatives'' for passenger cars and light 
trucks; and four action alternatives for HDPUVs. Within both the set of 
alternatives that apply to passenger cars and light trucks and the set 
of alternatives that apply to HDPUVs, one alternative is identified as 
the ``Preferred Alternative,'' which is NEPA parlance. In some places 
the Preferred Alternative may also be referred to as the ``standards'' 
or ``final standards,'' but NHTSA intends ``standards'' and ``Preferred 
Alternative'' to be used interchangeably for purposes of this final 
rule. NHTSA believes the range of No-Action and action alternatives for 
each set of standards appropriately comports with CEQ's directive that 
``agencies shall . . . limit their consideration to a reasonable number 
of alternatives.'' \823\
---------------------------------------------------------------------------

    \823\ 40 CFR 1502.14(f).
---------------------------------------------------------------------------

    The different regulatory alternatives for passenger cars and light 
trucks are defined in terms of percent-changes in CAFE stringency from 
year to year. Readers should recognize that those year-over-year 
changes in stringency are not measured in terms of mile per gallon 
differences (as in, 1 percent more stringent than 30 mpg in one year 
equals 30.3 mpg in the following year), but rather in terms of shifts 
in the footprint functions that form the basis for the actual CAFE 
standards (as in, on a gallon per mile basis, the CAFE standards change 
by a given percentage from one model year to the next).\824\
---------------------------------------------------------------------------

    \824\ The PC, LT, and HDPUV target curve function coefficients 
are defined in Equation IV-1, Equation IV-2, and Equation IV-3, 
respectively. See Final TSD Chapter 1.2.1 for a complete discussion 
about the footprint and work factor curve functions and how they are 
calculated.
---------------------------------------------------------------------------

    For PCs, consistent with prior rulemakings, NHTSA is defining final 
fuel economy targets as shown in Equation IV-1.
[GRAPHIC] [TIFF OMITTED] TR24JN24.064

Where:

TARGETFE is the fuel economy target (in mpg) applicable 
to a specific vehicle model type with a unique footprint 
combination,
a is a minimum fuel economy target (in mpg),
b is a maximum fuel economy target (in mpg),
c is the slope (in gallons per mile per square foot, or gpm per 
square foot), of a line relating fuel consumption (the inverse of 
fuel economy) to footprint, and
d is an intercept (in gpm) of the same line.

    Here, MIN and MAX are functions that take the minimum and maximum 
values, respectively, of the set of included values. For example, 
MIN[40, 35] = 35 and MAX(40, 25) = 40, such that MIN[MAX(40, 25), 35] = 
35.
    The resultant functional form is reflected in graphs displaying the 
passenger car target function in each model year for each regulatory 
alternative in Sections IV.B.1 and IV.B.3.
    For LTs, also consistent with prior rulemakings, NHTSA is defining 
fuel economy targets as shown in Equation IV-2.
[GRAPHIC] [TIFF OMITTED] TR24JN24.065

Where:

TARGETFE is the fuel economy target (in mpg) applicable 
to a specific vehicle model type with a unique footprint 
combination,
a, b, c, and d are as for PCs, but taking values specific to LTs,
e is a second minimum fuel economy target (in mpg),
f is a second maximum fuel economy target (in mpg),
g is the slope (in gpm per square foot) of a second line relating 
fuel consumption (the inverse of fuel economy) to footprint), and
h is an intercept (in gpm) of the same second line.

    NHTSA is defining HDPUV fuel efficiency targets as shown in 
Equation IV-3:
[GRAPHIC] [TIFF OMITTED] TR24JN24.066

Where:

c is the slope of the gasoline, CNG, Strong Hybrid, and PHEV work 
factor target curve in gal/100 mile per WF
For diesel engines, BEVs and FCEVs, c will be replaced with e
d is the gasoline CNG, Strong Hybrid, and PHEV minimum fuel 
consumption work factor target curve value in gal/100 mile

    For diesel engines, BEVs and FCEVs, d will be replaced with f

WF = Work Factor = [0.75 x (Payload Capacity + Xwd)] + [0.25 x Towing 
Capacity]

Where:


[[Page 52697]]


Xwd = 4wd adjustment = 500 lbs. if the vehicle group is equipped 
with 4wd and all-wheel drive (AWD), otherwise equals 0 lbs. for 2wd
Payload Capacity = GVWR (lbs.)-Curb Weight (lbs.) (for each vehicle 
group)
Towing Capacity = GCWR (lbs.)-GVWR (lbs.) (for each vehicle group)

    In a departure from recent CAFE rulemaking trends, for this final 
rule, we have applied different rates of increase to the passenger car 
and the light truck fleets in different model years. For the Preferred 
Alternative, rather than have both fleets increase their respective 
standards at the same rate, passenger car standards will increase at a 
steady rate year over year, while light truck standards will not 
increase for a few years before beginning to rise again at the 
passenger car rate. Several action alternatives evaluated for this 
final rule have passenger car fleet rates-of-increase of fuel economy 
that are different from the rates-of-increase of fuel economy for the 
light truck fleet, while the Preferred Alternative has the same rate of 
increase for passenger cars and light trucks for three out of the five 
model years. NHTSA has discretion, by law, to set CAFE standards that 
increase at different rates for cars and trucks, because NHTSA must set 
maximum feasible CAFE standards separately for cars and trucks.\825\
---------------------------------------------------------------------------

    \825\ See, e.g., the 2012 final rule establishing CAFE standards 
for model years 2017 and beyond, in which rates of stringency 
increase for passenger cars and light trucks were different. 77 FR 
62623, 62638-39 (Oct. 15, 2012).
---------------------------------------------------------------------------

    For HDPUVs, the different regulatory alternatives are also defined 
in terms of percent-increases in stringency from year to year, but in 
terms of fuel consumption reductions rather than fuel economy 
increases, so that increasing stringency appears to result in standards 
going down (representing a direct reduction in fuel consumed) over time 
rather than up. Also, unlike for the passenger car and light truck 
standards, because HDPUV standards are in fuel consumption space, year-
over-year percent changes actually do represent gallon/mile differences 
across the work-factor range. For the Preferred Alternative, the 
stringency increases at one fixed percentage rate in each the first 
three model years, and a different fixed percentage rate in each of the 
remaining three model years in the rulemaking time frame. Under the 
other action alternatives, the stringency changes at the same 
percentage rate in each model year in the rulemaking time frame. One 
action alternative is less stringent than the Preferred Alternative for 
HDPUVs, and two action alternatives are more stringent.

B. Regulatory Alternatives Considered

    The regulatory alternatives considered by the agency in this final 
rule are presented here as the percent-changes-per-year that they 
represent. The sections that follow will present the alternatives as 
the literal coefficients that define standards curves increasing at the 
given percentage rates.
[GRAPHIC] [TIFF OMITTED] TR24JN24.067

[GRAPHIC] [TIFF OMITTED] TR24JN24.068

    A variety of factors will be at play simultaneously as 
manufacturers seek to comply with the final standards that NHTSA is 
promulgating. NHTSA, EPA, and CARB will all be regulating 
simultaneously; manufacturers will be

[[Page 52698]]

responding to those regulations as well as to foreseeable shifts in 
market demand during the rulemaking time frame (both due to cost/price 
changes for different types of vehicles over time, fuel price changes, 
and the recently-passed tax credits for BEVs and PHEVs). Many costs and 
benefits that will accrue as a result of manufacturer actions during 
the rulemaking time frame will be occurring for reasons other than CAFE 
standards, and NHTSA believes it is important to try to reflect many of 
those factors in order to present a more accurate picture of the 
effects of different potential CAFE and HDPUV standards to decision-
makers and to the public. Because the EPA and NHTSA programs were 
developed in coordination jointly, and stringency decisions were made 
in coordination, NHTSA did not incorporate EPA's only recently-
finalized CO2 standards as part of the analytical reference 
baseline for the main analysis. The fact that EPA finalized its rule 
before NHTSA is an artifact of circumstance only.
    The following sections define each regulatory alternative, 
including the No-Action Alternative, for each program, and explain 
their derivation.
1. Reference Baseline/No-Action Alternative
    As with the 2022 final rule, our No-Action Alternative (also 
referred to as the reference baseline) is fairly nuanced. In this 
analysis, the reference No-Action Alternative assumes:
     The existing (through model year 2026) national CAFE and 
GHG standards are met, and that the CAFE and GHG standards for model 
year 2026 finalized in 2022 continue in perpetuity.\826\
---------------------------------------------------------------------------

    \826\ NHTSA recognizes EPA published their Multi-Pollutant 
Emissions Standards For Model Years 2027 and Later Light-Duty and 
Medium-Duty Vehicles rule before this final rule is published, 
however, EPA's newest standards were not included in the baseline 
analysis, as the agencies developed their respective 27+ standards 
jointly.
---------------------------------------------------------------------------

     Manufacturers who committed to the California Framework 
Agreements met their contractual obligations for model year 2022.
     The HDPUV model year 2027 standards finalized in the 
NHTSA/EPA Phase 2 program continue in perpetuity.
     Manufacturers will comply with the Advanced Clean Trucks 
(ACT) program that California and other states intend to implement 
through 2035.
     Manufacturers will, regardless of the existence or non-
existence of a legal requirement, produce additional electric vehicles 
consistent with the levels that would be required under the ZEV/
Advanced Clean Cars II program, if it were to be granted a Clean Air 
Act preemption waiver.
     Manufacturers will make production decisions in response 
to estimated market demand for fuel economy or fuel efficiency, 
considering estimated fuel prices, estimated product development 
cadence, the estimated availability, applicability, cost, and 
effectiveness of fuel-saving technologies, and available tax credits.
    NHTSA continues to believe that to properly estimate fuel 
economies/efficiencies (and achieved CO2 emissions) in the 
No-Action Alternative, it is necessary to simulate all of these legal 
requirements, additional deployment plans of automakers, and other 
influences affecting automakers and vehicle design simultaneously.\827\ 
Consequently, the CAFE Model evaluates each requirement in each model 
year, for each manufacturer/fleet. Differences among fleets and 
compliance provisions often create over-compliance in one program, even 
if a manufacturer is able to exactly comply (or under-comply) in 
another program. This is similar to how manufacturers approach the 
question of concurrent compliance in the real world--when faced with 
multiple regulatory programs, the most cost-effective path may be to 
focus efforts on meeting one or two sets of requirements, even if that 
results in ``more effort'' than would be necessary for another set of 
requirements, in order to ensure that all regulatory obligations are 
met. We elaborate on those model capabilities below. Generally 
speaking, the model treats each manufacturer as applying the following 
logic when making technology decisions, both for simulating passenger 
car and light truck compliance, and HDPUV compliance, with a given 
regulatory alternative:
---------------------------------------------------------------------------

    \827\ To be clear, this is for purposes of properly estimating 
the No-Action Alternative, which represents what NHTSA believes is 
likely to happen in the world in the absence of future NHTSA 
regulatory action. NHTSA does not attempt to simulate further 
application of BEVs, for example, in determining amongst the action 
alternatives for passenger cars and light trucks which one would be 
maximum feasible, because the statute prohibits NHTSA from 
considering the fuel economy of BEVs in determining maximum feasible 
CAFE standards.
---------------------------------------------------------------------------

    1. What do I need to carry over from last year?
    2. What should I apply more widely in order to continue sharing 
(of, e.g., engines) across different vehicle models?
    3. What new BEVs do I need to build in order to satisfy the various 
state ZEV programs and voluntary deployment of electric vehicles 
consistent with ACC II?
    4. What further technology, if any, could I apply that would enable 
buyers to recoup additional costs within 30 months after buying new 
vehicles?
    5. What additional technology, if any, should I apply to respond to 
potential new CAFE and CO2 standards for PCs and LTs, or to 
potential new HDPUV standards?
    Additionally, within the context of 4 and 5, the CAFE Model may 
consider, as appropriate and allowed by statutory restrictions on 
technology application for a given model year, the applicability of 
recently-passed tax credits for battery-based vehicle technologies, 
which improve the attractiveness of those technologies to consumers and 
thus the model's likelihood of choosing them as part of a compliance 
solution. The model can also apply over-compliance credits if 
applicable and not legally prohibited. The CAFE Model simulates all of 
these simultaneously. As mentioned above, this means that when 
manufacturers make production decisions in response to actions or 
influences other than CAFE or HDPUV standards, those costs and benefits 
are not attributable to possible future CAFE or HDPUV standards. This 
approach allows the analysis to isolate the effects of the decision 
being made on the appropriate CAFE standards, as opposed to the effects 
of many things that will be occurring simultaneously.
    To account for the existing CAFE standards finalized in model year 
2026 for passenger cars and light trucks, the No-Action Alternative 
includes the following coefficients defining those standards, which 
(for purposes of this analysis) are assumed to persist without change 
in subsequent model years:

[[Page 52699]]

[GRAPHIC] [TIFF OMITTED] TR24JN24.069

[GRAPHIC] [TIFF OMITTED] TR24JN24.070

    These coefficients are used to create the graphic below, where the 
x-axis represents vehicle footprint and the y-axis represents fuel 
economy, showing that in ``CAFE space,'' targets are higher in fuel 
economy for smaller footprint vehicles and lower for larger footprint 
vehicles.
---------------------------------------------------------------------------

    \828\ The PC, LT, and HDPUV target curve function coefficients 
are defined in Equation IV-1, Equation IV-2, and Equation IV-3, 
respectively. See Final TSD Chapter 1.2.1 for a complete discussion 
about the footprint and work factor curve functions and how they are 
calculated.
    \829\ The PC, LT, and HDPUV target curve function coefficients 
are defined in Equations IV-1, IV-2, and IV-3, respectively. See 
Final TSD Chapter 1.2.1 for a complete discussion about the 
footprint and work factor curve functions and how they are 
calculated.

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

[[Page 52700]]

[GRAPHIC] [TIFF OMITTED] TR24JN24.071

    Additionally, EPCA, as amended by EISA, requires that any 
manufacturer's domestically-manufactured passenger car fleet must meet 
the greater of either 27.5 mpg on average, or 92 percent of the average 
fuel economy projected by the Secretary for the combined domestic and 
non-domestic passenger automobile fleets manufactured for sale in the 
United States by all manufacturers in the model year. NHTSA retains the 
1.9 percent offset to the Minimum Domestic Passenger Car Standard 
(MDPCS), first used in the 2020 final rule, to account for recent 
projection errors as part of estimating the total passenger car fleet 
fuel economy, and used in rulemakings since.830 831 The 
projection shall be published in the Federal Register when the standard 
for that model year is promulgated in accordance with 49 U.S.C. 
32902(b).832 833 For purposes of the No-Action Alternative, 
the MDPCS is as it was established in the 2022 final rule for model 
year 2026, as shown in Table IV-5 below:
---------------------------------------------------------------------------

    \830\ Section VI.A.2 (titled ``Separate Standards for Passenger 
Cars, Light Trucks, and Heavy-Duty Pickups and Vans, and Minimum 
Standards for Domestic Passenger Cars'') discusses the basis for the 
offset.
    \831\ 87 FR 25710 (May 2, 2022).
    \832\ 49 U.S.C. 32902(b)(4).
    \833\ The offset will be applied to the final regulation 
numbers, but was not used in this analysis. The values for the MDPCS 
for the action alternatives are nonadjusted values.
[GRAPHIC] [TIFF OMITTED] TR24JN24.072

    To account for the HDPUV standards finalized in the Phase 2 rule, 
the No-Action Alternative for HDPUVs includes the following 
coefficients defining those standards, which (for purposes of this 
analysis) are assumed to persist without change in subsequent model 
years:

[[Page 52701]]

[GRAPHIC] [TIFF OMITTED] TR24JN24.073

[GRAPHIC] [TIFF OMITTED] TR24JN24.074

    These equations are represented graphically below:
---------------------------------------------------------------------------

    \834\ The PC, LT, and HDPUV target curve function coefficients 
are defined in Equation IV-1, Equation IV-2, and Equation IV-3, 
respectively. See Final TSD Chapter 1.2.1 for a complete discussion 
about the footprint and work factor curve functions and how they are 
calculated.
    \835\ The PC, LT, and HDPUV target curve function coefficients 
are defined in Equation IV-1, Equation IV-2, and Equation IV-3, 
respectively. See Final TSD Chapter 1.2.1 for a complete discussion 
about the footprint and work factor curve functions and how they are 
calculated.

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

[[Page 52702]]

[GRAPHIC] [TIFF OMITTED] TR24JN24.075

[GRAPHIC] [TIFF OMITTED] TR24JN24.076


[[Page 52703]]


    As the reference baseline scenario, the No-Action Alternative also 
includes the following additional actions that NHTSA believes will 
occur in the absence of further regulatory action by NHTSA:
    To account for the existing national GHG emissions standards, the 
No-Action Alternative for passenger cars and light trucks includes the 
following coefficients defining the GHG standards set by EPA in 2022 
for model year 2026, which (for purposes of this analysis) are assumed 
to persist without change in subsequent model years:
[GRAPHIC] [TIFF OMITTED] TR24JN24.077

[GRAPHIC] [TIFF OMITTED] TR24JN24.078

    Coefficients a, b, c, d, e, and f define the model year 2026 
Federal CO2 standards for passenger cars and light trucks, 
respectively, in Table IV-8 and Table IV-9 above. Analogous to 
coefficients defining CAFE standards, coefficients a and b specify 
minimum and maximum CO2 targets in each model year. 
Coefficients c and d specify the slope and intercept of the linear 
portion of the CO2 target function, and coefficients e and f 
bound the region within which CO2 targets are defined by 
this linear form.
    To account for the NHTSA/EPA Phase 2 national GHG emission 
standards, the No-Action Alternative for HDPUVs includes the following 
coefficients defining the WF based standards set by EPA for model year 
2027 and beyond. The four-wheel drive coefficient is maintained at 500 
(coefficient `a') and the weighting multiplier coefficient is 
maintained at 0.75 (coefficient `b'). The CI and SI coefficients are in 
the tables below:
[GRAPHIC] [TIFF OMITTED] TR24JN24.079

[GRAPHIC] [TIFF OMITTED] TR24JN24.080


[[Page 52704]]


    Coefficients c, d, e, and f define the existing model year 2027 and 
beyond CO2 standards from Phase 2 rule for HDPUVs, in Table 
III-10 and Table III-11 above. The coefficients are linear work-factor 
based function with c and d representing gasoline, CNG vehicles, SHEVs 
and PHEVS and e and f representing diesels, BEVS and FCEVs. For this 
rulemaking, this is identical to the NHTSA's fuel efficiency standards 
No Action alternative.
    The reference baseline No-Action Alternative also includes NHTSA's 
estimates of ways that each manufacturer could introduce new PHEVs and 
BEVs in response to state ZEV programs and additional production of 
PHEVs and BEVs that manufacturers have indicated they will undertake 
consistent with ACC II, regardless of whether it becomes a legal 
requirement.\836\ To account for manufacturers' expected compliance 
with the ACC I and ACT programs and additional deployment of electric 
vehicles consistent with ACC II, NHTSA has included the main provisions 
of the ACC, ACC II, (as currently submitted to EPA), and ACT programs 
in the CAFE Model's analysis. Incorporating these programs into the 
model includes converting vehicles that have been identified as 
potential ZEV candidates into battery-electric vehicles (BEVs) and 
taking into account PHEVs that meet the ZEV PHEV credit requirements so 
that a manufacturer's fleet meets the calculated ZEV credit 
requirements or anticipated voluntary compliance. The CAFE Model makes 
manufacturer fleets consistent with ACC I, ACC II (as currently 
submitted to EPA), and ACT first in the reference baseline, then solves 
for the technology pathway used to meet increasing ZEV penetration 
levels described by the state programs. Chapter 2.3 of the Final TSD 
discusses, in detail, how NHTSA developed these estimates.
---------------------------------------------------------------------------

    \836\ NHTSA interprets EPCA/EISA as allowing consideration of 
BEVs and PHEVs built in response to state ZEV programs or voluntary 
deployed by automakers independent of NHTSA's standards as part of 
the analytical baseline because (1) 49 U.S.C. 32902(h) clearly 
applies to the ``maximum feasible'' determination made under 49 
U.S.C. 32902(f), which is a determination between regulatory 
alternatives, and the baseline is simply the backdrop against which 
that determination is made, and (2) NHTSA continues to believe that 
it is arbitrary to interpret 32902(h) as requiring NHTSA to pretend 
that BEVs and PHEVs clearly built for non-CAFE-compliance reasons do 
not exist, because doing so would be unrealistic and would bias 
NHTSA's analytical results by inaccurately attributing costs and 
benefits to future potential CAFE standards that will not accrue as 
a result of those standards in real life.
---------------------------------------------------------------------------

    Several stakeholders commented in support of NHTSA's inclusion of 
state ZEV programs and assumptions regarding other electric vehicles 
that will be deployed in the absence of legal requirements in the 
reference baseline.\837\ The States and Cities, for example, commented 
that ``[g]iven NHTSA's duty to project a No-Action baseline that 
accounts for sharply growing zero emission vehicle sales, modeling 
compliance with California's Advanced Clean Cars I (``ACCI''), Advanced 
Clean Cars II (``ACCII''), and Advanced Clean Trucks (``ACT'') 
regulations is a reasonable methodology to do so, at least in the event 
that California is granted its requested waiver for ACCII and ACCII 
thus becomes enforceable.'' \838\ Similarly, the Joint NGOs commented 
that ``consistent with EPCA's language, history, and legislative 
intent, NHTSA models an accurate, real-world `no action' baseline for 
the rulemaking, a task that requires a rational accounting of the real-
world BEVs and PHEVs projected to exist in the absence of the CAFE 
standards NHTSA is considering. . . . NHTSA has done so here.'' \839\
---------------------------------------------------------------------------

    \837\ States and Cities, Docket No. NHTSA-2023-0022-61904, 
Attachment 2, at 40; Joint NGOs, Docket No. NHTSA-2023-0022-61944, 
Attachment 2, at 56-57; ALA, Docket No. NHTSA-2023-0022-60091, at 2-
3; Tesla, Docket No. NHTSA-2023-0022-60093, at 7.
    \838\ States and Cities, Docket No. NHTSA-2023-0022-61904, 
Attachment 2, at 40.
    \839\ Joint NGOs, Docket No. NHTSA-2023-0022-61944, Attachment 
2, at 56-57.
---------------------------------------------------------------------------

    Some stakeholders commented about uncertainties that they believe 
could impact the reference baseline. For example, Kia commented that 
``[w]hile automakers will plan to comply with the regulations, there is 
great uncertainty as to whether automakers have the capacity to do so, 
whether the California ZEV mandate will remain as currently written 
through 2035, whether states that have adopted it will remain in the 
program, and whether California will be granted a waiver.'' \840\
---------------------------------------------------------------------------

    \840\ Kia, Docket No. NHTSA-2023-0022-58542-A1, at 4-5.
---------------------------------------------------------------------------

    Other stakeholders commented in explicit opposition to modeling 
state ZEV programs in the reference baseline.\841\ Stakeholders 
asserted that NHTSA could not account for state ZEV programs in the 
light-duty standards reference baseline because of EPCA/EISA's 
statutory prohibition on considering electric vehicle fuel economy in 
49 U.S.C. 32902(h). Several of these commenters objected in particular 
to NHTSA's use of OMB Circular A-4 to guide the development of the 
light-duty regulatory reference baseline, as they believe that Circular 
A-4 cannot ``trump a clear statutory requirement,'' referring to 49 
U.S.C. 32902(h).\842\ Stakeholders also commented that state ZEV 
programs should not be included in the reference baseline because they 
are preempted by various federal laws,\843\ and/or because EPA has not 
yet granted a waiver of preemption to California for the ACC II 
program.\844\ Commenters opposing the inclusion of state ZEV programs 
in the reference baseline also alleged that it was a backdoor way to 
establish an EV mandate when setting CAFE standards.845 846
---------------------------------------------------------------------------

    \841\ Growth Energy, Docket No. NHTSA-2023-0022-61555, at 1; 
KCGA, Docket No. NHTSA-2023-0022-59007, at 2; RFA, NCGA, and NFU, 
Docket No. NHTSA-2023-0022-57625; NCB, Docket No. NHTSA-2023-0022-
53876; CEA, Docket No. NHTSA-2023-0022-61918, at 6; Corn Growers 
Associations, Docket No. NHTSA-2023-0022-62242, at 4; ACE, Docket 
No. NHTSA-2023-0022-60683; The Alliance, Docket No. NHTSA-2023-0022-
60652, Attachment 3, at 8-13; Toyota, Docket No. NHTSA-2023-0022-
61131, at 2, 23; AmFree, Docket No. NHTSA-2023-0022-62353, at 4; 
AFPM, Docket No. NHTSA-2023-0022-61911, Attachment 2, at 23; 
Stellantis, Docket No. NHTSA-2023-0022-61107, at 9; POET, Docket No. 
NHTSA-2023-0022-61561, at 13-16.
    \842\ E.g., The Alliance, Docket No. NHTSA-2023-0022-60652, 
Attachment 0, at 2.
    \843\ RFA, NCGA, and NFU, Docket No. NHTSA-2023-0022-57625; CEA, 
Docket No. NHTSA-2023-0022-61918, at 9; Corn Growers Associations, 
Docket No. NHTSA-2023-0022-62242, at 6-8; AFPM, Docket No. NHTSA-
2023-0022-61911, Attachment 2, at 22.
    \844\ Valero, Docket No. NHTSA-2023-0022-58547, at 5; Hyundai, 
Docket No. NHTSA-2023-0022-51701, at 5; Nissan, Docket No. NHTSA-
2023-0022-60684, at 4; The Alliance, Docket No. NHTSA-2023-0022-
60652, Attachment 3, at 8-13; AFPM, Docket No. NHTSA-2023-0022-
61911, Attachment 2, at 23; Corn Growers Associations, Docket No. 
NHTSA-2023-0022-62242, at 8.
    \845\ Valero, Docket No. NHTSA-2023-0022-58547, Attachments A, 
B, C, and D. Valero gave as an example vehicle models that were 
flagged in the analysis fleet as BEV ``clones'' turning into BEVs 
from model year 2022 to model year 2027 and later. However NHTSA has 
confirmed that is exactly how our modeling of the ZEV program was 
intended to operate. NHTSA directs Valero to TSD Chapter 2.5, which 
describes when ZEV clones are created and when sales volume is 
assigned to those clones for ZEV program compliance, and the CAFE 
Model Documentation, which describes how the CAFE Model implements 
restrictions surrounding BEV technology unrelated to ZEV modeling.
    \846\ See, e.g., CEA, Docket No. NHTSA-2023-0022-61918, at 12. 
CEA stated that ``NHTSA's baseline is a federal `insurance' policy 
in the event that state mandates are repealed or struck down by the 
courts--a federal regulatory `horcrux' that'll ensure the continued 
survival of these state laws even if they are killed elsewhere.'' It 
should be noted that while a horcrux and this commenter's implied 
definition of a ``federal `insurance' policy'' would function 
similarly in their ability to preserve and protect, the creation 
process for each would be markedly dissimilar. Moreover, even if 
NHTSA's baseline was a ``horcrux,'' the agency would liken it to the 
horcrux in Harry Potter himself: It was created organically as a 
product of the circumstances, and even after attempts to be struck 
down, the Advanced Clean Car program does still live. Ohio v. 
E.P.A., No. 22-1081 (D.C. Cir. Apr. 9, 2024).
---------------------------------------------------------------------------

    Toyota did not explicitly object to NHTSA's consideration of state 
ZEV

[[Page 52705]]

regulatory programs in the reference baseline but stated that ``NHTSA 
should consider the impact of the EVs stemming from both the ZEV 
Mandate and the GHG Program, but then use that knowledge to establish 
economically practicable CAFE standards for the remining ICEs in the 
U.S. fleet, thereby simultaneous[sic] satisfying 49 U.S.C. 32902(h). 
For example, if 45 percent of a projected 17 million vehicle fleet in 
2030 model year will be electrified due to other government programs, 
CAFE standards would be set for the remaining 9.4 million ICE and 
hybrid vehicles.'' \847\
---------------------------------------------------------------------------

    \847\ Toyota, Docket No. NHTSA-2023-0022-61131, at 24.
---------------------------------------------------------------------------

    Several stakeholders also commented about specific assumptions used 
in the ZEV modeling such as the number of states signed on to the 
program, how some compliance obligations should be assumed to be met 
through credits, and assumptions around PHEV credit values; those 
comments are addressed in Section III.C.5, above.
    NHTSA agrees with commenters that the agency has a duty to model a 
reference baseline that includes increasing zero emission vehicle sales 
in response to state standards, and that the agency's methodology for 
doing so is consistent with EPCA's language, history, and legislative 
intent. NHTSA continues to believe that it is appropriate for the 
reference baseline to reflect legal obligations other than CAFE 
standards that automakers will be meeting and additional non-regulatory 
deployment of electric vehicles during this time period so that the 
regulatory analysis can identify the distinct effects of the CAFE 
standards. Information provided by California continues to show there 
has been industry compliance with the ZEV standards,\848\ which 
provides further confirmation that manufacturers will meet legally-
binding state standards. This is also confirmed by manufacturers' 
stated intent to deploy electric vehicles consistent with what would be 
required under ACC II, regardless of whether it becomes a binding legal 
obligation, as discussed in more detail below.
---------------------------------------------------------------------------

    \848\ California Air Resources Board, Annual ZEV Credits 
Disclosure Dashboard, available at https://ww2.arb.ca.gov/applications/annual-zev-credits-disclosure-dashboard (accessed April 
12, 2024).
---------------------------------------------------------------------------

    In response to comments opposing the inclusion of state ZEV 
programs in the reference baseline because doing so conflicts with 49 
U.S.C. 32902(h), NHTSA maintains that it is perfectly possible to give 
meaningful effect to the 49 U.S.C. 32902(h) prohibition by not allowing 
the CAFE Model to rely on ZEV (or other dedicated alternative fuel) 
technology during the rulemaking time frame, while still acknowledging 
the clear reality that the state ZEV programs exist, and manufacturers 
are complying with them, just like the agency acknowledges that 
electric vehicles exist in the fleet independent of the ZEV program. 
Comments regarding whether including state ZEV programs in the 
reference baseline is consistent with 49 U.S.C. 32902(h) are discussed 
in more detail below in Section VI.A.5.a.(5), and in the final rule for 
model years 2024-2026 CAFE standards.\849\ Regarding commenters' views 
that state ZEV programs are preempted, NHTSA addressed preemption in 
the agency's 2021 rulemaking, and further discussion is located in the 
NPRM and final rule for that rulemaking.\850\ In that rulemaking, the 
agency expressed ``significant doubts as to the validity'' of 
preemption positions similar to those raised by commenters here.\851\
---------------------------------------------------------------------------

    \849\ 87 FR 25899-900 (May 2, 2022).
    \850\ CAFE Preemption. 86 FR 25,980 (May 12, 2021); 86 FR 74,236 
(Dec. 29, 2021).
    \851\ See 86 FR 25,980, 25,990.
---------------------------------------------------------------------------

    NHTSA also disagrees that including state ZEV programs in the 
reference baseline is a way to, according to commenters, ``bypass'' 
limitations in 49 U.S.C. 32902(h). ACC I is a relevant legal 
requirement that manufacturers must meet,\852\ and as mentioned above, 
manufacturers are not just meeting those standards, they are exceeding 
them.\853\ Further, manufacturers have indicated their intent to deploy 
electric vehicles consistent with what would be required under ACC II, 
regardless of whether it becomes a binding legal obligation. Vehicle 
manufacturers told NHTSA, in CBI conversations regarding planned 
vehicle product and technology investments, that they are complying 
with and plan to comply in the future with ZEV programs.\854\ These 
conversations were later confirmed by manufacturers' subsequent public 
announcements, confirming both their support for California's programs 
and for meeting their own stated electrification goals, which are 
discussed in extensive detail below.
---------------------------------------------------------------------------

    \852\ Ohio v. E.P.A., No. 22-1081 (D.C. Cir. Apr. 9, 2024).
    \853\ California Air Resources Board, Annual ZEV Credits 
Disclosure Dashboard, available at https://ww2.arb.ca.gov/applications/annual-zev-credits-disclosure-dashboard (accessed April 
12, 2024).
    \854\ Docket ID NHTSA-2023-0022-0007, Docket Submission of Ex 
Parte Meetings Prior to Publication of the Corporate Average Fuel 
Economy Standards for Passenger Cars and Light Trucks for Model 
Years 2027-2032 and Fuel Efficiency Standards for Heavy-Duty Pickup 
Trucks and Vans for Model Years 2030-2035 Notice of Proposed 
Rulemaking.
---------------------------------------------------------------------------

    Kia, stating in their comments that ``automakers will plan to 
comply with the regulations,'' joins a list of OEMs that have 
established that they are planning technology decisions to comply with 
state ZEV program deployment levels: Stellantis in a recent agreement 
with California confirmed that they will explicitly comply with the ACC 
programs through 2030; \855\ General Motors sent a letter to California 
Governor Gavin Newsom both recognizing California's authority under the 
Clean Air Act to set vehicle emissions standards and expressing its 
commitment to ``emissions reductions that are aligned with the 
California Air Resources Board's targets and . . . complying with 
California's regulations'',\856\ and Ford, Volkswagen, BMW, Honda, and 
Volvo formed a group of five manufacturers that committed in 2020 to 
comply with ZEV program requirements and have since reiterated their 
support for California's programs in a lengthy declaration to the D.C. 
Circuit Court of Appeals.\857\ Not only have all three domestic 
automakers expressed support for California's standards, several other 
automakers have followed suit in explicitly expressing support for 
California's programs, as shown above.
---------------------------------------------------------------------------

    \855\ California Air Resources Board, California announces 
partnership with Stellantis to further emissions reductions (March 
19, 2024), available at https://ww2.arb.ca.gov/news/california-announces-partnership-stellantis-further-emissions-reductions.
    \856\ Hayley Harding, GM to recognize California emissions 
standards, allowing state to buy its fleet vehicles, The Detroit 
News (Jan. 9, 2022), available at https://www.detroitnews.com/story/business/autos/general-motors/2022/01/09/gm-recognizes-calif-emission-standards-opening-door-fleet-sales/9153355002/.
    \857\ Initial Brief for Industry Respondent-Intervenors 
(Document #1985804, filed February 13, 2023) in Ohio v. E.P.A., No. 
22-1081 (D.C. Cir. Apr. 9, 2024); California Air Resources Board, 
Zero-Emission Vehicle Program, available at https://ww2.arb.ca.gov/our-work/programs/zero-emission-vehicle-program/about.
---------------------------------------------------------------------------

    Further, automakers have publicly signaled their commitment to the 
EV transition at levels that well exceed the 28 percent BEV market 
share in MY 2031 reflected in the baseline reference case. In August 
2021, major automakers including GM, Ford, Stellantis, BMW, Honda, 
Volkswagen, and Volvo pledged their support to achieve 40 to 50 percent 
sales of electric vehicles by 2030.\858\ These announcements are 
consistent with previous and ongoing corporate statements. Several 
manufacturers have announced plans to fully transition to electric 
vehicles, such as General

[[Page 52706]]

Motors ambition to shift its light-duty vehicles entirely to zero-
emissions by 2035,\859\ Volvo's plans to make only electric cars by 
2030,\860\ Mercedes plans to become ready to go all-electric by 2030 
where possible,\861\ and Honda's full electrification plan by 
2040.\862\ Other car makers have chosen incremental commitments to 
electrification that are still exceed the equivalent national EV market 
share reflected in the reference baseline, such as Ford's announcement 
that the company expects 40 percent of its global sales will be all-
electric by 2030,\863\ Volkswagen's expectation that half of its U.S. 
sales will be all-electric by 2030,\864\ Subaru's global target to 
achieve 50 percent BEVs by 2030,\865\ and Toyota's plans to introduce 
30 BEV models by 2030.\866\ In addition to Honda's fully-electric 
target in 2040, the company also expects 40 percent of North American 
sales to be fully electric by 2030, and 80 percent by 2035.\867\
---------------------------------------------------------------------------

    \858\ The White House, ``Statements on the Biden 
Administration's Steps to Strengthen American Leadership on Clean 
Cars and Trucks,'' August 5, 2021. Accessed on October 19, 2021 at 
https://www.whitehouse.gov/briefing-room/statements-releases/2021/08/05/statements-on-the-biden-administrations-steps-to-strengthen-american-leadership-on-clean-cars-and-trucks/.
    \859\ General Motors, ``General Motors, the Largest U.S. 
Automaker, Plans to be Carbon Neutral by 2040,'' Press Release, 
January 28, 2021.
    \860\ Volvo Car Group, ``Volvo Cars to be fully electric by 
2030,'' Press Release, March 2, 2021.
    \861\ Mercedes-Benz, ``Mercedes-Benz prepares to go all-
electric,'' Press Release, July 22, 2021.
    \862\ Honda News Room, ``Summary of Honda Global CEO Inaugural 
Press Conference,'' April 23, 2021. Accessed June 15, 2021 at 
https://global.honda/newsroom/news/2021/c210423eng.html.
    \863\ Ford Motor Company, ``Superior Value From EVs, Commercial 
Business, Connected Services is Strategic Focus of Today's 
`Delivering Ford+' Capital Markets Day,'' Press Release, May 26, 
2021.
    \864\ Volkswagen Newsroom, ``Strategy update at Volkswagen: The 
transformation to electromobility was only the beginning,'' March 5, 
2021. Accessed June 15, 2021 at https://www.volkswagen-newsroom.com/en/stories/strategy-update-at-volkswagen-the-transformation-to-electromobility-was-only-the-beginning-6875.
    \865\ Subaru Corporation, ``Briefing on the New Management 
Policy,'' August 2, 2023. Accessed on December 5, 2023 at https://www.subaru.co.jp/pdf/news-en/en2023_0802_1_2023-08-01-193334.pdf
    \866\ Toyota Motor Corporation, ``Video: Media Briefing on 
Battery EV Strategies,'' Press Release, December 14, 2021. Accessed 
on December 14, 2021 at https://global.toyota/en/newsroom/corporate/36428993.html.
    \867\ Honda News Room, ``Summary of Honda Global CEO Inaugural 
Press Conference,'' April 23, 2021. Accessed June 15, 2021 at 
https://global.honda/newsroom/news/2021/c210423eng.html.
---------------------------------------------------------------------------

    The transition to electric vehicles is also taking place among 
heavy-duty pick-up trucks and vans, with much of the initial focus on 
last mile delivery vans. Several models of parcel delivery vans have 
already entered the market including GM's BrightDrop Zevo 400 and Zevo 
600; and the Rivian EDV 500 and EDV 700.868 869 Commercial 
fleets have announced commitments to purchase zero emission delivery 
trucks and vans, including FedEx,\870\ Amazon,\871\ and Walmart.\872\ 
Amazon reached 10,000 electric delivery vans operating in over 18,000 
U.S. cities.\873\
---------------------------------------------------------------------------

    \868\ https://www.gobrightdrop.com/.
    \869\ https://rivian.com/fleet.
    \870\ BrightDrop, ``BrightDrop Accelerates EV Production with 
First 150 Electric Delivery Vans Integrated into FedEx Fleet,'' 
Press Release, June 21, 2022.
    \871\ Amazon Corporation, ``Amazon's Custom Electric Delivery 
Vehicles from Rivian Start Rolling Out Across the U.S.,'' Press 
Release, July 21, 2022.
    \872\ Walmart, ``Walmart To Purchase 4,500 Canoo Electric 
Delivery Vehicles To Be Used for Last Mile Deliveries in Support of 
Its Growing eCommerce Business,'' Press Release, July 12, 2022.
    \873\ https://www.axios.com/2023/10/17/amazon-rivian-electrification-10000-climate.
---------------------------------------------------------------------------

    These commitments provide further confirmation that automakers plan 
to deploy electric vehicles at the levels indicated in the reference 
baseline. They also provide further evidence that NHTSA's modeled 
reference baseline is a reasonable--yet, as discussed further below, 
likely conservative--representation of manufacturers' future product 
offerings. Nevertheless, NHTSA developed an alternative baseline that 
does not include ACC I or manufacturer deployment of electric vehicles 
that would be consistent with ACC II--and as discussed below, NHTSA 
determined that its final standards are reasonable as compared against 
this alternative baseline.
    In response to Toyota's alternative approach to considering state 
ZEV programs in the analysis, not only does NHTSA not believe this 
approach would allow the agency to set maximum feasible standards, but 
NHTSA believes that the agency functionally already does what Toyota is 
describing. In addition, by converting vehicles to BEVs to comply with 
the ZEV program first, and then applying technology to the rest of the 
remaining fleet, NHTSA is setting a standard based only on the 
capability of the rest of the fleet to apply non-BEV technology.
    Finally, in regards to including BEVs in the light-duty reference 
baseline, while NHTSA agrees that OMB Circular A-4 cannot trump a clear 
statutory requirement, NHTSA disagrees the agency's reference baseline 
does or attempts to do so. Nowhere does EPCA/EISA say that NHTSA should 
not consider the best available evidence in establishing the regulatory 
reference baseline for its CAFE rulemakings. As explained in Circular 
A-4, ``the benefits and costs of a regulation are generally measured 
against a no-action baseline: an analytically reasonable forecast of 
the way the world would look absent the regulatory action being 
assessed, including any expected changes to current conditions over 
time.'' \874\ NHTSA makes clear that its interpretation of 49 U.S.C. 
32902(h) restricts the agency's analytical options when analyzing what 
standards are maximum feasible, while being consistent with A-4's 
guidance about how best to construct the reference baseline. Thus, 
absent a clear indication to blind itself to important facts, NHTSA 
continues to believe that the best way to implement its duty to 
establish maximum feasible CAFE standards is to establish as realistic 
a reference baseline as possible, including, among other factors, the 
most likely composition of the fleet. This concept is discussed in more 
detail in Section VI.A.
---------------------------------------------------------------------------

    \874\ OMB Circular A-4, ``Regulatory Analysis'' Nov. 9, 2003, at 
11. Note that Circular A-4 was recently updated; the initial version 
was in effect at the time of the proposal.
---------------------------------------------------------------------------

    In addition to their comments opposing the inclusion of ACC I and 
ACC II in the light duty reference baseline, Valero also commented 
opposing NHTSA's inclusion of the ACT program in the HDPUV reference 
baseline, for several reasons.\875\ Regarding Valero's statutory 
arguments, we direct Valero to EPA's grant of the waiver of preemption 
for California's ACT program.\876\ EPA made requisite findings under 
the Clean Air Act that the waiver should be granted and also grappled 
with several issues that commenters raised about the program. NHTSA 
defers to EPA's judgment there. Valero also took issue with the fact 
that all states that have adopted California's ACT program standards 
have adopted them on a different timeline than California, for example 
Massachusetts' program beings with model year 2025 and Vermont's 
program begins in model year 2026. NHTSA defers to EPA on what is an 
appropriate interpretation of 42 U.S.C. 7507 but believes the agency 
has appropriately modeled a most likely future scenario as a reference 
baseline for future years.
---------------------------------------------------------------------------

    \875\ Valero, Docket No. NHTSA-2023-0022-58547, Attachmend D, at 
4.
    \876\ 88 FR 20688 (April 6, 2023).
---------------------------------------------------------------------------

    Separately, NHTSA can include a legal obligation in the reference 
baseline that ``has not yet begun implementation or demonstrated 
feasibility,'' contrary to Valero's assertions. First, regarding the 
program having ``not yet begun implementation'': a reference baseline 
is an ``analytically reasonable forecast of the way the world would 
look absent the regulatory action being assessed'' (emphasis 
added),\877\ and the nature of

[[Page 52707]]

the Clean Air Act waiver process is that EPA grants waivers for 
programs that will affect future model years.
---------------------------------------------------------------------------

    \877\ OMB Circular A-4, at 11. Some commenters in support of 
their arguments that NHTSA cannot consider state ZEV programs in the 
baseline have stated that OMB guidance cannot trump a statute. NHTSA 
disagrees that the agency is trying to ``trump'' 49 U.S.C. 32902(h) 
by observing guidance in OMB Circular A-4; but, regardless in the 
case of the HDPUV program where there is no similar command to 49 
U.S.C. 32902(h), NHTSA considers OMB guidance on the analytical 
baseline to be instructive.
---------------------------------------------------------------------------

    Regarding the argument that the ACT program has not demonstrated 
feasibility, Chapter 2.5.1 of the TSD shows the ZEV sales percentage 
requirements for Class 2b and 3 trucks (the vehicles covered by the 
HDPUV standards included in this final rule) and in the near-term, 
model years 2024-2026, the requirements increase by just 3% per year, 
and then only by 5% per year in the model years after that. The HDPUV 
segment is also a fraction of the size of the light-duty segment, as 
discussed elsewhere in this preamble, but stakeholders have already 
identified portions of the HDPUV segment that are candidates for 
electrification. For example, a North American Council for Freight 
Efficiency (NACFE) study of electrification for vans and step vans 
found that ``fleets are aggressively expanding their purchases of 
electric vans and step vans after successful pilot programs.'' \878\ 
Delivery vans are especially suited for electrification because range 
is typically not a major factor in urban delivery/e-commerce solutions, 
which in particular are spurring a rapid growth in the van and step van 
market segment.\879\ In other words, the market seems to be heading in 
a direction to meet state HDPUV ZEV programs not solely because of the 
requirements, but also because the segment is ready for it. Valero's 
characterization of state ACT programs as ``the transition of a large 
and complex transportation system'' and a ``massive undertaking,'' is 
an inaccurate dramatization of the scale of the ACT program in relation 
to NHTSA's current analysis.
---------------------------------------------------------------------------

    \878\ North American Council for Freight Efficiency, Run on 
Less--Electric, available at https://nacfe.org/research/run-on-less-electric/#vans-step-vans.
    \879\ Id.
---------------------------------------------------------------------------

    Like for the NPRM, NHTSA additionally ran the CAFE Model for the 
HDPUV analysis assuming the ACT program was not included in the 
reference baseline. In the RIA, Table 9-8 highlights the changes in 
technology penetration for the HDPUV No ZEV sensitivity. We see that by 
model year 2038, BEV penetration decreases by just 0.2% and mild hybrid 
penetration increases by 4.9% when compared to the reference baseline. 
Between 2022-2050 we also see net social benefits increase by $1.81b, 
gasoline consumption is reduced by 1 billion gallons, and regulatory 
costs per vehicle increase by $41. This happens for two reasons: BEVs 
are still a relatively cost-effective technology for compliance with 
increasing levels of standards, and all of the benefits captured by the 
ACT program in the reference baseline are now attributable to our HDPUV 
program in the alternative case. Removing the ACT program from the 
HDPUV reference baseline has little impact on the analysis and it alone 
does not lead us to change our preferred alternative.
    The No-Action Alternative also includes NHTSA estimates of ways 
that manufacturers could take advantage of recently-passed tax credits 
for battery-based vehicle technologies. NHTSA explicitly models 
portions of three provisions of the IRA when simulating the behavior of 
manufacturers and consumers. The first is the Advanced Manufacturing 
Production Tax Credit (AMPC). The AMPC also includes a credit for the 
production of applicable minerals. This provision of the IRA provides a 
$35 per kWh tax credit for manufacturers of battery cells and an 
additional $10 per kWh for manufacturers of battery modules (all 
applicable to manufacture in the United States).\880\ These credits, 
with the exception of the critical minerals credit, phase out 2030 to 
2032. The agency also jointly modeled the Clean vehicle credit and the 
Credit for qualified commercial clean vehicles (CVCs),\881\ which 
provides up to $7,500 toward the purchase of clean vehicles covered by 
this regulation.882 883 The AMPC and CVCs provide tax 
credits for light-duty and HDPUV PHEVs, BEVs, and FCVs. Chapter 2.3 in 
the TSD discusses, in detail, how NHTSA has modeled these tax credits.
---------------------------------------------------------------------------

    \880\ 26 U.S.C. 45X. If a manufacturer produces a battery module 
without battery cells, they are eligible to claim up to $45 per kWh 
for the battery module. The provision includes other provisions 
related to vehicles such as a credit equal to 10 percent of the 
manufacturing cost of electrode active materials, and another 10 
percent for the manufacturing cost of critical minerals. We are not 
modeling these credits directly because of how we estimate battery 
costs and to avoid the potential to double count the tax credits if 
they are included into other analyses that feed into our inputs.
    \881\ 26 U.S.C. 30D.
    \882\ There are vehicle price and consumer income limitations on 
the CVC as well, see Congressional Research Service. Tax Provisions 
in the Inflation Reduction Act of 2022 (H.R. 5376). Aug. 10, 2022.
    \883\ 26 U.S.C. 45W.
---------------------------------------------------------------------------

    Stakeholders commented that NHTSA both underestimated and 
overestimated the effect of tax credits on reference baseline EV 
adoption for both the light-duty and HDPUV analyses. For example, IPI 
commented that ``[a]lthough NHTSA's baseline modeling includes many 
commendable elements . . . NHTSA appears to underestimate the baseline 
share of BEVs resulting from the IRA during the Proposed Rule's 
compliance period. This, in turn, likely produces an underestimate of 
baseline average fuel economy and a corresponding overestimate of 
compliance cost.'' \884\ On the other hand, the Corn Growers 
Associations commented that NHTSA overestimated the CVC, and did not 
support its assumptions surrounding its credit estimates.\885\ In 
regards to the HDPUV analysis, ACEEE commented that ``[b]y excluding 
the Commercial Credit from its baseline analysis, NHTSA risks 
underestimating the additional positive impact that the IRA is 
projected to have on market penetration of BEVs in its no-action 
scenarios for passenger cars and HDPUVs.'' \886\ Rivian similarly 
commented that they strongly supported NHTSA's stated intention to 
consult with EPA to implement the Commercial CVC in the final rule. 
NHTSA did not receive any comments recommending the agency not include 
tax credits in the final rule.
---------------------------------------------------------------------------

    \884\ The Institute for Policy Integrity at New York University 
School of Law, NHTSA-2023-0022-60485, at 21-22.
    \885\ Corn Growers Associations, Docket No. NHTSA-2023-0022-
62242, at 13-15.
    \886\ ACEEE, Docket No. NHTSA-2023-0022-60684, at 9.
---------------------------------------------------------------------------

    NHTSA believes that its approach to modeling available tax credits 
reasonably represents the ways that tax credits could be applied to 
vehicles in the reference baseline during the years covered by the 
standards. NHTSA disagrees that its assumptions were not well supported 
and notes that the agency included a significant and transparent 
discussion of the modeling assumptions the agency used in the NPRM and 
associated technical documents. However, for this final rule, NHTSA has 
refined important aspects of its tax credit modeling and presents 
additional supporting documentation about those assumptions in Section 
III.C.5, above, and in Chapter 2 of the Final TSD. In particular, for 
the final rule analysis in response to comments and in light of further 
guidance from the Department of Treasury, NHTSA modeled the Sec.  45W 
tax credit jointly with Sec.  30D. NHTSA believes that these additional 
updates ensure the agency's handling of tax credits does not over or 
underestimate their effect in the reference baseline.
    The No-Action Alternative for the passenger car, light truck, and 
HDPUV fleets also includes NHTSA's

[[Page 52708]]

assumption, for purposes of compliance simulations, that manufacturers 
will add fuel economy- or fuel efficiency-improving technology 
voluntarily, if the value of future undiscounted fuel savings fully 
offsets the cost of the technology within 30 months. This assumption is 
often called the ``30-month payback'' assumption, and NHTSA has used it 
for many years and in many CAFE rulemakings.\887\ It is used to 
represent consumer demand for fuel economy. It can be a source of 
apparent ``over-compliance'' in the No-Action Alternative, especially 
when technology is estimated to be extremely cost-effective, as occurs 
later in the analysis time frame when learning has significant effects 
on some technology costs.
---------------------------------------------------------------------------

    \887\ Even though NHTSA uses the 30-month payback assumption to 
assess how much technology manufacturers would add voluntarily in 
the absence of new standards, the benefit-cost analysis accounts for 
the full lifetime fuel savings that would accrue to vehicles 
affected by the standards.
---------------------------------------------------------------------------

    NHTSA has determined that manufacturers do at times improve fuel 
economy even in the absence of new standards, for several reasons. 
First, overcompliance is not uncommon in the historical data, both in 
the absence of new standards, and with new standards--NHTSA's analysis 
in the 2022 TSD included CAFE compliance data showing that from 2004-
2017, while not all manufacturers consistently over-complied, a number 
did. Of the manufacturers who did over-comply, some did so by 20 
percent or more, in some fleets, over multiple model years.\888\ 
Ordinary market forces can produce significant increases in fuel 
economy, either because of consumer demand or because of technological 
advances.
---------------------------------------------------------------------------

    \888\ See 2022 TSD, at 68.
---------------------------------------------------------------------------

    Second, manufacturers have consistently told NHTSA that they do 
make fuel economy improvements where the cost can be fully recovered in 
the first 2-3 years of ownership. The 2015 NAS report discussed this 
assumption explicitly, stating: ``There is also empirical evidence 
supporting loss aversion as a possible cause of the energy paradox. 
Greene (2011) showed that if consumers accurately perceived the upfront 
cost of fuel economy improvements and the uncertainty of fuel economy 
estimates, the future price of fuel, and other factors affecting the 
present value of fuel savings, the loss-averse consumers among them 
would appear to act as if they had very high discount rates or required 
payback periods of about 3 years.'' \889\ Furthermore, the 2020 NAS HD 
report states: ''The committee has heard from manufacturers and 
purchasers that they look for 1.5- to 2-year paybacks or, in other 
cases, for a payback period that is half the expected ownership period 
of the first owner of the vehicle.'' \890\ Naturally, there are 
heterogenous preferences for vehicle attributes in the marketplace: at 
the same time that we are observing record sales of electrified 
vehicles, we are also seeing sustained demand for pickup trucks with 
higher payloads and towing capacity and hence lower fuel economy. This 
analysis, like all the CAFE analyses preceding it, uses an average 
value to represent these preferences for the CAFE fleet and the HDPUV 
fleet. The analysis balances the risks of estimating too low of a 
payback period, which would preclude most technologies from 
consideration regardless of potential cost reductions due to learning, 
against the risk of allowing too high of a payback period, which would 
allow an unrealistic cost increase from technology addition in the 
reference baseline fleet.
---------------------------------------------------------------------------

    \889\ NRC. 2015. Cost, Effectiveness, and Deployment of Fuel 
Economy Technologies for Light-Duty Vehicles. The National Academies 
Press: Washington, DC. Page 31. Available at: https://doi.org/10.17226/21744. (Accessed: Feb. 27, 2024) and available for review 
in hard copy at DOT headquarters). (hereinafter ``2015 NAS 
report'').
    \890\ National Academies of Sciences, Engineering, and Medicine. 
2020. Reducing Fuel Consumption and Greenhouse Gas Emissions of 
Medium- and Heavy-Duty Vehicles, Phase Two: Final Report. The 
National Academies Press: Washington, DC, at 296. Available at: 
https://doi.org/10.17226/25542. (Accessed: May 31, 2023).
---------------------------------------------------------------------------

    Third, as in previous CAFE analyses, our fuel price projections 
assume sustained increases in real fuel prices over the course of the 
rule (and beyond). As readers are certainly aware, fuel prices have 
changed over time--sometimes quickly, sometimes slowly, generally 
upward. See further details of this in TSD Chapter 3.2.
    In the 1990s, when fuel prices were historically low, manufacturers 
did not tend to improve their fuel economy, likely in part because 
there simply was very little consumer demand for improved fuel economy 
and CAFE standards remained flat due to appropriations riders from 
Congress preventing their increase. In subsequent decades, when fuel 
prices were higher, many of them have exceeded their standards in 
multiple fleets, and for multiple years. Our current fuel price 
projections look more like the last two decades, where prices have been 
more volatile, but also closer to $3/gallon on average. In recent 
years, when fuel prices have generally declined on average and CAFE 
standards have continued to increase, fewer manufacturers have exceeded 
their standards. However, our compliance data show that at least some 
manufacturers do improve their fuel economy if fuel prices are high 
enough, even if they are not able to respond perfectly to fluctuations 
precisely when they happen. This highlights the importance of fuel 
price assumptions both in the analysis and in the real world on the 
future of fuel economy improvements.
    Stakeholders commented that the 30-month/2.5-year payback 
assumption should be shorter (or nonexistent) or significantly longer 
and specifically mentioned the effects of that assumption and 
alternative assumptions on the reference baseline. Consumer Reports 
reiterated their opposition to NHTSA's inclusion of the 2.5-year 
payback assumption, citing previous comments they had submitted to past 
CAFE rules and discussing additional historical data and 
arguments.\891\ The Joint NGOs also re-submitted comments to prior 
rules opposing the 30-month payback assumptions.\892\
---------------------------------------------------------------------------

    \891\ Consumer Reports, Docket No. NHTSA-2023-0022-61098, at 20-
22.
    \892\ Joint NGOs, Docket No. NHTSA-2023-0022-61944, Attachment 
3.
---------------------------------------------------------------------------

    On the other hand, CEA commented in opposition to the use of a 30-
month payback period and stated that it should be significantly longer, 
and pointed to NHTSA's 60-month sensitivity case as an example of how 
that assumption was important enough to be included in the main 
analysis.\893\ Valero also commented in opposition to the 30-month 
payback assumption specifically in the HDPUV analysis, calling it 
``unsupported'' and identified a situation where ``between model year 
2029 and 2030, the CAFE Model projects that 168 models of Conventional, 
MHEV, or SHEV HDPUVs will be converted to BEVs in the No Action 
scenario--only 40 of those powertrain conversions have a modeled 
``Payback'' of less than 30 months, and none have a ``Payback TCO'' of 
less than 30 months.'' \894\ CEA similarly commented in opposition to 
the use of a 30-month payback period in the HDPUV analysis.\895\
---------------------------------------------------------------------------

    \893\ CEA, Docket No. NHTSA-2023-0022-61918, at 18.
    \894\ Valero, Docket No. NHTSA-2023-0022-58547, Attachment A, at 
10.
    \895\ CEA, Docket No. NHTSA-2023-0022-61918, at 18.
---------------------------------------------------------------------------

    In preparation for this final rule, NHTSA updated its review of 
research supporting the 30-month payback assumption and continued to 
use that

[[Page 52709]]

value for this final rule. Additional details on this research survey 
are discussed in Section III.E, above, and in detail in FRIA Chapter 
2.1.4. NHTSA also performed a range of sensitivity cases using 
different payback assumptions, and those cases are discussed in detail 
in FRIA Chapter 9. While NHTSA modeled those cases to determine the 
effect of different payback assumptions on the levels of standards, 
NHTSA still believes that 30 months is the most appropriate value to 
use for the central analysis. Regarding Valero's comment about cost-
effective technology application in the HDPUV analysis, NHTSA believes 
that Valero is missing the effect of tax credits in the effective cost 
calculation. When the CAFE Model determines if a technology is cost 
effective, it assesses the total cost of applying that technology and 
subtracts any available tax credits, fuel savings, and reduction in 
fines (if applicable for the analysis). The columns in the output file 
that Valero references in their comments is what the CAFE Model 
computes internally for only fuel savings for each vehicle and does not 
include tax credits or fines (if applicable). Additional details on the 
effective cost calculation are included in Section III.C.6 above and in 
the FRM CAFE Model Documentation.
    NHTSA also received several general comments that reiterated the 
need for the agency to accurately consider EVs in the reference 
baseline, unrelated to state ZEV programs, tax credits, or consumer 
willingness to pay for increased fuel economy. Rivian commented that 
``ignoring [EVs] in determining how automakers can and should improve 
fuel economy in their fleets is nonsensical.'' \896\ As discussed 
above, the Joint NGOs commented that ``consistent with EPCA's language, 
history, and legislative intent, NHTSA models an accurate, real-world 
`no action' baseline as a starting point for the rulemaking, a task 
that requires a rational accounting of the real-world BEVs and PHEVs 
projected to exist in the absence of the CAFE standards NHTSA is 
considering setting.'' \897\ However, the Joint NGOs stated that ``in 
an abundance of caution'' in light of the ongoing litigation in NRDC v. 
NHTSA, No. 221080 (D.C. Cir.), NHTSA should ``model and evaluate the 
effect of alternative ways in which it could account for the real-world 
existence of BEVs/PHEVs in regulatory no-action alternatives,'' like 
changing its assumptions surrounding compliance with state ZEV 
programs.
---------------------------------------------------------------------------

    \896\ Rivian, Docket No. NHTSA-2023-0022-59765, at 3.
    \897\ Joint NGOs, Docket No. NHTSA-2023-0022-61944, Attachment 
2, at 56-57.
---------------------------------------------------------------------------

    NHTSA also received several requests for the agency to account for 
manufacturer EV announcements in the reference baseline, or general 
comments that because manufacturer EV announcements were not included 
in the reference baseline, NHTSA's reference baseline underrepresented 
future EV penetration rates. Consumer Reports commented that ``[i]n 
order to finalize a rule that achieves its statutory requirements to 
set maximum feasible standards that continue to reduce fuel consumption 
from gasoline-powered vehicles, NHTSA must appropriately consider the 
market share of electric vehicles that will exist in the fleet in the 
absence of the CAFE rule. Failure to consider the significant and 
rapidly growing sales of electric vehicles will result in a rule that 
serves no useful purpose, because the stringency will be too low to 
affect automakers' decisions to deploy fuel saving technology.'' \898\ 
However, Consumer Reports also stated that they found the percentage of 
EVs in NHTSA's modeled reference baseline to be ``extremely 
conservative'' based on projections of future EV market share: ``even 
some of the most cautious estimates are significantly greater than 
NHTSA's constrained baseline, indicating that it is an extremely 
conservative approach'' \899\ Similarly, the States and Cities 
commented that ``[b]ecause NHTSA's modeling does not account for 
significant zero-emission vehicle sales outside of the States adopting 
ACCI/II and ACT, its No-Action scenario likely significantly 
underestimates the zero emission vehicles in the baseline fleet. 
Because this underestimation may result in less stringent standards 
than are truly the ``maximum feasible'' standards, 49 U.S.C. 32902(a), 
NHTSA should consider modeling zero-emission vehicle adoption in States 
not adopting ACCI/II and ACT.'' \900\ Tesla likewise commented that 
``NHTSA's baseline suggests BEV technology market penetration rates 
that are low,'' and that NHTSA ``must ensure it utilize[s public 
commitments from manufacturers] in its analysis of the industry and 
recognize shifts towards BEV technology in the marketplace is occurring 
for reasons outside of the CAFE standards setting process.''
---------------------------------------------------------------------------

    \898\ Consumer Reports, Docket No. NHTSA-2023-0022-61098, at 13-
15.
    \899\ Consumer Reports, Docket No. NHTSA-2023-0022-61098, at 15.
    \900\ States and Cities, Docket No. NHTSA-2023-0022-61904, 
Attachment 2, at 41.
---------------------------------------------------------------------------

    NHTSA agrees that having an accurate reference baseline results in 
a more accurate analysis. However, in practice, it can be difficult to 
model manufacturer deployment plans without the structure that a 
regulatory program provides. NHTSA believes that the agency's modeling 
methodology, which incorporates state ZEV requirements that are legally 
binding and manufacturer commitments to deploy electric vehicles that 
would be consistent with the targets of California's ACC II program, 
regardless of whether it receives a waiver of Clean Air Act preemption, 
is the most reasonable approach available to the agency at present. Per 
the nature of NHTSA's standard-setting modeling, the agency recognizes 
that the reference baseline will necessarily reflect fewer EVs than 
will likely exist in the future fleet. However, the approach used to 
construct the reference baseline necessarily reflects the data 
constraints under which NHTSA was operating regarding manufacturer 
plans outside of voluntary alignment with ACC II. Regarding NRDC's 
comment, NHTSA did model several alternative ways that manufacturers 
could comply with the agency's standards, including as assessed against 
an alternative baseline that does not include state ZEV programs or 
voluntary deployment consistent with ACC II. The alternative baseline 
and range of sensitivity cases that NHTSA modeled, and results are 
discussed in more detail in Chapters 3 and 9 of the FRIA, and the No 
ZEV alternative baseline is discussed further below.
    Lastly, regarding the reference baseline, the Joint NGOs commented 
that the methodology of holding the reference baseline constant for 
years prior to the start of the analysis year unrealistically 
restricted automakers from adopting fuel economy improving technologies 
they might otherwise adopt in response to increasingly stringent 
standards.\901\ The Joint NGOs stated that this modeling decision had a 
significant effect on the reference baseline, ``particularly for the 
standard-setting runs where additional, economically efficient electric 
vehicle technologies cannot be deployed in the model year 2027-2032 
period.'' \902\ The Joint NGOs also stated that NHTSA did not explain 
this methodology or decision in any of the agency's rulemaking 
documents.
---------------------------------------------------------------------------

    \901\ Joint NGOs, Docket No. NHTSA-2023-0022-61944, Attachment 
2, at 8.
    \902\ Id.
---------------------------------------------------------------------------

    By way of additional background on this modeling approach: any 
fleet improvements obtained when evaluating the No-Action Alternative 
during model years 2022-2026 for the

[[Page 52710]]

passenger car and light truck fleets, and during model years 2022-2029 
for the HDPUV fleet will be carried over into the Action Alternatives 
for the same range of model years. Additionally, during those 
``reference baseline'' set of years, any further fleet upgrades will 
not be performed under the Action Alternatives. For the Action 
Alternatives, technology evaluation and fleet improvements will then 
begin starting with the first standard-setting year, which is model 
year 2027 for passenger cars and light trucks, and model year 2030 for 
HDPUV. Doing so prevents the reference baseline years from being 
affected by standards defined under the Action Alternatives and ensures 
that the reference baseline years remain constant irrespective of the 
alternative being evaluated.
    NHTSA believes that this approach captures the impact of new 
regulations more accurately, as compared to the previously established 
standards defined under the No-Action Alternative. More specifically, 
this better allows the agency to capture the costs and benefits of the 
range of standards being considered. If NHTSA allowed manufacturers to 
apply technology in advance of increasing standards in later model 
years, the costs and benefits of those improvements would be 
attributable to the reference baseline and not NHTSA's action. 
Moreover, this approach provides an additional level of certainty that 
the model is not selecting BEV technology in the reference baseline 
before the operative standards begin to take effect. Put another way, 
this requirement was intended to ensure that the model does not 
simulate manufacturers creating new BEVs prior to the standard-setting 
years in anticipation of the need to comply with the CAFE standards 
during those standard-setting years. It is exactly the situation that 
the Joint NGOs describe--that the model might apply BEV technology in 
the reference baseline but in response to the standards--that NHTSA 
seeks to avoid in order to fully comply with 49 U.S.C. 32902(h). In 
sum, not only does this approach allow NHTSA to better capture the 
costs and benefits of different levels of standards under 
consideration, but it ensures the modeling comports with all relevant 
statutory constraints.
2. Alternative Baseline/No-Action Alternative
    In addition to the reference baseline for the passenger car and 
light truck fleet analysis, NHTSA considered an alternative baseline 
analysis. This alternative baseline analysis for the passenger car and 
light truck fleets was performed to provide a greater level of insight 
into the possibilities of a changing baseline landscape. The 
alternative baseline analysis is not meant to be a replacement for the 
reference analysis, but a secondary review of the NHTSA analysis with 
all of the assumptions from the reference baseline held (see Section 
IV.B.1 above), except for the assumption of compliance with CARB ZEV 
programs, and the voluntary deployment of electric vehicles consistent 
with ACC II. The alternative baseline does not assume manufacturers 
will comply with any of the California light duty ZEV programs or 
voluntarily deploy electric vehicles consistent with ACC II during any 
of the model years simulated in the analysis. Results for this 
alternative baseline are shown in Chapter 8.2.7 of the FRIA and 
discussed in more detail in Section VI.
3. Action Alternatives for Model Years 2027-2032 Passenger Cars and 
Light Trucks
    In addition to the No-Action Alternatives, NHTSA has considered 
five ``action'' alternatives for passenger cars and light trucks, each 
of which is more stringent than the No-Action Alternative during the 
rulemaking time frame. These action alternatives are specified below 
and demonstrate different possible approaches to balancing the 
statutory factors applicable for passenger cars and light trucks. 
Section VI discusses in more detail how the different alternatives 
reflect different possible balancing approaches.
a. Alternative PC1LT3
    Alternative PC1LT3 would increase CAFE stringency by 1 percent per 
year, year over year, for model years 2027-2032 passenger cars, and by 
3 percent per year, year over year, for model years 2027-2032 light 
trucks.
---------------------------------------------------------------------------

    \903\ The PC, LT, and HDPUV target curve function coefficients 
are defined in Equation IV-1, Equation IV-2, and Equation IV-3, 
respectively. See Final TSD Chapter 1.2.1 for a complete discussion 
about the footprint and work factor curve functions and how they are 
calculated.
[GRAPHIC] [TIFF OMITTED] TR24JN24.081


[[Page 52711]]


[GRAPHIC] [TIFF OMITTED] TR24JN24.082

    These equations are represented graphically below:
---------------------------------------------------------------------------

    \904\ The PC, LT, and HDPUV target curve function coefficients 
are defined in Equation IV-1, Equation IV-2, and Equation IV-3, 
respectively. See Final TSD Chapter 1.2.1 for a complete discussion 
about the footprint and work factor curve functions and how they are 
calculated.
[GRAPHIC] [TIFF OMITTED] TR24JN24.083


[[Page 52712]]


[GRAPHIC] [TIFF OMITTED] TR24JN24.084

    Under this alternative, the MDPCS is as follows:
    [GRAPHIC] [TIFF OMITTED] TR24JN24.085
    
b. Alternative PC2LT002--Final Standards
    Alternative PC2LT002 would increase CAFE stringency by 2 percent 
per year, year over year for model years 2027-2032 for passenger cars, 
and by 0 percent per year, year over year for model years 2027-2028 
light trucks and then 2 percent per year, year over year for model 
years 2029-2032 for light trucks.
[GRAPHIC] [TIFF OMITTED] TR24JN24.086


[[Page 52713]]


[GRAPHIC] [TIFF OMITTED] TR24JN24.087

[GRAPHIC] [TIFF OMITTED] TR24JN24.088

    These equations are represented graphically below:
    [GRAPHIC] [TIFF OMITTED] TR24JN24.089
    

[[Page 52714]]


[GRAPHIC] [TIFF OMITTED] TR24JN24.090

c. Alternative PC2LT4

    Alternative PC2LT4 would increase CAFE stringency by 2 percent per 
year, year over year, for model years 2027-2032 for passenger cars, and 
by 4 percent per year, year over year, for model years 2027-2032 for 
light trucks.
---------------------------------------------------------------------------

    \905\ The PC, LT, and HDPUV target curve function coefficients 
are defined in Equation IV-1, Equation IV-2, and Equation IV-3, 
respectively. See Final TSD Chapter 1.2.1 for a complete discussion 
about the footprint and work factor curve functions and how they are 
calculated.
[GRAPHIC] [TIFF OMITTED] TR24JN24.091


[[Page 52715]]


[GRAPHIC] [TIFF OMITTED] TR24JN24.092

    These equations are represented graphically below:
---------------------------------------------------------------------------

    \906\ The PC, LT, and HDPUV target curve function coefficients 
are defined in Equation IV-1, Equation IV-2, and Equation IV-3, 
respectively. See Final TSD Chapter 1.2.1 for a complete discussion 
about the footprint and work factor curve functions and how they are 
calculated.
[GRAPHIC] [TIFF OMITTED] TR24JN24.093


[[Page 52716]]


[GRAPHIC] [TIFF OMITTED] TR24JN24.094

    Under this alternative, the MDPCS is as follows:
    [GRAPHIC] [TIFF OMITTED] TR24JN24.095
    
d. Alternative PC3LT5
    Alternative PC3LT5 would increase CAFE stringency by 3 percent per 
year, year over year, for model years 2027-2032 for passenger cars, and 
by 5 percent per year, year over year, for model years 2027-2032 for 
light trucks.

[[Page 52717]]

[GRAPHIC] [TIFF OMITTED] TR24JN24.096

[GRAPHIC] [TIFF OMITTED] TR24JN24.097

    These equations are represented graphically below:
---------------------------------------------------------------------------

    \907\ The PC, LT, and HDPUV target curve function coefficients 
are defined in Equation IV-1, Equation IV-2, and Equation IV-3, 
respectively. See Final TSD Chapter 1.2.1 for a complete discussion 
about the footprint and work factor curve functions and how they are 
calculated.
    \908\ The PC, LT, and HDPUV target curve function coefficients 
are defined in Equation IV-1, Equation IV-2, and Equation IV-3, 
respectively. See Final TSD Chapter 1.2.1 for a complete discussion 
about the footprint and work factor curve functions and how they are 
calculated.
[GRAPHIC] [TIFF OMITTED] TR24JN24.098


[[Page 52718]]


[GRAPHIC] [TIFF OMITTED] TR24JN24.099

    Under this alternative, the MDPCS is as follows:
    [GRAPHIC] [TIFF OMITTED] TR24JN24.100
    
e. Alternative PC6LT8
    Alternative PC6LT8 would increase CAFE stringency by 6 percent per 
year, year over year, for model years 2027-2032 for passenger cars, and 
by 8 percent per year, year over year, for model years 2027-2032 for 
light trucks.

[[Page 52719]]

[GRAPHIC] [TIFF OMITTED] TR24JN24.101

[GRAPHIC] [TIFF OMITTED] TR24JN24.102

    These equations are represented graphically below:
---------------------------------------------------------------------------

    \909\ The PC, LT, and HDPUV target curve function coefficients 
are defined in Equation IV-1, Equation IV-2, and Equation IV-3, 
respectively. See Final TSD Chapter 1.2.1 for a complete discussion 
about the footprint and work factor curve functions and how they are 
calculated.
    \910\ The PC, LT, and HDPUV target curve function coefficients 
are defined in Equation IV-1, Equation IV-2, and Equation IV-3, 
respectively. See Final TSD Chapter 1.2.1 for a complete discussion 
about the footprint and work factor curve functions and how they are 
calculated.
[GRAPHIC] [TIFF OMITTED] TR24JN24.103


[[Page 52720]]


[GRAPHIC] [TIFF OMITTED] TR24JN24.104

    Under this alternative, the MDPCS is as follows: 
    [GRAPHIC] [TIFF OMITTED] TR24JN24.105
    
f. Other Alternatives Suggested by Commenters for Passenger Car and LT 
CAFE Standards
    Commenters also suggested a variety of other regulatory 
alternatives for NHTSA to analyze for the final rule.
    Rivian commented that NHTSA should increase stringency for light 
trucks relative to passenger cars by an even greater degree than the 
proposal, such as ``stringency combinations in which standards would 
increase by 2 percent annually for passenger cars but 5 to 8 percent 
annually for light trucks.'' \911\ Rivian argued that this was 
appropriate given ``that more stringent light truck targets perform 
well from a cost-benefit perspective.'' \912\ Rivian also suggested 
that NHTSA evaluate an alternative in which only light truck standards 
were increased.\913\
---------------------------------------------------------------------------

    \911\ Rivian, Docket No. NHTSA-2023-0022-28017, at 1.
    \912\ Id.
    \913\ Id.
---------------------------------------------------------------------------

    IPI commented that NHTSA should (1) evaluate an alternative which 
expressly maximizes net benefits (suggesting PC2LT8, specifically), and 
(2) ``assess a broader range of alternatives that decouple increases 
from light trucks from those for passenger cars and that impose non-
linear increases, which could further maximize net benefits.'' \914\
---------------------------------------------------------------------------

    \914\ IPI, Docket No. NHTSA-2023-0022-60485, at 1, 6-9.
---------------------------------------------------------------------------

    NHTSA appreciates Rivian's comment; however, we have an obligation 
to set maximum feasible CAFE standards separately for passenger cars 
and light trucks (see 49 U.S.C. 32902). We would not be in compliance 
with our statutory authority if we failed to increase passenger car 
standards despite concluding that Alternative PC2LT002 is feasible for 
the industry. Establishing maximum feasible standards involves 
balancing several factors, which means that some factors, like net 
benefits, may not reach their maximum level. As previously mentioned, 
NHTSA is statutorily required to set independent standards for 
passenger cars and light trucks. As such, NHTSA's preferred alternative 
contains passenger car and light truck standards that are already 
``decoupled.'' Also, the stringency for the light truck fleet is non-
linear where it increases by 0 percent per year, year over year for MYs 
2027-2028 light trucks and then 2 percent per year, year over year for 
model years 2029-2031.

[[Page 52721]]

4. Action Alternatives for Model Years 2030-2035 Heavy-Duty Pickups and 
Vans
    In addition to the No-Action Alternative, NHTSA has considered four 
action alternatives for HDPUVs. Each of the Action Alternatives, 
described below, would establish increases in stringency over the No-
Action Alternative from model year 2030 through model year 2035.\915\ 
In the NPRM, NHTSA also sought comment on a scenario in which the 
Action Alternatives would extend only through model year 2032. Ford 
supported NHTSA ending its HDPUV standards in model year 2032 as more 
harmonized with EPA's proposed standards, and as aligning ``better . . 
. with the Inflation Reduction Act's ZEV credits, scheduled to end by 
2032.'' \916\ Ford suggested re-evaluating the standards for model 
years 2033-2035 at a later time.\917\ Wisconsin DNR, in contrast, 
stated that ``given the different statutory authorities under which EPA 
and NHTSA promulgate vehicle standards, it is appropriate for NHTSA to 
set standards for the model year ranges it has proposed, rather than 
extending these standards only through 2032 (which would align with the 
final model year of EPA's proposed multipollutant standards).'' \918\
---------------------------------------------------------------------------

    \915\ See 87 FR 29242-29243 (May 5, 2023). NHTSA recognizes that 
the EIS accompanying this final rule examines only regulatory 
alternatives for HDPUVs in which standards cover model years 2030-
2035.
    \916\ Ford, Docket No. NHTSA-2023-0022-60837, at 11; see also 
Stellantis, NHTSA-2023-0022-61107, at 3.
    \917\ Id.; see also Alliance, NHTSA-2023-0022-60652, Appendix F, 
at 62.
    \918\ Wisconsin DNR, Docket No. NHTSA-2023-0022-21431, at 2.
---------------------------------------------------------------------------

    We believe that setting HDPUV standards through model year 2035 is 
appropriate based on our review of the baseline fleet and its 
capability, in addition to the range of technologies that are available 
for adoption in the rulemaking timeframe. In addition to the advanced 
credit multiplier that is available for manufacturers until model year 
2027, the current standards do not require significant improvements 
from model year 2027 through model year 2029. Accordingly, our analysis 
for model years 2030-2035 shows the potential for high technology 
uptake; this can be seen in detail in RIA Chapter 8. We proposed 10 
percent year over year increases and now we are finalizing 8 percent 
year over year increases. This means that over the six-year period 
where these standards are in effect, the stringency of our standards 
almost matches the stringency of the EPA standards in model year 2032. 
Our regulatory model years are different due to our statutory 
requirements, however, as our statutory lead time requirements 
prevented us from harmonizing with EPA directly on the model year 2027-
2029 standards.\919\ For a more detailed discussion on the lead time 
for HDPUVs, see Section VI.A.1.b. Section VI also discusses in more 
detail how the different alternatives reflect different possible 
balancing approaches for setting HDPUV standards. HDPUV action 
alternatives are specified below.
---------------------------------------------------------------------------

    \919\ 49 U.S.C 32902(k)(3).
---------------------------------------------------------------------------

a. Alternative HDPUV4
    Alternative HDPUV4 would increase HDPUV standard stringency by 4 
percent per year for model years 2030-2035 for HDPUVs. NHTSA included 
this alternative in order to evaluate a possible balancing of statutory 
factors in which cost-effectiveness outweighed all other factors. The 
four-wheel drive coefficient is maintained at 500 (coefficient `a') and 
the weighting multiplier coefficient is maintained at 0.75 (coefficient 
`b').
---------------------------------------------------------------------------

    \920\ The PC, LT, and HDPUV target curve function coefficients 
are defined in Equation IV-1, Equation IV-2, and Equation IV-3, 
respectively. See Final TSD Chapter 1.2.1 for a complete discussion 
about the footprint and work factor curve functions and how they are 
calculated.
[GRAPHIC] [TIFF OMITTED] TR24JN24.106

[GRAPHIC] [TIFF OMITTED] TR24JN24.107

    These equations are represented graphically below:
---------------------------------------------------------------------------

    \921\ The PC, LT, and HDPUV target curve function coefficients 
are defined in Equation IV-1, Equation IV-2, and Equation IV-3, 
respectively. See Final TSD Chapter 1.2.1 for a complete discussion 
about the footprint and work factor curve functions and how they are 
calculated.

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

[[Page 52722]]

[GRAPHIC] [TIFF OMITTED] TR24JN24.108

[GRAPHIC] [TIFF OMITTED] TR24JN24.109

b. Alternative HDPUV108--Final Standards
    Alternative HDPUV108 would increase HDPUV standard stringency by 10 
percent per year, year over year for model years 2030-2032, and by 8 
percent per year, year over year for model years 2033-2035 for HDPUVs. 
The four-wheel drive coefficient is maintained at 500 (coefficient `a') 
and the weighting multiplier coefficient is maintained at 0.75 
(coefficient `b').

[[Page 52723]]

[GRAPHIC] [TIFF OMITTED] TR24JN24.110

[GRAPHIC] [TIFF OMITTED] TR24JN24.111

    These equations are represented graphically below:
---------------------------------------------------------------------------

    \922\ The PC, LT, and HDPUV target curve function coefficients 
are defined in Equation IV-1, Equation IV-2, and Equation IV-3, 
respectively. See Final TSD Chapter 1.2.1 for a complete discussion 
about the footprint and work factor curve functions and how they are 
calculated.
    \923\ The PC, LT, and HDPUV target curve function coefficients 
are defined in Equation IV-1, Equation IV-2, and Equation IV-3, 
respectively. See Final TSD Chapter 1.2.1 for a complete discussion 
about the footprint and work factor curve functions and how they are 
calculated.
[GRAPHIC] [TIFF OMITTED] TR24JN24.112


[[Page 52724]]


[GRAPHIC] [TIFF OMITTED] TR24JN24.113

c. Alternative HDPUV10
    Alternative HDPUV10 would increase HDPUV standard stringency by 10 
percent per year for model years 2030-2035 for HDPUVs. The four-wheel 
drive coefficient is maintained at 500 (coefficient `a') and the 
weighting multiplier coefficient is maintained at 0.75 (coefficient 
`b').
[GRAPHIC] [TIFF OMITTED] TR24JN24.114

[GRAPHIC] [TIFF OMITTED] TR24JN24.115

    These equations are represented graphically below:
---------------------------------------------------------------------------

    \924\ The PC, LT, and HDPUV target curve function coefficients 
are defined in Equation IV-1, Equation IV-2, and Equation IV-3, 
respectively. See Final TSD Chapter 1.2.1 for a complete discussion 
about the footprint and work factor curve functions and how they are 
calculated.
    \925\ The PC, LT, and HDPUV target curve function coefficients 
are defined in Equation IV-1, Equation IV-2, and Equation IV-3, 
respectively. See Final TSD Chapter 1.2.1 for a complete discussion 
about the footprint and work factor curve functions and how they are 
calculated.

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

[[Page 52725]]

[GRAPHIC] [TIFF OMITTED] TR24JN24.116

[GRAPHIC] [TIFF OMITTED] TR24JN24.117

d. Alternative HDPUV14
    Alternative HDPUV14 would increase HDPUV standard stringency by 14 
percent per year for model years 2030-2035 for HDPUVs. The four-wheel 
drive coefficient is maintained at 500 (coefficient `a') and the 
weighting multiplier coefficient is maintained at 0.75 (coefficient 
`b').

[[Page 52726]]

[GRAPHIC] [TIFF OMITTED] TR24JN24.118

[GRAPHIC] [TIFF OMITTED] TR24JN24.119

    These equations are represented graphically below:
---------------------------------------------------------------------------

    \926\ The PC, LT, and HDPUV target curve function coefficients 
are defined in Equation IV-1, Equation IV-2, and Equation IV-3, 
respectively. See Final TSD Chapter 1.2.1 for a complete discussion 
about the footprint and work factor curve functions and how they are 
calculated.
    \927\ The PC, LT, and HDPUV target curve function coefficients 
are defined in Equation IV-1, Equation IV-2, and Equation IV-3, 
respectively. See Final TSD Chapter 1.2.1 for a complete discussion 
about the footprint and work factor curve functions and how they are 
calculated.
[GRAPHIC] [TIFF OMITTED] TR24JN24.120


[[Page 52727]]


[GRAPHIC] [TIFF OMITTED] TR24JN24.121

V. Effects of the Regulatory Alternatives

A. Effects on Vehicle Manufacturers

1. Passenger Cars and Light Trucks
    Each regulatory alternative considered in this final rule, aside 
from the No-Action Alternative, would increase the stringency of both 
passenger car and light truck CAFE standards during model years 2027-
2031 (with model year 2032 being an augural standard). To estimate the 
potential effects of each of these alternatives, NHTSA has, as with all 
recent rulemakings, assumed that standards would continue unchanged 
after the last model year to be covered by CAFE targets (in this case 
model year 2031 for the primary analysis and 2032 for the augural 
standards). NHTSA recognizes that it is possible that the size and 
composition of the fleet (i.e., in terms of distribution across the 
range of vehicle footprints) could change over time, affecting the 
average fuel economy requirements under both the passenger car and 
light truck standards, and for the overall fleet. If fleet changes 
ultimately differ from NHTSA's projections, average requirements would 
differ from NHTSA's projections.
    Following are the estimated required average fuel economy values 
for the passenger car, light truck, and total fleets for each action 
alternative that NHTSA considered alongside values for the No-Action 
Alternative. (As a reminder, all projected effects presented use the 
reference baseline unless otherwise stated.)

[[Page 52728]]

[GRAPHIC] [TIFF OMITTED] TR24JN24.122

[GRAPHIC] [TIFF OMITTED] TR24JN24.123

    Manufacturers do not always comply exactly with each CAFE standard 
in each model year. To date, some manufacturers have tended to exceed 
at least one requirement.\928\ Many manufacturers in practice make use 
of EPCA's provisions allowing CAFE compliance credits to be applied 
when a fleet's CAFE level falls short of the corresponding requirement 
in a given model year.\929\ Some manufacturers have paid civil 
penalties (i.e., fines) required under EPCA when a fleet falls short of 
a standard in a given model year and the manufacturer lacks compliance 
credits sufficient to address the compliance shortfall. As discussed in 
the accompanying FRIA and TSD, NHTSA simulates manufacturers' responses 
to each alternative given a wide range of input estimates (e.g., 
technology cost and efficacy, fuel prices), and, per EPCA requirements, 
setting aside the potential that any manufacturer would respond to CAFE 
standards in model years 2027-2031 by applying CAFE compliance credits 
or considering the fuel economy attributable to alternative fuel 
sources.\930\ Many of these inputs are subject to uncertainty, and, in 
any event, as in all CAFE rulemakings, NHTSA's analysis simply 
illustrates one set of ways manufacturers could potentially respond to 
each regulatory alternative. The tables below show the estimated 
achieved fuel economy produced by the CAFE Model for each regulatory 
alternative.
---------------------------------------------------------------------------

    \928\ Overcompliance can be the result of multiple factors 
including projected ``inheritance'' of technologies (e.g., changes 
to engines shared across multiple vehicle model/configurations) 
applied in earlier model years, future technology cost reductions 
(e.g., decreased techology costs due to learning), and changes in 
fuel prices that affect technology cost effectiveness. As in all 
past rulemakings over the last decade, NHTSA assumes that beyond 
fuel economy improvements necessitated by CAFE standards, EPA-GHG 
standards, and ZEV programs, manufacturers may also improve fuel 
economy via technologies that would pay for themselves within the 
first 30 months of vehicle operation.
    \929\ For additional detail on the creation and use of 
compliance credits, see Chapters 1.1 and 2.2.2.3 of the accompanying 
TSD.
    \930\ In the case of battery-electric vehicles, this means BEVs 
will not be built in response to the standards. For plug-in hybrid 
vehicles, this means only the gasoline-powered operation (i.e., non-
electric fuel economy, or charge sustaining mode operation only) is 
considered when selecting technology to meet the standards.

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

[[Page 52729]]

[GRAPHIC] [TIFF OMITTED] TR24JN24.124

[GRAPHIC] [TIFF OMITTED] TR24JN24.125

    While these increases in estimated fuel economy levels are 
partially attributable to changes in the composition of the fleet as 
simulated by the CAFE Model (i.e., the relative shares of passenger 
cars and light trucks), they result almost entirely from the projected 
application of fuel-saving technology. Manufacturers' actual responses 
will almost assuredly differ from NHTSA's simulations, and therefore 
the achieved compliance levels will differ from these tables.
    The SHEV share of the light-duty fleet initially (i.e., in model 
year 2022) is relatively low, but increases to approximately 23 to 27 
percent by the beginning of the final rule's regulatory period 
(MY2027). Across action alternatives, SHEV penetration rates increase 
as alternatives become more stringent, in both the passenger car and 
light truck fleets. SHEVs are estimated to make up a larger portion of 
light truck fleet than passenger car fleet across model years 2027-
2031. While their market shares do not increase to the levels of SHEVs, 
PHEVs make up between 7 to 8 percent of the estimated light truck fleet 
across the alternatives by the end of the regulatory period. In the 
passenger car fleet, PHEV penetration stays under 2 percent for all 
alternatives and all model years. Variation in penetration rates across 
alternatives generally results from how many vehicles or models require 
additional technology to become compliant, e.g. one technology pathway 
is the most cost-effective pathway if a manufacturer is just shy of 
their fuel economy target, but becomes ineffective if there's a larger 
gap which may necessitate pursuing broader changes in powertrain across 
the manufacturers' fleet. For example, Honda is projected to redesign 
several of its models from MHEV to PHEV in 2027. This accounts for the 
slightly increased PHEV

[[Page 52730]]

penetration rate in PC2LT002.\931\ For more detail on the technology 
application by regulatory fleet, see FRIA Chapter 8.2.2.1.
---------------------------------------------------------------------------

    \931\ In this particular case, the higher stringencies of 
PC1LT3, PC2LT4, PC3LT5 and PC6LT8 lead to greater penetration of 
SHEV in Honda's fleet. At this greater level of tech penetration and 
tech investment in SHEV, the CAFE model projects that it becomes 
more cost effective for Honda to convert several of its CrV and TLX 
models to SHEV rather than convert additional models to PHEV, which 
is present only in the PC2LT002 altnernative during Honda's standard 
setting years, as making certain model lines within their fleet 
PHEVs are extremely constly. Specifically for Honda in PC2LT002, 
Honda is overcomplying with the CAFE standard, and the CAFE model 
applies PHEV tech in order to comply with GHG standards. At higher 
levels of stringency, SHEV tech is applied since it is a more cost-
effective method of achieving fuel efficiency than PHEV.
[GRAPHIC] [TIFF OMITTED] TR24JN24.126

[GRAPHIC] [TIFF OMITTED] TR24JN24.127


[[Page 52731]]


[GRAPHIC] [TIFF OMITTED] TR24JN24.128

[GRAPHIC] [TIFF OMITTED] TR24JN24.129

    Due to the statutory constraints imposed on the analysis by EPCA 
that exclude consideration of AFVs, BEVs are not a compliance option 
through model year 2031. Similarly, PHEVs can be introduced by the CAFE 
Model, but only their charge-sustaining fuel economy value is 
considered during standard setting years (as opposed to their charge-
depleting fuel economy value, which is used in all other years). As 
seen in Table V-9 and Table V-10, BEV penetration increases across 
model years in the No-Action Alternative. During the standard setting 
years, BEVs are only added to account for manufacturers' expected 
response to state ZEV programs and additional electric vehicles that 
manufacturers have committed to deploy consistent with ACC II, 
regardless of whether it becomes legally binding. In model years 
outside of the standard setting restrictions, BEVs may be added if they 
are cost-effective to produce for reasons other than the CAFE standards 
The action alternatives show nearly the same BEV penetration rates as 
the No-Action Alternative during the standard setting years, although 
in some cases there is a slight deviation despite no new BEV models 
entering the fleet, due to rounding in some model years where fewer 
vehicles are being sold in response to the standards and altering fleet 
shares.

[[Page 52732]]

[GRAPHIC] [TIFF OMITTED] TR24JN24.130

[GRAPHIC] [TIFF OMITTED] TR24JN24.131

    The FRIA provides a longer summary of NHTSA's estimates of 
manufacturers' potential application of fuel-saving technologies 
(including other types of technologies, such as advanced transmissions, 
aerodynamic improvements, and reduced vehicle mass) in response to each 
regulatory alternative. Appendices I and II of the accompanying FRIA 
provide more detailed and comprehensive results, and the underlying 
CAFE Model output files provide all the information used to construct 
these estimates, including the specific combination of technologies 
estimated to be applied to every vehicle model/configuration in each of 
model years 2022-2050.
    NHTSA's analysis shows manufacturers' regulatory costs for 
compliance with the CAFE standards, combined with existing EPA GHG 
standards, state ZEV programs, and voluntary deployment of electric 
vehicles consistent with ACC II 932 933 unsurprisingly 
increasing more under the more stringent alternatives as more fuel-
saving technologies would be required. As summarized in Table V-11, 
NHTSA estimates manufacturers' cumulative regulatory costs across model 
years 2027-2031 could total $148b under the No-Action Alternative, and 
an additional $18b, $21.8b, $33b, $41.4b, and $55.5b under alternatives 
PC2LT002, PC1LT3, PC2LT4, PC3LT5, and PC6LT8, respectively, when 
accounting for fuel-saving technologies added under the simulation for 
each regulatory alternative (including AC improvements and other off-
cycle technologies), and also accounting for CAFE civil penalties that 
NHTSA estimates some manufacturers could elect to pay rather than 
achieving full compliance with the CAFE targets in

[[Page 52733]]

some model years in some fleets.\934\ The table below shows how these 
costs are estimated to vary among manufacturers, accounting for 
differences in the quantities of vehicles produced for sale in the U.S. 
Differences in technology application and compliance pathways play a 
significant role in determining variation across aggregate manufacturer 
costs, and technology costs for each model year are defined on an 
incremental basis, with costs equal to the relevant technology applied 
minus the costs of the initial technology state in a reference 
fleet.\935\ Appendices I and II of the accompanying FRIA present 
results separately for each manufacturer's passenger car and light 
truck fleets in each model year under each regulatory alternative, and 
the underlying CAFE Model output files also show results specific to 
manufacturers' domestic and imported car fleets.
---------------------------------------------------------------------------

    \932\ EPA's Multi-Pollutant Emissions Standards for Model Years 
2027 and Later Light-Duty and Medium-Duty Vehicles were not modeled 
for this final rule.
    \933\ NHTSA does not model state GHG programs outside of the ZEV 
programs. See Chapter 2.2.2.6 of the accompanying TSD for details 
about how NHTSA models anticipated manufacturer compliance with 
California's ZEV program.
    \934\ Refer to Chapter 8.2.2 of the FRIA for more details on 
civil penalty payments by regulatory alternative.
    \935\ For more detail regarding the calculation of technology 
costs, see the CAFE Model Documentation.
[GRAPHIC] [TIFF OMITTED] TR24JN24.132

    As discussed in the TSD, these estimates reflect technology cost 
inputs that, in turn, reflect a ``markup'' factor that includes 
manufacturers' profits. In other words, if costs to manufacturers are 
reflected in vehicle price increases, NHTSA estimates that the average 
costs to new vehicle purchasers could increase through model year 2031 
as summarized in Table V-12 and Table V-13. Table V-14 shows how these 
costs could vary among manufacturers, suggesting that price differences 
between manufacturers could increase as the stringency of standards 
increases. See Chapter 8.2.2 of the FRIA for more details of the 
effects on vehicle manufacturers, including compliance and regulatory 
costs.

[[Page 52734]]

[GRAPHIC] [TIFF OMITTED] TR24JN24.133

[GRAPHIC] [TIFF OMITTED] TR24JN24.134


[[Page 52735]]


[GRAPHIC] [TIFF OMITTED] TR24JN24.135

    Fuel savings and regulatory costs act as competing forces on new 
vehicle sales. All else being equal, as fuel savings increase, the CAFE 
Model projects higher new vehicle sales, but as regulatory costs 
increase, the CAFE Model projects lower new vehicle sales. Both fuel 
savings and regulatory costs increase with stringency. NHTSA observed 
that on net that regulatory costs were increasing faster than the first 
30 months of fuel savings in the CAFE Model projections and as such, 
sales decreased in higher stringency alternatives. The magnitude of 
these fuel savings and vehicle price increases depends on manufacturer 
compliance decisions, especially technology application. In the event 
that manufacturers select technologies with lower prices and/or higher 
fuel economy improvements, vehicle sales effects could differ. TSD 
Chapter 4.2.1.2 discusses NHTSA's approach to estimating new vehicle 
sales, including NHTSA's estimate that new vehicle sales could recover 
from 2020's aberrantly low levels. Figure V-1 shows the estimated 
annual light-duty industry sales by regulatory alternative. For all 
scenarios, sales stay constant relative to the No-Action scenario 
through model year 2026, after which the model begins applying 
technology in response to the action alternatives. Excluding the most 
stringent case, light-duty vehicle sales differ from the No-Action 
Alternative by approximately 1 percent or less through model year 2050, 
and PC6LT8 sales differ from the No-Action Alternative by less than 2.5 
percent through model year 2050.

[[Page 52736]]

[GRAPHIC] [TIFF OMITTED] TR24JN24.136

    These slight reductions in new vehicle sales tend to reduce 
projected automobile industry labor projections by small margins. NHTSA 
estimates that the cost increases could reflect an underlying increase 
in employment to produce additional fuel-saving technology, such that 
automobile industry labor could remain relatively similar under each of 
the five regulatory alternatives.
[GRAPHIC] [TIFF OMITTED] TR24JN24.137


[[Page 52737]]


    The accompanying TSD Chapter 6.2.5 discusses NHTSA's approach to 
estimating automobile industry employment, and the accompanying FRIA 
Chapter 8.2 (and its Appendices I and II) and CAFE Model output files 
provide more detailed results of NHTSA's light-duty analysis.
    We also include in the analysis a No ZEV alternative baseline, 
wherein some sales volumes do not in MYs 2023 and beyond turn into ZEVs 
in accordance with OEM commitments to deploy additional electric 
vehicles consistent with ACC II, regardless of whether it becomes 
legally binding. The No ZEV alternative baseline still includes BEVs 
and PHEVs, but they are those that were already observed in the MY 2022 
analysis fleet, as well as any made by the model outside of standard 
setting years for LD BEVs (or in all years, in the case of PHEVs and 
HDPUV BEVs). Across the entire light-duty fleet, the technology 
penetration rates differ mainly from 2027 onwards. In the reference 
baseline, BEVs make up approximately 28 percent of the total light-duty 
fleet by model year 2031; they make up only 19 percent of the total 
light-duty fleet by 2031 in the No ZEV alternative baseline.
    PHEVs have virtually the same tech penetration in the reference 
baseline as in the no ZEV alternative baseline, as the CAFE Model does 
not build PHEVs for ZEV program compliance (only counts PHEVs built for 
other reasons towards ZEV program compliance) or deploy them based on 
OEM commitments to deploy electric vehicles consistent with ACC II. 
PHEVs increase only from 2 percent in the reference case to 3 percent 
in the No ZEV alternative baseline by model year 2031. Strong hybrids 
have a slightly higher tech penetration rate under the reference 
baseline than in the No ZEV case in model years between 2027 and 2031 
at 27 percent compared to 23 percent in the reference baseline in model 
year 2031.

2. Heavy-Duty Pickups and Vans

    Each of the regulatory alternatives considered represents an 
increase in HDPUV fuel efficiency standards for model years 2030-2035 
relative to the existing standards set in 2016, with increases in 
efficiency each year through model year 2035. Unlike the light-duty 
CAFE program, NHTSA may consider AFVs when setting maximum feasible 
average standards for HDPUVs. Additionally, for purposes of calculating 
average fuel efficiency for HDPUVs, NHTSA considers EVs, fuel cell 
vehicles, and the proportion of electric operation of EVs and PHEVs 
that is derived from electricity that is generated from sources that 
are not onboard the vehicle to have a fuel efficiency value of 0 
gallons/mile.
    NHTSA recognizes that it is possible that the size and composition 
of the fleet (i.e., in terms of vehicle attributes that impact 
calculation of standards for averaging sets) could change over time, 
which would affect the currently-estimated average fuel efficiency 
requirements. If fleet changes ultimately differ from NHTSA's 
projections, average requirements could, therefore, also differ from 
NHTSA's projections. The table below includes the estimated required 
average fuel efficiency values for the HDPUV fleet in each of the 
regulatory alternatives considered in this final rule.
[GRAPHIC] [TIFF OMITTED] TR24JN24.138

    As with the light-duty program, manufacturers do not always comply 
exactly with each fuel efficiency standard in each model year. 
Manufacturers may bank credits from overcompliance in one year that may 
be used to cover shortfalls in up to five future model years. 
Manufacturers may also carry forward credit deficits for up to three 
model years. If a manufacturer is still unable to address the 
shortfall, NHTSA may assess civil penalties. As discussed in the 
accompanying FRIA and TSD, NHTSA simulates manufacturers' responses to 
each alternative given a wide range of input estimates (e.g., 
technology cost and effectiveness, fuel prices, electrification 
technologies). For this final rule, NHTSA estimates that manufacturers' 
responses to standards defined in each alternative could lead average 
fuel efficiency levels to improve through model year 2035, as shown in 
the following tables.

[[Page 52738]]

[GRAPHIC] [TIFF OMITTED] TR24JN24.139

    Table V-16 displays the projected achieved FE levels for the HDPUV 
fleet through model year 2035. Estimates of achieved levels are very 
similar between the No-Action Alternative and the least stringent 
action alternative, with even the most stringent action alternative 
differing by less than 0.8 gallons/100 miles from the No-Action 
Alternative. The narrow band of estimated average achieved levels in 
Table V-16 is primarily due to several factors. Relative to the LD 
fleet, the HDPUV fleet (i) represents a smaller number of vehicles, 
(ii) includes fewer manufacturers, and (iii) is composed of a smaller 
number of manufacturer product lines. Technology choices for an 
individual manufacturer or individual product line can therefore have a 
large effect on fleet-wide average fuel efficiency. Second, Table V-17 
shows that in the No-Action Alternative a substantial portion of the 
fleet converts to an electrified powertrain (e.g., SHEV, PHEV, BEV) 
between model year 2022 and model year 2030. This reduces the 
availability of, and need for,\936\ additional fuel efficiency 
improvement to meet more stringent standards.
---------------------------------------------------------------------------

    \936\ The need for further improvements in response to more 
stringent HDPUV standards is further reduced by the fact that NHTSA 
regulations currently grant BEVs (and the electric-only operation of 
PHEVs) an HDPUV compliance value of 0 gallons/100 miles.

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

[[Page 52739]]

[GRAPHIC] [TIFF OMITTED] TR24JN24.140

[GRAPHIC] [TIFF OMITTED] TR24JN24.141

    In line with the technology application trends above, regulatory 
costs do not differ by large amounts between the No-Action Alternative 
and the action alternatives. The largest differences in regulatory 
costs occur in the HDPUV14 alternative and are also concentrated in a 
few manufacturers (e.g., Ford, GM), where the compliance modeling 
projects increases in PHEV and advanced engine technologies. For 
example, GM is projected to increase its turbo parallel engine 
technology penetration by 2038, which is modeled as a lower cost than 
the superseded advanced diesel engine technology in the reference 
baseline, contributing to the negative cost in the No-Action 
Alternative. See RIA Chapter 8.3.2 for more detail on the manufacturer 
regulatory cost by action alternative.
---------------------------------------------------------------------------

    \937\ Specifically, this includes technologies with the 
following codes in the CAFE Model: TURBO0, TURBOE, TURBOD, TURBO1, 
TURBO2, ADEACD, ADEACS, HCR, HRCE, HCRD, VCR, VTG, VTGE, TURBOAD, 
ADSL, DSLI.

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

[[Page 52740]]

[GRAPHIC] [TIFF OMITTED] TR24JN24.142

    On a per-vehicle basis, costs by 2033 increase progressively with 
stringency. Average per-vehicle costs are estimated to decrease 
slightly for alternatives HDPUV108 and HPUV10 relative to the No-Action 
Alternative for model year 2030-2032. Cost reductions of technology 
applied in these years, combined with shifts altering the combination 
of technologies to comply with different stringencies, result in 
negative regulatory costs relative to the No-Action Alternative. 
Specifically, differences in the quantity and type of technology 
applications in the compliance pathways contribute to the cost 
variation across regulatory alternatives.\938\ Overall, the two least 
stringent alternatives represent less than a 12 percent difference in 
average per-vehicle cost compared to the No-Action Alternative. FRIA 
Chapter 8.3.2.1 provides more information about the technology 
penetration changes and the subsequent costs.
---------------------------------------------------------------------------

    \938\ Manufacturers overcomplying with the least stringent 
standard can lead the CAFE model to applying additional cost-
effective technology adjustments which may increase the average 
regulatory cost. As the stringency increases, the CAFE model follows 
the cost-effective compliance path which may be limited in terms of 
manufacturer refresh/redesign schedules. In the HDPUV4 scenario, 
Ford is modeled to transition more towards BEV rather than strong 
hybrids, which results in an increased average cost over the 
reference scenario. In the HDPUV108 and HDPUV10 scenarios, a 
redesign in 2030 is projected to lead to more lower level engine 
technology and fewer overall tech changes compared to HDPUV4, which 
contribute to the negative average cost for several years but a 
larger jump in costs in later years.
[GRAPHIC] [TIFF OMITTED] TR24JN24.143

    The sales and labor markets are estimated to have relatively little 
variation in impacts across the No-Action Alternative and action 
alternatives. The increase in sales in the No-Action Alternative 
carries over to each of the action alternatives as well. The vehicle-
level cost increases noted above in Table V-19 produce very small 
declines in overall sales. With the exception of HDPUV14, the change in 
sales across alternatives stays within about a 0.21 percent change 
relative to the No-Action Alternative, and HDPUV14 stays within a 0.6 
percent change relative to the No-Action Alternative.

[[Page 52741]]

[GRAPHIC] [TIFF OMITTED] TR24JN24.144

    These minimal sales declines and limited additional technology 
application produce small decreases in labor utilization, as the sales 
effect ultimately outweighs job gains due to development and 
application of advanced technology. In aggregate, the alternatives 
represent less than half of a percentage point deviation from the No-
Action Alternative.
[GRAPHIC] [TIFF OMITTED] TR24JN24.145

    The accompanying TSD Chapter 6.2.5 discusses NHTSA's approach to 
estimating automobile industry employment, and the accompanying FRIA 
Chapter 8.3.2.3 (and its Appendix III) and CAFE Model output files

[[Page 52742]]

provide more detailed results of NHTSA's HDPUV analysis.

B. Effects on Society

    NHTSA accounts for the effects of the standards on society using a 
benefit-cost framework. The categories considered include private costs 
borne by manufacturers and passed on to consumers, social costs, which 
include Government costs and externalities pertaining to emissions, 
congestion, noise, energy security, and safety, and all the benefits 
resulting from related categories in the form of savings, however they 
may occur across the presented alternatives. In this accounting 
framework, the CAFE Model records costs and benefits for vehicles in 
the fleet throughout the lifetime of a particular model year and also 
allows for the accounting of costs and benefits by calendar years. 
Examining program effects through this lens illustrates the temporal 
differences in major cost and benefit components and allows us to 
examine costs and benefits for only those vehicles that are directly 
regulated by the standards. In the HDPUV FE analysis, where the 
standard would continue until otherwise amended, we report only the 
costs and benefits across calendar years.
1. Passenger Cars and Light Trucks
    We split effects on society into private costs, social costs, 
private benefits, and external benefits. Table V-21 and Table V-22 
describe the costs and benefits of increasing CAFE standards in each 
alternative, as well as the party to which they accrue. Manufacturers 
are directly regulated under the program and incur additional 
production costs when they apply technology to their vehicle offerings 
in order to improve their fuel economy. We assume that those costs are 
fully passed through to new car and truck buyers in the form of higher 
prices. We also assume that any civil penalties paid by manufacturers 
for failing to comply with their CAFE standards are passed through to 
new car and truck buyers and are included in the sales price. However, 
those civil penalties are paid to the U.S. Treasury, where they 
currently fund the general business of government. As such, they are a 
transfer from new vehicle buyers to all U.S. citizens, who then benefit 
from the additional Federal revenue. While they are calculated in the 
analysis, and do influence consumer decisions in the marketplace, they 
do not directly contribute to the calculation of net benefits (and are 
omitted from the tables below).
    While incremental maintenance and repair costs and benefits would 
accrue to buyers of new cars and trucks affected by more stringent CAFE 
standards, we do not carry these impacts in the analysis. They are 
difficult to estimate but represent real costs (and potential benefits 
in the case of AFVs that require less frequent maintenance events). 
They may be included in future analyses as data become available to 
evaluate lifetime maintenance impacts. This analysis assumes that 
drivers of new vehicles internalize 90 percent of the risk associated 
with increased exposure to crashes when they engage in additional 
travel (as a consequence of the rebound effect).
    Private benefits are dominated by the value of fuel savings, which 
accrue to new car and truck buyers at retail fuel prices (inclusive of 
Federal and state taxes). In addition to saving money on fuel 
purchases, new vehicle buyers also benefit from the increased mobility 
that results from a lower cost of driving their vehicle (higher fuel 
economy reduces the per-mile cost of travel) and fewer refueling 
events. The additional travel occurs as drivers take advantage of lower 
operating costs to increase mobility, and this generates benefits to 
those drivers--equivalent to the cost of operating their vehicles to 
travel those miles, the consumer surplus, and the offsetting benefit 
that represents 90 percent of the additional safety risk from travel.
    In addition to private benefits and costs--those borne by 
manufacturers, buyers, and owners of cars and light trucks--there are 
other benefits and costs from increasing CAFE standards that are borne 
more broadly throughout the economy or society, which NHTSA refers to 
as social costs.\939\ The additional driving that occurs as new vehicle 
buyers take advantage of lower per-mile fuel costs is a benefit to 
those drivers, but the congestion (and road noise) created by the 
additional travel also imposes a small additional social cost to all 
road users. We also include transfers from one party to another other 
than those directly incurred by manufacturers or new vehicle buyers 
with social costs, the largest of which is the loss in fuel tax revenue 
that occurs as a result of falling fuel consumption.\940\ Buyers of new 
cars and light trucks produced in model years subject to increasing 
CAFE standards save on fuel purchases that include Federal, state, and 
sometimes local taxes, so revenues from these taxes decline; because 
that revenue funds maintenance of roads and bridges as well as other 
government activities, the loss in fuel tax revenue represents a social 
cost, but is offset by the benefits gained by drivers who spend less at 
the pump.\941\
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    \939\ Some of these external benefits and social costs result 
from changes in economic and environmental externalities from 
supplying or consuming fuel, while others do not involve changes in 
such externalities but are similar in that they are borne by parties 
other than those whose actions impose them.
    \940\ Changes in tax revenues are a transfer and not an economic 
externality as traditionally defined, but we group these with social 
costs instead of private costs since that loss in revenue affects 
society as a whole as opposed to impacting only consumers or 
manufacturers.
    \941\ It may subsequently be replaced by another source of 
revenue, but that is beyond the scope of this final rule to examine.
---------------------------------------------------------------------------

    Among the purely external benefits created when CAFE standards are 
increased, the largest is the reduction in damages resulting from GHG 
emissions. Table V-20 shows the different social cost results that 
correspond to each GHG discount rate. The associated benefits related 
to reduced health damages from criteria pollutants and the benefit of 
improved energy security are both significantly smaller than the 
associated change in GHG damages across alternatives. As the tables 
also illustrate, the majority of costs are private costs that accrue to 
buyers of new cars and trucks, but the plurality of benefits stem from 
external welfare changes that affect society more generally. These 
external benefits are driven mainly by the benefits from reducing GHGs.
    The tables show that the social and SC-GHG discount rates have a 
significant impact on the estimated benefits in terms of magnitudes. 
Net social benefits are positive for all alternatives at both the 3 
percent and 7 percent social discount rates but have higher magnitudes 
under the lower SC-GHG discount rates. Net benefits are higher when 
assessed at a 3 percent social discount rate since the largest 
benefit--fuel savings--accrues over a prolonged period, while the 
largest cost--technology costs--accrue predominantly in earlier years. 
Totals in the following table may not sum perfectly due to rounding.
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    Our analysis also includes a No ZEV alternative baseline for light-
duty, and the CAFE Model outputs results for all scenarios relative to 
that baseline as well. Net benefits in the preferred alternative 
increase when viewing the analysis from the perspective of the No ZEV 
alternative baseline. Using the model year perspective, the SC-GHG DR 
of 2% and a social discount rate of 3%, net benefits in the preferred 
alternative of the No ZEV alternative baseline are 44.9 billion, 
compared to the preferred alternative's net benefits relative to the 
reference baseline (35.2 billion).
2. Heavy-Duty Pickups and Vans
    Our categorizations of benefits and costs in the HDPUV space 
mirrors the approach taken above for light-duty passenger trucks and 
vans. Table V-22 describes the costs and benefits of increasing 
standards in each alternative, as well as the party to which they 
accrue. Manufacturers are directly regulated under the program and 
incur additional production costs when they apply technology to their 
vehicle offerings in order to improve their fuel efficiency. We assume 
that those costs are fully passed through to new HDPUV buyers, in the 
form of higher prices.
    One key difference between the light-duty and HDPUV analysis is how 
the agency approaches VMT. As explained in more detail in III.E.3 and 
TSD Chapter 4.3, the agency does not constrain non-rebound VMT. As a 
result, decreasing sales in the HDPUV fleet will lower the amount of 
total VMT, while the rebound effect will cause those vehicles that are 
improved and sold, to be driven more. On net, the CAFE Model shows that 
the amount of VMT forgone from lower sales slightly outweighs the 
amount of VMT gained through rebound driving, and as a result some of 
the externalities from driving, such as safety costs and congestion, 
appear as a cost reduction relative to the No-Action Alternative.
    The choice of GHG discount rate also affects the resulting benefits 
and costs. As the tables show, net social benefits are positive for all 
alternatives, and are greatest when the SC-GHG discount rate of 1.5 
percent is used. Totals in the following table may not sum perfectly 
due to rounding.

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C. Physical and Environmental Effects

1. Passenger Cars and Light Trucks
    NHTSA estimates various physical and environmental effects 
associated with the standards. These include quantities of fuel and 
electricity consumed, GHGs and criteria pollutants reduced, and health 
and safety impacts. Table V-23 shows the cumulative impacts grouped by 
decade, including the on-road fleet sizes, VMT, fuel consumption, and 
CO2 emissions, across alternatives. The size of the on-road 
fleet increases in later decades regardless of alternative, but the 
greatest on-road fleet size projection is seen in the reference 
baseline, with fleet sizes declining as the alternatives become 
increasingly more stringent. This is

[[Page 52749]]

attributable to the reduction in sales caused by increased regulatory 
costs, which overtime decreases the existing vehicle stock, and 
therefore the size of the overall fleet.
    VMT increases occur in the two later decades, with the highest 
miles occurring from 2041-2050. Fuel consumption (measured in gallons 
or gasoline gallon equivalents) declines across both decades and 
alternatives as the alternatives become more stringent, as do GHG 
emissions.
---------------------------------------------------------------------------

    \942\ These rows report total vehicle units observed during the 
period. For example, 2,404 million units are modeled in the on-road 
fleet for calendar years 2022-2030. On average, this represents 
approximately 267 million vehicles in the on-road fleet for each 
calendar year in this calendar year cohort.
    \943\ These row report total miles traeled during the period. 
For example, 27,853 billion miles traveled in calendar years 2022-
2030. On average, this represents approximately 3.05 trillion annual 
miles traveled in this calendar year cohort.
[GRAPHIC] [TIFF OMITTED] TR24JN24.152

    From a calendar year perspective, NHTSA's analysis estimates total 
annual consumption of fuel by the entire on-road fleet from calendar 
year 2022 through calendar year 2050. On this basis, gasoline and 
electricity consumption by the U.S. light-duty fleet evolves as shown 
in Figure IV-5 and Figure IV-6, each of which shows projections for the 
No-Action Alternative (No-Action Alternative, i.e., the reference 
baseline), Alternative PC2LT002, Alternative PC1LT3, Alternative 
PC2LT4, Alternative PC3LT5, and Alternative PC6LT8. Gasoline 
consumption decreases over time, with the largest decreases occurring 
in more stringent alternatives. Electricity consumption increases over 
time, with the same pattern of Alternative PC6LT8 experiencing the 
highest magnitude of change.

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    NHTSA estimates the GHGs attributable to the light-duty on-road 
fleet, from both vehicles and upstream energy sector processes (e.g., 
petroleum refining, fuel transportation and distribution, electricity 
generation). Figure IV-7, Figure IV-8, and Figure IV-9 present NHTSA's 
estimate of how emissions from these three GHGs across

[[Page 52751]]

all fuel types could evolve over the years. Note that these graphs 
include emissions from both downstream (powertrain and BTW) and 
upstream processes. All three GHG emissions follow similar trends of 
decline in the years between 2022-2050. Note that CO2 
emissions are expressed in units of million metric tons (mmt) while 
emissions from other pollutants are expressed in metric tons.
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[GRAPHIC] [TIFF OMITTED] TR24JN24.157

    The figures presented here are not the only estimates NHTSA 
calculates regarding projected GHG emissions in future years. The 
accompanying EIS uses an ``unconstrained'' analysis as opposed to the 
``standard setting'' analysis presented in this final rule. For more 
information regarding projected GHG emissions, as well as model-based

[[Page 52753]]

estimates of corresponding impacts on several measures of global 
climate change, see the EIS.
    NHTSA also estimates criteria pollutant emissions resulting from 
downstream (powertrain and BTW) and upstream processes attributable to 
the light-duty on-road fleet. Since the NPRM, NHTSA has adopted the 
NREL 2022 grid mix forecast which projects significant reductions in 
criteria emission rates from upstream electricity production. This 
results in further emission reductions across alternatives as EVs in 
the reference baseline induce marginally less emissions relative to the 
NPRM. This decrease in criteria pollutant emissions in turn leads to a 
decrease in adverse health outcomes described in later sections. Under 
each regulatory alternative, NHTSA projects a dramatic decline in 
annual emissions of NOX, and PM2.5 attributable 
to the light-duty on-road fleet between 2022 and 2050. As exemplified 
in Figure V-10, NOx emissions in any given year could be very nearly 
the same under each regulatory alternative.
    On the other hand, as discussed in the FRIA Chapter 8.2 and Chapter 
4 of the EIS accompanying this document, NHTSA projects that annual 
SO2 emissions attributable to the LD on-road fleet could 
increase by 2050, after significant fluctuation, in all of the 
alternatives, including the reference baseline, due to greater use of 
electricity for PHEVs and BEVs (See Figure IV-6). Differences between 
the action alternatives are modest.
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[GRAPHIC] [TIFF OMITTED] TR24JN24.160

    Health impacts quantified by the CAFE Model include various 
instances of hospital visits due to respiratory problems, minor 
restricted activity days, non-fatal heart attacks, acute bronchitis, 
premature mortality, and other effects of criteria pollutant emissions 
on health. Table V-24 shows the split in select health impacts relative 
to the No-Action

[[Page 52755]]

Alternative, across all action alternatives. The magnitude of the 
differences relates directly to the changes in tons of criteria 
pollutants emitted. Magnitudes differ across health impact types 
because of variation in the reference baseline totals; for example, the 
total Minor Restricted Activity Days are much higher than the 
Respiratory Hospital Admissions. See Chapter 5.4 of the TSD for 
information regarding how the CAFE Model calculates these health 
impacts.
[GRAPHIC] [TIFF OMITTED] TR24JN24.161

    Lastly, NHTSA also quantifies safety impacts in its analysis. These 
include estimated counts of fatalities, non-fatal injuries, and 
property damage crashes occurring over the lifetimes of the LD on-road 
vehicles considered in the analysis. The following table shows the 
changes in these counts projected in action alternatives relative to 
the reference baseline.

[[Page 52756]]

[GRAPHIC] [TIFF OMITTED] TR24JN24.162

    Generally, increasing fuel economy stringency leads to more adverse 
safety outcomes from increased rebound VMT (motorists choosing to drive 
more as driving becomes cheaper), and the reduction in scrappage 
causing older vehicles with less safety features to remain in the fleet 
longer. The impacts of mass reduction are nonlinear and depend on the 
specific fleet receiving those reductions, with mass reduction to PCs 
generally causing an increase in adverse safety outcomes and mass 
reductions for LTs generally causing a decrease in adverse safety 
outcomes; this explains the difference in the impacts of mass reduction 
for Alternative PC6LT8, as this alternative sees the largest transition 
from LTs to PCs and has PCs receiving the most mass reductions. NHTSA 
notes that none of these safety outcomes due to mass reduction can be 
statistically distinguished from zero. Chapter 7.1.5 of the FRIA 
accompanying this document contains an in-depth discussion on the 
effects of the various alternatives on these safety measures, and 
Chapter 7 of the TSD contains information regarding the construction of 
the safety estimates.
    We also analyze physical and environmental effects relative to the 
No ZEV alternative baseline. In the model year perspective (model years 
through 2031), in the preferred alternative (PC2LT002) relative to the 
No ZEV alternative baseline, CO2 emission reductions are 
1,207 MMT, compared to the reduction in CO2 emissions in the 
preferred alternative relative to the reference baseline (659 MMT).
2. Heavy-Duty Pickups and Vans
    NHTSA estimates the same physical and environmental effects for 
HDPUVs as it does for LDVs, including: quantities of fuel and 
electricity consumption; tons of GHG emissions and criteria pollutants 
reduced; and health and safety impacts. Table V-26 shows the cumulative 
impacts grouped by decade, including the on-road fleet sizes, VMT, fuel 
consumption, and CO2 emissions, across alternatives. The 
size of the on-road fleet increases in later decades regardless of the 
alternative, but the greatest on-road fleet size projection is seen in 
the reference baseline. Most differences between the alternatives are 
not visible in the Table V-26 due to rounding.
    VMT increases occur in the later two decades, with the highest 
numbers occurring from 2041-2050. Across alternatives, the VMT 
increases remain around approximately the same magnitude. Fuel 
consumption (measured in gallons or gasoline gallon equivalents) 
declines across decades, as do GHG emissions. Differences between the 
alternatives are minor but fuel consumption and GHG emissions also 
decrease as alternatives become more stringent. As discussed in the 
previous section, since the agency does not constrain VMT for HDPUVs, 
alternatives

[[Page 52757]]

with fewer vehicles see a corresponding decrease in 
VMT.944 945
---------------------------------------------------------------------------

    \944\ These rows report total vehicle units observed during the 
period. For example, 152 million units are modeled in the on-road 
fleet for calendar years 2022-2030. On average, this represents 
approximately 17 million vehicles in the on-road fleet for each 
calendar year in this calendar year cohort.
    \945\ These rows report total miles traveled during the period. 
For example, 1.992 trillion miles traveled in calendar years 2022-
2030. On average, this represents approximately 221 billion annual 
miles traveled in this calendar year cohort.
[GRAPHIC] [TIFF OMITTED] TR24JN24.163

    Figure V-13 and Figure V-14 show the estimates of gasoline and 
electricity consumption of the on-road HDPUV fleet for all fuel types 
over time on a calendar year basis, from 2022-2050. The four action 
alternatives, HDPUV4, HDPUV108, HDPUV10, and HDPUV14, are compared to 
the reference baseline changes over time.
    Gasoline consumption decreases over time, with the largest 
decreases occurring in more stringent alternatives. Electricity 
consumption increases over time, with the same pattern of Alternative 
HDPUV14 experiencing the highest magnitude of change. In both charts, 
the differences in magnitudes across alternatives do not vary 
drastically.

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[[Page 52759]]


    NHTSA estimates the GHGs attributable to the HDPUV on-road fleet, 
from both downstream and upstream energy sector processes (e.g., 
petroleum refining, fuel transportation and distribution, electricity 
generation). These estimates mirror those discussed in the light-duty 
section above. Figure IV15, Figure IV16, and Figure IV17 present 
NHTSA's estimate of how emissions from these three GHGs could evolve 
over the years (CY 2022-2050). Emissions from all three GHG types 
tracked follow similar trends of decline in the years between 2022-
2050. Note that these graphs include emissions from both vehicle and 
upstream processes and scales vary by figure (CO2 emissions 
are expressed in units of million metric tons (mmt) while emissions 
from other pollutants are expressed in metric tons). NHTSA's 
calculation of N2O emissions has changed since the NPRM 
resulting in increased emission rates for diesel vehicles, which 
comprise a significant portion of the HDPUV fleet.
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[[Page 52760]]


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[GRAPHIC] [TIFF OMITTED] TR24JN24.168

    For more information regarding projected GHG emissions, as well as 
model-based estimates of corresponding impacts on several measures of 
global climate change, see the EIS.
    NHTSA also estimates criteria pollutant emissions resulting from 
vehicle and upstream processes attributable to the HDPUV on-road fleet. 
Under each regulatory alternative, NHTSA projects a significant decline 
in annual emissions of NOX, and PM2.5 
attributable to the HDPUV on-road fleet between 2022 and 2050. As 
exemplified in Figure IV-18, the magnitude of

[[Page 52761]]

emissions in any given year could be very similar under each regulatory 
alternative.
    On the other hand, as discussed in the FRIA Chapter 8.3 and the 
EIS, NHTSA projects that annual SO2 emissions attributable 
to the HDPUV on-road fleet could increase modestly under the action 
alternatives, because, as discussed above, NHTSA projects that each of 
the action alternatives could lead to greater use of electricity (for 
PHEVs and BEVs) in later calendar years.
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[[Page 52762]]


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[GRAPHIC] [TIFF OMITTED] TR24JN24.171

    Health impacts quantified by the CAFE Model include various 
instances of hospital visits due to respiratory problems, minor 
restricted activity days, non-fatal heart attacks, acute bronchitis, 
premature mortality, and other effects of criteria pollutant emissions 
on health. Table V-27 shows select health impacts relative to the 
baseline, across all action alternatives. The magnitude of the 
differences relates directly to the changes in tons of criteria 
pollutants

[[Page 52763]]

emitted. The magnitudes differ across health impact types because of 
variation in the totals; for example, the total Minor Restricted 
Activity Days are much higher than the Respiratory Hospital Admissions. 
See Chapter 5.4 of the TSD for information regarding how the CAFE Model 
calculates these health impacts.
[GRAPHIC] [TIFF OMITTED] TR24JN24.172

    Lastly, NHTSA also quantifies safety impacts in its analysis. These 
include estimated counts of fatalities, non-fatal injuries, and 
property damage crashes occurring over the lifetimes of the HD on-road 
vehicles considered in the analysis. The following table shows 
projections of these counts in action alternatives relative to the 
baseline. As noted earlier, the safety impacts for HDPUV are a result 
of changes in aggregate VMT.
[GRAPHIC] [TIFF OMITTED] TR24JN24.173


[[Page 52764]]


    Chapter 7.1.5 of the FRIA accompanying this document contains an 
in-depth discussion on the effects of the various alternatives on these 
safety measures, and TSD Chapter 7 contains information regarding the 
construction of the safety estimates.

D. Sensitivity Analysis, Including Alternative Baseline

    The analysis conducted to support this rulemaking consists of data, 
estimates, and assumptions, all applied within an analytical framework, 
the CAFE Model. Just as with all past CAFE and HDPUV rulemakings, NHTSA 
recognizes that many analytical inputs are uncertain, and some inputs 
are very uncertain. Of those uncertain inputs, some are likely to exert 
considerable influence over specific types of estimated impacts, and 
some are likely to do so for the bulk of the analysis. Yet making 
assumptions in the face of that uncertainty is necessary when analyzing 
possible future events (e.g., consumer and industry responses to fuel 
economy/efficiency regulation). In other cases, we made assumptions in 
how we modeled the effects of other existing regulations that affected 
the costs and benefits of the action alternatives (e.g., state ZEV 
programs were included in the No-Action Alternative). To better 
understand the effect that these assumptions have on the analytical 
findings, we conducted additional model runs with alternative 
assumptions. These additional runs were specified in an effort to 
explore a range of potential inputs and the sensitivity of estimated 
impacts to changes in these model inputs. Sensitivity cases and the 
alternative baseline in this analysis span assumptions related to 
technology applicability and cost, economic conditions, consumer 
preferences, externality values, and safety assumptions, among 
others.\946\ A sensitivity analysis can identify two critical pieces of 
information: how big of an influence does each parameter exert on the 
analysis, and how sensitive are the model results to that assumption?
---------------------------------------------------------------------------

    \946\ In contrast to an uncertainty analysis, where many 
assumptions are varied simultaneously, the sensitivity analyses 
included here vary a single assumption and provide information about 
the influence of each individual factor, rather than suggesting that 
an alternative assumption would have justified a different Preferred 
Alternative.
---------------------------------------------------------------------------

    That said, influence is different from likelihood. NHTSA does not 
mean to suggest that any one of the sensitivity cases presented here is 
inherently more likely than the collection of assumptions that 
represent the reference baseline in the figures and tables that follow. 
Nor is this sensitivity analysis intended to suggest that only one of 
the many assumptions made is likely to prove off-base with the passage 
of time or new observations. It is more likely that, when assumptions 
are eventually contradicted by future observation (e.g., deviations in 
observed and predicted fuel prices are nearly a given), there will be 
collections of assumptions, rather than individual parameters, that 
simultaneously require updating. For this reason, we do not interpret 
the sensitivity analysis as necessarily providing justification for 
alternative regulatory scenarios to be preferred. Rather, the analysis 
simply provides an indication of which assumptions are most critical, 
and the extent to which future deviations from central analysis 
assumptions could affect costs and benefits of the rule. For a full 
discussion of how this information relates to NHTSA's determination of 
which regulatory alternatives are maximum feasible, please see Section 
VI.D].
    Table V-29 lists and briefly describes the cases and alternative 
baseline that we examined in the sensitivity analysis. Note that some 
cases only apply to the LD fleet (e.g., scenarios altering assumptions 
about fleet share modeling) and others only affect the HDPUV analysis 
(e.g., initial PHEV availability).
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    Chapters 3 and 9 of the accompanying FRIA summarize results for the 
alternative baseline and sensitivity cases, and detailed model inputs 
and outputs for curious readers are available on NHTSA's website.\947\ 
For purposes of this preamble, the figures in Section V.D.1 illustrate 
the relative change of the sensitivity effect of selected inputs on the 
costs and benefits estimated for this rule for LDVs, while the figures 
in Section V.D.2 present the same data for the HDPUV analysis. Each 
collection of figures groups sensitivity cases by the category of input 
assumption (e.g., macroeconomic assumptions, technology assumptions, 
and so on).
---------------------------------------------------------------------------

    \947\ NHTSA. 2023. Corporate Average Fuel Economy. Available at: 
https://www.nhtsa.gov/laws-regulations/corporate-average-fuel-economy. (Accessed: Feb. 23, 2024).
---------------------------------------------------------------------------

    While the figures in this section do not show precise values, they 
give us a sense of which inputs are ones for which a different 
assumption would have a much different effect on analytical findings, 
and which ones would not have much effect. For example, assuming a 
different oil price trajectory would have a relatively large effect, as 
would doubling, or eliminating the assumed ``payback period.'' 
Sensitivity analyses also allow us to examine the impact of specific 
changes from the proposal on our findings. For example, in the final 
rule analysis, NHTSA used estimates of the social costs of greenhouse 
gases produced by the EPA, whereas these inputs were taken from the IWG 
in the proposal. This has a significant impact on net benefits, though 
they would remain strongly positive regardless of which set of 
estimates was used. The relative magnitude of these effects also varies 
by fleet. Making alternative assumptions about the future costs of 
battery technology has a larger effect on the HDPUV results. Adjusting 
assumptions related to the tax credits included in the IRA has a 
significant impact on results for both LDVs and HDPUVs. On the other 
hand, assumptions about which there has been significant disagreement 
in the past, like the rebound effect or the sales-scrappage response to 
changes in vehicle price, appear to cause only relatively small changes 
in net benefits across the range of analyzed input values. Chapter 9 of 
the FRIA provides an extended discussion of these findings, and 
presents net benefits estimated under each of the cases included in the 
sensitivity analysis.
    The results presented in the earlier subsections of Section V and 
discussed in Section VI reflect NHTSA's best judgments regarding many 
different factors, and the sensitivity analysis discussed here is 
simply to illustrate the obvious, that differences in assumptions can 
lead to differences in analytical outcomes, some of which can be large 
and some of which may be smaller than expected. Policymaking in the 
face of future uncertainty is inherently complex. Section VI explains 
how NHTSA balances the statutory factors in light of the analytical 
findings, the uncertainty that we know exists, and our nation's policy 
goals, to set CAFE standards for model years 2027-2031, and HDPUV fuel 
efficiency standards for model year 2030 and beyond that NHTSA 
concludes are maximum feasible.
1. Passenger Cars and Light Trucks
    Overall, NHTSA finds that for light duty vehicles, the preferred 
alternative PC2LT002 produces positive societal net benefits for each 
sensitivity and alternative baseline at both 3 and 7 percent discount 
rates. Societal net benefits are highest in the ``No payback period'' 
case ($33 billion) and lowest in the ``Standard-setting conditions for 
MY 2023-2050'' case ($7.7 billion) at a 3 percent social discount rate 
and 2 percent SC-GHG discount rate.

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2. Heavy-Duty Pickups and Vans
    In our HDPUV analysis the preferred alternative HDPUV108 produces 
positive net benefits for all but a handful of cases. In these cases, 
the alternative assumptions lead to greater technology adoption in the 
No-Action Alternative and lead to net benefits that are just below 0.

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VI. Basis for NHTSA's Conclusion That the Standards Are Maximum 
Feasible

    NHTSA's purpose in setting CAFE standards is to conserve energy, as 
directed by EPCA/EISA. Energy conservation provides many benefits to 
the American public, including better protection for consumers against 
changes in fuel prices, significant fuel savings and reduced impacts 
from harmful pollution. NHTSA continues to believe that fuel economy 
standards can function as an important insurance policy against oil 
price volatility, particularly to protect consumers even as the U.S. 
has improved its energy independence over time. Although NHTSA proposed 
PC2LT4 as the preferred alternative for CAFE standards for model years 
2027-2031, NHTSA is finalizing PC2LT002 for those model years. Based on 
comments received and a closer look at the model results under the 
statutorily-constrained analysis, NHTSA now concludes that 
``shortfalls'' and civil penalties must be managed in order to conserve 
manufacturer capital and resources for making the technological 
transition that NHTSA is prohibited from considering directly.
    Similarly, for HDPUV, while NHTSA proposed HDPUV10 for model years 
2030-2035, NHTSA is finalizing HDPUV108 for those model years. Based on 
comments received and a closer look at the model results--and 
specifically, as in the NPRM, the sensitivity analyses, as well as the 
apparent effects on certain manufacturers--NHTSA recognizes that 
uncertainty, particularly in the later model years of the rulemaking, 
means that a slower rate of increase is maximum feasible for those 
years. These conclusions, for both passenger cars and light trucks and 
for HDPUVs, will be discussed in more detail below.

A. EPCA, as Amended by EISA

    EPCA, as amended by EISA, contains provisions establishing how 
NHTSA must set CAFE standards and fuel efficiency standards for HDPUVs. 
DOT (by delegation, NHTSA) \948\ must establish separate CAFE standards 
for passenger cars and light trucks for each model 
year,949 950 and each standard must be the maximum feasible 
that the Secretary (again, by delegation, NHTSA) determines 
manufacturers can achieve in that model year.\951\ In determining the 
maximum feasible levels of CAFE standards, EPCA requires that NHTSA 
consider four statutory factors: technological feasibility, economic 
practicability, the effect of other motor vehicle standards of the 
Government on fuel economy, and the need of the United States to 
conserve energy.\952\ NHTSA must also set separate standards for 
HDPUVs, and while those standards must also ``achieve the maximum 
feasible improvement,'' they must be ``appropriate, cost-effective, and 
technologically feasible'' \953\--factors slightly different from those 
required to be considered for passenger car and light truck standards. 
NHTSA has broad discretion to balance the statutory factors in 
developing fuel consumption standards to achieve the maximum feasible 
improvement. In addition, NHTSA has the authority to consider (and 
typically does consider) other relevant factors, such as the effect of 
CAFE standards on motor vehicle safety.
---------------------------------------------------------------------------

    \948\ EPCA and EISA direct the Secretary of Transportation to 
develop, implement, and enforce fuel economy standards (see 49 
U.S.C. 32901 et seq.), which authority the Secretary has delegated 
to NHTSA at 49 FR 1.95(a).
    \949\ 49 U.S.C. 32902(b)(1) (2007).
    \950\ 49 U.S.C. 32902(a) (2007).
    \951\ Id.
    \952\ 49 U.S.C. 32902(f).
    \953\ 49 U.S.C. 32902(k)(2).
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    The ultimate determination of what standards can be considered 
maximum feasible involves a weighing and balancing of factors, and the 
balance may shift depending on the information NHTSA has available 
about the expected circumstances in the model years covered by the 
rulemaking. NHTSA's decision must also be guided by the overarching 
purpose of EPCA, energy conservation, while balancing these 
factors.\954\
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    \954\ Center for Biological Diversity v. NHTSA, 538 F.3d 1172, 
1197 (9th Cir. 2008) (``Whatever method it uses, NHTSA cannot set 
fuel economy standards that are contrary to Congress's purpose in 
enacting the EPCA--energy conservation.''). While this decision 
applied only to standards for passenger cars and light trucks, NHTSA 
interprets the admonition as broadly applicable to its actions under 
section 32902.

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[[Page 52780]]

    EPCA/EISA also contain several other requirements, as follows.
1. Lead Time
a. Passenger Cars and Light Trucks
    EPCA requires that NHTSA prescribe new CAFE standards at least 18 
months before the beginning of each model year.\955\ Thus, if the first 
year for which NHTSA is establishing new CAFE standards is model year 
2027, NHTSA interprets this provision as requiring us to issue a final 
rule covering model year 2027 standards no later than April 2025. No 
specific comments were received regarding the 18-month lead time 
requirement for CAFE standards, although ZETA and Hyundai commented 
that NHTSA should wait to finalize the CAFE standards until after DOE 
finalized the PEF revision, out of concern that failing to do so would 
``increase administrative burden for both'' agencies,\956\ and that 
NHTSA's final rule would not otherwise ``accurately reflect the final 
PEF.'' \957\ Because NHTSA coordinated with DOE as both agencies worked 
to finalize their respective rules, this final rule reflects DOE's 
final PEF. Given that the Deputy Administrator of NHTSA signed this 
final rule in June 2024, the statutory lead time requirement is met.
---------------------------------------------------------------------------

    \955\ 49 U.S.C. 32902(a) (2007).
    \956\ ZETA, Docket No. NHTSA-2023-0022-60508, at 28.
    \957\ Hyundai, Docket No. NHTSA-2023-0022-51701, at 6.
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b. Heavy-Duty Pickups and Vans
    EISA requires that standards for commercial medium- and HD on-
highway vehicles and work trucks (of which HDPUVs are part) provide not 
less than four full model years of regulatory lead time.\958\ Thus, if 
the first year for which NHTSA is establishing new fuel efficiency 
standards for HDPUVs is model year 2030, NHTSA interprets this 
provision as requiring us to issue a final rule covering model year 
2030 standards no later than October 2025.\959\ Stellantis commented 
that it agreed with the proposal, that in order to provide four full 
model years of regulatory lead time, the earliest model year for which 
NHTSA could establish new standards was model year 2030.\960\ NHTSA 
agrees and is establishing new standards for HDPUVs beginning in model 
year 2030. This means that the applicable model years of NHTSA's final 
rule do not align perfectly with EPA's recent final rule establishing 
multipollutant (including GHG) standards for the same vehicles, but 
this is a direct consequence of the statutory lead time requirement in 
EISA. The Alliance and GM also agreed in their comments that model year 
2030 was an appropriate start year for new HDPUV standards.\961\ GM 
stated that that timeframe ``would provide manufacturers sufficient 
lead time to adjust product plans to standards.'' \962\ Given that the 
Deputy Administrator of NHTSA signed this final rule in June, 2024, 
this lead time requirement is met.
---------------------------------------------------------------------------

    \958\ 49 U.S.C. 32902(k)(3)(A) (2007).
    \959\ As with passenger cars and light trucks, NHTSA interprets 
the model year for HDPUVs as beginning with October of the calendar 
year prior. Therefore, HDPUV model year 2029 would begin in October 
2028; therefore, four full model years prior to October 2028 would 
be October 2024.
    \960\ Stellantis, Docket No. NHTSA-2023-0022-61107, at 12.
    \961\ The Alliance, Docket No. NHTSA-2023-0022-60652, Attachment 
3, at 52; GM, Docket No. NHTSA-2023-0022-60686, at 7.
    \962\ GM, Docket No. NHTSA-2023-0022-60686, at 7.
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    EISA contains a related requirement for HDPUVs that the standards 
provide not only four full model years of regulatory lead time, but 
also three full model years of regulatory stability.\963\ As discussed 
in the Phase 2 final rule, Congress has not spoken directly to the 
meaning of the words ``regulatory stability.'' NHTSA interprets the 
``regulatory stability'' requirement as ensuring that manufacturers 
will not be subject to new standards in repeated rulemakings too 
rapidly, given that Congress did not include a minimum duration period 
for the MD/HD standards.\964\ NHTSA further interprets the statutory 
meaning as reasonably encompassing standards which provide for 
increasing stringency during the rulemaking time frame to be the 
maximum feasible. In this statutory context, NHTSA thus interprets the 
phrase ``regulatory stability'' in section 32902(k)(3)(B) as requiring 
that the standards remain in effect for three years before they may be 
increased by amendment. It does not prohibit standards that contain 
predetermined stringency increases.
---------------------------------------------------------------------------

    \963\ 49 U.S.C. 32902(k)(3)(B) (2007).
    \964\ In contrast, as discussed below, passenger car and 
standards must remain in place for ``at least 1, but not more than 
5, model years.'' 49 U.S.C. 32902(b)(3)(B).
---------------------------------------------------------------------------

    CEA commented that this interpretation was inconsistent with the 
law. It stated that a standard could not be ``stable'' if it 
``continually ratchets up each year,'' and argued that HDPUV redesign 
cycles are longer than light truck redesign cycles and that 
``manufacturers would therefore have difficulty meeting standards that 
ratchet up every year.'' \965\ In response, NHTSA continues to believe 
that ``stable'' can reasonably be interpreted as ``known in advance'' 
and ``remaining in effect for three years,'' in part because the 
dictionary provides definitions for ``stable'' that include ``firmly 
established; fixed; steadfast; enduring.'' \966\ While some definitions 
of ``stable'' mention ``not changing or fluctuating; unvarying,'' \967\ 
NHTSA believes that standards that are known in advance and established 
in three-year tranches can reasonably fit these definitions--the 
standards will not change or vary from what is established here, except 
by rulemaking as necessary (and as permissible given lead time 
requirements). EISA does not suggest that NHTSA interpret ``unvarying'' 
as exclusively suggesting that ``standards may only increase once every 
three years and then must be held at that level,'' and could also be 
reasonably read to suggest that ``standards should not change from 
established levels, once established.'' NHTSA is accordingly 
establishing new HDPUV standards in two tranches: standards that 
increase 10 percent per year for model years 2030-2031-2032, and 
standards that increase at 8 percent per year for model years 2033-
2034-2035.
---------------------------------------------------------------------------

    \965\ CEA, Docket No. NHTSA-2023-0022-61918, at 31.
    \966\ https://www.merriam-webster.com/dictionary/stable (last 
accessed Apr. 15, 2024).
    \967\ Id.
---------------------------------------------------------------------------

    NHTSA also believes, based on comments, that redesign cycles should 
not be a problem for the HDPUV standards. NHTSA notes the comment from 
GM, mentioned above, that NHTSA beginning new standards in model year 
2030 will provide sufficient lead time for manufacturers to adjust 
their product plans as needed, even while GM also noted that redesign 
cycles were longer for HDPUVs than for LTs.\968\ GM further stated that 
the lead time provided ``lowers the likelihood of product disruptions 
in the market.'' \969\ NHTSA agrees that HDPUV redesign cycles are 
longer than light truck redesign cycles and reflects this in our 
analysis, which shows the final standards (and indeed, all of the 
alternatives) as being achievable for the entirety of the HDPUV fleet, 
with no shortfalls under any regulatory alternative:
---------------------------------------------------------------------------

    \968\ GM, Docket No. NHTSA-2023-0022-60686, at 7.
    \969\ Id.

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[[Page 52781]]

[GRAPHIC] [TIFF OMITTED] TR24JN24.189

    This approach is consistent with our understanding of regulatory 
stability. Manufacturers appear likely to have little to zero 
difficulty in meeting the final standards. Setting HDPUV standards that 
did not increase for three years instead would make little functional 
difference to compliance, given the availability of credit banking.
2. Separate Standards for Passenger Cars, Light Trucks, and Heavy-Duty 
Pickups and Vans, and Minimum Standards for Domestic Passenger Cars
    EPCA requires NHTSA to set separate standards for passenger cars 
and light trucks for each model year.\970\ Based on the plain language 
of the statute, NHTSA has long interpreted this requirement as 
preventing NHTSA from setting a single combined CAFE standard for cars 
and trucks together. Congress originally required separate CAFE 
standards for cars and trucks to reflect the different fuel economy 
capabilities of those different types of vehicles, and over the history 
of the CAFE program, has never revised this requirement. Even as many 
cars and trucks have come to resemble each other more closely over 
time--many crossover and sport-utility models, for example, come in 
versions today that may be subject to either the car standards or the 
truck standards depending on their characteristics--it is still 
accurate to say that vehicles with truck-like characteristics such as 
4-wheel drive, cargo-carrying capability, etc., currently consume more 
fuel per mile than vehicles without these components. While there have 
been instances in recent rulemakings where NHTSA raised passenger car 
and light truck standard stringency at the same numerical rate year 
over year, NHTSA also has precedent for setting passenger car and light 
truck standards that increase at different numerical rates year over 
year, as in the 2012 final rule. This underscores that NHTSA's 
obligation is to set maximum feasible standards separately for each 
fleet, based on our assessment of each fleet's circumstances as seen 
through the lens of the four statutory factors that NHTSA must 
consider. Regarding the applicability of the CAFE standards, individual 
citizens commenting via Climate Hawks Civic Action asked whether U.S. 
Postal Service vehicles,\971\ airplanes,\972\ and non-road engines 
(such as for lawn equipment) \973\ could also be subject to CAFE 
standards. Postal Service vehicles are generally HDPUVs, and thus 
subject to those standards rather than to CAFE standards. Airplanes and 
non-road engines are not automobiles under 49 U.S.C. 32901, so they 
cannot be subject to CAFE standards. An individual citizen with Climate 
Hawks Civic Action also requested that NHTSA not set separate standards 
for light trucks, on the basis that doing so would be detrimental to 
energy conservation.\974\ As explained above, NHTSA interprets 49 
U.S.C. 32902 as requiring NHTSA to set separate standards for passenger 
cars and light trucks. Again, NHTSA does not believe that it has 
statutory authority to set a single standard for both passenger cars 
and light trucks.
---------------------------------------------------------------------------

    \970\ 49 U.S.C. 32902(b)(1) (2007).
    \971\ Climate Hawks, Docket No. NHTSA-2023-0022-61094, at 182.
    \972\ Id. at 2244.
    \973\ Id. at 2520.
    \974\ Id. at 2579.
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    EPCA, as amended by EISA, also requires another separate standard 
to be set for domestically manufactured passenger cars.\975\ Unlike the 
generally applicable standards for passenger cars and light trucks 
described above, the compliance obligation of the minimum

[[Page 52782]]

domestic passenger car standard (MDPCS) is identical for all 
manufacturers. The statute clearly states that any manufacturer's 
domestically manufactured passenger car fleet must meet the greater of 
either 27.5 mpg on average, or ``92 percent of the average fuel economy 
projected by the Secretary for the combined domestic and non-domestic 
passenger automobile fleets manufactured for sale in the United States 
by all manufacturers in the model year, which projection shall be 
published in the Federal Register when the standard for that model year 
is promulgated in accordance with [49 U.S.C. 32902(b)].'' \976\ Since 
that statutory requirement was established, the ``92 percent'' has 
always been greater than 27.5 mpg, and foreseeably will continue to be 
so in the future. As in the 2020 and 2022 final rules, NHTSA continues 
to recognize industry concerns that actual total passenger car fleet 
standards have differed significantly from past projections, perhaps 
more so when NHTSA has projected significantly into the future. In the 
2020 final rule, the compliance data showed that standards projected in 
the 2012 final rule were consistently more stringent than the actual 
standards as calculated at the end of the model year, by an average of 
1.9 percent. NHTSA has stated that this difference indicates that in 
rulemakings conducted in 2009 through 2012, NHTSA's and EPA's 
projections of passenger car vehicle footprints and production volumes, 
in retrospect, underestimated the production of larger passenger cars 
over the model years 2011 to 2018 period.\977\
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    \975\ In the CAFE program, ``domestically manufactured'' is 
defined by Congress in 49 U.S.C. 32904(b). The definition roughly 
provides that a passenger car is ``domestically manufactured'' as 
long as at least 75 percent of the cost to the manufacturer is 
attributable to value added in thie United States, Canada, or 
Mexico, unless the assembly of the vehicle is completed in Canada or 
Mexico and the vehicle is imported into the United States more than 
30 days after the end of the model year.
    \976\ 49 U.S.C. 32902(b)(4) (2007).
    \977\ See 85 FR 25127 (Apr. 30, 2020).
---------------------------------------------------------------------------

    Unlike the passenger car standards and light truck standards which 
are vehicle-attribute-based and automatically adjust with changes in 
consumer demand, the MDPCS are not attribute-based, and therefore do 
not adjust with changes in consumer demand and production. They are, 
instead, fixed standards that are established at the time of the 
rulemaking. As a result, by assuming a smaller-footprint fleet, on 
average, than what ended up being produced, the model year 2011-2018 
MDPCS ended up being more stringent and placing a greater burden on 
manufacturers of domestic passenger cars than was projected and 
expected at the time of the rulemakings that established those 
standards. In the 2020 final rule, therefore, NHTSA agreed with 
industry concerns over the impact of changes in consumer demand (as 
compared to what was assumed in 2012 about future consumer demand for 
greater fuel economy) on manufacturers' ability to comply with the 
MDPCS and in particular, manufacturers that produce larger passenger 
cars domestically. Some of the largest civil penalties for 
noncompliance in the history of the CAFE program have been paid for 
noncompliance with the MDPCS.\978\ NHTSA also expressed concern at that 
time that consumer demand may shift even more in the direction of 
larger passenger cars if fuel prices continue to remain low. Sustained 
low oil prices can be expected to have real effects on consumer demand 
for additional fuel economy, and if that occurs, consumers may 
foreseeably be even more interested in 2WD crossovers and passenger-
car-fleet SUVs (and less interested in smaller passenger cars) than 
they are at present.
---------------------------------------------------------------------------

    \978\ See the Civil Penalties Report visualization tool at 
https://www.nhtsa.gov/corporate-average-fuel-economy/cafe-public-information-center for more specific information about civil 
penalties previously paid.
---------------------------------------------------------------------------

    Therefore, in the 2020 final rule, to help avoid similar outcomes 
in the 2021 to 2026 time frame to what had happened with the MDPCS over 
the preceding model years, NHTSA determined that it was reasonable and 
appropriate to consider the recent projection errors as part of 
estimating the total passenger car fleet fuel economy for model years 
2021-2026. NHTSA therefore projected the total passenger car fleet fuel 
economy using the central analysis value in each model year, and 
applied an offset based on the historical 1.9 percent difference 
identified for model years 2011-2018.
    For the 2022 final rule, NHTSA retained the 1.9 percent offset, 
concluding that it is difficult to predict passenger car footprint 
trends in advance, which means that, as various stakeholders have 
consistently noted, the MDPCS may turn out quite different from 92 
percent of the ultimate average passenger car standard once a model 
year is complete. NHTSA also expressed concern, as suggested by the 
United Automobile, Aerospace, and Agricultural Implement Workers of 
America (UAW), that automakers struggling to meet the unadjusted MDPCS 
may choose to import their passenger cars rather than producing them 
domestically.
    In the NPRM, NHTSA proposed to continue employing the 1.9 percent 
offset for model years 2027-2032, stating that NHTSA continued to 
believe that the reasons presented previously for the offset still 
apply, and that therefore the offset is appropriate, reasonable, and 
consistent with Congress' intent.
    The Alliance, Ford, Nissan, and Kia commented that retaining the 
MDPCS offset was appropriate.\979\ Kia, for example, stated that it 
helped manufacturers avoid civil penalty payments, but expressed 
concern that the stringency of the proposed passenger car standards was 
so high that ``even strong hybrids may not achieve the proposed MDPCS 
in the outer years.'' \980\ Despite the offset, Kia suggested that this 
overall passenger car stringency could ``complicate'' Kia's continued 
ability to produce passenger cars in the United States.\981\
---------------------------------------------------------------------------

    \979\ The Alliance, NHTSA-2023-0022-60652, Attachment 2, at 10; 
Ford, NHTSA-2023-0022-60837, at 10; Nissan, NHTSA-2023-0022-60696, 
at 9; Kia, NHTSA-2023-0022-58542-A1, at 5.
    \980\ Kia, Docket No. NHTSA-2023-0022-58542-A1, at 5.
    \981\ Id.
---------------------------------------------------------------------------

    The States and Cities commented that while the offset to the MDPCS 
was not ``inherently unreasonable,'' they disagreed with NHTSA's 
interpretation of 32902(b)(4). Specifically, they argued that ``the 
average fuel economy projected by the Secretary for the combined 
domestic and non-domestic passenger car fleets . . .'' should be 
interpreted to refer to the estimated achieved value rather than (as 
NHTSA has long interpreted it) to the estimated required value.\982\ 
The States and Cities commented that this reading was closer to the 
plain language of the statute, and asked NHTSA to clarify in the final 
rule that the offset was a ``proxy for the required projected average, 
[rather than] an interpretation away from the plain statutory text.'' 
\983\ The States and Cities further requested that the offset, if any, 
be calculated as ``the difference between the previous model years' 
central analysis value and average fuel economies achieved, rather than 
the difference between the projected and actual fleet-average 
standard.'' \984\
---------------------------------------------------------------------------

    \982\ States and Cities, Docket No. NHTSA-2023-0022-61904, 
Attachment 2, at 41.
    \983\ Id.
    \984\ Id. at 41-42.
---------------------------------------------------------------------------

    NHTSA has interpreted ``projected'' as referring to estimated 
required levels rather than estimated achieved levels since at least 
2010. In the final rule establishing CAFE standards for model years 
2012-2016, NHTSA noted that the Alliance had requested in its comments 
that the MDPCS be based on estimated achieved values.\985\ NHTSA 
responded that because Congress referred in the second clause of 
32904(b)(4)(B) to the standard promulgated for that model year, 
therefore NHTSA interpreted the

[[Page 52783]]

``projection'' as needing to be based on the estimated required value 
(i.e., the projection of the standard).\986\ The estimated achieved 
value represents manufacturers' assumed performance against the 
standard, not the standard itself. NHTSA believes that this logic 
continues to hold, and thus continues to determine the MDPCS based on 
the estimated required mpg levels projected for the model years covered 
by the rulemaking, and to determine the offset based on the estimated 
required levels rather than on the estimated achieved levels.
---------------------------------------------------------------------------

    \985\ See 75 FR 25324, 25614 (May 7, 2010).
    \986\ Id.
---------------------------------------------------------------------------

    That said, NHTSA agrees that the offset is in some ways a proxy for 
92 percent of the projected standard, insofar as the future is 
inherently uncertain and many different factors may combine to result 
in actual final passenger car mpg values that differ from those 
estimated as part of this final rule. Vehicle manufacturers may face 
even more uncertainty in the time frame of this rulemaking than they 
have faced since the MDPCS offset was first implemented. While NHTSA 
believes that the overall passenger car standards are maximum feasible 
based on the discussion in Section VI.D below, in response to Kia's 
comment that passenger car standard stringency may cause Kia to move 
its car production offshore, NHTSA continues to believe that the MDPCS 
offset helps to mitigate that uncertainty and perhaps to ease the major 
transition through which the industry is passing.
    For HDPUVs, Congress gave DOT (by delegation, NHTSA) broad 
discretion to ``prescribe separate standards for different classes of 
vehicles'' under 49 U.S.C. 32902(k). HDPUVs are defined by regulation 
as ``pickup trucks and vans with a gross vehicle weight rating between 
8,501 pounds and 14,000 pounds (Class 2b through 3 vehicles) 
manufactured as complete vehicles by a single or final stage 
manufacturer or manufactured as incomplete vehicles as designated by a 
manufacturer.'' \987\ NHTSA also allows HD vehicles above 14,000 pounds 
GVWR to be optionally certified as HDPUVs and comply with HDPUV 
standards ``if properly included in a test group with similar vehicles 
at or below 14,000 pounds GVWR,'' and ``The work factor for these 
vehicles may not be greater than the largest work factor that applies 
for vehicles in the test group that are at or below 14,000 pounds 
GVWR.''\988\ Incomplete HD vehicles at or below 14,000 pounds GVWR may 
also be optionally certified as HDPUVs and comply with the HDPUV 
standards.\989\
---------------------------------------------------------------------------

    \987\ 49 CFR 523.7(a).
    \988\ 49 CFR 523.7(b).
    \989\ 49 CFR 523.7(c).
---------------------------------------------------------------------------

    GM commented that it was appropriate for NHTSA to set HDPUV 
standards and passenger car/light truck CAFE standards in the same 
rulemaking, because electrifying certain light trucks could increase 
their weight to the point where they become HDPUVs, and ``Conducting 
these rulemakings together is an important first step to considering 
this possibility when setting standards.'' \990\ In response, NHTSA 
does track the classification of vehicles in order to ensure that its 
consideration of potential future CAFE and HDPUV stringencies is 
appropriately informed, and NHTSA did reassign vehicles from the light 
truck fleet to the HDPUV fleet (and vice versa) in response to 
stakeholder feedback to the NPRM. RVIA commented that the NPRM neither 
considered nor specifically mentioned motorhomes weighing less than 
14,000 pounds GVWR, and expressed concern that the new standards would 
apply to these vehicles and ``require [them] to be electrified.'' \991\ 
In response, the Phase 2 MD/HD final rule explains that these vehicles 
are properly classified under EISA's definitions as Class 2b-8 
vocational vehicles and not as HDPUVs.\992\ NHTSA is not setting new 
standards for vocational vehicles as part of this action. Moreover, as 
discussed elsewhere in this document, the HDPUV standards are 
performance-based standards and not electric-vehicle mandates.\993\
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    \990\ GM, Docket No. NHTSA-2023-0022-60686, at 7.
    \991\ RVIA, Docket No. NHTSA-2023-0022-51462, at 1.
    \992\ See 81 FR 73478, at 73522 (Oct. 25, 2016).
    \993\ RVIA also commented that motor homes are often used for 
extended periods in areas without access to electricity (a practice 
known as ``boondocking''), and that therefore requiring motor homes 
to be BEVs was infeasible. RVIA, NHTSA-2023-0022-51462, at 2. Again, 
the vehicles described by RVIA are not subject to the HDPUV 
standards, and the HDPUV standards themselves are performance-based 
and not electric-vehicle mandates.
---------------------------------------------------------------------------

    AFPM commented that NHTSA ``failed to address any of the unique 
statutory factors for HDPUVs,'' pointing to 49 U.S.C. 32902(k)(1) and 
suggesting that NHTSA had not followed that section in developing its 
proposal.\994\ NHTSA agrees that it did not follow 32902(k)(1) in 
developing its proposal, because NHTSA executed the requirements of 
that section as part of the Phase 1 MD/HD fuel efficiency rulemaking, 
completed in 2011. NHTSA's website contains a link to the independent 
study that NHTSA performed, as directed by 32902(k)(1), following the 
publication of the NAS report.\995\ Because that statutory requirement 
has been executed, NHTSA did not undertake it again as part of this 
rulemaking.
---------------------------------------------------------------------------

    \994\ AFPM, Docket No. NHTSA-2023-0022-61911, Attachment 2, at 
84.
    \995\ NHTSA. 2010. Factors and Considerations for Establishing a 
Fuel Efficiency Regulatory Program for Commercial Medium- and Heavy-
Duty Vehicles. October 2010. Available at: https://www.nhtsa.gov/sites/nhtsa.gov/files/2022-02/NHTSA_Study_Trucks.pdf (last accessed 
Mar. 1, 2024).
---------------------------------------------------------------------------

    NHTSA is establishing separate standards for ``spark ignition'' 
(SI, or gasoline-fueled) and ``compression ignition'' (CI, or diesel-
fueled) HDPUVs, consistent with the existing Phase 2 standards. Each 
class of vehicles has its own work-factor based target curve; 
alternative fueled vehicles (such as BEVs) are subject to the standard 
for CI vehicles and HEVs and PHEVs are subject to the standard for SI 
vehicles. We understand that EPA has recently finalized a single curve 
for all HDPUVs regardless of fuel type. ACEEE commented that NHTSA 
should follow suit and raise the stringency of the gasoline standards 
to match that of the diesel standards, arguing that it would improve 
consistency with EPA's program and be consistent with NHTSA's 
acknowledgement of the emergence of van electrification.\996\ NHTSA is 
not taking this approach, for several reasons. First, EPA is modifying 
the model year 2027 standards set in the 2016 ``Phase 2'' rulemaking, 
and NHTSA cannot follow suit due to statutory lead time requirements. 
Second, EPA's single curve standard developed in GHG gas units (g 
CO2/mile) will still result in two separate curves when 
converted to the units used by NHTSA to set standards for fuel 
efficiency (gal/100 miles). This is a result of the differing amount of 
CO2 released by each fuel type represented by each standard 
curve. Gasoline releases about 8,887g of CO2 per gallon 
burned and diesel fuel releases about 10,180g of CO2 per 
gallon burned.\997\ As an example, a model year 2030 HDPUV with a WF of 
4500 would be required to produce less than 346 gCO2/mile according to 
the current EPA single curve standards; due to the difference in carbon 
content for fuels this translates to either a required gasoline 
consumption of less than 3.89 gal/100miles or a required diesel 
consumption of less than 3.4 gal/

[[Page 52784]]

100miles. Considering difference in carbon content between gasoline and 
diesel, NHTSA chose to continue to use two separate curves based on 
combustion (and fuel) type because the agency believes it results in a 
closer harmonization between the NHTSA and EPA's standards when 
compared in fuel efficiency space. By retaining separate CI and SI 
curves NHTSA's standards will not only align closer with EPA's 
standards, but also better balance to the agency's statutory factors 
for HDPUVs: cost-effectiveness and technological feasibility.
---------------------------------------------------------------------------

    \996\ ACEEE, Docket No. NHTSA-2023-0022-60684, at 8.
    \997\ See Greenhouse Gases Equivalencies Calculator--
Calculations and References, https://www.epa.gov/energy/greenhouse-gases-equivalencies-calculator-calculations-and-references, last 
accessed 04/18/2024.
---------------------------------------------------------------------------

3. Attribute-Based and Defined by a Mathematical Function
    For passenger cars and light trucks, EISA requires NHTSA to set 
CAFE standards that are ``based on 1 or more attributes related to fuel 
economy and express[ed]. in the form of a mathematical function.'' 
\998\ Historically, NHTSA has based standards on vehicle footprint, and 
will continue to do so for model years 2027-2031. As in previous 
rulemakings, NHTSA defines the standards in the form of a constrained 
linear function that generally sets higher (more stringent) targets for 
smaller-footprint vehicles and lower (less stringent) targets for 
larger-footprint vehicles. Comments received on these aspects of the 
final rule are summarized and addressed in Section III.B of this 
preamble.
---------------------------------------------------------------------------

    \998\ 49 U.S.C. 32902(b)(3)(A) (2007).
---------------------------------------------------------------------------

    For HDPUVs, NHTSA also sets attribute-based standards defined by a 
mathematical function. HDPUV standards have historically been set in 
units of gallons per 100 miles, rather than in mpg, and the attribute 
for HDPUVs has historically been ``work factor,'' which is a function 
of a vehicle's payload capacity and towing capacity.\999\ Valero argued 
that setting HDPUV standards in units of gallons per 100 miles was 
inconsistent with the statutory text, and referred to 49 U.S.C. 
32902(b)(1), which states that ``average fuel economy standards'' shall 
be prescribed for, among other things, ``work trucks and commercial 
medium- and heavy-duty on-highway vehicles in accordance with 
subsection (k).'' Valero argued that therefore the HDPUV standards are 
``fuel economy standards'' and subject to the 32902(h) 
prohibitions.\1000\ In response, NHTSA has long interpreted ``fuel 
economy standards'' in the context of 49 U.S.C. 32902(k) as referring 
not specifically to mpg, as in the passenger car/light truck context, 
but instead more broadly to account as accurately as possible for MD/HD 
fuel efficiency. In the Phase 1 MD/HD rulemaking, NHTSA considered 
setting standards for HDPUVs (and other MD/HD vehicles) in mpg, but 
concluded that that would not be an appropriate metric given the work 
that MD/HD vehicles are manufactured to do.\1001\ NHTSA has thus set 
fuel efficiency standards for HDPUVs in this manner since 2011, and 
further notes that 32902(h) applies by its terms to subsections (c), 
(f), and (g), but not (b) or (k).
---------------------------------------------------------------------------

    \999\ See 49 CFR 535.5(a)(2).
    \1000\ Valero, Docket No. NHTSA-2023-0022-58547, at 12.
    \1001\ See 76 FR 57106, 57112, fn. 19 (Sep. 15, 2011).
---------------------------------------------------------------------------

    While NHTSA does not interpret EISA as requiring NHTSA to set 
attribute-based standards defined by a mathematical function for 
HDPUVs, given that 49 U.S.C. 32902(b)(3)(A) refers specifically to fuel 
economy standards for passenger and non-passenger automobiles, NHTSA 
has still previously concluded that following that approach for HDPUVs 
is reasonable and appropriate, as long as the work performed by HDPUVs 
is accounted for. NHTSA therefore continues to set work-factor based 
gallons-per-100-miles standards for HDPUVs for model years 2030-2035.
4. Number of Model Years for Which Standards May Be Set at a Time
    For passenger cars and light trucks, EISA also states that NHTSA 
shall ``issue regulations under this title prescribing average fuel 
economy standards for at least 1, but not more than 5, model years.'' 
\1002\ For this final rule, NHTSA is establishing new CAFE standards 
for passenger cars and light trucks for model years 2027-2031, and to 
facilitate longer-term product planning by industry and in the interest 
of harmonization with EPA, NHTSA is also presenting augural standards 
for model year 2032 as representative of what levels of stringency 
NHTSA currently believes could be appropriate in that model year, based 
on the information before us today. Hyundai commented that it supported 
the inclusion of the augural standards for model year 2032 to the 
extent that they were coordinated with EPA's final GHG standards for 
model year 2032, and were ``representative of the actual starting point 
for the standards commencing in model year 2032.'' \1003\ The Alliance, 
in contrast, argued that presenting augural standards was ``unnecessary 
and generally inconsistent with Congressional intent,'' and that 
therefore NHTSA should defer any further mention of model year 2032 
standards until a future rulemaking.\1004\ In response, NHTSA has 
coordinated with EPA to the extent possible given our statutory 
restrictions and we continue to emphasize that the augural standards 
are informational only. As explained in the NPRM, a future rulemaking 
consistent with all applicable law will be necessary for NHTSA to 
establish final CAFE standards for model year 2032 passenger cars and 
light trucks. While the NPRM provided information about the impacts of 
the standards throughout the documents without distinguishing between 
the standards and the augural standards in the interest of brevity, the 
final rule and associated documents divorced the results for the 
augural model year 2032 standards (including the net benefits) to be 
abundantly clear that they are neither final nor included as part of 
the agency's decision on the model year 2027-2031 standards.
---------------------------------------------------------------------------

    \1002\ 49 U.S.C. 32902(b)(3)(B) (2007).
    \1003\ Hyundai, Docket No. NHTSA-2023-0022-51701, at 3.
    \1004\ The Alliance, Docket No. NHTSA-2023-0022-60652, at 10.
---------------------------------------------------------------------------

    The five-year statutory limit on average fuel economy standards 
that applies to passenger cars and light trucks does not apply to the 
HD pickup and van standards. NHTSA has previously stated that ``it is 
reasonable to assume that if Congress intended for the [MD/HD] 
regulatory program to be limited by the timeline prescribed in [49 
U.S.C. 32902(b)(3)(B)], it would have either mentioned [MD/HD] vehicles 
in that subsection or included the same timeline in [49 U.S.C. 
32902(k)].'' 1005 1006 Additionally, ``in order for [49 
U.S.C. 32902(b)(3)(B) to be interpreted to apply to [49 U.S.C. 
32902(k)], the agency would need to give less than full weight to the . 
. . phrase in [49 U.S.C. 32902(b)(1)(C)] directing the Secretary to 
prescribe standards for `work trucks and commercial MD or HD on-highway 
vehicles in accordance with Subsection (k).' Instead, this direction 
would need to be read to mean `in accordance with Subsection (k) and 
the remainder of Subsection (b).' NHTSA believes this interpretation 
would be inappropriate.

[[Page 52785]]

Interpreting `in accordance with Subsection (k)' to mean something 
indistinct from `in accordance of this Subsection' goes against the 
canon that statutes should not be interpreted in a way that `render[s] 
language superfluous.' Dobrova v. Holder, 607 F.3d 297, 302 (2d Cir. 
2010), quoting Mendez v. Holder, 566 F.3d 316, 321-22 (2d Cir. 2009).'' 
\1007\ As a result, the standards previously set remain in effect 
indefinitely at the levels required in the last model year, until 
amended by a future rulemaking action.
---------------------------------------------------------------------------

    \1005\ ``[W]here Congress includes particular language in one 
section of a statute but omits it in another section of the same 
Act, it is generally presumed that Congress acts intentionally and 
purposely in the disparate inclusion or exclusion.'' Russello v. 
United States, 464 U.S. 16, 23 (1983), quoting U.S. v. Wong Kim Bo, 
472 F.2d 720, 722 (5th Cir. 1972). See also Mayo v. Questech, Inc., 
727 F.Supp. 1007, 1014 (E.D. Va. 1989) (conspicuous absence of 
provision from section where inclusion would be most logical signals 
Congress did not intend for it to be implied).
    \1006\ 76 FR 57106, 57131 (Sep. 15, 2011).
    \1007\ Id.
---------------------------------------------------------------------------

5. Maximum Feasible Standards
    As discussed above, EPCA requires NHTSA to consider four factors in 
determining what levels of CAFE standards (for passenger cars and light 
trucks) would be maximum feasible--technological feasibility, economic 
practicability, the effect of other motor vehicle standards of the 
Government on fuel economy, and the need of the United States to 
conserve energy. For determining what levels of fuel efficiency 
standards (for HDPUVs) would be maximum feasible, EISA requires NHTSA 
to consider three factors--whether a given fuel efficiency standard 
would be appropriate, cost-effective, and technologically feasible. 
NHTSA presents in the sections below its understanding of the meanings 
of all those factors in their respective decision-making contexts.
a. Passenger Cars and Light Trucks
(1) Technological Feasibility
    ``Technological feasibility'' refers to whether a particular method 
of improving fuel economy is available for deployment in commercial 
application in the model year for which a standard is being 
established. Thus, NHTSA is not limited in determining the level of new 
standards to technology that is already being applied commercially at 
the time of the rulemaking. For this final rule, NHTSA has considered a 
wide range of technologies that improve fuel economy, while considering 
the need to account for which technologies have already been applied to 
which vehicle mode/configuration, as well as the need to estimate, 
realistically, the cost and fuel economy impacts of each technology as 
applied to different vehicle models/configurations. MEMA commented that 
it ``appreciated NHTSA's openness to using different constellations of 
powertrains (BEV, PHEV, mild hybrid, ICE, FCEV, etc.) to comply with 
the standards.'' \1008\ NHTSA thanks MEMA, and continues to believe 
that the range of technologies considered, as well as how the 
technologies are defined for purposes of the analysis, is reasonable, 
based on our technical expertise, our independent research, and our 
interactions with stakeholders. NHTSA has not, however, attempted to 
account for every technology that might conceivably be applied to 
improve fuel economy, nor does NHTSA believe it is necessary to do so, 
given that many technologies address fuel economy in similar 
ways.\1009\
---------------------------------------------------------------------------

    \1008\ MEMA, Docket No. NHTSA-2023-0022-59204-A1, at 3.
    \1009\ For example, NHTSA has not considered high-speed 
flywheels as potential energy storage devices for hybrid vehicles; 
while such flywheels have been demonstrated in the laboratory and 
even tested in concept vehicles, commercially available hybrid 
vehicles currently known to NHTSA use chemical batteries as energy 
storage devices, and the agency has considered a range of hybrid 
vehicle technologies that do so.
---------------------------------------------------------------------------

    Several commenters focused on the technological feasibility of 
electrifying vehicle fleets. Jaguar commented that ``At present, there 
are increasingly limited opportunities with regards to technologies 
that will meet the incredibly challenging standards set. Soon, it will 
only be possible to meet these targets with increased BEV sales.'' 
\1010\ Volkswagen commented that there may not be enough American-
sourced batteries to meet both Inflation Reduction Act requirements and 
the proposed standards, that those limitations would prevent industry 
from manufacturing more than a certain number of BEVs per year, and 
that therefore the proposed standards were beyond technologically 
feasible and civil penalty payment would be unavoidable.\1011\ AVE 
expressed concern about whether supply chains would be fully developed 
to support compliance.\1012\ CFDC et al., a group of corn-based ethanol 
producers' organizations, argued that ``shockingly high numbers'' of 
electric vehicles would be required by the proposed standards, and that 
therefore the proposed standards were infeasible and unlawful because 
they could not be met without electric vehicles.\1013\ The commenter 
further argued that ``the proposal systematically neglects the fact 
that there are simply not enough minerals, particularly lithium, 
available to sustain global electric vehicle growth,'' and that ``this 
is an insuperable obstacle [that makes] NHTSA's proposal not 
technologically feasible.'' \1014\ RFA et al., another group of corn-
based ethanol producers' organizations, commented that NHTSA had not 
adequately considered the technological feasibility of the regulatory 
reference baseline (i.e., the amount of electrification assumed in 
response to State ZEV programs and assumed market demand), and that 
NHTSA's analysis of technological feasibility now needed to include 
consideration of critical mineral availability and BEV charging 
infrastructure.\1015\ The Alliance commented that when it ran the CAFE 
model with BEVs removed from the analysis entirely and with no option 
for paying civil penalties, many fleets appeared unable to meet the 
proposed standards, which meant that the proposed standards were not 
technologically feasible.\1016\ AFPM offered similar comments.\1017\
---------------------------------------------------------------------------

    \1010\ Jaguar, Docket No. NHTSA-2023-0022-57296, at 3.
    \1011\ Volkswagen, Docket No. NHTSA-2023-0022-58702, at 5.
    \1012\ AVE, Docket No. NHTSA-2023-0022-60213, at 3-4.
    \1013\ CFDC et al., Docket No. NHTSA-2023-0022-62242, at 10.
    \1014\ Id. at 16.
    \1015\ RFA et al. 2, Docket No. NHTSA-2023-0022-57625, at 16-18.
    \1016\ The Alliance, Docket No. NHTSA-2023-0022-60652, Appendix 
B, at 8-9.
    \1017\ AFPM, Docket No. NHTSA-2023-0022-61911, Attachment 2, at 
37.
---------------------------------------------------------------------------

    In response, NHTSA clarifies, again, that CAFE standards are 
performance-based standards, not technology mandates, and that NHTSA 
cannot set standards that require BEVs because NHTSA is statutorily 
prohibited from considering BEV fuel economy in determining maximum 
feasible CAFE standards. Commenters objecting to electrification shown 
in NHTSA's analysis are looking at what is assumed in the reference 
baseline levels, not what is required to meet NHTSA's final standards 
being promulgated in this rulemaking. As Table VI1 shows, the 
technology penetration rates for the various alternatives do not result 
in further penetration of BEVs in response to the action alternatives, 
although they do illustrate a potential compliance path for industry 
that would rely on somewhat higher numbers of SHEVs.
BILLING CODE 4910-59-P

[[Page 52786]]

[GRAPHIC] [TIFF OMITTED] TR24JN24.190

BILLING CODE 4910-59-C
    As to whether NHTSA is required to prove that the reference 
baseline as well as the CAFE standards are technologically feasible--a 
point also inherent in the Alliance comments, because the BEVs that the 
Alliance removed from its analysis were nearly all in the reference 
baseline--NHTSA disagrees that this is the agency's obligation under 
EPCA/EISA. Section IV above discusses the various considerations that 
inform the reference baselines. NHTSA has determined it is reasonable 
to assume that certain technologies will appear in the reference 
baseline, regardless of any action by NHTSA, in response to cost-
effectiveness/market demand (as would occur if battery prices fall as 
currently assumed in our analysis, for example). Similarly, if certain 
technologies appear in the reference baseline because manufacturers 
have said they would plan to meet State regulations, then either the 
manufacturers have concluded that doing so is feasible (else they would 
not plan to do so), and/or the State(s) involved have made and are 
responsible for any determinations about feasibility. Nothing in EPCA/
EISA compels NHTSA to be responsible for proving the feasibility of 
things which are beyond our authority, like State regulations or 
development of charging infrastructure or permitting of critical 
minerals production sites, and which involve consideration of 
technologies which NHTSA itself is prohibited from

[[Page 52787]]

considering. Just as it is not NHTSA's authority or responsibility to 
determine whether State programs are feasible, so it is not NHTSA's 
responsibility to determine whether State programs are not feasible. 
State programs are developed under State legal authority, and their 
feasibility is a matter for the State(s) and vehicle manufacturers (and 
other interested parties) to discuss. Nonetheless, NHTSA continues to 
believe that it is reasonably foreseeable that manufacturers will at 
least plan to meet legally binding State regulations, and thus to 
reflect that intent in our regulatory reference baseline so that we may 
best reflect the world as it would look in the absence of further 
regulatory action by NHTSA.
---------------------------------------------------------------------------

    \1018\ The values in the table report fleet-wide technology 
penetration rates in the No-Action Alternative and differences from 
this baseline in the action alternatives.
    \1019\ Advanced Gasoline Engines includes SGDI, DEAC, and 
TURBO0.
    \1020\ Minor technology penetration differences exist due to 
rounding and changes in fleet size and regulaory class composition. 
Changes less than 0.1% were rounded to zero for this table.
---------------------------------------------------------------------------

    Reviewing Table VI-1 above, our analysis of the final rule 
illustrates a technology path in which manufacturers might modestly 
increase strong hybrid-based technologies beyond reference baseline 
levels. CTLCV commented that the technology exists to meet the 
standards, but that the auto industry ``must be required to provide the 
most efficient versions of gas-powered vehicles possible and not stand 
in the way of our transition to zero-emission vehicles.'' \1021\ The 
Joint NGOs commented that NHTSA's proposed standards were below maximum 
feasible levels because they do not represent future possible 
improvements that manufacturers could conceivably make to ICE 
vehicles.\1022\ The Joint NGOs cited the 2022 EPA Trends Report as 
indicating that various manufacturers had ``underutilized'' 
technologies ``such as turbocharged engines, continuously variable 
transmission and cylinder deactivation.'' \1023\ The Joint NGOs next 
cited an ICCT study suggesting that further ``continual'' improvements 
to cylinder deactivation, high compression Atkinson cycle engines, 
light weighting, and mild hybridization'' could increase the fuel 
economy benefits of those technologies.\1024\ The Joint NGOs then 
suggested that manufacturers could change the mix of vehicles they 
produced in a given model year so that only the ``cleanest powertrain'' 
was sold for each vehicle model.\1025\ The Joint NGOs later stated that 
NHTSA's analysis was based on ``what manufacturers `will,' `would,' or 
are `likely to' do--rather than what manufacturers `can' or `could' 
do.'' The Joint NGOs argued that ``many of these assumptions about what 
`would' happen are also based on a review of historical practice, 
rather than a forward-looking assessment of possibility.'' \1026\ The 
States and Cities also argued that all of the alternatives in the 
proposal were technologically feasible because they could be met with 
varying amounts of mass reduction and strong hybrids, technologies that 
certainly exist and are available for deployment.\1027\ This commenter 
further argued that mass reduction was highly effective and that NHTSA 
should use its authority to encourage more mass reduction.\1028\ 
Nissan, in contrast, expressed concern that the proposal would ``divert 
significant resources towards further technological development of ICE 
vehicles, rather than allowing manufacturers to focus on fleet 
electrification goals.'' \1029\
---------------------------------------------------------------------------

    \1021\ CTLCV, Docket No. NHTSA-2023-0022-29018, at 2.
    \1022\ Joint NGOs, Docket No. NHTSA-2023-0022-61944, NGO Comment 
Appendix, at 6.
    \1023\ Id. at 6-7.
    \1024\ Id.
    \1025\ Id.
    \1026\ Id. at 51-52.
    \1027\ States and Cities, Docket No. NHTSA-2023-0022-61904, 
Attachment 2, at 28.
    \1028\ Id.
    \1029\ Nissan, Docket No. NHTSA-2023-0022-60696, at 3.
---------------------------------------------------------------------------

    In response, while NHTSA sets performance-based standards rather 
than specifying which technologies should be used, NHTSA is mindful 
that industry is in the early to mid-stages of a major technological 
transition. NHTSA may not consider the fuel economy of BEVs when 
setting standards, but industry has made it extremely clear that it is 
committed to the transition to electric vehicles. The contrast between 
the comments from NRDC and the States and Cities, calling on NHTSA to 
somehow specifically require ongoing ICE vehicle improvements, and from 
Nissan, arguing that NHTSA must not require further ICE vehicle 
improvements, highlights this issue. NHTSA agrees that the 
technological feasibility factor allows NHTSA to set standards that 
force the development and application of new fuel-efficient 
technologies but notes this factor does not require NHTSA to do 
so.\1030\ In the 2012 final rule, NHTSA stated that ``[i]t is important 
to remember that technological feasibility must also be balanced with 
the other of the four statutory factors. Thus, while `technology 
feasibility' can drive standards higher by assuming the use of 
technologies that are not yet commercial, `maximum feasible' is also 
defined in terms of economic practicability, for example, which might 
caution the agency against basing standards (even fairly distant 
standards) entirely on such technologies.'' \1031\ NHTSA further stated 
that ``as the `maximum feasible' balancing may vary depending on the 
circumstances at hand for the model year in which the standards are 
set, the extent to which technological feasibility is simply met or 
plays a more dynamic role may also shift.'' \1032\ With performance-
based standards, NHTSA cannot mandate the mix of technologies that 
manufacturers will use to achieve compliance, so it is not within 
NHTSA's power to specifically require any particular type of ICE 
vehicle improvements, as NRDC and the States and Cities suggest and as 
Nissan fears. In determining maximum feasible CAFE standards, however, 
NHTSA can do its best to balance the concerns raised by all parties, as 
they fall under the various statutory factors committed to NHTSA's 
discretion. Whether these concerns are properly understood as ones of 
``technological feasibility'' is increasingly murky as the technology 
transition (that NHTSA cannot consider directly) proceeds. NHTSA has 
also grappled with whether the ``available for deployment in commercial 
application'' language of our historical interpretation of 
technological feasibility is appropriately read as ``available for 
deployment in the world'' or ``available for deployment given the 
restrictions of 32902(h).'' The Heritage Foundation commented that 
``There is no doubt that EPCA is referring to'' ICE vehicles in 
describing technological feasibility, because EPCA defines ``fuel'' as 
referring to gasoline or diesel fuels and electricity as an 
``alternative fuel,'' and NHTSA is prohibited from considering 
alternative fueled vehicles in determining maximum feasible CAFE 
standards.\1033\ Hyundai argued that the proposed PC2LT4 standards were 
not technologically feasible, because (1) the regulatory reference 
baseline included BEVs, and (2) DOE's changes to the PEF value and 
NHTSA's proposal to reduce available AC/OC flexibilities made any 
standards harder to meet.\1034\ NHTSA agrees that it cannot consider 
BEV fuel economy in determining maximum feasible standards, but NHTSA 
reiterates that the technological transition that NHTSA is prohibited 
from considering in setting standards complicates the historical 
approach to the statutory factors. It may well be that in light of this 
transition, a better interpretation is

[[Page 52788]]

for technological feasibility to be specifically limited to the 
technologies that NHTSA is permitted to consider.
---------------------------------------------------------------------------

    \1030\ See 77 FR 63015 (Oct. 12, 2012).
    \1031\ Id.
    \1032\ Id.
    \1033\ Heritage Foundation, Docket No. NHTSA-2023-0022-61952, at 
4.
    \1034\ Hyundai, Docket No. NHTSA-2023-0022-51701, at 5-6.
---------------------------------------------------------------------------

    Nevertheless, in the overall balancing of factors for determining 
maximum feasible, the above interpretive question may not matter, 
because it is clear that the very high cost of the most stringent 
alternatives likely puts them out of range of economic practicability, 
especially if manufacturers appear in NHTSA's analysis to be broadly 
resorting to payment of civil penalties rather than complying through 
technology application. Although some companies historically have 
chosen to pay civil penalties as a more cost-effective option than 
compliance, which NHTSA has not seen as an indication of infeasibility 
previously, the levels of widespread penalty payment rather than 
compliance projected in this analysis is novel. Further, penalty 
payment could detract from fuel economy during these particular model 
years, where manufacturers are devoting significant resources to a 
broader transition to electrification. Effectively, given the statutory 
constraints under which NHTSA must operate, and constraining technology 
deployment to what is feasible under expected redesign cycles, NHTSA 
does not see a technology path to reach the higher fuel economy levels 
that would be required by the more stringent alternatives, in the time 
frame of the rulemaking. Moreover, even if technological feasibility 
were not a barrier, that does not mean that requiring that technology 
to be added would be economically practicable under these specific 
circumstances.
    IPI commented that NHTSA's inclusion in the NPRM of tables showing 
technology penetration rates under the ``standard setting'' analysis 
belied NHTSA's suggestion in the NPRM that there did not appear to be a 
technology path to reach the higher fuel economy levels that would be 
required by the more stringent alternatives.\1035\ IPI suggested that 
either NHTSA must believe the more stringent alternatives to be 
impossible to meet in the rulemaking time frame, or that NHTSA was 
``collapsing'' the technological feasibility factor into the economic 
practicability factor by considering cost under the heading of 
technological feasibility.\1036\
---------------------------------------------------------------------------

    \1035\ IPI, Docket No. NHTSA-2023-0022-60485, at 9.
    \1036\ Id.
---------------------------------------------------------------------------

    In response, within the context of the constrained analysis which 
NHTSA must consider by statute, NHTSA does find that there is no 
technology path for the majority of manufacturers to meet the most 
stringent CAFE alternatives, considering expected redesign cycles, 
without shortfalling and resorting to penalties. Even setting aside 
that some manufacturers have historically chosen to pay penalties 
rather than applying technology as an economic decision, NHTSA's final 
rule (constrained) analysis illustrates that a number of manufacturers 
do not have enough opportunities to redesign enough vehicles during the 
rulemaking time frame in order to achieve the levels estimated to be 
required by the more stringent alternatives.
    Figure VI-2 through Figure VI-4 present several manufacturer-fleet 
combinations that clearly illustrate these limits in NHTSA's 
statutorily constrained analysis. The figures present fleet powertrain 
distribution along with vehicle redesign cycles.\1037\ Each bar in the 
figure represents total manufacturer-fleet sales in a given model year, 
and bars are shaded to indicate the composition of sales by powertrain. 
Any portion of the bar with overlayed hashed lines denotes the portion 
of the manufacturer's fleet that is not eligible for redesign (i.e., 
cannot change powertrain) in that model year, often due to recent 
redesigns and the need to adhere to the redesign cycle to avoid 
imposing costs for which NHTSA does not currently account.\1038\ The 
left and right panels of the figure present results for the least and 
most stringent action alternatives, respectively, for comparison.
---------------------------------------------------------------------------

    \1037\ Manufacturers also apply non-powertrain technology to 
improve vehicle fuel economy, and likely do so in these examples, 
but these plots are limited to powertrain conversion and eligibility 
to simplify the illustration. Note also that any increase in BEV 
share in model year 2027 and beyond is the result of ZEV compliance, 
as BEV conversion is constrained during standard-setting years.
    \1038\ See TSD Chapter 2.6 for more information on refresh and 
redesign assumptions.

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[[Page 52789]]

[GRAPHIC] [TIFF OMITTED] TR24JN24.191

    Figure VI-2 displays these results for Ford's light truck fleet. 
Under PC2LT002 (left panel), Ford's fleet complies with the standards 
in all model years, as shown in the row ``Achieved FE relative to 
standard,'' which has all results either positive or zero (meaning that 
the fleet exactly complies with Ford's estimated applicable standard). 
This occurs because the model converts a large part of the Ford light 
trucks eligible for redesign to SHEVs in model year 2027, represented 
by the large, un-hashed dark gray segment in the center of the model 
year 2027 bar. It continues to convert eligible MHEVs to SHEVs in model 
year 2028 and model year 2029. Under PC6LT8 (right panel), Ford 
converts all eligible vehicles to SHEVs in model years 2027, 2028, and 
2029. Even with this technology application, Ford's achieved fuel 
economy levels do not meet the alternative's estimated standards (note 
the negative values in the row ``Achieved FE relative to standard,'') 
and Ford is therefore assumed to pay civil penalties for model years 
2028 and beyond. Under all alternatives, Ford has no light trucks 
eligible for redesign in model year 2030, and the only vehicles whose 
redesign schedule makes them eligible in model year 2031 are BEVs, 
which represent the end of the powertrain pathway and have no other 
technology that may be applied.\1039\ According to the statutorily-
constrained analysis that NHTSA considers for determining maximum 
feasible standards, Ford simply cannot comply with the PC6LT8 light 
truck standards beginning in model year 2028, because it has redesigned 
all the light trucks that it can (consistent with its redesign 
schedule) and is out of technology moves.
---------------------------------------------------------------------------

    \1039\ At the time of the analysis, FCV technology is projected 
to make up a non-substantive percentatge of the fleet, and FCV is 
therefore not shown in the graphics, See technology penetration 
rates in FRIA Databook Appendices.
---------------------------------------------------------------------------

    Other manufacturers encounter similar constraints at higher 
stringency levels and across fleets. As shown in Figure VI-3, the model 
converts nearly all eligible portions of GM's light truck fleet to 
PHEVs, but GM still encounters compliance constraints. These 
constraints are marginal under PC2LT002, but under PC6LT8, GM is unable 
to comply beginning in model year 2027, with shortfalls exceeding 3 
MPG.

[[Page 52790]]

[GRAPHIC] [TIFF OMITTED] TR24JN24.192

    Figure VI-4 and Figure VI-5 show Toyota's import and domestic 
passenger car fleet, respectively. Under PC2LT002, Toyota's import 
passenger car fleet exceeds the applicable standard for all years, but 
in contrast Toyota's domestic passenger car fleet falls slightly short 
during model years 2027-2029. As in the other examples, this occurs due 
to the lack of powertrains eligible for redesign during those years. 
This phenomenon is even more pronounced and affects both Toyota's 
import and domestic passenger car fleets, under PC6LT8. Both of 
Toyota's passenger car fleets develop shortfalls but only the domestic 
fleet is able to eliminate the shortfall in the rulemaking time frame 
when redesigns are available in model year 2030.

[[Page 52791]]

[GRAPHIC] [TIFF OMITTED] TR24JN24.193

[GRAPHIC] [TIFF OMITTED] TR24JN24.194


[[Page 52792]]


    Figure VI-6 shows Honda's domestic passenger car fleet CAFE 
performance.\1040\ Under PC2LT002, the passenger car fleet complies 
with the standard across all years, achieving a 0.1 mpg overcompliance 
in model year 2027 and slowly increasing to a 2.2 mpg overcompliance by 
the end of the standard setting years. Under PC6LT8, Honda is unable to 
meet the standard for model year 2027 but reaches compliance by model 
year 2028 and maintains it through the standard-setting years. However, 
it is worth noting that the fleet drops from a 6.6 mpg overcompliance 
in model year 2029 to zero overcompliance in model year 2031, after 
converting over 75 percent of their fleet to advanced powertrain 
technologies, and Honda is the only non-BEV manufacturer to achieve 
consistent compliance under the highest stringency.
---------------------------------------------------------------------------

    \1040\ Only Honda's Domestic Car fleet is shown here; Honda's 
import car fleet makes up approxametly 1 percent of their U.S. sales 
volume.
[GRAPHIC] [TIFF OMITTED] TR24JN24.195


[[Page 52793]]


    NHTSA conducted similar analysis for every manufacturer-fleet 
combination and found similar patterns and constraints on compliance. 
Results for manufacturers that make up the top 80 percent of fleet 
sales in model year 2031 are included in Table VI-2 and Table VI-3.
    In the light truck fleet, nearly all vehicles are either ineligible 
for redesign or reach the end of their powertrain compliance pathways 
under PC6LT8, with the majority of manufacturers not achieving 
compliance, some falling short by as much as 18.7 mpg. Under PC2LT002, 
most manufacturers achieve the standard and overcomply somewhat, with 
only two manufacturers showing any shortfalls. And in all cases shown, 
representing 80 percent of all light truck sales volume, shortfalls are 
1.8 mpg or less under PC2LT002.
BILLING CODE 4910-59-P
[GRAPHIC] [TIFF OMITTED] TR24JN24.196

    All manufacturers shown, representing 80 percent of all passenger 
car sales volume, generally comply with fleet fuel economy levels in 
the passenger car fleet for the preferred alternative. Some 
manufacturers do show one or two years of shortfalls in the rulemaking 
time frame, resulting from redesign rate constraints, indicated by a 
lack of share eligibility. At high stringency levels, such as PC6LT8, 
the rate of stringency increase coupled with

[[Page 52794]]

limited share eligibility makes compliance for the majority of the 
fleet untenable in NHTSA's statutorily constrained analysis.
---------------------------------------------------------------------------

    \1041\ The passenger car fleet contains both domestic and 
imported car fleets. Shortfalls can occur in one fleet while the 
overall passenger car fleet remains in compliance. This could result 
in estimiated civil penalties with a positive compliance positon, as 
in the case of Nissan in model year 2028.
[GRAPHIC] [TIFF OMITTED] TR24JN24.197


[[Page 52795]]


    The compliance illustrations in the figures and tables above 
demonstrate the challenge that higher stringencies pose, especially 
within the constrained modeling framework required by statute. 
Historically, in the constrained analysis, the higher levels of 
electrification that could be considered under the statute (SHEV and 
PHEV in charge sustaining mode) in addition to advanced engine 
modifications (turbocharging and HCR) easily provided the effectiveness 
levels needed to raise the manufacturers' fleet fuel economy when 
applied at the rates governed by refresh and redesign schedules.\1042\ 
In past analyses, the cost of converting the vehicles to the new 
technologies was the limiting factor. However, the remaining 
percentages of fleets that can be modified consistent with redesign and 
refresh cycles, coupled with the limits of total fuel efficiency 
improvement possible (considering only statutorily-allowed 
technologies), now limits what is achievable by the manufacturers in 
the time frame of the rule. Regardless of the technology cost, or 
application of penalties, higher levels of fuel economy improvement are 
simply not achieved under the higher stringency alternatives, often 
because manufacturers have no opportunity to make the improvement and 
the statutorily-available technologies will not get them to where they 
would need to be.
---------------------------------------------------------------------------

    \1042\ See, e.g., 87 FR 25710 (May 2, 2022).
---------------------------------------------------------------------------

    For purposes of model years 2027-2031, NHTSA concludes that 
sufficient technology and timely opportunities to apply that technology 
exist to meet the final standards. Moreover, as Table VI-1 above shows, 
NHTSA's analysis demonstrates a technology path to meet the standards 
that does not involve application of BEVs, FCEVs, or other prohibited 
technologies. NHTSA therefore believes that the final standards are 
technologically feasible.
    As discussed above, NHTSA also conducted a ``No ZEV alternative 
baseline'' analysis. Technology penetration rates and manufacturer 
compliance status results are somewhat different under that analysis, 
as might be foreseeable.

[[Page 52796]]

[GRAPHIC] [TIFF OMITTED] TR24JN24.198

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

    \1043\ The values in the table report fleet-wide technology 
penetration rates in the No-Action Alternative and differences from 
this baseline in the action alternatives.
    \1044\ Advanced Gasoline Engines includes SGDI, DEAC, and 
TURBO0.
    \1045\ Minor technology penetration differences exist due to 
rounding and changes in fleet size and regulaory class composition. 
Changes less than 0.1% were rounded to zero for this table.

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

[[Page 52797]]

    Comparing to the reference case baseline analysis results in Table 
VI-1, under the No ZEV alternative baseline analysis, BEV rates in the 
baseline go down in every model year (and remain at 0 percent for all 
action alternatives due to statutory constraints implemented in the 
model); SHEV rates increase by several percentage points; PHEV rates go 
up by about 1 percent; and advanced gasoline engine rates remain 
roughly the same in the baseline but drop several percentage points in 
the action alternatives. These trends hold across action alternatives.
[GRAPHIC] [TIFF OMITTED] TR24JN24.199

    In terms of manufacturers' ability to comply with different 
regulatory alternatives given existing redesign schedules, results for 
the light truck fleet under the No ZEV alternative baseline did not 
vary significantly from the results presented in Table VI-2 for the 
reference case baseline analysis. Manufacturer light truck shortfalls

[[Page 52798]]

under PC6LT8 were still nearly universal, with maximum shortfalls 
reaching more than 19 mpg, higher than the shortfalls under the 
reference case baseline. Ford, GM, and Nissan light truck penalties are 
almost identical under both baselines. Under the No ZEV alternative 
baseline analysis, Toyota still pays no light truck penalties under 
PC2LT002, and generally lower penalties under PC6LT8. Stellantis pays 
slightly higher penalties under PC2LT002, and generally lower penalties 
under PC6LT8. Honda and Subaru still pay no penalties under PC2LT002 
and pay somewhat higher penalties under PC6LT8.
---------------------------------------------------------------------------

    \1046\ The passenger car fleet contains both domestic and 
imported car fleets. Shortfalls can occur in one fleet while the 
overall passenger car fleet remains in compliance. This could result 
in estimiated civil penalties with a positive compliance positon, as 
in the case of Nissan in model year 2027.
[GRAPHIC] [TIFF OMITTED] TR24JN24.200


[[Page 52799]]


[GRAPHIC] [TIFF OMITTED] TR24JN24.201

BILLING CODE 4910-59-C
    For passenger car shortfalls, the use of the No ZEV alternative 
baseline does not change much for Hyundai, Kia, VWA, Tesla, or GM 
(which in GM's case, illustrates that most of GM's compliance 
difficulty is in its light truck fleet), when comparing the results of 
the above table with Table VI-3. Toyota and Honda see higher passenger 
car penalties under the No ZEV alternative baseline for both PC2LT002 
and PC6LT8, with fewer opportunities for redesigns. Nissan sees higher 
penalties under the No ZEV alternative baseline even though redesign 
opportunities are nearly identical.
    Based on these results, which are generally quite similar to those 
under the reference case baseline, NHTSA finds that using the No ZEV 
alternative baseline would not change our conclusions regarding the 
technological feasibility of the various action alternatives.
(2) Economic Practicability
    ``Economic practicability'' has consistently referred to whether a 
standard is one ``within the financial capability of the industry, but 
not so stringent as to'' lead to ``adverse economic consequences, such 
as a significant loss of jobs or unreasonable elimination of consumer 
choice.'' \1047\ In evaluating economic practicability, NHTSA considers 
the uncertainty surrounding future market conditions and consumer 
demand for fuel economy alongside consumer demand for other vehicle 
attributes. There is not necessarily a bright-line test for whether a 
regulatory alternative is economically practicable, but there are 
several metrics that we discuss below that we find can be useful for 
making this assessment. In determining whether standards may or may not 
be economically practicable, NHTSA considers: \1048\
---------------------------------------------------------------------------

    \1047\ 67 FR 77015, 77021 (Dec. 16, 2002).
    \1048\ The Institute for Energy Research argued that NHTSA had 
``deliberate[ly]'' failed to propose ``any alternative that . . . 
meet[s] the threshold for economic practicability,'' and that NHTSA 
was ``thus asserting that economic practicability is a factor that 
can be disregarded at the agency's whim.'' Institute for Energy 
Research, NHTSA-2023-0022-63063, Attachment 1, at 2. In response, 
NHTSA grappled extensively with the economic practicability of the 
regulatory alternatives, see, e.g., 88 FR at 56328-56350 (Aug. 17, 
2023), and concluded that (for purposes of the proposal) the PC2LT4 
alternative was economically practicable but the more stringent 
alternatives likely were not. NHTSA does not understand how the 
commenter reached its conclusion that NHTSA disregarded economic 
practicability.
---------------------------------------------------------------------------

     Application rate of technologies--whether it appears that 
a regulatory alternative would impose undue burden on manufacturers in 
either or both the near and long term in terms of how much and which 
technologies might be required. This metric connects to other metrics, 
as well.
    The States and Cities commented that the differences in technology 
penetration rates between the proposed standards and Alternative PC3LT5 
were ``minimal,'' arguing that ``Where differences do exist, such as in 
the degree of strong hybrids and mass reduction improvements applied, 
[they] represent a modest additional burden for manufacturers that is 
lower than or similar to the technology application rates for passenger 
cars estimated for past rulemakings.'' \1049\ That commenter stated 
further that ``While the differences in degree of strong hybrid and 
mass reduction improvements estimated for light trucks in the current 
versus previous rulemaking is more moderate, . . . it does not make the 
standards economically impracticable.'' \1050\ CEI commented that ``The 
EV sales projections informing. . .NHTSA's regulatory proposal[ is] 
based in significant part on California's EPCA-preempted ZEV program.'' 
\1051\
---------------------------------------------------------------------------

    \1049\ States and Cities, Docket No. NHTSA-2023-0022-61904, 
Attachment 2, at 31.
    \1050\ Id.
    \1051\ CEI, Docket No. NHTSA-2023-0022-61121, Attachment 1, at 
8.
---------------------------------------------------------------------------

    NHTSA explored technology penetration rates above in the context of 
technological feasibility; for economic practicability, the question 
becomes less about ``does the technology exist and could it be 
applied'' and more about ``if manufacturers were to apply it at the 
rates NHTSA's analysis suggests, what would the economic consequences 
be?'' The States and Cities argue that the additional burden of 
applying additional ICE/vehicle-based technology would be ``modest'' 
and ``not economically impracticable,'' while CEI argues that NHTSA's 
analysis relies unduly and inappropriately on EVs. In response, NHTSA 
notes again that our analysis does not allow BEVs to be added in 
response to potential new CAFE standards, although it does recognize 
the existence of BEVs added during standard-setting years for non-CAFE 
reasons.\1052\ In their comments, the automotive industry dwells 
heavily on the difficulty of building BEVs for reasons other than the 
proposed standards, and suggests that having to make any fuel economy 
improvements to their ICEVs in response to the CAFE program would be 
economically impracticable and ruinous to their other technological 
efforts. NHTSA has considered these comments carefully.

[[Page 52800]]

NHTSA may be prohibited from considering the fuel economy of BEVs in 
determining maximum feasible CAFE standards, but NHTSA does not believe 
that it is prohibited from considering the industry resources needed to 
build BEVs, and industry is adamant that the resource load that it 
faces as part of this technological transition is unprecedented. As 
such, it appears that the economic-practicability tolerance of 
technological investment other than what manufacturers already intended 
to invest must be lower than NHTSA assumed in the NPRM. NHTSA 
recognizes, as discussed above in the technological feasibility 
section, that refresh and redesign schedules included in the analysis 
(in response to manufacturer comments to NHTSA rulemakings over the 
last decade or more) limit opportunities in the analysis for 
manufacturers to apply new technologies in response to potential future 
standards.\1053\ While this is a limitation, it is consistent with and 
a proxy for actual manufacturing practice. The product design cycle 
assumptions are based in manufacturer comments regarding how they 
manage the cost to design new models, retool factories, coordinate 
spare parts production, and train workers to build vehicles that 
accommodate new technologies. The product design cycle also allows 
products to exist in the market long enough to recoup (at least some 
of) these costs. Changing these assumptions, or assuming shorter 
product design cycles, would likely increase the resources required by 
industry and increase costs significantly in a way that NHTSA's 
analysis currently does not capture. Increasing costs significantly 
would distract industry's focus on the unprecedented technology 
transition, which industry has made clear it cannot afford to do. NHTSA 
therefore recognizes the refresh and redesign cycles as a very real 
limitation on economic practicability in the time frame of the final 
standards.
---------------------------------------------------------------------------

    \1052\ See Section IV above for more discussion on this topic.
    \1053\ See TSD Chapter 2.6 for discussions on Product Design 
Cycle.
---------------------------------------------------------------------------

     Other technology-related considerations--related to the 
application rate of technologies, whether it appears that the burden on 
several or more manufacturers might cause them to respond to the 
standards in ways that compromise, for example, vehicle safety, or 
other aspects of performance that may be important to consumer 
acceptance of new products.
    The Alliance commented that ``Manufacturers have a limited pool of 
human and capital resources to invest in new vehicles and 
powertrains,'' and argued that it would not be ``economically 
practicable to invest the resources necessary to achieve both the non-
EV improvements envisioned and the increase in EV market share 
envisioned.'' \1054\ Kia provided similar comments. Mitsubishi 
similarly expressed concern that the proposal would cause OEMs to spend 
resources on ICE technology ``that would otherwise be better used to 
accelerate the launch of new electric vehicle platforms.'' \1055\
---------------------------------------------------------------------------

    \1054\ The Alliance, Docket No. NHTSA-2023-0022-60652, 
Attachment 2, at 8.
    \1055\ Mitsubishi, Docket No. NHTSA-2023-0022-61637, at 2.
---------------------------------------------------------------------------

    As with the comments about technology penetration rates, while 
NHTSA does not consider the technological transition itself in 
determining maximum feasible standards, NHTSA does acknowledge the 
resources needed to make that transition and agrees that manufacturers 
have a limited pool of human and capital resources. That said, 
manufacturers' comments suggest that they believe that NHTSA is 
demanding specific types of technological investments to comply with 
CAFE standards. NHTSA reiterates that the CAFE standards are 
performance-based standards and NHTSA does not require any specific 
technologies to be employed to meet the standards. Moreover, NHTSA 
notes numerous recent manufacturer announcements of new HEV and PHEV 
models.\1056\ The central (statutorily-constrained) analysis for the 
final rule happens to reflect these recent technological developments, 
particularly in the early (pre-rulemaking time frame) years of the 
analysis. For model year 2026, the analysis shows a fleetwide sales-
weighted average of combined SHEV and PHEV technology penetration of 7 
percent for passenger cars and 24 percent for light trucks. This occurs 
in parallel with an estimated fleetwide sales-weighted average BEV 
technology penetration of 31 percent for passenger cars and 14 percent 
for light trucks. The analysis reflects the possibility that initial 
BEV offerings might fall in the passenger car market, as well as the 
rise of hybrid powertrain designs (perhaps as a transitional 
technology) early in the larger technology transition. We note that no 
significant additional advanced engine technology is introduced to the 
fleet in the analysis, across the alternatives. As stringency 
increases, the analysis mostly applies higher volumes of strong hybrid 
technologies. NHTSA thus concludes that given the announcements 
discussed above, the central analysis does in fact represent a 
reasonable path to compliance for industry (even if it is not the only 
technology path that industry might choose) that allows for a high 
level of resource focus by not requiring significant investments in 
technology beyond what they may already plan to apply.
---------------------------------------------------------------------------

    \1056\ See, e.g., ``GM to release plug-in hybrid electric 
vehicles, backtracking on product plans,'' cnbc.com, Jan. 30, 2024, 
at https://www.cnbc.com/2024/01/30/gm-to-release-plug-in-hybrid-vehicles-backtracking-on-product-plans.html; ``As Ford loses 
billions on EVs, the company embraces hybrids,'' cnbc.com, Jul. 28, 
2023, at https://www.cnbc.com/2023/07/28/ford-embraces-hybrids-as-it-loses-billions-on-evs.html; ``Here's why plug-in hybrids are 
gaining momentum,'' Automotive News, Mar. 7, 2024, at https://www.autonews.com/mobility-report/phevs-can-help-introduce-evs-reduce-emissions; ``Genesis will reportedly launch its first hybrid 
models in 2025,'' autoblog.com, Feb. 20, 2024, at https://www.autoblog.com/2024/02/20/genesis-will-reportedly-launch-its-first-hybrid-models-in-2025/?guccounter=1&guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&guce_referrer_sig=AQAAAEX5xWHtRIyg5otwKBUziml8MrkD5He-xxjOQdFZCnodUbvrtwUljfJ9IHSovY9JtYQjTUDDcjV4Zz1ZWrMu7VE9D037IhYTi_wfNPEI6aXzC-bbvrRVi2hkM3sqsGQBqFPgAVh_MK6WDqt1rNA25b14UovtiNgzQr6wpwp2iORi.
---------------------------------------------------------------------------

     Cost of meeting the standards--even if the technology 
exists and it appears that manufacturers can apply it consistent with 
their product cadence, if meeting the standards is estimated to raise 
per-vehicle cost more than we believe consumers are likely to accept, 
which could negatively impact sales and employment in the automotive 
sector, the standards may not be economically practicable. While 
consumer acceptance of additional new vehicle cost associated with more 
stringent CAFE standards is uncertain, NHTSA still finds this metric 
useful for evaluating economic practicability.
---------------------------------------------------------------------------

    \1057\ IPI, Docket No. NHTSA-2023-0022-60485, at 12.
    \1058\ Rivian, Docket No. NHTSA-2023-0022-59765, at 3.
---------------------------------------------------------------------------

    IPI commented that NHTSA's compliance costs were very likely 
overstated due to the statutory constraints, and that ``While NHTSA 
reasonably omits these features from its consideration due to its 
statutory constraints and should maintain that approach, it is 
particularly odd for NHTSA to prioritize compliance costs unduly as a 
basis to reject the most net-beneficial alternative when it knows that 
those costs are overestimates.'' \1057\ Rivian also commented that 
NHTSA's statutory constraints inflate the apparent cost of compliance, 
and suggested that NHTSA look at the feasibility of potential standards 
instead of at their cost.\1058\ An individual citizen commented that it 
appeared NHTSA had proposed lower standards than would otherwise be 
feasible out of

[[Page 52801]]

concern about costs, and stated that NHTSA should reconsider ``in light 
of recent news of the exorbitant personal annual CEO compensations for 
the Big Three automobile manufacturers, $75 million, combined,'' 
suggesting that perhaps all costs associated with technology 
application did not need to be passed fully on to consumers.\1059\ The 
States and Cities stated that the per-vehicle costs associated with the 
proposed standards and Alternative PC3LT5 ``are both reasonable and 
lower than past estimates of average price change.'' \1060\
---------------------------------------------------------------------------

    \1059\ Roselie Bright, Docket No. NHTSA-2022-0075-0030-0004.
    \1060\ States and Cities, Docket No. NHTSA-2022-0075-0033, 
Attachment 2, at 30.
---------------------------------------------------------------------------

    In contrast, Landmark stated that ``NHTSA admits'' that the 
projected costs due to meeting potential future standards would be 
passed forward to consumers as price increases, and that ``The Proposed 
Rule would punish consumers of passenger cars.'' \1061\ MOFB commented 
that increased vehicle prices would ``apply disproportionate burden on 
[its] members.'' \1062\ Jaguar commented that the proposed revisions to 
the PEF resulted in increased compliance costs and ``a weaker business 
case,'' which ``could push automakers to limit BEVs to more profitable 
markets.'' \1063\ Jaguar also expressed concerns about volatility for 
critical minerals pricing that could further affect per-vehicle 
costs.\1064\ AAPC commented that NHTSA's analysis showed that the 
projected per-vehicle cost was ``over three times greater'' for the 
Detroit 3 automakers than for the rest of the industry, and that this 
``directly results from DOE's proposed reduction of the PEF for EVs and 
NHTSA's proposal to require drastically faster fuel economy 
improvements from trucks as compared to cars.'' \1065\ AAPC argued that 
DOE and NHTSA were deliberately pursuing policies contrary to 
Administration goals, and that doing so would ``benefit[ ] foreign auto 
manufacturers'' and ``unfairly harm[ ] the [Detroit 3] and its 
workforce.'' \1066\
---------------------------------------------------------------------------

    \1061\ Landmark, Docket No. NHTSA-2023-0022-48725, Attachment 1, 
at 4.
    \1062\ MOFB, Docket No. NHTSA-2023-0022-61601, at 1.
    \1063\ Jaguar, Docket No. NHTSA-2023-0022-57296, Attachment 1, 
at 6.
    \1064\ Id.
    \1065\ AAPC, Docket No. NHTSA-2023-0022-60610, at 5.
    \1066\ Id.
---------------------------------------------------------------------------

    Several commenters stated that the proposed standards would require 
an unduly expensive transition to BEVs. KCGA argued that ``EVs actively 
lose companies money and require subsidization to remain competitive,'' 
and that ``Scaling would be one of the biggest challenges. . . .'' 
\1067\ The American Consumer Institute stated that among the 
``obstacles to a sudden and immediate electrification of the fleet,'' 
``The price differential between an EV and an ICE vehicle still exceeds 
$10,000, which poses a staggering disparity in upfront costs alone.'' 
\1068\ AHUA echoed these concerns, stating that ``the price of an EV 
was more than double the price of a subcompact car,'' and that ``This 
represents a real financial challenge for middle class families that 
need a basic vehicle to get to work, health care, the grocery store, 
and other fundamental destinations, and for local business travel, such 
as meetings and sales calls, particularly for small businesses.'' 
\1069\ SEMA argued that ``the only way for OEMs to comply with the 
proposed standards is to rapidly increase sales of electric vehicles 
and sell fewer ICE vehicles,'' and that ``The alternative is . . . to 
pay massive fines. . . .'' \1070\ SEMA also stated that electric 
vehicles were much more expensive than ICE vehicles, and that consumers 
would also be required to spend extra money on home vehicle 
chargers.\1071\ AFPM commented that NHTSA was ``ignor[ing]'' cross-
subsidization of vehicles by manufacturers, and that ``NHTSA must 
account for these real-world costs and communicate to the public that 
these cross-subsidies must be paid for by a shrinking number of ICEV 
buyers and, therefore, must significantly increase the average price of 
EVs.'' \1072\ Heritage Foundation offered similar comments about cross-
subsidization and also expressed concern about battery costs and lack 
of charging infrastructure.\1073\
---------------------------------------------------------------------------

    \1067\ KCGA, Docket No. NHTSA-2023-0022-59007, at 3.
    \1068\ American Consumer Institute, Docket No. NHTSA-2023-0022-
50765, Attachment 1, at 2.
    \1069\ AHUA, Docket No. NHTSA-2023-0022-58180, at 4.
    \1070\ SEMA, Docket No. NHTSA-2023-0022-57386, Attachment 1, at 
2.
    \1071\ Id.
    \1072\ AFPM, Docket No. NHTSA-2023-0022-61911, Attachment 2, at 
67.
    \1073\ Heritage Foundation, Docket No. NHTSA-2023-0022-61952, at 
6, 7.
---------------------------------------------------------------------------

    In response, NHTSA agrees that the statutory constraints lead to 
different analytical results (including per-vehicle costs) than if the 
statutory constraints were not included in the analysis, but the agency 
is bound to consider the facts as they appear within the context of 
that constrained analysis. Also within that context, NHTSA agrees with 
commenters who point out that some companies appear to struggle more 
than others to meet the different regulatory alternatives. After 
considering the comments, NHTSA understands better that manufacturers' 
tolerance for technology investments other than those they have already 
chosen to make is much lower than NHTSA previously understood. The 
updated per-vehicle costs for each fleet, each manufacturer, and the 
boundary cases for considered regulatory alternatives are as follows:

[[Page 52802]]

[GRAPHIC] [TIFF OMITTED] TR24JN24.202


[[Page 52803]]


[GRAPHIC] [TIFF OMITTED] TR24JN24.203

    Even though per-vehicle costs are quite low in some instances 
compared to what NHTSA has considered economically practicable in the 
past, they are still fairly high for others, and quite high for some 
individual manufacturers, like Kia and Mazda. Moreover, companies have 
made it clear that they cannot afford to make any further technology 
investments (which would result in higher per-vehicle costs) if they 
are to successfully undertake the technological transition that NHTSA 
cannot consider directly, due to constraints on research and production 
budgets. The idea that CEO compensation could be repurposed to research 
and production is innovative but not within NHTSA's control, so NHTSA 
cannot assume that companies would choose that approach.
    As discussed above, NHTSA also conducted a ``No ZEV alternative 
baseline'' analysis. Estimated average price change (regulatory cost) 
under the No ZEV alternative baseline, as compared to the reference 
case baseline, varies by manufacturer.

[[Page 52804]]

[GRAPHIC] [TIFF OMITTED] TR24JN24.204


[[Page 52805]]


[GRAPHIC] [TIFF OMITTED] TR24JN24.205

    As under the reference baseline analysis, even though per-vehicle 
costs are quite low in some instances under the No ZEV alternative 
baseline compared to what NHTSA has considered economically practicable 
in the past, they are still fairly high for others, and quite high for 
some individual manufacturers, like Kia and Mazda. Costs under the No 
ZEV alternative baseline analysis are somewhat higher than under the 
reference baseline analysis, particularly for passenger cars, but not 
by enough to change the agency's conclusions about the general 
direction of per-vehicle cost increases. As explained above, companies 
have made it clear that they cannot afford to make any further 
technology investments (which would result in higher per-vehicle costs) 
if they are to successfully undertake the technological transition that 
NHTSA cannot consider directly, due to constraints on research and 
production budgets. Additional costs would exacerbate that situation.
    With regard to the comments discussing perceived BEV costs, NHTSA 
reiterates that CAFE standards are performance-based standards and not 
technology mandates, and companies are free to choose their own 
compliance path with their own preferred technological approach. The 
comments suggesting that NHTSA ignores cross-subsidization may not have 
sufficiently considered the NPRM discussion on manufacturer pricing 
strategies.\1074\ NHTSA stated, and reiterates elsewhere in this final 
rule, that while the agency recognizes that some manufacturers may 
defray their regulatory costs through more complex pricing strategies 
or by accepting lower profits, NHTSA lacks sufficient insight into 
these practices to confidently model alternative approaches. 
Manufacturers tend to be unwilling to discuss these practices publicly 
or even privately with much specificity. Without better information, 
NHTSA believes it is more prudent to

[[Page 52806]]

continue to assume that manufacturers raise the prices of models whose 
fuel economy they elect to improve sufficiently to recover their 
increased costs for doing so, and then pass those costs forward to 
buyers as price increases. Any stakeholders who might wish to provide 
more information on cross-subsidization that could improve the realism 
of NHTSA's future analyses are invited to do so.
---------------------------------------------------------------------------

    \1074\ 88 FR at 56249 (Aug. 17, 2023).
---------------------------------------------------------------------------

    A number of commenters discussed the estimated civil penalties for 
non-compliance shown in the analysis for the NPRM. Civil penalties are 
a component of per-vehicle cost increases because NHTSA assumes that 
they (like technology costs) are passed forward to new vehicle buyers.
    Jaguar commented that all of the regulatory alternatives were 
beyond maximum feasible for Jaguar, because NHTSA's analysis showed 
Jaguar paying civil penalties under all regulatory alternatives.\1075\ 
The Alliance and Kia argued more broadly that automaker non-compliance 
at the level of the proposed standards ``exceeds reason'' and ``will 
increase costs to the American consumer with absolutely no 
environmental or fuel savings benefits.'' \1076\ AAPC made a similar 
point.\1077\ Kia stated further that ``Kia and the industry as a whole 
cannot afford to pay billions in civil penalties for CAFE non-
compliance while also investing billions of dollars in the EV 
transition and EPA GHG regulation compliance.'' \1078\ MEMA stated that 
``money spent on noncompliance fines is money not spent on technology 
investment or workforce training,'' and argued that these ``lost funds 
and unrealized improvements'' should be factored into the analysis. 
Toyota commented that the amount of civil penalties projected showed 
``that the technology being relied upon is insufficient to achieve the 
proposed standards.'' \1079\ BMW stated that NHTSA had forecast 
penalties for BMW over the rulemaking time frame of roughly $4.7 
billion, and that the standards were therefore not economically 
practicable because ``By its own admission, NHTSA has proposed a rule 
which is prohibitive to doing business in the U.S. market for 
BMW.''\1080\ Ford similarly commented that while NHTSA had acknowledged 
in the NPRM that Ford had never paid civil penalties under the CAFE 
program, NHTSA's analysis demonstrated that Ford would ``likely pay $1 
billion in civil penalties if NHTSA's proposal were finalized,'' making 
the proposed standards infeasible.\1081\ Stellantis offered similar 
comments, and also stated that ``The PEF adjustment combined with the 
proposed NHTSA rule forces fines with insufficient time to adjust 
plans.'' \1082\ The Alliance further stated that when it ran the CAFE 
model with civil penalties turned off, many fleets were unable to meet 
the standards, which made the proposed standards arbitrary and 
capricious.\1083\
---------------------------------------------------------------------------

    \1075\ Jaguar, Docket No. NHTSA-2023-0022-57296, Attachment 1, 
at 3.
    \1076\ The Alliance, Docket No. NHTSA-2023-0022-27803, 
Attachment 1, at 1; The Alliance, Docket No. NHTSA-2023-0022-60652, 
Appendix B, at 14-19; Kia, Docket No. NHTSA-2023-0022-58542-A1, at 
6.
    \1077\ AAPC, Docket No. NHTSA-2023-0022-60610, at 6.
    \1078\ Kia, at 6. Ford offered similar comments: Ford, Docket 
No. NHTSA-2023-0022-60837, at 4.
    \1079\ Toyota, Docket No. NHTSA-2023-0022-61131, at 2, 12, 16.
    \1080\ BMW, Docket No. NHTSA-2023-0022-58614, at 3.
    \1081\ Ford, Docket No. NHTSA-2023-0022-60837, at 3, 6.
    \1082\ Stellantis, Docket No. NHTSA-2023-0022-61107, at 8-9.
    \1083\ Alliance, Docket No. NHTSA-2023-0022-60652, Appendix B, 
at 21-23.
---------------------------------------------------------------------------

    Valero commented that ``It is inappropriate and unlawful for NHTSA 
to set standards that are so stringent that manufacturers cannot comply 
without the use of civil penalties,'' and stated that such standards 
would not be economically practicable.\1084\ POET commented that the 
proposal ``dictates that manufacturers must pay significant fines to 
continue in business,'' and argued that a rule that ``increase[d] 
manufacturer fines by multiple billions of dollars'' was neither 
technologically feasible nor economically practicable.\1085\ Heritage 
Foundation offered similar comments,\1086\ as did U.S. Chamber of 
Commerce, who suggested that standards that drove up vehicle prices 
(through manufacturers passing civil penalties forward to consumers as 
price increases) without improving efficiency must be beyond 
economically practicable.\1087\ Landmark also offered similar comments, 
stating that ``The government is seeking to force companies toward 
greater production of EVs by heavily penalizing them for failing to 
comply with completely unreasonable standards.''\1088\
---------------------------------------------------------------------------

    \1084\ Valero, Docket No. NHTSA-2023-0022-58547, Attachment A, 
at 7.
    \1085\ POET, Docket No. NHTSA-2023-0022-61561, Attachment 1, at 
16.
    \1086\ Heritage Foundation, Docket No. NHTSA-2023-0022-61952, at 
5.
    \1087\ U.S. Chamber of Commerce, Docket No. NHTSA-2023-0022-
61069, Attachment 1, at 3-4. NADA offered similar comments, Docket 
No. NHTSA-2023-0022-58200, at 5.
    \1088\ Landmark, Docket No. NHTSA-2023-0022-48725, Attachment 1, 
at 4.
---------------------------------------------------------------------------

    The Alliance argued further that analysis showing significant 
potential payment of civil penalties necessarily demonstrated that 
standards were economically impracticable, because NHTSA has 
consistently recognized that automakers are always free to pay 
penalties if they cannot meet the standards, meaning that ``in the 
light-duty context, the civil penalties effectively set an upper limit 
on economic practicability.'' \1089\ The Alliance stated that NHTSA was 
incorrect to suggest in the NPRM that ``moderating [its] standards in 
response to [civil penalty estimates] would . . . risk `keying 
standards to the least capable manufacturer,''' because ``these are 
precisely the type of `industry-wide considerations' that NHTSA has 
concluded [Congress intended NHTSA to consider].'' \1090\ The Alliance 
concluded that economic practicability ``might include standards that 
require a few laggards to pay penalties, but that concept cannot 
reasonably encompass a scenario in which the cost of compliance for a 
majority of the market in a given class will exceed the cost of 
penalties.'' \1091\
---------------------------------------------------------------------------

    \1089\ The Alliance, Docket No. NHTSA-2023-0022-60652, Appendix 
B, at 14.
    \1090\ Id. at 15.
    \1091\ Id.
---------------------------------------------------------------------------

    The Joint NGOs, in contrast, commented that manufacturers have the 
ability to use credit carry-forward and carry-back, and ``Nothing in 
EPCA contemplates that NHTSA will doubly account for automakers' multi-
year product plans by tempering the stringency of the standard in any 
particular model year,'' implying that shortfalls in any given year 
need not indicate economic impracticability.\1092\
---------------------------------------------------------------------------

    \1092\ Joint NGOs, Docket No. NHTSA-2023-0022-61944, NGO Comment 
Appendix, at 5.
---------------------------------------------------------------------------

    NHTSA has considered these comments carefully. The Joint NGOs are 
correct that manufacturers may carry credits forward and back, but 49 
U.S.C. 32902(h) does not allow NHTSA to consider the availability of 
credits in determining maximum feasible CAFE standards. NHTSA is bound 
by the statutory constraints, and the constrained analysis for the NPRM 
did show several manufacturers paying civil penalties rather than 
achieving compliance. With the final rule updates, estimated civil 
penalties for the Preferred Alternative appear as follows.

[[Page 52807]]

[GRAPHIC] [TIFF OMITTED] TR24JN24.206

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

    \1093\ For comparison, the combined profits for Stellantis, GM 
and Ford were approximately $143 billion over the last 5 years, 
averaging $28.6 billion per year. See: https://www.epi.org/blog/uaw-automakers-negotiations/.

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

[[Page 52808]]

[GRAPHIC] [TIFF OMITTED] TR24JN24.207

    For comparison, civil penalties estimated in the NPRM analysis for 
the then-Preferred Alternative (PC2LT4) totaled $10.6 billion for the 
entire industry summed over the 5 years of the rulemaking time 
frame.\1094\ Total civil penalties for the final rule under the 
reference baseline are estimated at an order of magnitude less, just 
over $1 billion for the 5-year period. For further comparison, civil 
penalties estimated for the 2022 final rule Preferred Alternative 
(Alternative 2.5) totaled $5.3 billion over 3 years for the entire 
industry, or approximately $1.8 billion per year, which is equivalent 
to the total 5-year estimate of civil penalties for the preferred 
alternative in this final rule.\1095\
---------------------------------------------------------------------------

    \1094\ See NHTSA, Preliminary Regulatory Impact Analysis, 
Corporate Average Fuel Economy Standards for Passenger Cars and 
Light Trucks for Model Years 2027 and Beyond and Fuel Efficiency 
Standards for Heavy-Duty Pickup Trucks and Vans for Model Years 2030 
and Beyond, July 2023. Available at https://www.nhtsa.gov/sites/nhtsa.gov/files/2023-08/NHTSA-2127-AM55-PRIA-tag.pdf (last accessed 
May 29, 2024).
    \1095\ See 87 FR 25710 (May 2, 2022).

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[[Page 52809]]

[GRAPHIC] [TIFF OMITTED] TR24JN24.208

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

    \1096\ For comparison, the combined profits for Stellantis, GM, 
and Ford were approximately $143 billion over the last 5 years, 
averaging $28.6 billion per year. See: https://www.epi.org/blog/uaw-automakers-negotiations/.

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

[[Page 52810]]

[GRAPHIC] [TIFF OMITTED] TR24JN24.209

    Comparing the estimated civil penalties under the reference case 
and No ZEV alternative baseline analyses, NHTSA finds that civil 
penalties are somewhat higher--roughly $1.6 billion for both passenger 
cars and light trucks under the No ZEV alternative baseline analysis, 
compared to roughly $770 million for passenger cars and roughly $1 
billion for light trucks under the reference case baseline analysis. 
Even the total under the No ZEV alternative baseline analysis is still 
considerably lower than the penalties estimated for the NPRM preferred 
alternative, or for the 2022 final rule. NHTSA therefore concludes that 
the use of the No ZEV alternative baseline rather than the reference 
case baseline does not result in costs that alter the agency's 
determination that the rule is economically feasible.
    NHTSA has long interpreted economic practicability as meaning that 
standards should be ``within the financial capability of the industry, 
but not so stringent as to lead to adverse economic consequences.'' 
Civil penalty payment has not historically been specifically 
highlighted as an ``adverse economic consequence,'' due to NHTSA's 
assumption that manufacturers recoup those payments by increasing new 
vehicle prices. NHTSA continues to believe that it is reasonable to 
assume that manufacturers will recoup civil penalty payments, and that 
changes in per-vehicle costs can drive sales effects. If per-vehicle 
costs and sales effects appear practicable, then shortfalls by 
themselves would not seem to weigh any more heavily on economic 
practicability.
    However, NHTSA is persuaded by the comments that civil penalties 
are money not spent on investments that could help manufacturers comply 
with higher standards in the future. NHTSA also agrees that civil 
penalties do not improve either fuel savings or emissions reductions, 
and thus do not directly serve EPCA's overarching purpose. As such, 
while NHTSA does not believe that economic practicability mandates that 
zero penalties be modeled to occur in response to potential future 
standards, NHTSA does believe, given the circumstances of this rule and 
the technological transition that NHTSA may not consider directly, that 
economic practicability can reasonably include the idea that high 
percentages of the cost of compliance should not be attributed to 
shortfall penalties across a wide group of manufacturers, either, 
because penalties are not compliance. Table VI-11 and Table VI-12 show 
the number of manufacturers who have shortfalls in each fleet with a 
regulatory cost break down for each alternative.\1097\
---------------------------------------------------------------------------

    \1097\ Values in these tables may not sum perfectly due to 
rounding.

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

[[Page 52811]]

[GRAPHIC] [TIFF OMITTED] TR24JN24.210

[GRAPHIC] [TIFF OMITTED] TR24JN24.211

    As Table VI-12 shows, civil penalties as a percentage of regulatory 
costs rise rapidly for light trucks as alternatives increase in 
stringency, jumping from only 9 percent for PC2LT002 to 29 percent for 
PC1LT3, and rising to 59 percent for PC6LT8--that is to say, civil 
penalties actually outweigh technology costs for the light truck fleet 
under PC6LT8. The number of manufacturers facing shortfalls (and thus 
civil penalties, for purposes of the analysis due to the statutory 
prohibition against considering the availability of credits) similarly 
rises as alternatives increase in stringency, from only 2 out of 19 
manufacturers under PC2LT002, to 8 out of 19 (nearly half) for PC1LT3, 
to 14 out of 19 for PC6LT8.
    Table VI-11 shows that results are for the passenger car fleet. The 
number of manufacturers facing shortfalls (particularly in their 
imported car fleets) and the percentage of regulatory costs represented 
by civil penalties rapidly increase for the highest stringency 
scenarios considered, PC3LT5 and PC6LT8, such that at the highest 
stringency 43 percent of the regulatory cost is attributed to penalties 
and approximately three quarters of the 19 manufacturers are facing 
shortfalls. The three less stringent alternatives show only one 
manufacturer facing shortfalls for each of alternatives PC2LT002, 
PC1LT3, and PC2LT4. However, civil penalties represent higher 
percentages of regulatory costs under PC1LT3 and PC2LT4 than under 
PC2LT002. Optimizing the use of resources for technology improvement 
over penalties suggests PC2LT002 as the best option of the three for 
the passenger car fleet.
    Considering this ratio as an element of economic practicability for 
purposes of this rulemaking, then, NHTSA believes that PC2LT002 
represents the least harmful alternative considered. With nearly half 
of light truck manufacturers facing shortfalls under PC1LT3, and nearly 
30 percent of regulatory costs being attributable to civil penalties, 
given the concerns raised by manufacturers regarding their ability to 
finance the ongoing technological transition if they must divert funds 
to paying CAFE penalties, NHTSA believes that PC1LT3 may be beyond 
economically practicable in this particular rulemaking time frame.
    NHTSA also considered civil penalties as a percentage of regulatory 
costs under the No ZEV alternative baseline, as follows:

[[Page 52812]]

[GRAPHIC] [TIFF OMITTED] TR24JN24.212

[GRAPHIC] [TIFF OMITTED] TR24JN24.213

    Similar to the reference baseline, the No ZEV alternative baseline 
demonstrates increased civil penalties and more fleet shortfalls with 
higher stringency alternatives. For example, Table VI-14 shows similar 
rapid increases percentage of regulatory costs for light trucks as 
alternative increase in stringency, jumping from 10 percent for 
PC2LT002 to 26 percent for PC1LT3 and rising to 62 percent for PC6LT8. 
Like the reference baseline, the number of manufacturers facing 
shortfalls similarly rises as alternatives increase in stringency. 
Another example, Table VI-13 shows the trends in results for the No ZEV 
alternative baseline. The number of manufacturers facing shortfalls and 
the percentage of regulatory costs represented by civil penalties 
rapidly increase for the highest stringency scenarios considered, 
PC3LT5 and PC6LT8, such that at the highest stringency 49 percent of 
the regulatory cost is attributed to penalties and approximately three 
quarters of the 19 manufacturers are facing shortfalls.
     Sales and employment responses--as discussed above, sales 
and employment responses have historically been key to NHTSA's 
understanding of economic practicability.
    The Alliance stated that ``The projected $3,000 average price 
increase over today's vehicles is likely to decrease sales and increase 
the average age of vehicles on our roads.'' \1098\ The America First 
Policy Institute also referred to NHTSA's estimated costs and stated 
that ``Raising the upfront costs of vehicles is regressive policy; it 
increasingly places vehicle purchases out of financial reach for the 
American people and disadvantages lower-income consumers. The estimated 
potential savings on vehicle operation are thus irrelevant for those 
who would be unable to purchase a vehicle in the first

[[Page 52813]]

place.'' \1099\ Mitsubishi commented that rising costs attributable to 
the proposed standards would drive ``price-sensitive car buyers . . . 
to the used car market [and] older, less fuel-efficient vehicles, 
exactly the opposite of the intention of the CAFE program.'' \1100\ 
Mitsubishi further stated that ``the resulting increased demand for 
used cars would also raise used car prices, leaving a growing segment 
of the U.S. population--mostly low-to-moderate income families--unable 
to purchase a vehicle at all.'' \1101\ AFPM argued that ``As ZEV prices 
rise, their sales and ICEV fleet turnover will slow, reducing fuel 
efficiency benefits and creating a significant drag on the economy.'' 
\1102\ U.S. Chamber of Commerce offered similar comments.\1103\
---------------------------------------------------------------------------

    \1098\ The Alliance, at 1.
    \1099\ America First Policy Institute, Docket No. NHTSA-2023-
0022-61447, at 3.
    \1100\ Mitsubishi, Docket No. NHTSA-2023-0022-61637, at 10.
    \1101\ Id.
    \1102\ AFPM, Docket No. NHTSA-2023-0022-61911, Attachment 2, at 
67.
    \1103\ U.S. Chamber of Commerce, Docket No. NHTSA-2023-0022-
61069, at 3.
---------------------------------------------------------------------------

    The Heritage Foundation commented that the proposed standards would 
cause there to be fewer new vehicle choices and that those options 
would be more expensive, and that therefore new vehicle sales would 
drop, which ``will challenge the profitability of the auto industry and 
lead to a loss of jobs for tens of thousands of America's autoworkers, 
as well as a loss of jobs'' amongst suppliers, and entail ``soaring 
unemployment among both consumers and workers in the auto- and related 
industries.'' \1104\ SEMA commented that ``A large-scale transition to 
EVs over a truncated timeline will significantly disrupt automotive 
supply chains and potentially eliminate many jobs in vehicle 
manufacturing, parts production, and repair shops,'' including negative 
effects on many small businesses.\1105\ In contrast, Ceres commented 
that their 2021 report ``found that the strongest of NHTSA's previously 
proposed alternatives would make U.S. automakers more globally 
competitive and increase auto industry jobs.'' \1106\ Ceres concluded 
that ``Failing to adopt the strongest fuel economy standards would 
undermine the U.S.' efforts to create a globally competitive domestic 
vehicle supply chain and put [their] members' business strategies at 
risk.'' \1107\ The Conservation Voters of South Carolina cited the same 
Ceres report to argue that ``Strong fuel economy standards mean more 
U.S. manufacturing opportunities that can provide new, well-paying, 
family-sustaining union manufacturing jobs.'' \1108\
---------------------------------------------------------------------------

    \1104\ Heritage Foundation, Docket No. NHTSA-2023-0022-61952, at 
7.
    \1105\ SEMA, Docket No. NHTSA-2023-0022-57386, at 3.
    \1106\ Ceres BICEP, Docket No. NHTSA-2023-0022-28667, at 1.
    \1107\ Id.
    \1108\ Conservation Voters of South Carolina, Docket No. NHTSA-
2023-0022-27799, at 1.
---------------------------------------------------------------------------

    While NHTSA agrees generally that changes in per-vehicle costs can 
affect vehicle sales and thus employment, the analysis for this final 
rule found that the effects were much smaller than the commenters above 
suggest could occur. Section 8.2.2.3 of the RIA discusses NHTSA's 
findings that, with the exception of PC6LT8, sales effects in the 
action alternatives differ from the No-Action alternative by no more 
than 1 percent in any given model year, with most below this 
value.\1109\ Relatedly, Table 8-1 in Section 8.2.2.3 of the RIA shows 
that maximum employment effects in any year is fewer than 7,000 full 
time equivalent jobs added (against a backdrop of over 900,000 full 
time equivalent jobs industry-wide). Overall labor utilization follows 
the general trend of the No-Action alternative but increases very 
slightly over the reference baseline in all but the most stringent 
action alternative cases, which indicates to NHTSA that technological 
innovation (industry's need to build more advanced technologies in 
response to the standards) ultimately outweighs sales effects in the 
rulemaking time frame. Under the No ZEV alternative baseline, sales and 
labor market effects are slightly larger than in the reference 
baseline. This is in line with expectations, as alternative baseline 
costs are slightly larger than costs in the reference baseline. With 
the exception of PC6LT8, where sales reductions are approximately 3 
percent, sales changes for all other action alternatives relative to 
the No-Action alternative remain below 1.5 percent. Labor market 
increases do not exceed 8,000 full-time equivalent jobs added over No-
Action levels.\1110\ Given that annual sales and employment effects 
represent differences of well under 2 percent for each year for every 
regulatory alternative, contrary to the commenters' concerns, NHTSA 
does not find sales or employment effects to be dispositive for 
economic practicability in this rulemaking.
---------------------------------------------------------------------------

    \1109\ NHTSA models total light duty sales differences from the 
regulatory baseline based on the percentage difference in the 
average price paid by consumers, net of any tax credits. NHTSA 
adjusts sales using a constant price elasticity of -0.4. NHTSA's 
methodology is explained in more detail in TSD Chapter 4.1.
    \1110\ For additional detail, see FRIA 8.2.7.
---------------------------------------------------------------------------

     Uncertainty and consumer acceptance of technologies--these 
are considerations not accounted for expressly in our modeling 
analysis,\1111\ but important to an assessment of economic 
practicability given the timeframe of this rulemaking. Consumer 
acceptance can involve consideration of anticipated consumer response 
not just to increased vehicle cost and consumer valuation of fuel 
economy, but also the way manufacturers may change vehicle models and 
vehicle sales mix in response to CAFE standards.
---------------------------------------------------------------------------

    \1111\ See, e.g., Center for Auto Safety v. NHTSA (CAS), 793 
F.2d 1322 (D.C. Cir. 1986) (Administrator's consideration of market 
demand as component of economic practicability found to be 
reasonable).
---------------------------------------------------------------------------

    Many commenters stated that the proposed rule would restrict 
consumer choice by forcing consumers to purchase electric vehicles, 
because there would be no ICE vehicles available.\1112\ Mitsubishi 
expressed concern that the proposal would require OEMs to ``prematurely 
phase-out some of the most affordable/cleaner ICE and hybrid vehicles 
and replace them with more expensive battery electric vehicles, thereby 
limiting consumer choice for fuel efficient and affordable vehicles.'' 
\1113\ Heritage Foundation argued that the ICEs that could meet the 
standards would be ``anemic'' and ``woefully lacking in power, 
durability, and performance and will thus offer far less utility for 
America's families,'' causing a ``generational loss in consumer 
welfare.'' \1114\ Additional commenters argued that these required BEVs 
would not meet consumers' diverse needs,\1115\ and that consumers did 
not want them.\1116\ The American

[[Page 52814]]

Consumer Institute, for example, stated that ``Car companies losing 
money on their EV divisions is a testament to their unpopularity among 
the public. Several automakers are losing tens of thousands of dollars 
for every unit sold. One of the `Big Three' automobile manufacturers is 
poised to lose billions on its electric vehicles division this year.'' 
\1117\ CEI argued that higher vehicle prices would force ``millions'' 
of households to ``rely on transit'' and ``experience significant 
losses of personal liberty, time, convenience, economic opportunity, 
health, safety, and, yes, fun.'' \1118\ NADA cited data from multiple 
surveys suggesting that consumers would not consider buying EVs or were 
very unlikely to buy one.\1119\ Other commenters stated that more lead 
time was needed to make more BEVs and for more consumers to accept 
them.\1120\
---------------------------------------------------------------------------

    \1112\ American Consumer Institute, Docket No. NHTSA-2023-0022-
50765, at 2; WPE, Docket No. NHTSA-2023-0022-52616, at 1; National 
Association of Manufacturers, Docket No. NHTSA-2023-0022-59203-A1, 
at 1; Heritage Foundation, Docket No. NHTSA-2023-0022-61952, 
Attachment 1, at 3; SEMA, Docket No. NHTSA-2023-0022-57386, at 2; 
POET, Docket No. NHTSA-2023-0022-61561, at 13; AHUA, Docket No. 
NHTSA-2023-0022-58180, at 3; MCGA, Docket No. NHTSA-2023-0022-58413, 
at 2; CEI, Docket No. NHTSA-2023-0022-61121, at 2.
    \1113\ Mitsubishi, Docket No. NHTSA-2023-0022-61637, at 2.
    \1114\ Heritage Foundation, Docket No. NHTSA-2023-0022-61952, at 
6.
    \1115\ American Consumer Institute, at 2; Heritage Foundation, 
at 7.
    \1116\ KCGA, at 3; American Consumer Institute, Docket No. 
NHTSA-2023-0022-50765, Attachment 1, at 1, 7-8; CFDC et al., Docket 
No. NHTSA-2023-0022-62242, at 16; AFPM, Docket No. NHTSA-2023-0022-
61911, Attachment 2, at 52 (citing range anxiety and infrastructure 
limitations); CEI, Docket No. NHTSA-2023-0022-61121, at 9 (citing 
``high purchase price,'' price ``volatility,'' range anxiety, 
refueling times, ``reduced cold-weather performance,'' and ``less 
reliability during blackouts'').
    \1117\ American Consumer Institute, at 7.
    \1118\ CEI, Docket No. NHTSA-2023-0022-61121, at 2.
    \1119\ NADA, Docket No. NHTSA-2023-0022-58200, at 7.
    \1120\ National Association of Manufacturers, at 1.
---------------------------------------------------------------------------

    In contrast, the States and Cities commented that the proposed 
standards promoted greater consumer choice, ``as consumers will have a 
greater array of vehicles with higher fuel economy, including plug-in 
and mild hybrids, some of which offer advantages over internal 
combustion engine vehicles, such as faster vehicle acceleration, more 
torque, and lower maintenance costs.'' \1121\ Lucid commented that 
research from Consumer Reports showed that fuel economy was important 
to many American consumers and that ``Stringent fuel economy standards 
are aligned with the interests of American consumers.'' \1122\
---------------------------------------------------------------------------

    \1121\ States and Cities, Docket No. NHTSA-2023-0022-61904, 
Attachment 2, at 30-31.
    \1122\ Lucid, Docket No. NHTSA-2023-0022-50594, Attachment 1, at 
5.
---------------------------------------------------------------------------

    NHTSA disagrees that the proposed standards would have forced new 
vehicle buyers to purchase BEVs, and thus comments expressing concern 
about alleged lack of consumer interest in BEVs are not relevant here. 
CAFE standards do not and cannot require electrification. BEVs included 
in the reference baseline are simply those that are anticipated to 
exist in the world for reasons other than CAFE compliance, including 
but not limited to estimated consumer demand for BEVs as costs decrease 
over time in response to market forces. NHTSA's analysis of the effects 
of potential new CAFE standards is bound by the statutory constraints.
    That said, NHTSA agrees with comments suggesting that improved fuel 
economy is beneficial to consumers, and that having an array of vehicle 
choices with higher fuel economy is also beneficial. While NHTSA has no 
authority to compel manufacturers to improve fuel economy in every 
single vehicle that they offer, higher average fleet fuel economy 
standards improve the likelihood that more vehicle models' fuel economy 
will improve over time. NHTSA does not believe that it is a given that 
improving fuel economy comes at the expense of improving other vehicle 
attributes appreciated by consumers, and NHTSA's analysis expressly 
holds vehicle performance constant when simulating the application of 
fuel-efficient technologies.\1123\ The assumption of performance 
neutrality is built into the technology costs incurred in the analysis, 
and thus ensures the costs to maintain performance are represented when 
feasibility is considered. While this does not address every single 
vehicle attribute listed by commenters, NHTSA believes that it helps to 
ensure the economic practicability of the standards that NHTSA chooses.
---------------------------------------------------------------------------

    \1123\ Performance neutrality is further discussed in the Final 
TSD Chapter 2.3.4 and in the CAFE Analysis Autonomie Documentation.
---------------------------------------------------------------------------

    That said, NHTSA is also aware, as cited above, that a number of 
manufacturers are beginning to introduce new SHEV and PHEV models, 
purportedly in response to consumer demand for them.\1124\ NHTSA still 
maintains that our analysis demonstrates only one technological path 
toward compliance with potential future CAFE standards, and that there 
are many paths toward compliance, but it may be a relevant data point 
that the technological path we show includes a reliance on SHEV 
technology in the light truck sector, particularly pickups, similar to 
some product plans recently announced or already being 
implemented.\1125\ The auto industry has a strong interest in offering 
vehicles that consumers will buy. Introducing new models with these 
technologies suggests that the industry believes that consumer demand 
for these technologies is robust enough to support a greater supply. 
The future remains uncertain, but it is possible that NHTSA's 
constrained analysis may not completely fail to reflect consumer 
preferences for vehicle technologies, if recent and planned 
manufacturer behavior is indicative.
---------------------------------------------------------------------------

    \1124\ Reuters. 2024. U.S. automakers race to build more hybrids 
as EV sales slow. Mar. 15, 2024. Available at: https://www.reuters.com/business/autos-transportation/us-automakers-race-build-more-hybrids-ev-sales-slow-2024-03-15/.
    \1125\ Rosevear, J. CNBC. 2023. As Ford loses billions on EVs, 
the company embraces hybrids. Jul. 28, 2023. Available at: https://www.cnbc.com/2023/07/28/ford-embraces-hybrids-as-it-loses-billions-on-evs.html; Sutton, M. Car and Driver. 2024. 2024 Toyota Tacoma 
Hybrid Is a Spicier Taco. Apr.23, 2024. Available at: https://www.caranddriver.com/reviews/a60555316/2024-toyota-tacoma-hybrid-drive/.
---------------------------------------------------------------------------

    Over time, NHTSA has tried different methods to account for 
economic practicability. NHTSA previously abandoned the ``least capable 
manufacturer'' approach to ensuring economic practicability, of setting 
standards at or near the level of the manufacturer whose fleet mix was, 
on average, the largest and heaviest, generally having the highest 
capacity (for passengers and/or cargo) and capability (in terms of 
ability to perform their intended function(s)) so as not to limit the 
availability of those types of vehicles to consumers.\1126\ Economic 
practicability has typically focused on the capability of the industry 
and seeks to avoid adverse consequences such as (inter alia) a 
significant loss of jobs or unreasonable elimination of consumer 
choice. If the overarching purpose of EPCA is energy conservation, 
NHTSA generally believes that it is reasonable to expect that maximum 
feasible standards may be harder for some automakers than for others, 
and that they need not be keyed to the capabilities of the least 
capable manufacturer. NHTSA concluded in past rulemakings that keying 
standards to the least capable manufacturer may disincentivize 
innovation by rewarding laggard performance, and it could very 
foreseeably result in less energy conservation than an approach that 
looked at the abilities of the industry as a whole.
---------------------------------------------------------------------------

    \1126\ NHTSA has not used the ``least capable manufacturer'' 
approach since prior to the model year 2005-2007 rulemaking (68 FR 
16868, Apr. 7, 2003) under the non-attribute-based (fixed) CAFE 
standards.

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

[[Page 52815]]

    IPI commented that NHTSA's emphasis on costs, that as NHTSA notes 
are ``likely overstate[d],'' resembles the rejected ``least capable 
manufacturer approach.'' IPI stated that ``This rejection is 
reasonable,'' as NHTSA had explained in the NPRM, and that therefore 
``costs should not be a decisive barrier to adopting more stringent 
standards.'' \1127\ NHTSA agrees that for purposes of the final rule, 
estimated per-vehicle costs are not a decisive barrier to adopting more 
stringent standards, because costs for a number of alternatives are 
well within limits which NHTSA has previously considered economically 
practicable. However, estimated civil penalties, as a subcomponent of 
manufacturer costs, do remain meaningful in light of the technological 
transition that NHTSA does not consider directly, insofar as 
manufacturers state that they divert resources from that transition, 
even though NHTSA assumes that manufacturers eventually recoup those 
costs by passing them forward to consumers. NHTSA thus concludes that, 
for purposes of this final rule, the threshold of economic 
practicability may be much lower in terms of estimated shortfalls than 
NHTSA tentatively concluded could be practicable in the NPRM.
---------------------------------------------------------------------------

    \1127\ IPI, NHTSA-2023-0022-60485, at 10.
---------------------------------------------------------------------------

    NHTSA recognizes that this approach to economic practicability may 
appear to be focusing on the least capable manufacturers, but as 
industry and other commenters noted, civil penalties do not reduce fuel 
use or emissions, and thus do not serve the overarching purpose of 
EPCA. They merely consume resources that could otherwise be better 
spent elsewhere. NHTSA has also sought to account for economic 
practicability by applying marginal benefit-cost analysis since the 
first rulemakings establishing attribute-based standards, considering 
both overall societal impacts and overall consumer impacts. Whether the 
standards maximize net benefits has thus been a relevant, albeit not 
dispositive, factor in the past for NHTSA's consideration of economic 
practicability. E.O. 12866 states that agencies should ``select, in 
choosing among alternative regulatory approaches, those approaches that 
maximize net benefits . . .'' As the E.O. further recognizes, agencies, 
including NHTSA, must acknowledge that the modeling of net benefits 
does not capture all considerations relevant to economic 
practicability, and moreover that the uncertainty of input assumptions 
makes perfect foresight impossible. As in past rulemakings, NHTSA has 
considered our estimates of net societal impacts, net consumer impacts, 
and other related elements in the consideration of economic 
practicability. We emphasize, however, that it is well within our 
discretion to deviate from the level at which modeled net benefits 
appear to be maximized if we conclude that the level would not 
represent the maximum feasible level for future CAFE standards, given 
all relevant and statutorily-directed considerations, as well as 
unquantifiable benefits.\1128\ Economic practicability is complex, and 
like the other factors must be considered in the context of the overall 
balancing and EPCA's overarching purpose of energy conservation.
---------------------------------------------------------------------------

    \1128\ Even E.O. 12866 acknowledges that ``Nothing in this order 
shall be construed as displacing the agencies' authorities or 
responsibilities, as authorized by law.'' E.O. 12866, Sec. 9.
---------------------------------------------------------------------------

    The Renewable Fuels Association et al. commented that the passenger 
car standards for both the PC1LT3 and PC2LT4 alternatives were beyond 
economically practicable, because NHTSA's analysis showed that they 
resulted in net costs for both society and for consumers.\1129\ The 
commenters stated that NHTSA had explained in the NPRM that it had the 
authority to deviate from the point at which net benefits were 
maximized if other statutory considerations made it appropriate to do 
so, but the commenters asserted that the fuel savings associated with 
those alternatives were ``not high'' and did not outweigh the 
costs.\1130\ Institute for Energy Research and Mitsubishi offered 
similar comments.\1131\ POET argued that because even NHTSA 
acknowledged that there was substantial uncertainty in its analysis, 
therefore NHTSA should ``only adopt standards that clearly have a net 
positive benefit under all its main discount rate scenarios,'' using 
``conservative assumptions'' ``to avoid a rule that puts automakers 
into severe non-compliance.'' \1132\
---------------------------------------------------------------------------

    \1129\ Renewable Fuels Association et al., Docket No. NHTSA-
2023-0022-1652, at 14-15; RFA et al. 1, Docket No. NHTSA-2023-0022-
57720, at 4.
    \1130\ Id.
    \1131\ Institute for Energy Research, Docket No. NHTSA-2023-
0022-63063, at 2; Mitsubishi, Docket No. NHTSA-2023-0022-61637, at 
3.
    \1132\ POET, Docket No. NHTSA-2023-0022-61561, at 13.
---------------------------------------------------------------------------

    In contrast, IPI argued that the net benefits of all alternatives 
were likely understated due to (1) ``conservative'' assumptions about 
the SC-GHG and discount rates, and (2) the analysis ending at calendar 
year 2050 rather than extending further, ``given that more stringent 
standards' net benefits rise quickly in later years.'' \1133\
---------------------------------------------------------------------------

    \1133\ IPI, Docket No. NHTSA-2023-0022-60485, at 11.
---------------------------------------------------------------------------

    In response, NHTSA notes that the benefit-cost landscape of the 
final rule is somewhat different from the NPRM analysis. While NHTSA 
maintains that economic practicability does not mandate that the agency 
choose only the alternative(s) that maximize net benefits, NHTSA agrees 
that passenger car and light truck standards should be independently 
justifiable. NHTSA also agrees that alternatives for which costs 
outweigh benefits should be scrutinized closely, even while NHTSA 
recognizes that certain benefits, especially related to climate 
effects, remain uncaptured by our analysis. Regarding the timeframe of 
the analysis, NHTSA emphasizes the fact that model-year accounting for 
benefits and costs focuses on effects over the lifetime of the light 
duty vehicles affected by the rulemaking. The fleet of remaining 
vehicles declines over time, and the analysis extends beyond calendar 
year 2050. For example, a model year 2031 vehicle accrues benefits and 
costs through calendar year 2070, though only approximately 2 percent 
of these vehicles remain in the fleet.\1134\
---------------------------------------------------------------------------

    \1134\ See RIA 8.2.4 for an illustration of model-year 
accounting of benefits and costs, reported by calendar year.
---------------------------------------------------------------------------

    To examine the benefit-cost landscape and results more closely, 
Table VI-15 reports social benefits and costs for passenger cars and 
light trucks separately, along with the total net benefits for the two 
fleets combined. Though the preferred alternative does not maximize net 
benefits across the two fleets, it is the only alternative in which net 
benefits are positive for both passenger cars and light trucks.

[[Page 52816]]

This holds at both the 3 percent social discount rate and a more 
conservative 7 percent discount rate, as shown in Table VI-16.
---------------------------------------------------------------------------

    \1135\ Values may not add exactly due to rounding.
    \1136\ Includes safety costs, congestion and noise costs, and 
loss in fuel tax revenue.
    \1137\ Includes benefits from rebound VMT and less frequent 
refueling.
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[[Page 52817]]

[GRAPHIC] [TIFF OMITTED] TR24JN24.215

    Net benefits for PC2LT002 remain positive due in part to 
differences in fleet and travel behavior projected by the CAFE Model. 
That is, when stringencies increase at a faster rate for light trucks, 
as in alternatives PC1LT3 through PC6LT8, passenger cars see 
significantly more use and are kept in service longer. The resulting 
increase in costs (e.g., additional fuel use from more driving) offsets 
some portion of benefits (e.g., reduced fuel use from higher fuel 
economy). The rate of improved benefits for passenger cars is also 
limited by the technology feasibility issues discussed in the section 
above. The PC2LT002 stringency manages to strike a favorable balance of 
this effect.
    To examine this effect in more detail, observe the levels of 
incremental private benefits and non-technology costs for alternatives 
PC1LT3 through PC6LT8 relative to PC2LT002 in Table VI-15. The majority 
of this difference is an artifact of the interaction between passenger 
car and light truck fleets in instances where car and truck 
stringencies increase at different rates. For instance, where light 
truck stringency increases faster than passenger car stringency (e.g., 
PC2LT4), light truck vehicle costs increase more than passenger car 
costs. This reduces light truck sales, and hence total light truck non-
rebound VMT.\1138\ The sales effect, coupled with the model's aggregate 
non-rebound VMT constraint, increases passenger car VMT. This change in 
mileage affects a number of benefit-cost categories. Some of the 
categories for which mileage is a central input include congestion and 
noise costs, safety costs, fuel savings benefits, and emissions 
reductions. With increased passenger car mileage, congestion and noise 
costs and safety costs all increase relative to the No-Action 
alternative. Some fuel savings benefits for the passenger car fleet are 
offset by increased travel relative to the No-Action alternative; even 
if industry-wide fuel economy levels rise, increased vehicle use can 
suppress fuel savings benefits as overall fuel savings is the product 
of the two metrics. Emissions reductions for the passenger car fleet 
are offset in a similar manner. In the case of PC2LT002, costs, sales, 
and VMT do not see the same VMT shift as the other action alternatives. 
For passenger cars, this produces lower non-technology costs and avoids 
suppressing some portion of projected fuel cost savings and emissions 
reductions. The higher costs and partially-offset benefits of PC1LT3 
through PC6LT8 combine to produce negative net social benefits for the 
passenger car fleet in these alternatives. Conversely, the absence of 
VMT shifts between fleets in the case of PC2LT002 allow net social 
benefits to remain positive.\1139\
---------------------------------------------------------------------------

    \1138\ The CAFE Model's non-rebound VMT constraint operates on a 
fleet-wide basis and does not hold VMT fixed within regulatory 
class.
    \1139\ For all of the reasons discussed in the TSD and FRIA, 
NHTSA believes that the CAFE model's treatment of passenger car and 
light truck VMT and fleet share behavior are reasonable 
representations of market behavior, and that the benefit-cost values 
that result are a plausible result of the modeled compliance 
pathways. NHTSA also ran a sensitivity case with the fleet share 
adjustment disabled, which showed that PC2LT002 remains the 
alternative with the highest net benefits for passenger cars. See 
Chapter 9 of the FRIA for full results.
---------------------------------------------------------------------------

    Consumer benefits and costs produce a slightly different picture. 
For the passenger car fleet, per-vehicle fuel savings exceed regulatory 
cost in both PC2LT002 (by $191 in model year 2031) and PC1LT3 (by $132 
in model year 2031). For the light truck fleet, this difference remains 
positive for PC2LT002, PC1LT3, and PC2LT4.

[[Page 52818]]

[GRAPHIC] [TIFF OMITTED] TR24JN24.216


[[Page 52819]]


[GRAPHIC] [TIFF OMITTED] TR24JN24.217


[[Page 52820]]


    From these tables, it is clear that consumers who purchase 
passenger cars stand to save the most from the PC2LT002 standards, 
according to the statutorily-constrained analysis, and that the more 
stringent alternatives would result in net consumer costs, as 
identified by some commenters. For light truck purchasers, PC1LT3 
represents slightly higher net fuel savings, but PC2LT002 is only about 
$50 less per vehicle.
    Under the No ZEV alternative baseline analysis, results are fairly 
similar, as shown:
---------------------------------------------------------------------------

    \1140\ Values may not add exactly due to rounding.
    \1141\ Includes safety costs, congestion and noise costs, and 
loss in fuel tax revenue.
    \1142\ Includes benefits from rebound VMT and less frequent 
refueling.
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[[Page 52821]]

[GRAPHIC] [TIFF OMITTED] TR24JN24.219

    For light trucks, net benefits under the No ZEV alternative 
baseline analysis peak at PC1LT3, while for passenger cars, net 
benefits operate generally the same way under the No ZEV alternative 
baseline analysis as under the reference baseline analysis, where net 
benefits are only positive for PC2LT002, and remain positive due in 
part to differences in fleet and travel behavior projected by the CAFE 
Model, as discussed above.
    Consumer benefits and costs produce a slightly different picture. 
For the passenger car fleet, per-vehicle fuel savings exceed regulatory 
cost in both PC2LT002 (by $375 in model year 2031) and PC1LT3 (by $191 
in model year 2031). For the light truck fleet, this difference remains 
positive for PC2LT002, and PC1LT3. In these regulatory alternatives 
under the No ZEV alternative baseline, regulatory costs increase 
slightly over those in the reference baseline but this is outweighed by 
an increase in fuel savings.
[GRAPHIC] [TIFF OMITTED] TR24JN24.220


[[Page 52822]]


[GRAPHIC] [TIFF OMITTED] TR24JN24.221

    From these tables, under the No ZEV alternative baseline analysis 
as under the reference baseline analysis, it is clear that consumers 
who purchase passenger cars stand to save the most from the PC2LT002 
standards, according to the statutorily-constrained analysis, and that 
the more stringent alternatives would result in net consumer costs, as 
identified by some commenters. For light truck purchasers, PC2LT002 
also saves consumers the most under the No ZEV alternative baseline 
analysis. Given the passenger car results and the closeness of the 
light truck results, NHTSA concludes that PC2LT002 would be most 
directly beneficial for consumers according to the constrained 
analysis.
(3) The Effect of Other Motor Vehicle Standards of the Government on 
Fuel Economy
    ``The effect of other motor vehicle standards of the Government on 
fuel economy'' involves analysis of the effects of compliance with 
emission, safety, noise, or damageability standards on fuel economy 
capability, and thus on the industry's ability to meet a given level of 
CAFE standards. In many past CAFE rulemakings, NHTSA has said that it 
considers the adverse effects of other motor vehicle standards on fuel 
economy. It said so because, from the CAFE program's earliest years 
until recently, compliance with these other types of standards has had 
a negative effect on fuel economy.\1143\ For example, safety standards 
that have the effect of increasing vehicle weight thereby lower fuel 
economy capability (because a heavier vehicle must work harder to 
travel the same distance, and in working harder, consumes more energy), 
thus decreasing the level of average fuel economy that NHTSA can 
determine to be feasible. NHTSA notes that nothing about the Federal 
Motor Vehicle Safety Standards (FMVSS) would be altered or inhibited by 
this CAFE/HDPUV standards rule. NHTSA has also accounted for Federal 
Tier 3 and California LEV III criteria pollutant standards within its 
estimates of technology effectiveness in prior rules and in this final 
rule.\1144\
---------------------------------------------------------------------------

    \1143\ 43 FR 63184, 63188 (Dec. 15, 1977). See also 42 FR 33534, 
33537 (Jun. 30, 1977).
    \1144\ For most ICE vehicles on the road today, the majority of 
vehicle-based NOX, NMOG, and CO emissions occur during 
``cold-start,'' before the three-way catalyst has reached higher 
exhaust temperatures (e.g., approximately 300[deg]C), at which point 
it is able to convert (through oxidation and reduction reactions) 
those emissions into less harmful derivatives. By limiting the 
amount of those emissions, vehicle-level smog standards require the 
catalyst to be brought to temperature rapidly, so modern vehicles 
employ cold-start strategies that intentionally release fuel energy 
into the engine exhaust to heat the catalyst to the right 
temperature as quickly as possible. The additional fuel that must be 
used to heat the catalyst is typically referred to as a ``cold-start 
penalty,'' meaning that the vehicle's fuel economy (over a test 
cycle) is reduced because the fuel consumed to heat the catalyst did 
not go toward the goal of moving the vehicle forward. The Autonomie 
work employed to develop technology effectiveness estimates for this 
final rule accounts for cold-start penalties, as discussed in the 
Chapter ``Cold-start Penalty'' of the ``CAFE Analysis Autonomie 
Documentation''.
---------------------------------------------------------------------------

    In other cases, the effect of other motor vehicle standards of the 
Government on fuel economy may be neutral, or positive. Since the Obama 
Administration, NHTSA has considered the GHG standards set by EPA as 
``other motor vehicle standards of the Government.'' NHTSA received 
many comments about considering EPA's GHG standards. BMW commented that 
``coordination between NHTSA and EPA during the rulemaking process is 
critical'' and stated further that in light of differences in governing 
statutes, NHTSA and EPA ``have historically recognized and accounted 
for these differences in the standard setting process.'' \1145\ Jaguar 
stated that ``while there has always been a degree of misalignment 
between NHTSA CAFE and EPA GHG regulations due to differences in their 
treatment of BEVs,'' NHTSA had gone to great lengths in the model years 
2024-2026 CAFE rule to minimize those differences, and needed

[[Page 52823]]

to make a similar proof for the current final rule.\1146\ Jaguar 
further argued that ``If NHTSA cannot consider that BEVs are required 
to meet their proposed CAFE standards, NHTSA should consider that 
significant levels of electrification are needed to meet the EPA 
targets.'' \1147\ The Alliance also argued that NHTSA's proposed 
standards were ``serious[ly] misalign[ed]'' with EPA's proposed 
standards, given, among other things, DOE's proposal to revise the PEF 
value.\1148\ The Alliance further stated that EPA's proposed standards 
were ``neither reasonable nor achievable'' and needed to be less 
stringent, and that NHTSA's CAFE standards ``should also be modified 
commensurately.'' \1149\
---------------------------------------------------------------------------

    \1145\ BMW, Docket No. NHTSA-2023-0022-58614, at 1.
    \1146\ Jaguar, Docket No. NHTSA-2023-0022-57296, at 5.
    \1147\ Id. at 6.
    \1148\ The Alliance, Docket No. NHTSA-2023-0022-60652, 
Attachment 2, at 2.
    \1149\ Id. at 4. National Association of Manufacturers offered 
similar comments, Docket No. NHTSA-2023-0022-59203-A1, at 2; Kia 
offered similar comments, Docket No. NHTSA-2023-0022-58542-A1, at 5-
6; NADA offered similar comments, Docket No. NHTSA-2023-0033-58200, 
at 12.
---------------------------------------------------------------------------

    Subaru stated that ``regulatory alignment'' between NHTSA, EPA, DOE 
(with the PEF value revision) and CARB was crucial, because 
``Regulations that impose differing requirements for the same vehicle 
add costs, without consumer benefit, and divert resources that could 
otherwise be used toward meeting the Administration's electrification 
goals.'' \1150\ Subaru added that ``If any automaker can comply with 
one set of standards, they should not be in jeopardy of paying 
penalties toward another agency's efficiency program,'' and suggested 
that the DOE PEF value revision made that more likely under NHTSA's 
proposal.\1151\ GM commented that not only should manufacturers be able 
to comply with both standards without paying penalties in CAFE space, 
but that they should also be able to comply ``without . . . restricting 
product, or purchasing credits,'' and that NHTSA, EPA, and CARB needed 
``to base their analyses of industry compliance . . . on the same level 
of EV deployment and ICE criteria pollutant and efficiency 
improvement.'' \1152\ Nissan stated that the combination of EPA, NHTSA, 
DOE, and CARB regulations ``create a complicated and unachievable 
landscape for the automotive industry in the proposed timeframe.'' 
\1153\ AHUA made a similar point and added that it complicates the 
landscape for related industries (like electricity generation/
infrastructure and mining/minerals processing) as well, concluding that 
``It makes it harder to make favorable assumptions on how quickly 
changes can be made in the market for EV chargers and in other markets 
that must perform well to facilitate marketplace acceptance of EVs and 
otherwise increase fuel economy as proposed in these efforts.'' \1154\
---------------------------------------------------------------------------

    \1150\ Subaru, Docket No. NHTSA-2023-0022-58655, at 2. Ford 
offered similar comments, Docket No. NHTSA-2023-0022-60837, at 1; 
Jaguar offered similar comments, Docket No. NHTSA-2023-0022-57296, 
at 5; MECA offered similar comments, Docket No. NHTSA-2023-0022-
63053, at 4; NADA offered similar comments, Docket No. NHTSA-2023-
0022-58200, at 12; GM offered similar comments, Docket No. NHTSA-
2023-0022-60686, at 4; Mitsubishi offered similar comments, Docket 
No. NHTSA-2023-0022-61637, at 2.
    \1151\ Id.; Kia offered similar comments, Docket No. NHTSA-2023-
0022-58542-A1, at 2-3; Jaguar offered similar comments, Docket No. 
NHTSA-2023-0022-57296, at 6; Ford offered similar comments, Docket 
No. NHTSA-2023-0022-60837, at 3; Mitsubishi offered similar 
comments, Docket No. NHTSA-2023-0022-61637, at 2; Stellantis offered 
similar comments, Docket No. NHTSA-2023-0022-61107, at 3.
    \1152\ GM, Docket No. NHTSA-2023-0022-60686, at 4.
    \1153\ Nissan, Docket No. NHTSA-2023-0022-60696, at 1. BMW 
offered similar comments, Docket No. NHTSA-2023-0022-58614, at 1.
    \1154\ AHUA, Docket No. NHTSA-2023-0022-58180, at 6.
---------------------------------------------------------------------------

    Volkswagen commented that EPA's rule was ``the leading rule'' and 
that NHTSA's proposal ``fails to align'' and needed to ``harmonize[ ] 
to the finalized EPA GHG regulation,'' \1155\ or if not, that NHTSA 
accept compliance with EPA's standard in lieu of compliance with 
NHTSA's standard.\1156\ POET similarly commented that NHTSA should 
finalize standards ``no more stringent than what correlates to fuel 
economy equivalence under a corrected EPA light-duty vehicle GHG 
rule.'' \1157\ ANHE commented that NHTSA's standards were not strong 
enough and needed to be aligned with EPA's proposal to ensure benefits 
to lung health due to less-polluting vehicles.\1158\ The Colorado State 
Agencies also commented that NHTSA's standards needed to be aligned 
with EPA's to ``avoid any backsliding'' as well as ``a scenario in 
which OEMs are forced to divert investment away from transportation 
electrification.'' \1159\ Wisconsin DNR requested that NHTSA coordinate 
with EPA on additional standards for ozone and PM2.5.\1160\
---------------------------------------------------------------------------

    \1155\ Jaguar made similar comments, at 6; AHUA also offered 
similar comments, Docket No. NHTSA-2023-0022-58180, at 3; Toyota 
offered similar comments, Docket No. NHTSA-2023-0022-61131, at 2.
    \1156\ Volkswagen, Docket No. NHTSA-2023-0022-58702, at 1, 3. 
U.S. Chamber of Commerce offered similar comments, Docket No. NHTSA-
2023-0022-61069, at 2; Hyundai offered similar comments, Docket No. 
NHTSA-2023-0022-51701, at 2-3; NADA offered similar comments, Docket 
No. NHTSA-2023-0022-58200, at 12. Volkswagen also requested, if 
NHTSA took a ``deemed to comply'' approach, that NHTSA allow 
compliance ``reporting requirements [to] be streamlined.'' 
Volkswagen, at 3.
    \1157\ POET, Docket No. NHTSA-2023-0022-61561, at 10.
    \1158\ ANHE, Docket No. NHTSA-2023-0022-27781, at 1.
    \1159\ Colorado State Agencies, Docket No. NHTSA-2023-0022-
41652, at 2.
    \1160\ Wisconsin DNR, Docket No. NHTSA-2023-0022-21431, at 2. 
NHTSA has no authority under EPCA/EISA or any other statute to issue 
standards for criteria pollutants, so this comment will not be 
addressed further.
---------------------------------------------------------------------------

    MEMA commented that NHTSA should abandon a separate rulemaking and 
``jointly collaborate with EPA in writing one final rule,'' and that 
``Joint regulatory action will also allow EPA to fill in the gaps in 
NHTSA's congressional authority regarding EVs.'' \1161\ Consumer 
Reports also encouraged NHTSA to ``work with EPA to ensure consistency 
between the levels of stringency in each specific model year.'' \1162\ 
MECA commented that NHTSA and EPA had long issued joint rules, and 
given that the agencies had issued separate proposals, NHTSA needed to 
``spend additional effort to document in the final rule how the 
regulations are aligned and where they are not aligned.'' \1163\ 
Specifically, MECA requested that ``NHTSA analyze the impact of 
separate regulations, particularly on compliance flexibility and the 
potential for . . . fuel economy penalties to be used as a compliance 
mechanism,'' and ``clearly articulate'' the effect of the revised DOE 
PEF value on CAFE compliance.\1164\ GM similarly argued that NHTSA's 
analysis needed to ``include how the modeled NHTSA-, EPA-, and CARB-
regulated fleets comply with all regulations with a consistent level of 
EVs and ICE improvement,'' both ``on an industry-wide basis'' and ``for 
each manufacturer individually.'' \1165\
---------------------------------------------------------------------------

    \1161\ MEMA, Docket No. NHTSA-2023-0022-59204-A1, at 2.
    \1162\ Consumer Reports, Docket No. NHTSA-2023-0022-61098, at 
17.
    \1163\ MECA, Docket No. NHTSA-2023-0022-63053, at 3.
    \1164\ Id. at 4.
    \1165\ GM, Docket No. NHTSA-2023-0022-60686, at 4.
---------------------------------------------------------------------------

    CEI agreed that NHTSA and EPA conducting separate rulemakings was 
problematic, stating that it ``undermined key premises'' of 
Massachusetts v. EPA because the agencies now seek to ``ban ICE 
vehicles'' rather than to issue ``CAFE and GHG standards of 
approximately equal stringency.'' \1166\

[[Page 52824]]

CEI argued that EPA and NHTSA's standards were inconsistent in two 
ways: first, that EPA's standards were more stringent overall, and 
second, that NHTSA's standards were more stringent for ICE 
vehicles.\1167\ As a result, CEI stated, manufacturers who could comply 
with EPA's standards but not with NHTSA's would be compelled ``to 
withdraw from the ICE vehicle market . . . in order to simplify and 
reduce overall compliance burdens.'' \1168\ CEI further stated that 
NHTSA had not shown in the NPRM what CO2 targets would 
correspond to the proposed CAFE standards, unlike in the model years 
2024-2026 final rule, and argued that it was ``backwards'' for NHTSA to 
suggest that its proposed standards ``complement and align with EPA's'' 
because ``The EPA's standards increasingly clash and misalign with 
NHTSA's.'' \1169\ The Heritage Foundation argued that NHTSA's efforts 
to ``force the auto industry to convert to the production of electric 
vehicles in violation of [its] statutory authorities'' was ``part of a 
unified strategy of the Biden administration, as set forth in executive 
orders,'' combining NHTSA, EPA, and CARB efforts.\1170\
---------------------------------------------------------------------------

    \1166\ CEI, Docket No. NHTSA-2023-0022-61121, at 2. West 
Virginia Attorney General's Office offered similar comments, Docket 
No. NHTSA-2023-0022-63056, at 2.
    \1167\ CEI, at 1.
    \1168\ Id.
    \1169\ Id. at 4.
    \1170\ Heritage Foundation, Docket No. NHTSA-2023-0022-61952, at 
2.
---------------------------------------------------------------------------

    In response, NHTSA notes that many of these comments and arguments 
are generally similar to those offered to the model years 2024-2026 
proposal, and that the response provided by NHTSA in the model years 
2024-2026 final rule largely continues to apply. NHTSA has carefully 
considered EPA's standards, by including the baseline (i.e., through 
model year 2026) CO2 standards in our analytical reference 
baseline for the main analysis.
    In the 2012 final rule, NHTSA stated that ``[t]o the extent the GHG 
standards result in increases in fuel economy, they would do so almost 
exclusively as a result of inducing manufacturers to install the same 
types of technologies used by manufacturers in complying with the CAFE 
standards.'' \1171\ NHTSA concluded in 2012 that ``no further action 
was needed'' because ``the agency had already considered EPA's [action] 
and the harmonization benefits of the National Program in developing 
its own [action].'' \1172\ In the 2020 final rule, NHTSA reinforced 
that conclusion by explaining that a textual analysis of the statutory 
language made it clear that EPA's GHG standards are literally ``other 
motor vehicle standards of the Government'' because they are standards 
set by a Federal agency that apply to motor vehicles. NHTSA and EPA are 
obligated by Congress to exercise their own independent judgment in 
fulfilling their statutory missions, even though both agencies' 
regulations affect both fuel economy and CO2 emissions. 
There are differences between the two agencies' programs that make 
NHTSA's CAFE standards and EPA's GHG standards not perfectly one-to-one 
(even besides the fact that EPA regulates other GHGs besides 
CO2, EPA's CO2 standards also differ from NHTSA's 
in a variety of ways, often because NHTSA is bound by statute to a 
certain aspect of CAFE regulation). NHTSA creates standards that meet 
our statutory obligations, including through considering EPA's 
standards as other motor vehicle standards of the Government.\1173\ 
Specifically, NHTSA has considered EPA's standards through model year 
2026 for this final rule by including the baseline GHG standards in our 
analytical reference baseline for the main analysis. Because the EPA 
and NHTSA programs were developed in coordination, and stringency 
decisions were made in coordination, NHTSA has not incorporated EPA's 
CO2 standards for model years 2027-2032 as part of the 
analytical reference baseline for this final rule's main analysis. The 
fact that EPA finalized its rule before NHTSA is an artifact of 
circumstance only. NHTSA recognizes, however, that the CAFE standards 
thus sit alongside EPA's light-duty vehicle multipollutant emission 
standards that were issued in March. NHTSA also notes that any electric 
vehicles deployed to comply with EPA's standards will count towards 
real-world compliance with these fuel economy standards. In this final 
rule, NHTSA's goal has been to establish regulations that achieve 
energy conservation per its statutory mandate and consistent with its 
statutory constraints, and that work in harmony with EPA's regulations 
addressing air pollution. NHTSA believes that these statutory mandates 
can be met while ensuring that manufacturers have the flexibility they 
need to achieve cost-effective compliance.
---------------------------------------------------------------------------

    \1171\ 77 FR 62624, 62669 (Oct. 15, 2012).
    \1172\ Id.
    \1173\ Massachusetts v. EPA, 549 U.S. 497, 532 (2007) (``[T]here 
is no reason to think that the two agencies cannot both administer 
their obligations and yet avoid inconsistency.'').
---------------------------------------------------------------------------

    NHTSA is aware that when multiple agencies regulate concurrently in 
the same general space, different regulations may be binding for 
different regulated entities at different times. Many commenters 
requested that NHTSA set standards low enough so that, among the CAFE, 
CO2, and California regulations, the CAFE standards were 
never the binding regulation. NHTSA explained in the model years 2024-
2026 final rule that NHTSA and EPA had explained in the 2012 final rule 
that depending on each manufacturer's chosen compliance path, there 
could be situations in which the relative difficulty of each agency's 
standards varied. To quote the 2012 final rule again,

    Several manufacturers commented on this point and suggested that 
this meant that the standards were not aligned, because NHTSA's 
standards might be more stringent in some years than EPA's. This 
reflects a misunderstanding of the agencies' purpose. The agencies 
have sought to craft harmonized standards such that manufacturers 
may build a single fleet of vehicles to meet both agencies' 
requirements. That is the case with these final standards. 
Manufacturers will have to plan their compliance strategies 
considering both the NHTSA standards and the EPA standards and 
assure that they are in compliance with both, but they can still 
build a single fleet of vehicles to accomplish that goal.'' \1174\ 
(emphasis added)
---------------------------------------------------------------------------

    \1174\ 77 FR at 63054-55 (Oct. 15, 2012).

    As explained in the model years 2024-2026 final rule, even in 2012, 
the agencies anticipated the possibility of this situation and 
explained that regardless of which agency's standards are binding given 
a manufacturer's chosen compliance path, manufacturers will still have 
to choose a path that complies with both standards--and in doing so, 
will still be able to build a single fleet of vehicles, even if they 
must be slightly more strategic in how they do so. This remains the 
case with this final rule.
    In requesting that NHTSA set CAFE standards that account precisely 
for each difference between the programs and ensure that CAFE standards 
are never more stringent than EPA's, never require any payment of civil 
penalties for any manufacturer, etc., commenters appear to be asking 
NHTSA again to define ``maximum feasible'' as ``the fuel economy level 
at which no manufacturer need ever apply any additional technology or 
spend any additional dollar beyond what EPA's standards, with their 
greater flexibilities, would require.'' NHTSA believes that this takes 
``consideration'' of ``the effect of other motor vehicle standards of 
the Government'' farther than Congress intended for it to go.
    NHTSA has considered EPA's standards in determining the maximum 
feasible CAFE standards for model years 2027-2031, as discussed above. 
In

[[Page 52825]]

response to comments, NHTSA conducted a side study in which we analyzed 
simultaneous compliance with EPA's recently finalized CO2 
standards and the regulatory alternatives considered here.\1175\ This 
analysis confirms that if industry reaches compliance with EPA's 
standards, then compliance with NHTSA final standards is feasible. 
NHTSA has coordinated its standards with EPA's where doing so was 
consistent with NHTSA's separate statutory direction. NHTSA disagrees 
that harmonization can only ever be achieved at the very cheapest 
level, or that this would be consistent with NHTSA's statutory mandate.
---------------------------------------------------------------------------

    \1175\ Side Study Memo to Docket.
---------------------------------------------------------------------------

    Industry commenters discussed at length their concerns with 
managing simultaneous compliance with NHTSA's standards while also 
making the technological transition that NHTSA cannot consider, just as 
they did in their comments to the model years 2024-2026 proposal. NHTSA 
recognizes that the difference in the current rulemaking is that the 
transition that NHTSA cannot consider directly is likely closer, and 
the urgency of needing all available resources and capital for that 
transition--resources and capital investments that NHTSA can consider, 
because they are dollars and not miles per gallon--is greater at the 
current time. Given that, NHTSA has accounted for the significant 
investments needed by manufacturers to meet EPA's standards, and has 
reduced CAFE stringency from the proposal accordingly, as will be 
discussed more in Section VI.D below. As the final standards show, it 
is possible for NHTSA to account for EPA's program without the agencies 
needing to conduct a single joint rulemaking, and without NHTSA being 
obliged to prove, as some commenters requested, that exactly the same 
technology for every single vehicle for every single manufacturer will 
result in compliance with all applicable standards. Manufacturers are 
sophisticated enterprises well-accustomed to managing compliance with 
multiple regulatory regimes, particularly in this space. The reduced 
stringency of the final standards should address their concerns.
    With regard to the comments requesting that NHTSA accept compliance 
with EPA standards in lieu of compliance with CAFE standards, NHTSA 
does not believe that this would be consistent with the intent of ``the 
effect of other motor vehicle standards of the Government on fuel 
economy'' provision. Congress would not have set that provision as one 
factor among four for NHTSA to consider if it intended for it to 
control absolutely--instead, NHTSA and courts have long held that all 
factors must be considered together. Moreover, Congress delegated to 
DOT (and DOT delegated to NHTSA) decision-making authority for the CAFE 
standards program. The Supreme Court said in Massachusetts v. EPA that 
because ``DOT sets mileage standards in no way licenses EPA to shirk 
its environmental responsibilities. EPA has been charged with 
protecting the public's `health' and `welfare,' 42 U.S.C. 7521(a)(1), a 
statutory obligation wholly independent of DOT's mandate to promote 
energy efficiency. See Energy Policy and Conservation Act, Sec.  2(5), 
89 Stat. 874, 42 U.S.C. 6201(5). The two obligations may overlap, but 
there is no reason to think the two agencies cannot both administer 
their obligations and yet avoid inconsistency.'' The converse must 
necessarily be true--the fact that EPA sets GHG standards in no way 
licenses NHTSA to shirk its energy conservation responsibilities. 
Unless and until Congress changes EPCA/EISA, NHTSA is bound to continue 
exercising its own independent judgment and setting CAFE standards and 
to do so consistent with statutory directives. Part of setting CAFE 
standards is considering EPA's GHG standards and other motor vehicle 
standards of the Government and how those affect manufacturers' ability 
to comply with potential future CAFE standards, but that is only one 
inquiry among several in determining what levels of CAFE standards 
would be maximum feasible.
    Additionally, nothing in EPCA or EISA suggests that compliance with 
GHG standards would be an acceptable basis for CAFE compliance. The 
calculation provisions in 49 U.S.C. 32904 are explicit. The compliance 
provisions in 49 U.S.C. 32912 state that automakers must comply with 
applicable fuel economy standards, and failure to do so is a failure to 
comply. Emissions standards are not fuel economy standards. NHTSA does 
not agree that a ``deemed to comply'' option is consistent with 
statute, nor that it is necessary for coordination with and 
consideration of those other standards.
    With regard to the comments suggesting that NHTSA, EPA, California, 
and the rest of the Federal government are somehow colluding to force a 
transition from ICE to BEV technology, NHTSA reiterates that 49 U.S.C. 
32902(h) bars NHTSA from setting standards that require alternative 
fuel vehicle technology.
    With regard to state standards, as for the NPRM analysis, NHTSA 
considered and accounted for the impacts of anticipated manufacturer 
compliance with California's ACC I and ACT programs (and their 
adoption, where relevant, by the Section 177 states), incorporating 
them into the reference baseline No-Action Alternative as other 
regulatory requirements foreseeably applicable to automakers during the 
rulemaking time frame. NHTSA continues not to model other state-level 
emission standards, as discussed in the 2022 final rule.\1176\
---------------------------------------------------------------------------

    \1176\ See 87 FR at 25982 (May 2, 2022).
---------------------------------------------------------------------------

    API commented that NHTSA was prohibited from considering the 
California ACC and ACT programs in setting standards, because ``The 
term `the Government' clearly is a reference to the federal government 
and cannot reasonably be construed as including state or local 
governments''; because even if it was reasonable to construe the term 
as including state and local governments, NHTSA ``is still barred from 
considering BEVs,'' because any EPA grant of a CAA waiver does not 
federalize those standards, and because those standards are preempted 
by EPCA.\1177\ API stated that ``NHTSA's refusal to engage on these 
issues here is facially arbitrary and capricious.'' \1178\
---------------------------------------------------------------------------

    \1177\ API, Docket No. NHTSA-2023-0022-60234, Attachment 1, at 
6-7.
    \1178\ Id. at 7.
---------------------------------------------------------------------------

    NHTSA continues to disagree that it is necessary for NHTSA to 
determine definitively whether these regulatory requirements are or are 
not other motor vehicle standards of the Government (in effect, whether 
they became ``federalized'' when EPA granted the CAA preemption waiver 
for ACC I and ACT), because whether they are or not, it is still 
appropriate to include these requirements in the regulatory reference 
baseline because the automakers have repeatedly stated their intent to 
comply with those requirements during the rulemaking time frame. For 
the same reason, NHTSA included additional electric vehicles in the 
reference baseline--which would be consistent with ACC II, which has 
not been granted a waiver--because the automakers have similarly stated 
their intention to deploy electric vehicles at the modeled level 
independent of whether ACC II is granted a waiver and independent of 
the existence of NHTSA's standards. If manufacturers are operating as 
though they plan to comply with ACC I and ACT and deploy additional 
electric vehicles beyond that level, then that assumption is therefore 
relevant to understanding the state of the world absent any further 
regulatory action by NHTSA. With regard to whether the

[[Page 52826]]

California standards are preempted under EPCA, NHTSA is not a court and 
thus does not have authority to make such determinations with the force 
of law, no matter how much commenters may wish us to do so. Further, as 
discussed above and below, NHTSA addressed uncertainty about the level 
of penetration of electric vehicles into the reference baseline fleet 
by developing an alternative baseline, No ZEV, and assessing the final 
standards against that baseline.
    Some commenters also argued that NHTSA should consider the CAFE 
standards in the context of other Federal rules and programs. Absolute 
Energy commented that ``CAFE is not the only tool'' for addressing 
``fuel efficiency, energy security, and decarbonization,'' and NHTSA 
should consider the role of CAFE given the existence of the Renewable 
Fuel Standard (RFS) and various tax credits and grant programs that 
encourage renewable fuels production.\1179\ West Virginia Attorney 
General's office stated that by ``considering EVs as the chief 
compliance option'' for CAFE standards, ``NHTSA's analysis is at odds 
with promoting renewable fuels,'' and suggested that this created a 
conflict of laws.\1180\ POET offered similar comments and added that 
``NHTSA should expand incentives for biofuels under the CAFE program to 
further promote energy security.'' \1181\
---------------------------------------------------------------------------

    \1179\ Absolute Energy, Docket No. NHTSA-2023-0022-50902, at 2. 
CAE offered similar comments, Docket No. NHTSA-2023-0022-61599, at 
3.
    \1180\ West Virginia Attorney General's Office, Docket No. 
NHTSA-2023-0022-63056, at 5-6.
    \1181\ POET, Docket No. NHTSA-2023-0022-61651, at 9.
---------------------------------------------------------------------------

    In response, NHTSA agrees that CAFE is not the only tool for 
addressing fuel efficiency, energy security, and decarbonization. 
However, since CAFE compliance is measured on EPA's test cycle with a 
defined test fuel, and since NHTSA does not have authority to require 
in-use compliance, programs like the RFS and other programs that 
encourage biofuels production cannot factor into NHTSA's consideration. 
The test cycle (and the off-cycle program, which does not include 
alternative fuels) is NHTSA's entire world for purposes of the CAFE 
program. To the extent that some commenters believe there is a conflict 
between the RFS and the CAFE program, it has existed for decades and 
Congress has had multiple opportunities to address it, but has not done 
so. This may be evidence that the programs do not conflict but instead 
aim to solve similar problems with different approaches.
(4) The Need of the U.S. To Conserve Energy
    NHTSA has consistently interpreted ``the need of the United States 
to conserve energy'' to mean ``the consumer cost, national balance of 
payments, environmental, and foreign policy implications of our need 
for large quantities of petroleum, especially imported petroleum.'' 
\1182\ The following sections discuss each of these elements, relevant 
comments, and NHTSA's responses, in more detail.
---------------------------------------------------------------------------

    \1182\ See, e.g., 42 FR 63184, 63188 (Dec. 15, 1977); 77 FR 
62624, 62669 (Oct. 15, 2012).
---------------------------------------------------------------------------

(a) Consumer Costs and Fuel Prices
    Fuel for vehicles costs money for vehicle owners and operators, so 
all else equal, consumers benefit from vehicles that need less fuel to 
perform the same amount of work. Future fuel prices are a critical 
input into the economic analysis of potential CAFE standards because 
they determine the value of fuel savings both to new vehicle buyers and 
to society; the amount of fuel economy that the new vehicle market is 
likely to demand in the absence of regulatory action; and they inform 
NHTSA about the ``consumer cost . . . of our need for large quantities 
of petroleum.'' For this final rule, NHTSA relied on fuel price 
projections from the EIA AEO for 2023, updating them from the AEO 2022 
version used for the proposal. Federal Government agencies generally 
use EIA's price projections in their assessment of future energy-
related policies.
    Raising fuel economy standards can reduce consumer costs on fuel--
this has long been a major focus of the CAFE program and was one of the 
driving considerations for Congress in establishing the CAFE program 
originally. Over time, as average VMT has increased and more and more 
Americans have come to live farther and farther from their workplaces 
and activities, fuel costs have become even more important. Even when 
gasoline prices, for example, are relatively low, they can still add up 
quickly for consumers whose daily commute measures in hours, like many 
Americans in economically disadvantaged and historically underserved 
communities. When vehicles can go farther on a gallon of gasoline, 
consumers save money, and for lower-income consumers the savings may 
represent a larger percentage of their income and overall expenditures 
than for more-advantaged consumers. Of course, when fuel prices spike, 
lower-income consumers suffer disproportionately. Thus, clearly, the 
need of the United States to conserve energy is well-served by helping 
consumers save money at the gas pump.
    NHTSA and the DOT are committed to improving equity in 
transportation. Helping economically disadvantaged and historically 
underserved Americans save money on fuel and get where they need to go 
is an important piece of this puzzle, and it also improves energy 
conservation, thus implementing Congress' intent in EPCA. All of the 
action alternatives considered in this final rule improve fuel economy 
over time as compared to the reference baseline standards, with the 
most stringent alternatives saving consumers the most on fuel costs.
    The States and Cities agreed that increasing fuel economy will save 
consumers money and also further EPCA's energy conservation 
goals.\1183\ NESCAUM agreed that consumers would save more money under 
the strictest alternatives, stating that saving money on fuel was 
particularly important for consumers with long commutes, such as those 
in rural areas and economically disadvantaged and historically 
underserved communities.\1184\ NESCAUM emphasized that lower income 
consumers benefit most from reductions in fuel costs and are most 
vulnerable to fuel cost price spikes.\1185\ IPL and Chispa LCV offered 
similar comments.\1186\ NHTSA appreciates these comments.
---------------------------------------------------------------------------

    \1183\ States and Cities, Docket No. NHTSA-2022-0075-0033-0035, 
at 25-26.
    \1184\ NESCAUM, Docket No. NHTSA-2023-0022-57714, at 3.
    \1185\ Id.
    \1186\ IPL, Docket No. NHTSA-2023-0022-49058, at 1-2; Chispa 
LCV, Docket No. NHTSA-2023-0022-28014, at 1.
---------------------------------------------------------------------------

    NHTSA also notes that, in many previous CAFE rulemakings, 
discussions of fuel prices have always been intended to reflect the 
price of motor gasoline. However, a growing set of vehicle offerings 
that rely in part, or entirely, on electricity suggests that gasoline 
prices are no longer the only fuel prices relevant to evaluations of 
the effects of different possible CAFE standards. In the analysis 
supporting this final rule, NHTSA considers the energy consumption from 
the entire on-road fleet, which already contains a number of plug-in 
hybrid and fully electric vehicles that are part of the fleet 
independent of CAFE standards.\1187\

[[Page 52827]]

While the current and projected national average electricity price is 
and is expected to remain significantly higher than that of gasoline, 
on an energy equivalent basis ($/MMBtu),\1188\ electric motors convert 
energy into propulsion much more efficiently than ICEs. This means 
that, even though the energy-equivalent prices of electricity are 
higher, electric vehicles still produce fuel savings for their owners. 
As the reliance on electricity grows in the LD fleet, NHTSA will 
continue to monitor the trends in electricity prices and their 
implications, if any, for CAFE standards.
---------------------------------------------------------------------------

    \1187\ Higher CAFE standards encourage manufacturers to improve 
fuel economy; at the same time, manufacturers will foreseeably seek 
to continue to maximize profit, and to the extent that plug-in 
hybrids and fully-electric vehicles are cost-effective to build and 
desired by the market, manufacturers may well build more of these 
vehicles, even though NHTSA does not expressly consider them as a 
compliance option when we are determining maximum feasible CAFE 
stringency. Due to forces other than CAFE standards, however, we do 
expect continued growth in electrification technologies (and we 
reflect those forces in the analytical baseline).
    \1188\ See AEO. 2023. Table 3: Energy Prices by Sector and 
Source. Available at: https://www.eia.gov/outlooks/aeo/data/browser/#/?id=3-AEO2023&cases=ref2023&sourcekey=0. (Accessed: Mar. 22, 
2024).
---------------------------------------------------------------------------

(b) National Balance of Payments
    NHTSA has consistently included consideration of the ``national 
balance of payments'' as part of the need of the U.S. to conserve 
energy because of concerns that importing large amounts of oil created 
a significant wealth transfer to oil-exporting countries and left the 
U.S. economically vulnerable.\1189\ According to EIA, the net U.S. 
petroleum trade value deficit peaked in 2008, but it has fallen over 
the past decade as volumes of U.S. petroleum exports increased to 
record-high levels and imports decreased.\1190\ The 2020 net U.S. 
petroleum trade value deficit was $3 billion, the smallest on record, 
partially because of less consumption amid COVID mitigation 
efforts.\1191\ In 2020 and 2021, annual total petroleum net imports 
were actually negative, the first years since at least 1949. For 
petroleum that was imported in 2023, 52 percent came from Canada, 11 
percent came from Mexico, 5 percent came from Saudi Arabia, 4 percent 
came from Iraq and 3 percent came from Brazil.\1192\ The States and 
Cities agreed that finalizing the proposal would improve the U.S. 
balance of payments and protect consumers from global price shocks, and 
added that ``NHTSA could strengthen its analysis by acknowledging that 
the U.S. consumed more petroleum than it produced in 2022, and that the 
U.S. remained a net crude oil importer in 2022, importing about 6.28 
million barrels per day of crude oil and exporting about 3.58 million 
barrels per day.'' \1193\ NHTSA appreciates the comment.
---------------------------------------------------------------------------

    \1189\ For the earliest discussion of this topic, see 42 FR 
63184, 63192 (Dec. 15, 1977).
    \1190\ EIA. 2021. Today in Energy: U.S. Energy Trade Lowers the 
Overall 2020 U.S. Trade Deficit for the First Time on Record. Last 
revised: Sept. 22, 2021. Available at https://www.eia.gov/todayinenergy/detail.php?id=49656#. (Accessed: Feb. 27, 2024).
    \1191\ EIA. 2022. Oil and Petroleum Products Explained, Oil 
Imports and Exports. Last revised: Nov. 2, 2022. Available at: 
https://www.eia.gov/energyexplained/oil-and-petroleum-products/imports-and-exports.php. (Accessed Feb. 27, 2024).
    \1192\ EIA. Frequently Asked Questions (FAQs): How much 
petroleum does the United States import and export? Last revised: 
March 29, 2024. Available at: https://www.eia.gov/tools/faqs/faq.php?id=727&t=6. (Accessed April 16, 2024).
    \1193\ States and Cities, Docket No. NHTSA-2022-0075-0033-0011, 
at 26.
---------------------------------------------------------------------------

    While transportation demand is expected to continue to increase as 
the economy recovers from the pandemic, it is foreseeable that the 
trend of trade in consumer goods and services continuing to dominate 
the national balance of payments, as compared to petroleum, will 
continue during the rulemaking time frame.\1194\ Regardless, the U.S. 
does continue to rely on oil imports. Moreover, because the oil market 
is global in nature, the U.S. is still subject to price volatility, as 
recent global events have demonstrated.\1195\ NHTSA recognizes that 
reducing the vulnerability of the U.S. to possible oil price shocks 
remains important. This final rule aims to improve fleet-wide fuel 
efficiency and to help reduce the amount of petroleum consumed in the 
U.S., and therefore aims to improve this part of the U.S. balance of 
payments as well as to protect consumers from global price shocks.
---------------------------------------------------------------------------

    \1194\ EIA, Oil and Petroleum Products Explained, Oil Imports 
and Exports.
    \1195\ See, e.g., FRED (St. Louis Federal Reserve) Blog, ``The 
Ukraine War's effects on US commodity prices,'' Oct. 26, 2023, 
available at https://fredblog.stlouisfed.org/2023/10/the-ukraine-wars-effects-on-us-commodity-prices/ (last accessed May 23. 2024).
---------------------------------------------------------------------------

(c) Environmental Implications
    Higher fleet fuel economy reduces U.S. emissions of CO2 
as well as various other pollutants by reducing the amount of oil that 
is produced and refined for the U.S. vehicle fleet but can also 
potentially increase emissions by reducing the cost of driving, which 
can result in increased vehicle miles traveled (i.e., the rebound 
effect). Thus, the net effect of more stringent CAFE standards on 
emissions of each pollutant depends on the relative magnitudes of its 
reduced emissions in fuel refining and distribution and any increases 
in emissions from increased vehicle use. Fuel savings from CAFE 
standards also result in lower emissions of CO2, the main 
GHG emitted as a result of refining, distribution, and use of 
transportation fuels.
    NHTSA has considered environmental issues, both within the context 
of EPCA and the context of NEPA, in making decisions about the setting 
of standards since the earliest days of the CAFE program. As courts of 
appeal have noted in three decisions stretching over the last 20 
years,\1196\ NHTSA defined ``the need of the United States to conserve 
energy'' in the late 1970s as including, among other things, 
environmental implications. In 1988, NHTSA included climate change 
considerations in its CAFE notices and prepared its first environmental 
assessment addressing that subject.\1197\ It cited concerns about 
climate change as one of the reasons for limiting the extent of its 
reduction of the CAFE standard for model year 1989 passenger 
cars.\1198\
---------------------------------------------------------------------------

    \1196\ CAS, 793 F.2d 1322, 1325 n. 12 (D.C. Cir. 1986); Public 
Citizen, 848 F. 2d 256, 262-63 n. 27 (D.C. Cir. 1988) (noting that 
``NHTSA itself has interpreted the factors it must consider in 
setting CAFE standards as including environmental effects''); CBD, 
538 F.3d 1172 (9th Cir. 2007).
    \1197\ 53 FR 33080, 33096 (Aug. 29, 1988).
    \1198\ 63 FR 39275, 39302 (Oct. 6, 1988).
---------------------------------------------------------------------------

    NHTSA also considers EJ issues as part of the environmental 
considerations under the need of the United States to conserve energy, 
as described in the Final Environmental Impact Statement for this 
rulemaking.'' \1199\ The affected environment for EJ is nationwide, 
with a focus on areas that could contain communities with EJ concerns 
who are most exposed to the environmental and health effects of oil 
production, distribution, and consumption, or the impacts of climate 
change. This includes areas where oil production and refining occur, 
areas near roadways, coastal flood-prone areas, and urban areas that 
are subject to the heat island effect.
---------------------------------------------------------------------------

    \1199\ DOT. 2021. Actions to Address Environmental Justice in 
Minority Populations and Low-Income Populations. Order 5610.2(c).
---------------------------------------------------------------------------

    Numerous studies have found that some environmental hazards are 
more prevalent in areas where minority and low-income populations 
represent a higher proportion of the population compared with the 
general population. In terms of effects due to criteria pollutants and 
air toxics emissions, the body of scientific literature points to 
disproportionate representation of minority and low-income populations 
in proximity to a range of industrial, manufacturing, and hazardous 
waste facilities that are stationary sources of air pollution, although 
results of individual studies may vary. While the

[[Page 52828]]

scientific literature specific to oil refineries is limited, 
disproportionate exposure of minority and low-income populations to air 
pollution from oil refineries is suggested by other broader studies of 
racial and socioeconomic disparities in proximity to industrial 
facilities generally. Studies have also consistently demonstrated a 
disproportionate prevalence of minority and low-income populations 
living near mobile sources of pollutants (such as roadways) and 
therefore are exposed to higher concentrations of criteria air 
pollutants in multiple locations across the United States. Lower-
positioned socioeconomic groups are also generally more exposed to air 
pollution, and thus generally more vulnerable to effects of exposure.
    In terms of exposure to climate change risks, the literature 
suggests that across all climate risks, low-income communities, some 
communities of color, and those facing discrimination are 
disproportionately affected by climate events. Communities overburdened 
by poor environmental quality experience increased climate risk due to 
a combination of sensitivity and exposure. Urban populations 
experiencing inequities and health issues have greater susceptibility 
to climate change, including substantial temperature increases. Some 
communities of color facing cumulative exposure to multiple pollutants 
also live in areas prone to climate risk. Indigenous peoples in the 
United States face increased health disparities that cause increased 
sensitivity to extreme heat and air pollution.
    Available information indicates that climate impacts 
disproportionately affect communities with environmental justice 
concerns in part because of socioeconomic circumstances, including 
location of lower-income housing, histories of discrimination, and 
inequity can be contributing factors. Furthermore, high temperatures 
can exacerbate poor air quality, further compounding the risk to 
overburdened communities. Finally, health-related sensitivities in low-
income and minority populations increase risk of damaging impacts from 
poor air quality under climate change, underscoring the potential 
benefits of improving air quality to communities overburdened by poor 
environmental quality. Chapter 7 of the EIS discusses EJ issues in more 
detail.
    In the EIS, Chapters 3 through 5 discuss the connections between 
oil production, distribution, and consumption, and their health and 
environmental impacts. Electricity production and distribution also 
have health and environmental impacts, discussed in those chapters as 
well.
    All of the action alternatives in this final rule reduce carbon 
dioxide emissions and, thus, the effects of climate change, over time 
as compared to the reference baseline. Under the No ZEV alternative 
baseline analysis as compared to the reference baseline analysis, 
CO2 emissions (and thus climate change effects) are reduced 
by similar magnitudes under the different action alternatives, because 
while the No ZEV alternative baseline starts at a higher CO2 
level than the reference baseline, the action alternatives under the No 
ZEV alternative baseline analysis reduce CO2 by more than 
the action alternatives under the reference baseline analysis. Criteria 
pollutant and air toxic emissions are also all reduced over time 
compared to both the reference baseline analysis and the No ZEV 
alternative baseline analysis, with marginal changes occurring in early 
years and becoming more pronounced in later years as more new vehicles 
subject to the standards enter the fleet and the electricity grid 
shifts fuel sources. FRIA Chapter 8 discusses modeled standard-setting 
air quality and climate effects in more detail, while Chapters 4 and 5 
of the EIS discuss the unrestricted modeling results in more detail.
    As discussed above, while our analysis suggests that the majority 
of LDVs will continue to be powered by ICEs in the near- to mid-term 
under all regulatory alternatives, greater electrification in the mid- 
to longer-term is foreseeable. While NHTSA is prohibited from 
considering the fuel economy of EVs in determining maximum feasible 
CAFE standards, EVs (which appear both in NHTSA's reference baseline 
and which may be produced in model years following the period of 
regulation as an indirect effect of more stringent standards, or in 
response to other non-NHTSA standards, or in response to tax incentives 
and other government incentives, or in response to market demand) 
produce few to zero combustion-based emissions. As a result, 
electrification contributes meaningfully to the decarbonization of the 
transportation sector, in addition to having additional environmental, 
health, and economic development benefits, although these benefits may 
not yet be equally distributed across society. They also present new 
environmental (and social) questions, like the consequences of upstream 
electricity production, minerals extraction for battery components, and 
ability to charge an EV. The upstream environmental effects of 
extraction and refining for petroleum are well-recognized; minerals 
extraction and refining can also have significant environmental 
impacts. NHTSA's EIS discusses these and other effects (such as 
production and end-of-life issues) in more detail in Chapters 3 and 6, 
and NHTSA will continue to monitor these issues going forward insofar 
as CAFE standards may end up causing increased electrification levels 
even if NHTSA does not consider electrification in setting those 
standards, because NHTSA does not control what technologies 
manufacturers use to meet those standards, and because NHTSA is 
required to consider the environmental effects of its standards under 
NEPA.
    NHTSA carefully considered the environmental effects of this 
rulemaking, both quantitative and qualitative, as discussed in the EIS 
and in Sections VI.C and VI.D of this preamble.
    Comments on climate effects associated with the proposal varied. 
The States and Cities commented that consideration of the environmental 
effects of the regulatory alternatives as set forth in the Draft EIS 
supported more stringent standards, because reducing GHG emissions is 
necessary to stave off the worst effects of climate change, and because 
more stringent standards will also help to reduce criteria pollutant 
emissions.\1200\ That commenter also argued that NHTSA had likely 
understated the climate benefits of stricter standards by using a SC-
GHG value that ``does not fully capture the harms from climate change . 
. . particularly in terms of unquantified climate damages (such as 
damages caused by more frequent and intense wildfires and loss of 
cultural and historical resources, neither of which are accounted for 
in the SC-GHG) and its utilization of overly high discount rates.'' 
\1201\ An individual citizen commented that NHTSA should finalize the 
strictest possible standards even though they do not contribute greatly 
to overall emissions because ``all emissions count.'' \1202\
---------------------------------------------------------------------------

    \1200\ States and Cities, Docket No. NHTSA-2022-0075-0033-0012, 
at 8, 26-28.
    \1201\ Id. at 33.
    \1202\ Roselie Bright, Docket No. NHTSA-2022-0075-0030-0007, at 
1.
---------------------------------------------------------------------------

    In contrast, CEI commented that ``climate change is not a crisis, 
and the global warming mitigation achieved by the proposed CAFE 
standards would be orders of magnitude smaller than scientists can 
detect or identify.'' \1203\ CEA argued that NHTSA should not be 
considering climate effects in

[[Page 52829]]

determining maximum feasible standards, because to do so contradicted 
Massachusetts v. EPA, which states that EPA's and NHTSA's obligations 
are ``wholly independent'' from one another.\1204\ The commenter 
further argued that ``Case law holding NHTSA may consider climate 
change is therefore in serious conflict with Supreme Court precedent.'' 
\1205\
---------------------------------------------------------------------------

    \1203\ CEI, Docket No. NHTSA-2023-0022-61121, at 2, 10.
    \1204\ CEA, Docket No. NHTSA-2023-0022-61918, at 28.
    \1205\ Id.
---------------------------------------------------------------------------

    NHTSA agrees that stricter standards should, in theory, reduce 
emissions further, although NHTSA recognizes the possibility of 
situations under which intended emission reductions might not be fully 
achieved. For example, on the supply side of the market, if standards 
were too strict, companies might choose to pay civil penalties instead 
of complying with the standards. On the demand side of the market, 
vehicle prices associated with standards that are too strict could 
potentially lead some consumers to forego new vehicle purchases, 
perhaps choosing less fuel efficient alternatives and thus dampening 
the intended emissions reductions. Climate effects of potential new 
CAFE standards may appear small in absolute terms, as suggested by CEI, 
but they are quantifiable, as shown in the FRIA, and they do contribute 
meaningfully to mitigating the worst effects of climate change, as part 
of a suite of actions taken by the U.S. and the international 
community. With regard to the comments from CEA, NHTSA reiterates that 
the overarching purpose of the CAFE standards is energy conservation. 
Improving fuel economy generally reduces carbon dioxide emissions, 
because basic principles of chemistry explain that consuming less 
carbon-based fuel to do the same amount of work results in less carbon 
dioxide being released per amount of work (in this case, a vehicle 
traveling a mile). Thus, reducing climate-related emissions is an 
effect of improving fuel economy, even if it is not the overarching 
purpose of improving fuel economy. Another effect of improving fuel 
economy is that consumers can travel the same distance for less money 
spent on fuel. If NHTSA took the comment literally, NHTSA would be 
compelled to consider only gallons of fuel use avoided, rather than the 
dollars that would otherwise be spent on those gallons. NHTSA disagrees 
that it would be appropriate to circumscribe its effects analysis to 
such a degree. It should also be clear at this point that EPA and NHTSA 
are each capable of executing their statutory obligations 
independently.
    On environmental justice, SELC and NESCAUM commented that exposure 
to smog disproportionately affects communities with environmental 
justice concerns, and that stricter CAFE standards would reduce these 
effects.\1206\ Lucid commented that finalizing PC6LT8 would not only 
reduce on-road emissions but also significantly reduce emissions 
associated with petroleum extraction and distribution.\1207\ Climate 
Hawks commented that all vehicles should have exhaust pipes on the left 
side, so that pedestrians on sidewalks did not have to breathe in 
emissions.\1208\
---------------------------------------------------------------------------

    \1206\ SELC, Docket No. NHTSA-2023-0022-60224, at 5, 6; NESCAUM, 
Docket No. NHTSA-2023-0022-57714, at 3. MPCA agency offered similar 
comments, Docket No. NHTSA-2023-0022-60666, at 2; IPL offered 
similar comments, Docket No. NHTSA-2023-0022-49058, at 2.
    \1207\ Lucid, Docket No. -2023-0022-50594, at 6.
    \1208\ Climate Hawks, Docket No. NHTSA-2023-0022-61094, at 854.
---------------------------------------------------------------------------

    NHTSA agrees that environmental justice concerns are significant 
and that stricter CAFE standards reduce effects on communities with 
environmental justice concerns in many ways. NHTSA does not have 
authority to regulate the location of exhaust pipes on a vehicle, and 
so is unable to respond further to Climate Hawks on the point raised in 
the comment.
(d) Foreign Policy Implications
    U.S. consumption and imports of petroleum products impose costs on 
the domestic economy that are not reflected in the market price for 
crude petroleum or in the prices paid by consumers for petroleum 
products such as gasoline. These costs include (1) higher prices for 
petroleum products resulting from the effect of U.S. oil demand on 
world oil prices; (2) the risk of disruptions to the U.S. economy, and 
the effects of those disruptions on consumers, caused by sudden 
increases in the global price of oil and its resulting impact of fuel 
prices faced by U.S. consumers; (3) expenses for maintaining the 
Strategic Petroleum Reserve (SPR) to provide a response option should a 
disruption in commercial oil supplies threaten the U.S. economy, to 
allow the U.S. to meet part of its International Energy Agency 
obligation to maintain emergency oil stocks, and to provide a national 
defense fuel reserve; and (4) the threat of significant economic 
disruption, and the underlying effect on U.S. foreign policy, if an 
oil-exporting country threatens the United States and uses, as part of 
its threat, its power to upend the U.S. economy. Reducing U.S. 
consumption of crude oil or refined petroleum products (by reducing 
motor fuel use) can reduce these external costs.
    In addition, a 2006 report by the Council on Foreign Relations 
identified six foreign policy costs that it said arose from U.S. 
consumption of imported oil: (1) The adverse effect that significant 
disruptions in oil supply will have for political and economic 
conditions in the U.S. and other importing countries; (2) the fears 
that the current international system is unable to secure oil supplies 
when oil is seemingly scarce and oil prices are high; (3) political 
realignment from dependence on imported oil that limits U.S. alliances 
and partnerships; (4) the flexibility that oil revenues give oil-
exporting countries to adopt policies that are contrary to U.S. 
interests and values; (5) an undermining of sound governance by the 
revenues from oil and gas exports in oil-exporting countries; and (6) 
an increased U.S. military presence in the Middle East that results 
from the strategic interest associated with oil consumption.
    CAFE standards over the last few decades have conserved significant 
quantities of oil, and the petroleum intensity of the U.S. fleet has 
decreased significantly. Continuing to improve energy conservation and 
reduce U.S. oil consumption by raising CAFE standards further has the 
potential to continue to help with all of these considerations. Even if 
the energy security picture has changed since the 1970s, due in no 
small part to the achievements of the CAFE program itself in increasing 
fleetwide fuel economy, energy security in the petroleum consumption 
context remains extremely important. Congress' original concern with 
energy security was the impact of supply shocks on American consumers 
in the event that the U.S.'s foreign policy objectives lead to 
conflicts with oil-producing nations or that global events more 
generally lead to fuel disruptions. Moreover, oil is produced, refined, 
and sold in a global marketplace, so events that impact it anywhere, 
impact it everywhere. The world is dealing with these effects 
currently. Oil prices have fluctuated dramatically in recent years and 
reached over $100/barrel in 2022. A motor vehicle fleet with greater 
fuel economy is better able to absorb increased fuel costs, 
particularly in the short-term, without those costs leading to a 
broader economic crisis, as had occurred in the 1973 and 1979 oil 
crises. Ensuring that the U.S. fleet is positioned to take advantage of 
cost-effective technology innovations will allow the U.S. to continue 
to base its international activities on foreign policy objectives

[[Page 52830]]

that are not limited, at least not completely, by petroleum issues. 
Further, when U.S. oil consumption is linked to the globalized and 
tightly interconnected oil market, as it is now, the only means of 
reducing the exposure of U.S. consumers to global oil shocks is to 
reduce their oil consumption and the overall oil intensity of the U.S. 
economy. Thus, the reduction in oil consumption driven by fuel economy 
standards creates an energy security benefit.
    This benefit is the original purpose behind the CAFE standards. Oil 
prices are inherently volatile, in part because geopolitical risk 
affects prices. International conflicts, sanctions, civil conflicts 
targeting oil production infrastructure, pandemic-related economic 
upheaval, cartels, all of these have had dramatic and sudden effects on 
oil prices in recent years. For all of these reasons, energy security 
remains quite relevant for NHTSA in determining maximum feasible CAFE 
standards.\1209\ There are extremely important energy security benefits 
associated with raising CAFE stringency that are not discussed in the 
TSD Chapter 6.2.4, and which are difficult to quantify, but have 
weighed importantly for NHTSA in developing the standards in this final 
rule.
---------------------------------------------------------------------------

    \1209\ TSD Chapter 6.2.4 also discusses emerging energy security 
considerations associated with vehicle electrification, but NHTSA 
only considers these effects for decision-making purposes within the 
framework of the statutory restrictions applicable to NHTSA's 
determination of maximum feasible CAFE standards.
---------------------------------------------------------------------------

    The States and Cities agreed with NHTSA that energy security in the 
petroleum consumption context remains extremely important, and 
encouraged NHTSA to choose a more stringent alternative than the 
proposed standards, citing potential benefits in terms of reducing 
military spending and reducing revenue to regimes potentially hostile 
to U.S. interests.\1210\ In contrast, America First Policy Institute 
commented that improving energy security and reducing costs for 
consumers can be more expeditiously done using other policies.\1211\ 
While NHTSA agrees that more stringent standards must directionally 
improve foreign policy benefits, it has long been difficult to quantify 
these effects precisely due to numerous confounding factors. NHTSA thus 
considers these effects from a mostly qualitative perspective. In 
response to whether other policies might more ``expeditiously'' improve 
energy security and reduce consumer costs, even if that were true, 
Congress requires NHTSA to continue setting standards, and when setting 
standards, to set maximum feasible standards.\1212\
---------------------------------------------------------------------------

    \1210\ States and Cities, Docket No. NHTSA-2022-0075-0033-0012, 
at 27.
    \1211\ America First Policy Institute, Docket No. NHTSA-2023-
0022-61447, at 7.
    \1212\ 49 U.S.C. 32902.
---------------------------------------------------------------------------

    Heritage Foundation stated that U.S. oil and gas reserves are 
plentiful and that a ``proper consideration of the `need of the U.S. to 
conserve energy' should result in standards becoming less stringent.'' 
\1213\ This could be true if oil were not a global commodity. Oil 
produced in the U.S. is not necessarily consumed in the U.S., and its 
price is tied to global oil prices (and their fluctuations due to world 
events). CAFE standards are intended to insulate against external risks 
given the U.S. participation in global markets, and thus, strong CAFE 
standards continue to be helpful in this regard.
---------------------------------------------------------------------------

    \1213\ Heritage Foundation, Docket No. NHTSA-2023-0022-61952, at 
10.
---------------------------------------------------------------------------

    A number of commenters expressed concern that ``essentially 
mandating electric vehicles'' would create non-petroleum-related energy 
security issues, associated with production of critical minerals for 
BEVs in parts of the world that are neither consistently reliable nor 
friendly to U.S. interests.\1214\ Related comments argued that the U.S. 
could not itself produce sufficient critical minerals to supply the 
volumes of BEVs that would be needed to meet the standards.\1215\ Other 
related comments argued that the U.S. could produce sufficient 
petroleum, but could not produce sufficient critical minerals, and that 
requiring vehicles to be BEVs amounted to creating an energy security 
issue where there would otherwise be none.\1216\ Various commenters 
said that NHTSA's commitment to ``monitoring'' these issues was 
insufficient, and that NHTSA was required to analyze these energy 
security risks from electrification (including, among other things, 
critical minerals and electric grid capacity and cybersecurity) 
expressly.\1217\
---------------------------------------------------------------------------

    \1214\ Valero, Docket No. NHTSA-2023-0022-58547, Appendix A, at 
7; Absolute Energy, Docket No. NHTSA-2023-0022-50902, at 2; Heritage 
Foundation, Docket No. NHTSA-2023-0022-61952, at 9; NATSO et al., 
Docket No. NHTSA-2023-0022-61070, at 12; West Virginia Attorney 
General's Office, Docket No. NHTSA-2023-0022-63056, at 12-15; ACE, 
Docket No. NHTSA-2023-0022-60683, at 2-3; American Consumer 
Institute, Docket No. NHTSA-2023-0022-50765, at 6, 7.
    \1215\ KCGA, Docket No. NHTSA-2023-0022-59007, at 3.
    \1216\ Institute for Energy Research, Docket No. NHTSA-2023-
0022-63063, at 3, 4.
    \1217\ MME, Docket No. NHTSA-2023-0022-50861, at 2; WPE, Docket 
No. NHTSA-2023-0022-52616, at 2; MCGA, Docket No. NHTSA-2023-0022-
60208, at 3-10; RFA et al. 2, Docket No. NHTSA-2023-0022-41652, at 
3-10 (arguing that it would be arbitrary and capricious for NHTSA 
not to issue a supplemental NPRM expressly analyzing and accounting 
for energy security risks associated with critical minerals); HCP, 
Docket No. NHTSA-2023-0022-59280, at 2; SIRE, Docket No. NHTSA-2023-
0022-57940, at 2; Missouri Corn Growers Association, Docket No. 
NHTSA-2023-0022-58413, at 2; CAE, Docket No. NHTSA-2023-0022-61599, 
at 2; AFPM, Docket No. NHTSA-2023-0022-61911, Attachment 2, at 21; 
Heritage Foundation, Docket No. NHTSA-2023-0022-61952, at 10.
---------------------------------------------------------------------------

    In the model years 2024-2026 final rule, NHTSA responded to similar 
comments by explaining that NHTSA is prohibited from considering the 
fuel economy of electric vehicles in determining maximum feasible 
standards, and that the agency did not believe that the question was 
truly ripe, given expected concentrations of electrified vehicles in 
the-then rulemaking time frame. For the current rulemaking, due to the 
proliferation of electrified vehicles in the reference baseline, it is 
harder to say that the question is not ripe, and if NHTSA considers the 
resources necessary for the technological transition (without 
considering the fuel economy of BEVs or the full fuel economy of PHEVs) 
in evaluating economic practicability, then it is logical also to be 
informed about energy security effects of these vehicles (without 
considering their fuel economy) in evaluating the need of the U.S. to 
conserve energy. That said, there is a difference between being 
informed about something, and taking responsibility for it. As long as 
NHTSA is statutorily prohibited from considering the fuel economy of 
BEVs and the full fuel economy of PHEVs, NHTSA continues to disagree 
that it is required to account in its determination for energy security 
effects that CAFE regulations are prohibited from causing. This 
discussion is part of NHTSA's ongoing commitment to monitoring these 
issues. Commenters may wish for NHTSA to take responsibility for which 
the agency does not have authority, but NHTSA continues to believe that 
remaining informed is the best and most reasonable course of action in 
this area.
    As discussed in Chapter 6.2.4 of the TSD, as the number of electric 
vehicles on the road continues to increase, NHTSA agrees that the issue 
of energy security is likely to expand to encompass the United States' 
ability to supply the material necessary to build these vehicles and 
the additional electricity necessary to power their use. Nearly all 
electricity in the United States is generated through the conversion of 
domestic energy sources and thus its supply does not raise security 
concerns, although commenters did express some concern with grid 
resilience and cybersecurity. NHTSA is

[[Page 52831]]

aware that under the Bipartisan Infrastructure Law, DOE will administer 
more than $62 billion for investments in energy infrastructure, 
including $14 billion in financial assistance to States, Tribes, 
utilities, and other entities who provide products and services for 
enhancing the reliability, resilience, and energy efficiency of the 
electric grid.\1218\ Dozens of projects are already underway across the 
country.\1219\ This work is ongoing and NHTSA has no reason at present 
to conclude that it is not being addressed, as commenters suggest. With 
regard to cybersecurity, if commenters mean to suggest that BEVs are at 
greater risk of hacking than ICEVs, NHTSA disagrees that this is the 
case. NHTSA's efforts on cybersecurity cover all light vehicles, as all 
new light vehicles are increasingly computerized.\1220\ Additionally, 
the Joint Office of Energy and Transportation published cybersecurity 
procurement language to address risks when building out charging 
infrastructure.\1221\ If commenters mean to suggest that there are 
cybersecurity risks associated with electric grid attacks, those would 
exist no matter how many BEVs or other electrified vehicles there were. 
DOE is also actively involved in this issue,\1222\ and as before, NHTSA 
has no reason to think either that this is not being addressed, as 
commenters suggest, or that because work is ongoing, it is an inherent 
barrier to NHTSA's assumptions.
---------------------------------------------------------------------------

    \1218\ https://netl.doe.gov/bilhub/grid-resilience (last 
accessed Mar. 28, 2024).
    \1219\ https://www.energy.gov/gdo/grid-resilience-and-innovation-partnerships-grip-program-projects (last accessed Mar. 
28, 2024).
    \1220\ https://www.nhtsa.gov/research/vehicle-cybersecurity 
(last accessed Mar. 28, 2024).
    \1221\ See https://driveelectric.gov/news/joint-office-offers-new-cybersecurity-resource (last accessed May 23, 2024).
    \1222\ https://www.energy.gov/sites/default/files/2021/01/f82/OTT-Spotlight-on-Cybersecurity-final-01-21.pdf (last accessed Mar. 
28, 2024).
---------------------------------------------------------------------------

    Besides requiring electricity generation and distribution, electric 
vehicles also require batteries to store and deliver that electricity. 
Currently, the most commonly used vehicle battery chemistries include 
materials that are relatively scarce or expensive, and are sourced 
largely from overseas sites, and/or (like any mined minerals) can pose 
environmental challenges during extraction and conversion to usable 
material, which can create security issues if environmental challenges 
result in political destabilization. NHTSA does not include costs or 
benefits related to securing sourcing of battery materials in its 
analysis for this final rule, just as NHTSA has not previously or here 
included costs or benefits associated with the energy security 
considerations associated with internal combustion vehicle supply 
chains. However, we are aware that uncertainties exist. Although robust 
efforts are already underway to build a secure supply chain for 
critical minerals that includes domestic sources as well as friendly 
countries, the U.S. is currently at a disadvantage with respect to 
domestic sources of materials (raw and processed). To combat these 
challenges, President Biden issued an E.O. on ``America's Supply 
Chains,'' aiming to strengthen the resilience of America's supply 
chains, including those for automotive batteries.\1223\ Reports 
covering six sectors were developed by seven agencies within one year 
of issuance of the E.O. and outlined specific actions for the Federal 
government and Congress to take.\1224\ The Biden-Harris administration 
also awarded $2.8 billion from the Bipartisan Infrastructure Law to 
support projects that develop supplies of battery-grade lithium, 
graphite, and nickel and invest in other battery related mineral 
production.\1225\ Overall, the BIL appropriates $7.9 billion for the 
purpose of battery manufacturing, recycling, and critical 
minerals.\1226\
---------------------------------------------------------------------------

    \1223\ White House. 2021. Executive Order on America's Supply 
Chains. Available at: https://www.whitehouse.gov/briefing-room/presidential-actions/2021/02/24/executive-order-on-americas-supply-chains/ (last accessed May 31, 2024).
    \1224\ White House. 2022. Executive Order on America's Supply 
Chains: A Year of Actions and Progress. National Security Affairs. 
Washington, DC. Available at: https://www.whitehouse.gov/wp-content/uploads/2022/02/Capstone-Report-Biden.pdf (last accessed Mar. 28, 
2024).
    \1225\ See https://netl.doe.gov/node/12160 (last accessed Mar. 
28, 2024).
    \1226\ Congressional Research Service. Energy and Minerals 
Provisions in the Infrastructure Investment and Jobs Act (Pub. L. 
117-58). CRS Report R47034. Congressional Research Service. 
Available at https://crsreports.conress.gov/product/pdf/R/R47034. 
(last accessed Feb. 14, 2024).
---------------------------------------------------------------------------

    The Inflation Reduction Act calls for half of the Clean Vehicle 
Credit to be contingent on at least 40 percent of the value of the 
critical minerals in the battery having been extracted or processed in 
the United States or a country with a U.S. free-trade agreement, or 
recycled in North America. Starting in 2025, an EV cannot qualify for 
the clean vehicle credit if the vehicle's battery contains critical 
minerals that were extracted, processed, or recycled by a ``foreign 
entity of concern.''\1227\ The Inflation Reduction Act also included an 
Advanced Manufacturing Production tax credit that provides taxpayers 
who produce certain eligible components, such as electrodes and battery 
arrays for BEVs, and critical minerals tax credits on a per-unit 
basis.\1228\ These measures are intended to spur the development of 
more secure supply chains for critical minerals used in battery 
production. Additionally, since 2021, over $100 billion of investments 
have been announced for new or expanded U.S. facilities for recycling 
and upcycling, materials separation and processing, and battery 
component manufacturing.\1229\
---------------------------------------------------------------------------

    \1227\ Public Law 117-169, Section 13401.
    \1228\ Id., Section 13502.
    \1229\ See U.S. Department of Energy, 2023. Battery Supply Chain 
Investments. Available at https://www.energy.gov/investments-american-made-energy (last accessed Feb. 14, 2024).
---------------------------------------------------------------------------

    The IRA also removed the $25 billion cap on the total amount of 
Advanced Technology Vehicle Manufacturing direct loans.\1230\ These 
loans may be used to expand domestic production of advanced technology 
vehicles and their components. Finally, it established the Domestic 
Manufacturing Conversion Grant Program, a $2 billion cost-shared grant 
program to aid businesses in manufacturing for hybrid, plug-in hybrid 
electric, plug-in electric drive, and hydrogen fuel cell electric 
vehicles.\1231\
---------------------------------------------------------------------------

    \1230\ See https://www.energy.gov/lpo/inflation-reduction-act-2022 (last accessed Mar. 28, 2024).
    \1231\ See https://www.energy.gov/mesc/domestic-manufacturing-conversion-grants (last accessed Mar. 28, 2024).
---------------------------------------------------------------------------

    With regard to making permitting for critical minerals extraction 
more efficient and effective, the Biden-Harris administration has also 
targeted permitting reform as a legislative priority.\1232\ This 
includes reforming mining laws to accelerate the development of 
domestic supplies of critical minerals. These priorities also include 
improving community engagement through identifying community engagement 
officers for permitting processes, establishing community engagement 
funds to expand the capacity of local governments, Tribes, or community 
groups to engage on Federal actions, create national maps of Federal 
actions being analyzed with an Environmental Impact Statement, and 
transferring funds to Tribal Nations to enhance engagement in National 
Historic Preservation Act consultations. In March 2023, the 
administration also released implementation guidance for permitting 
provisions in the BIL. This

[[Page 52832]]

guidance directs agencies to, among other things: engage in early and 
meaningful outreach and communication with Tribal Nations, States, 
Territories, and Local Communities; improve responsiveness, technical 
assistance, and support; adequately resource agencies and use the 
environmental review process to improve environmental and community 
outcomes.\1233\
---------------------------------------------------------------------------

    \1232\ See The White House, 2023, Fact Sheet: Biden-Harris 
Administration Outlines Priorities for Building America's 
Infrastructure Faster, Safer and Cleaner. Available at https://www.whitehouse.gov/briefing-room/statements-releases/2023/05/10/fact-sheet-biden-harris-administration-outlines-priorities-for-building-americas-energy-infrastructure-faster-safer-and-cleaner/ 
(last accessed Mar. 28, 2024).
    \1233\ See OMB, FPISC, and CEQ, 2023, Memorandum M-23-14: 
Implementation Guidance for the Biden-Harris Permitting Action Plan. 
Available at: https://www.whitehouse.gov/wp-content/uploads/2023/03/M-23-14-Permitting-Action-Plan-Implementation-Guidance_OMB_FPISC_CEQ.pdf (last accessed Mar. 28, 2024).
---------------------------------------------------------------------------

    Based on all of the above, NHTSA finds that the energy security 
benefits of more stringent CAFE standards outweigh any potential energy 
security drawbacks that (1) are not the result of the CAFE standards 
and (2) are being actively addressed by numerous government and private 
sector efforts.
    When considering both the reference baseline and the No ZEV 
alternative baseline analyses, NHTSA finds that fuel savings, national 
balance of payments, environmental implications, and energy security 
effects are all similar with reference to estimated outcomes of the 
different action alternatives. When alternatives are compared to either 
baseline, more stringent CAFE standards would generally result in more 
energy conserved and thus better meet the need of the United States to 
conserve energy.
(5) Factors That NHTSA Is Prohibited From Considering
    EPCA also provides that in determining the level at which it should 
set CAFE standards for a particular model year, NHTSA may not consider 
the ability of manufacturers to take advantage of several EPCA 
provisions that facilitate compliance with CAFE standards and thereby 
reduce the costs of compliance.\1234\ NHTSA cannot consider the 
trading, transferring, or availability of compliance credits that 
manufacturers earn by exceeding the CAFE standards and then use to 
achieve compliance in years in which their measured average fuel 
economy falls below the standards. NHTSA also must consider dual fueled 
automobiles to be operated only on gasoline or diesel fuel, and it 
cannot consider the possibility that manufacturers would create new 
dedicated alternative fueled automobiles--including battery-electric 
vehicles--to comply with the CAFE standards in any model year for which 
standards are being set. EPCA encourages the production of AFVs by 
specifying that their fuel economy is to be determined using a special 
calculation procedure; this calculation results in a more-generous fuel 
economy assignment for alternative-fueled vehicles compared to what 
they would achieve under a strict energy efficiency conversion 
calculation. Of course, manufacturers are free to use dedicated and 
dual-fueled AFVs and credits in achieving compliance with CAFE 
standards.
---------------------------------------------------------------------------

    \1234\ 49 U.S.C. 32902(h).
---------------------------------------------------------------------------

    The effect of the prohibitions against considering these statutory 
flexibilities (like the compliance boosts for dedicated and dual-fueled 
alternative vehicles, and the use and availability of overcompliance 
credits) in setting the CAFE standards is that NHTSA cannot set 
standards that assume the use of these flexibilities in response to 
those standards--in effect, that NHTSA cannot set standards as 
stringent as NHTSA would if NHTSA could account for the availability of 
those flexibilities. For example, NHTSA cannot set standards based on 
an analysis that modeled technology pathway that includes additional 
BEV penetration specifically in response to more stringent CAFE 
standards.
    In contrast, for the non-statutory fuel economy improvement value 
program that NHTSA developed by regulation, as explained in the 
proposal, NHTSA has long believed that these fuel economy adjustments 
are not subject to the 49 U.S.C. 32902(h) prohibition. The statute is 
very clear as to which flexibilities are not to be considered in 
determining maximum feasible CAFE standards. When NHTSA has introduced 
additional compliance mechanisms such as AC efficiency and ``off-
cycle'' technology fuel improvement values, NHTSA has considered those 
technologies as available in the analysis. Thus, the analysis for this 
final rule includes assumptions about manufacturers' use of those 
technologies, as detailed in Chapter 2 of the accompanying TSD.
    In developing the proposal, NHTSA explained that it was aware that 
some stakeholders had previously requested that we interpret 32902(h) 
to erase completely all knowledge of BEVs' existence from the analysis, 
not only restricting their application during the standard-setting 
years, but restricting their application entirely, for any reason, and 
deleting them from the existing fleet that NHTSA uses to create an 
analytical reference baseline. PHEVs would correspondingly be counted 
simply as strong hybrids, considered only in ``charge-sustaining'' 
mode. In the NPRM, NHTSA continued to restrict the application of BEVs 
(and other dedicated alternative fueled vehicles) during standard-
setting years (except as is necessary to model compliance with state 
ZEV programs), and to count PHEVs only in charge-sustaining mode during 
that time frame, which for this final rule is model years 2027-2032. 
NHTSA's proposal analysis also mandated the same compliance solution 
(based on compliance with the reference baseline standards) for all 
regulatory alternatives for the model years 2022-2026 period. This was 
intended to ensure that the model does not simulate manufacturers 
creating new BEVs prior to the standard-setting years in anticipation 
of the need to comply with the CAFE standards during those standard-
setting years. Additionally, because the model is restricted (for 
purposes of the standard-setting analysis) from applying BEVs during 
model years 2027-2032 (again, except as is necessary to model 
compliance with state ZEV programs), it literally cannot apply BEVs in 
those model years in an effort to reach compliance in subsequent model 
years. NHTSA did not take the additional step of removing BEVs from the 
reference baseline fleet, and continued to assume that manufacturers 
would meet their California ZEV obligations and deployment commitments 
whether or not NHTSA sets new CAFE standards. Those manufacturer 
efforts were reflected in the reference baseline fleet. Thus, in the 
NPRM, NHTSA interpreted the 32902(h) prohibition as preventing NHTSA 
from setting CAFE standards that effectively require additional 
application of dedicated alternative fueled vehicles in response to 
those standards, not as preventing NHTSA from being aware of the 
existence of dedicated alternative fueled vehicles that are already 
being produced for other reasons besides CAFE standards. Modeling the 
application of BEV technology in model years outside the standard-
setting years allowed NHTSA to account for BEVs that manufacturers may 
produce for reasons other than the CAFE standards, without accounting 
for those BEVs that would be produced because of the CAFE standards. 
This is consistent with Congress' intent, made evident in the statute, 
that NHTSA does not consider the potential for manufacturers to comply 
with CAFE standards by producing additional dedicated alternative fuel 
automobiles. We further explained that OMB Circular A-4 directs 
agencies to conduct cost-benefit analyses against a reference baseline 
that represents the world in the absence of further regulatory action, 
and that an

[[Page 52833]]

artificial reference baseline that pretends that dedicated alternative 
fueled vehicles do not exist would not be consistent with that 
directive. We concluded that we could not fulfill our statutory mandate 
to set maximum feasible CAFE standards without understanding these 
real-world reference baseline effects.
    In the NPRM, NHTSA also tested the possible effects of this 
interpretation on NHTSA's analysis by conducting several sensitivity 
cases: one which applied the EPCA standard setting year restrictions 
from model years 2027-2035, one which applied the EPCA standard setting 
year restrictions from model years 2027-2050, and one which applied the 
EPCA standard setting year restrictions for all model years covered by 
the analysis. NHTSA concluded that none of the results of these 
sensitivity analyses were significant enough to change our position on 
what regulatory alternative was maximum feasible.
    Before discussing the comments, we note, as we did in the NPRM, 
that NHTSA is aware of challenges to its approach in Natural Resources 
Defense Council v. NHTSA, No. 22-1080 (D.C. Cir.), but as of this final 
rule, no decision has yet been issued in this case.
    NHTSA received comments from numerous stakeholders on this issue.
    A number of commenters opposed the agency's approach in the 
proposal. These commenters included:
     Representatives of the auto industry, including the 
Alliance,\1235\ as well as several individual manufacturers: BMW,\1236\ 
Toyota,\1237\ Volkswagen,\1238\ Kia,\1239\ and Stellantis; \1240\
---------------------------------------------------------------------------

    \1235\ The Alliance, Docket No. NHTSA-2023-0022-60652, 
Attachment 2, at 6; Attachment 3, at 2-7.
    \1236\ BMW, Docket No. NHTSA-2023-0022-58614, at 1.
    \1237\ Toyota, Docket No. NHTSA-2023-0022-61131, at 11.
    \1238\ Volkswagen, Docket No. NHTSA-2023-0022-58702, at 3.
    \1239\ Kia, Docket No. NHTSA-2023-0022-58542, at 4.
    \1240\ Stellantis, Docket No. NHTSA-2023-0022-61107, at 9.
---------------------------------------------------------------------------

     NADA; \1241\
---------------------------------------------------------------------------

    \1241\ NADA, Docket No. NHTSA-2023-0022-58200, at 9.
---------------------------------------------------------------------------

     The Motorcycle Riders Foundation; \1242\
---------------------------------------------------------------------------

    \1242\ Motorcycle Riders Foundation, Docket No. NHTSA-2023-0022-
63054, at 1-2.
---------------------------------------------------------------------------

     Representatives of the oil industry, including 
Valero,\1243\ API,\1244\ and the AFPM; \1245\
---------------------------------------------------------------------------

    \1243\ Valero, Docket No. NHTSA-2023-0022-58547, at 4, 11.
    \1244\ API, Docket No. NHTSA-2023-0022-60234, at 5-8.
    \1245\ AFPM, Docket No. NHTSA-2023-0022-61911, at 27-30.
---------------------------------------------------------------------------

     Entities involved in the renewable fuels and ethanol 
industry, including a joint comment from RFA, NCGA, NFU, NACS, NATSO, 
and SIGMA (RFA et al. 1), \1246\ a separate, more detailed joint 
comment from RFA, NCGA, and NFU (RFA et al. 2).\1247\ ACE),\1248\ 
KCGA,\1249\ SIRE,\1250\ NCB,\1251\ CAE,\1252\ MME,\1253\ WPE,\1254\ 
Growth Energy,\1255\ and HCP; \1256\
---------------------------------------------------------------------------

    \1246\ RFA et al. 1, Docket No. NHTSA-2023-0022-57720, at 2.
    \1247\ RFA et al 2, Docket No. NHTSA-2023-0022-41652, at 11-14.
    \1248\ ACE, Docket No. NHTSA-2023-0022-60683, at 2.
    \1249\ KCGA, Docket No. NHTSA-2023-0022-59007, at 2.
    \1250\ SIRE, Docket No. NHTSA-2023-0022-57940, at 2.
    \1251\ NCB, Docket No. NHTSA-2023-0022-53876, at 2.
    \1252\ CAE, Docket No. NHTSA-2023-0022-61599, at 2.
    \1253\ MME, Docket No. NHTSA-2023-0022-50861, at 1.
    \1254\ WPE, Docket No. NHTSA-2023-0022-52616, at 2.
    \1255\ Growth Energy, Docket No. NHTSA-2023-0022-61555, at 1.
    \1256\ HCP, Docket No. NHTSA-2023-0022-59280, at 1.
---------------------------------------------------------------------------

     Various other energy industry commenters, including 
Absolute Energy \1257\ and the Institute for Energy Research; \1258\
---------------------------------------------------------------------------

    \1257\ Absolute Energy, Docket No. NHTSA-2023-0022-50902, at 2.
    \1258\ IER, Docket No. NHTSA-2023-0022-63063, at 1-2.
---------------------------------------------------------------------------

     The National Association of Manufacturers; \1259\
---------------------------------------------------------------------------

    \1259\ NAM, Docket No. NHTSA-2023-0022-59203, at 2-3 (NHTSA-
2023-0022-59289 is a duplicate comment).
---------------------------------------------------------------------------

     A joint comment led by NACS; \1260\ and
---------------------------------------------------------------------------

    \1260\ NACS, Docket No. NHTSA-2023-0022-61070, at 11.
---------------------------------------------------------------------------

     Non-governmental organizations, including the America 
First Policy Institute,\1261\ CEI,\1262\ and the Heritage 
Foundation.\1263\
---------------------------------------------------------------------------

    \1261\ America First Policy Institute, Docket No. NHTSA-2023-
0022-61447, at 6.
    \1262\ CEI, Docket No. NHTSA-2023-0022-61121, at 2, 7.
    \1263\ Heritage Foundation, Docket No. NHTSA-2023-0022-61952, at 
4.
---------------------------------------------------------------------------

    NHTSA also received comments that were generally supportive of its 
proposed approach from MEMA,\1264\ Lucid,\1265\ a joint comment from 
several NGOs,\1266\ and IPI.\1267\
---------------------------------------------------------------------------

    \1264\ MEMA, Docket No. NHTSA-2023-0022-59204, at 9-10.
    \1265\ Lucid, Docket No. NHTSA-2023-0022-50594.
    \1266\ Joint NGOs, Docket No. NHTSA-2023-0022-61944, Appendix 2, 
at 56.
    \1267\ IPI, Docket No. NHTSA-2023-0022-60485, at 29-31.
---------------------------------------------------------------------------

    NHTSA also received two comments from different coalitions of 
States, one led by West Virginia that opposed the agency's 
approach,\1268\ while the other, led by California and also supported 
by several local governments, supported the agency's approach.\1269\
---------------------------------------------------------------------------

    \1268\ West Virginia Attorney General's Office, Docket No. 
NHTSA-2023-0022-63056, at 1-8.
    \1269\ States and Cities, Docket No. NHTSA-2023-0022-61904, 
Attachment 2, at 39-40.
---------------------------------------------------------------------------

    Generally, the views expressed by commenters were consistent with 
views and arguments made in the prior CAFE rule and during the ongoing 
litigation. Further, commenters who opposed our approach to 
implementing this provision opposed it in its entirety. That is, 
commenters either uniformly opposed any consideration of 
electrification (e.g., whether that be due to market-driven factors or 
state programs, or whether in the reference baseline or beyond the 
standard-setting years), or, made most clearly in the case of the 
States and Cities comment, supported all aspects of our proposed 
approach. Similarly, commenters who opposed the agency's approach to 
considering BEVs under 32902(h)(1) also opposed how the agency had 
considered PHEVs under (h)(2) and credits under (h)(3). This is not 
surprising, as all of these particular questions stem from the more 
general question of how NHTSA may ``consider'' these vehicles and 
flexibilities. Thus, in the below discussion, we typically discuss the 
comments and our response broadly as applying to all uses of BEVs in 
either the reference baseline or outside the standard-setting years.
    The agency continues to find arguments that it should not consider 
real-world increases in BEVs and PHEVs that occur due to factors other 
than the CAFE requirements, both in constructing the reference baseline 
and outside the standard-setting years, to be unpersuasive. As 
discussed in the proposal and in the prior rulemaking, to do so would 
unnecessarily divorce the CAFE standards from how the world would most 
likely exist in the absence of our program.
    Commenters opposing the agency's inclusion of BEVs as part of the 
reference baseline fleet relied on three primary categories of 
argument--two of which are purely legal, while the third

[[Page 52834]]

concerns the effect of NHTSA's approach on whether the proposed 
standards are achievable.\1270\
---------------------------------------------------------------------------

    \1270\ Technical comments concerning the construction of the 
baseline are discussed in Section IV above; this discussion is 
limited to the legal questions concerning the application of this 
section.
---------------------------------------------------------------------------

    First, commenters opposing NHTSA's proposed approach argued that 
the language of EPCA prohibited NHTSA's approach to the inclusion of 
BEVs in the reference baseline. The level of detail provided in their 
comment on this issue varied across commenters, with the coalition of 
State commenters led by West Virginia providing the most extensive 
arguments.\1271\ Regardless of detail, all comments revolved around the 
central question of what it means for NHTSA to ``consider'' 
electrification in this context. West Virginia and commenters 
expressing similar views argue that the prohibition here is broad and 
thus the presence of BEVs should, as the Alliance put it, be excluded 
``for any purpose whatsoever,'' \1272\ or as West Virginia put it, 
``not in the reference baseline, not in technology options, and not in 
compliance paths.'' \1273\ According to many of these commenters, 
NHTSA's interpretation conflicts with the ``plain meaning'' of the text 
and instead relies on, as RFA et al. 2 argued, NHTSA to ``add words to 
the Act'' that are not present.\1274\ West Virginia also argued that 
the proposed approach would frustrate both the intent of EPCA to 
provide incentives for dual-fueled vehicles rather than mandate them, 
and the Renewable Fuel Standards program, which exists to incentivize 
biofuels.\1275\ Other commenters expressed similar concerns that 
NHTSA's approach prioritized EVs at the expense of other vehicle 
technologies or compliance paths.\1276\
---------------------------------------------------------------------------

    \1271\ West Virginia Attorney General's office, Docket No. 
NHTSA-2023-0022-60356, at 1-8.
    \1272\ The Alliance, Docket No. NHTSA-2023-0022-60652, 
Attachment 3, at 2.
    \1273\ West Virginia Attorney General's office, Docket No. 
NHTSA-2023-0022-60356, at 6.
    \1274\ RFA et al. 2, Docket No. Docket No. NHTSA-2023-0022-
41652, at 11-12.
    \1275\ West Virginia Attorney General's office, Docket No. 
NHTSA-2023-0022-60356, at 6-7.
    \1276\ See, e.g., CAE, Docket No. NHTSA-2023-0022-61599, at 2; 
MME, Docket No. NHTSA-2023-0022-50861, at 1; WPE, Docket No. NHTSA-
2023-0022-52616, at 2.
---------------------------------------------------------------------------

    NHTSA remains unpersuaded by these arguments. The statute makes 
clear that NHTSA ``may not consider the fuel economy'' of BEVs (among 
others) when ``carrying out subsections (c), (f), and (g) of this 
section.'' Which is to say, for purposes of this rulemaking, the 
prohibition applies only when NHTSA is making decisions about whether 
the CAFE standards are maximum feasible under 32902(c). NHTSA is not 
reading any additional words into the statutory text, but instead is 
reading the entire relevant provision, rather than a single word in 
isolation without the necessary context. In making the maximum feasible 
determination in this rule, as in all previous rules, NHTSA is clear 
that it does not consider that BEVs could be used to meet new CAFE 
standards. Instead, NHTSA models a cost-effective pathway to compliance 
with potential new CAFE standards that includes no new BEVs in response 
to the standards, and that counts PHEVs in charge-sustaining mode only, 
avoiding consideration of their electric-only-operation fuel economy. 
Consequently, NHTSA is in no way pushing manufacturers toward 
electrification--just the opposite, as without this provision, NHTSA 
would almost certainly include pathways involving increased 
electrification, which would provide the agency with more flexibility 
in determining what standards could be maximum feasible. Without the 
restriction on considering electrification, these standards would be 
significantly more stringent and achieve significantly greater fuel 
economy benefits. Commenters asserting favorable treatment of BEVs 
appear to be arguing with other policies of Federal and State 
governments, such as the IRA credits and the California ZEV program, 
and with manufacturer plans to deploy electric vehicles independent of 
any legal requirements. These are other policies and business plans 
that exist separate from CAFE. NHTSA chooses to acknowledge that these 
policies and commitments (and other factors) exist when developing the 
regulatory reference baseline and considering years after the standard-
setting time frame, rather than ignoring them, but when it comes to 
determining maximum feasible standards NHTSA does not consider these 
technologies.
    Commenters opposing NHTSA's interpretation argue that the 
prohibition should be expanded beyond this determination. They assert 
that Congress intended NHTSA to ignore BEVs entirely, even when, as is 
the case here, there is clear evidence that significant BEVs are 
already in the fleet and their numbers are anticipated to grow 
significantly during the rulemaking time frame independent of the CAFE 
standards. As NHTSA explained in the NPRM, doing so would require NHTSA 
to ignore what is occurring with the fleet separate from the CAFE 
program. NHTSA would thus be attempting to determine maximum feasible 
CAFE standards on the foundation of a fleet that it knows is divorced 
from reality. The agency does not believe that this was Congress' 
intent or that it is a proper construction of the statute. Instead, as 
the statute clearly states, Congress only required that NHTSA could not 
issue standards that are presumed on the use of additional BEVs and 
other alternative fueled vehicles.
    Nowhere does EPCA/EISA say that NHTSA should not consider the best 
available evidence in establishing the regulatory reference baseline 
for its CAFE rulemakings. As explained in Circular A-4, ``The benefits 
and costs of a regulation are generally measured against a no-action 
baseline: an analytically reasonable forecast of the way the world 
would look absent the regulatory action being assessed, including any 
expected changes to current conditions over time.'' \1277\ The Alliance 
commented that ``an OMB Circular does not trump a clear statutory 
requirement.'' \1278\ This is, of course, correct and NHTSA does not 
intend to imply anything else. Instead, NHTSA makes clear that its 
interpretation of this provision restricts the agency's analytical 
options when analyzing what standards are maximum feasible, while being 
consistent with A-4's guidance about how best to construct the 
reference baseline. Thus, absent a clear indication to blind itself to 
important facts, NHTSA continues to believe that the best way to 
implement its duty to establish maximum feasible CAFE standards is to 
establish as realistic a reference baseline as possible, including, 
among other factors, the most likely composition of the fleet.
---------------------------------------------------------------------------

    \1277\ OMB Circular A-4, ``Regulatory Analysis'' Nov. 9, 2003, 
at 11. Note that Circular A-4 was recently updated; the initial 
version was in effect at the time of the proposal.
    \1278\ The Alliance, Docket No. NHTSA-2023-0022-60652, 
Attachment 3, at 2.
---------------------------------------------------------------------------

    Second, several commenters argued that including BEVs in the 
reference baseline would run afoul of the ``major questions doctrine.'' 
West Virginia made this argument most comprehensively, stating that 
``this proposal is about transforming the American auto markets to lead 
with EVs. It aims to morph a longstanding scheme to regulate internal 
combustion engine vehicles into one that erases them from the market.'' 
\1279\ These arguments misunderstand the major questions doctrine. 
NHTSA has clear authority to establish CAFE

[[Page 52835]]

standards, and thus simply establishing new ones that are more 
stringent than prior ones cannot be considered to be a ``major 
question.'' Moreover, commenters imply a motive to this rulemaking that 
appears nowhere in the rule, which is simply about establishing CAFE 
standards that include marginal increases to the prior standards. And 
finally, 32902(h) is the literal provision that prohibits any attempt 
by NHTSA to actually require electrification. The very provision that 
these commenters believe somehow raises major questions is the 
provision that prevents NHTSA from actually taking that action.
---------------------------------------------------------------------------

    \1279\ West Virginia Attorney General's office, Docket No. 
NHTSA-2023-0022-63056, at 6-8; see also Valero, Docket No. NHTSA-
2023-0022-58547, at 4. Several other commenters (e.g., NACS and CEI) 
argued that the rule more broadly raised major questions; those 
comments are addressed in Section VI.B.
---------------------------------------------------------------------------

    Third, several other commenters, including the Alliance,\1280\ 
Stellantis,\1281\ NACS,\1282\ and AFPM,\1283\ argued that the proposed 
standards were technologically achievable only if BEVs were considered 
in the reference baseline and, based on their view that NHTSA is 
prohibited from taking this action in the reference baseline, the 
standards were not in fact maximum feasible. Other commenters were not 
so explicit in making this argument, but their general theme, that 
NHTSA's approach to the reference baseline led to standards that were 
beyond maximum feasible, is consistent with many otherwise purely 
legalistic objections. Finally, the environmental NGOs recommended that 
the agency conduct sensitivity analyses examining this issue.\1284\
---------------------------------------------------------------------------

    \1280\ Alliance, Docket No. NHTSA-2023-0022-60652, Attachment 3, 
at 5-9.
    \1281\ Stellantis, Docket No. NHTSA-2023-0022-61107, at 9.
    \1282\ NACS, Docket No. NHTSA-2023-0022-61070, at 11.
    \1283\ AFPM, Docket No. NHTSA-2023-0022-61911, at 30.
    \1284\ Joint NGO comments, Docket No. NHTSA-2023-0022-61944, 
Appendix 2, at 56.
---------------------------------------------------------------------------

    At the outset, NHTSA stresses that it disagrees with the basic 
premise here, and as discussed above, the agency believes that it is 
permitted to include electrification in the reference baseline and in 
the years following the rulemaking time frame. Leaving that aside, it 
is also important to note that, in response to comments from the auto 
industry and others, the final CAFE standards for light trucks have 
changed significantly since the proposal. Thus, any concerns about the 
practicability of achieving the proposed standards are clearly reduced 
in this final rule.
    That said, NHTSA also modeled a No ZEV alternative baseline. The No 
ZEV case removed not only the electric vehicles that would be deployed 
to comply with ACC I, but also those that would be deployed consistent 
with manufacturer commitments to deploy additional electric vehicles 
regardless of legal requirements, consistent with the levels under ACC 
II. NHTSA also modeled three cases that extend the EPCA standard 
setting year constraints (no application of BEVs and no credit use) 
beyond years considered in the reference baseline.
    When the standards are assessed relative to the no ZEV alternative 
baseline, the industry as a whole overcomplies with the final standards 
in every year covered by the standards. The passenger car fleet 
overcomplies handily, and the light truck fleet overcomplies in model 
years 2027-2030, until model year 2031 when the fleet exactly meets the 
standard. Individual manufacturers' compliance results are also much 
less dramatically affected than comments would lead one to believe; 
while some manufacturers comply with the 4 percent per year light truck 
stringency increases from the proposal without ZEV in the reference 
baseline, a majority of manufacturers comply in most or all years under 
the final light truck standards. In general, the manufacturers that 
have to work harder to comply with CAFE standards without ZEV in the 
reference baseline are the same manufacturers that have to work harder 
to comply with CAFE standards with no ZEV in the reference baseline. 
For example, General Motors sees higher technology costs and civil 
penalties to comply with the CAFE standards over the five years covered 
by the standards; however, this is expected as they are starting from a 
lower reference baseline compliance position. General Motors seems to 
be the only outlier, and for the rest of the industry technology costs 
are low and civil penalty payments are nonexistent in many cases.
    Net benefits of CAFE standards increase in the no ZEV case, which 
is expected as benefits related to increased fuel economy attributable 
to state ZEV programs and automaker-driven deployment of electric 
vehicles in the reference baseline are now attributable to the CAFE 
program. This includes additional decreases in fuel use, CO2 
emissions, and criteria emissions deaths from the application of fuel 
economy-improving technology in response to CAFE standards. In 
addition, consumer fuel savings attributable to state ZEV programs and 
non-regulatory manufacturer ZEV deployment in the reference baseline 
are now attributable to the CAFE program: in 2031, the final standards 
show fuel savings of over $1,000 for consumers buying model year 2031 
vehicles.
    Similar trends hold true for the EPCA standard setting year 
constraints cases. Examining the most restrictive scenario, which does 
not allow BEV adoption in response to CAFE standards in any year when 
the CAFE Model adds technology to vehicles (2023-2050, as 2022 is the 
reference baseline fleet year), the industry, as a whole, still 
overcomplies in every year from model year 2027-2031, in both the 
passenger car and light truck fleets. Some manufacturers again have to 
work harder in individual model years or compliance categories, but the 
majority comply or overcomply in both compliance categories of 
vehicles. Again, General Motors is the only manufacturer that sees 
notable increases in their technology costs over the reference 
baseline, however their civil penalty payments are low, at under $500 
million total over the five-year period covered by the new standards. 
Net benefits attributable to CAFE standards do decrease from the 
central analysis under the EPCA constraints case--but they remain 
significantly positive. However, as discussed in more detail below, net 
benefits are just one of many factors considered when NHTSA sets fuel 
economy standards.
    This alternative baseline and these sensitivity cases offer two 
conclusions. First, contrary to the Alliance's and other commenter's 
concerns, the difference between including BEVs in the base case for 
non-CAFE reasons and excluding them are not great--thus, NHTSA would 
make the same determination of what standards are maximum feasible 
under any of the analyzed scenarios.\1285\ And second, this lack of 
dispositive difference in the alternative baseline and sensitivity 
cases shows that the interpretive concerns raised by commenters, even 
if correct, would not lead to a different decision by NHTSA on the 
question of what is maximum feasible. This reaffirms NHTSA's point all 
along: understanding the reference baseline is a crucial part of 
determining the costs and benefits of various regulatory alternatives, 
but the real decision making is informed by the analysis NHTSA conducts 
when ``carrying out'' its duty to determine the appropriate standards.
---------------------------------------------------------------------------

    \1285\ See RIA Chapter 9 for sensitivity run results.
---------------------------------------------------------------------------

    The results of the sensitivity cases not discussed here are 
discussed in detail in Chapter 9 of the FRIA. Chapter 9 also reports 
other metrics not reported here like categories of technology adoption 
and physical impacts such as changes in fuel use and greenhouse gas 
emissions.
    On a somewhat similar point, America First Policy Institute argued 
that language from NHTSA acknowledging that real-world compliance may 
differ from modeled

[[Page 52836]]

compliance in the standard-setting runs indicated that the standards 
would be met by additional electrification.\1286\ This concern 
misunderstands NHTSA's point. As always, NHTSA's modeling is intended 
to show one potential path toward compliance that is based on the 
statutory constraints and NHTSA's assumptions about costs, 
effectiveness, and other manufacturer and consumer behaviors. Actual 
compliance will always be different, both due to the fact that 
compliance options do not include the statutory limitations discussed 
here, and also simply because NHTSA cannot perfectly predict the 
future. NHTSA's point is just to acknowledge this reality, not to make 
any implications about how it believes compliance should occur. West 
Virginia made a similar point, arguing that ``everything in the CAFE 
model assumes the fastest possible adoption of electrification.'' 
\1287\ This, too, misunderstands NHTSA's modeling, which applies a 
technologically-neutral approach consistent with the statutory 
limitations in the standard-setting years.
---------------------------------------------------------------------------

    \1286\ America First Policy Institute, Docket No. NHTSA-2023-
0022-61447, at 6.
    \1287\ West Virginia Attorney General's office, Docket No. 
NHTSA-2023-0022-63056, at 4.
---------------------------------------------------------------------------

(6) Other Considerations in Determining Maximum Feasible CAFE Standards
    NHTSA has historically considered the potential for adverse safety 
effects in setting CAFE standards. This practice has been upheld in 
case law.\1288\ Heritage Foundation commented that ``the proposed rule 
will cause an increase in traffic deaths and serious injuries on 
America's highways,'' both because automakers will make vehicles 
smaller and lighter in response to the standards, and because consumers 
will retain older vehicles for longer rather than buying newer, more 
expensive vehicles.\1289\ Heritage Foundation further argued that NHTSA 
inappropriately ``downplayed and minimized the loss of lives and 
serious injuries its standards will cause by attributing many of these 
. . . to EPA's parallel rules and to the EV mandates issued by CARB--in 
other words, by assuming them away and not counting them for purposes 
of the current rulemaking.'' \1290\ For this final rule, as explained 
in Chapter 8.2.4.6 of the accompanying FRIA, across nearly all 
alternatives (with the exception of PC6LT8), mass changes relative to 
the reference baseline result in small reductions in overall 
fatalities, injuries, and property damage, due to changes in the 
model's fleet share accounting such that the relatively beneficial 
effect of mass reduction on light trucks results in safety benefits. 
Rebound and scrappage effects increase fatalities as policy 
alternatives become more stringent, but these effects are relatively 
minor and NHTSA discusses its consideration of these effects in Section 
VI.D below. These safety outcomes for mass reduction, rebound, and 
scrappage are also present in the No ZEV alternative baseline analysis. 
With regard to NHTSA's analytical decision not to include safety 
effects associated with activities occurring in the reference baseline, 
this is because NHTSA does not include reference baseline effects in 
its incremental analysis of the effects of regulatory alternatives, 
because to do so would obscure the effects of NHTSA's action, which is 
what NHTSA is supposed to consider. If NHTSA were to include baseline 
safety effects, NHTSA should then also include baseline CO2 
reductions, which would be demonstrably absurd because NHTSA's actions 
did not cause those--they belong to the reference baseline because 
their cause is something other than CAFE standards. NHTSA disagrees 
that it would be appropriate for NHTSA's rule to account for reference 
baseline safety effects.
---------------------------------------------------------------------------

    \1288\ As courts have recognized, ``NHTSA has always examined 
the safety consequences of the CAFE standards in its overall 
consideration of relevant factors since its earliest rulemaking 
under the CAFE program.'' Competitive Enterprise Institute v. NHTSA, 
901 F.2d 107, 120 n. 11 (D.C. Cir. 1990) (``CEI-I'') (citing 42 FR 
33534, 33551 (Jun. 30, 1977)). Courts have consistently upheld 
NHTSA's implementation of EPCA in this manner. See, e.g., 
Competitive Enterprise Institute v. NHTSA, 956 F.2d 321, 322 (D.C. 
Cir. 1992) (``CEI-II'') (in determining the maximum feasible 
standard, ``NHTSA has always taken passenger safety into account'') 
(citing CEI-I, 901 F.2d at 120 n. 11); Competitive Enterprise 
Institute v. NHTSA, 45 F.3d 481, 482-83 (D.C. Cir. 1995) (``CEI-
III'') (same); Center for Biological Diversity v. NHTSA, 538 F.3d 
1172, 1203-04 (9th Cir. 2008) (upholding NHTSA's analysis of vehicle 
safety issues associated with weight in connection with the model 
years 2008-2011 CAFE rulemaking).
    \1289\ Heritage Foundation, Docket No. NHTSA-2023-0022-61952, at 
8.
    \1290\ Id.
---------------------------------------------------------------------------

b. Heavy-Duty Pickups and Vans
    Statutory authority for the fuel consumption standards established 
in this document for HDPUVs is found in Section 103 of EISA, codified 
at 49 U.S.C. 32902(k). That section authorizes a fuel efficiency 
improvement program, designed to achieve the maximum feasible 
improvement, to be created for (among other things) HDPUVs. Congress 
directed that the standards, test methods, measurement metrics, and 
compliance and enforcement protocols for HDPUVs be ``appropriate, cost-
effective, and technologically feasible,'' while achieving the 
``maximum feasible improvement'' in fuel efficiency. These three 
factors are similar to and yet somewhat different from the four factors 
that NHTSA considers for passenger car and light truck standards, but 
they still modify ``feasible'' in ``maximum feasible'' in the context 
of the HDPUV final rule beyond a plain meaning of ``capable of being 
done.''\1291\ Importantly, NHTSA interprets them as giving NHTSA 
similarly broad authority to weigh potentially conflicting priorities 
to determine maximum feasible standards.\1292\ Thus, as with passenger 
car and light truck standards, NHTSA believes that it is firmly within 
our discretion to weigh and balance the HDPUV factors in a way that is 
technology-forcing, as evidenced by this final rule, but not in a way 
that requires the application of technology that will not be available 
in the lead time provided by this final rule, or that is not cost-
effective.
---------------------------------------------------------------------------

    \1291\ See Center for Biological Diversity v. NHTSA, 538 F. 3d 
1172, 1194 (9th Cir. 2008).
    \1292\ Where Congress has not directly spoken to a potential 
issue related to such a balancing, NHTSA's interpretation must be a 
``reasonable accommodation of conflicting policies . . . committed 
to the agency's care by the statute.'' Id. at 1195.
---------------------------------------------------------------------------

    While NHTSA has sought in the past to set HDPUV standards that are 
maximum feasible by balancing the considerations of whether standards 
are appropriate, cost-effective, and technologically feasible, NHTSA 
has not sought to interpret those factors more specifically. In the 
interest of helping NHTSA ground the elements of its analysis in the 
words of the statute, without intending to restrict NHTSA's 
consideration of any important factors, NHTSA is interpreting the 
32902(k)(2) factors as follows.
(1) Appropriate
    Given that the overarching purpose of EPCA is energy conservation, 
the amount of energy conserved by standards should inform whether 
standards are appropriate. When considering energy conservation, NHTSA 
may consider things like average estimated fuel savings to consumers, 
average estimated total fuel savings, and benefits to our nation's 
energy security, among other things. Environmental benefits are another 
facet of energy conservation, and NHTSA may consider carbon dioxide 
emissions avoided, criteria pollutant and air toxics emissions avoided, 
and so forth. Given NHTSA's additional mission as a safety agency, 
NHTSA may also consider the possible safety effects of different 
potential standards in determining whether those standards are

[[Page 52837]]

appropriate. Effects on the industry that do not relate directly to 
``cost-effectiveness'' may be encompassed here, such as estimated 
effects on sales and employment, and effects in the industry that 
appear to be happening for reasons other than NHTSA's regulations may 
also be encompassed. NHTSA interprets ``appropriate'' broadly, as not 
prohibiting consideration of any relevant elements that are not already 
considered under one of the other factors.
    AFPM commented that ``appropriate'' should also encompass ``the 
significant costs to commercial fleet operators associated with 
purchasing, using and maintaining HDPUV ZEVs,'' suggesting that 
maintenance costs would be higher, and that refueling HDPUV ZEVs would 
``require significant time to accommodate charging needs, which results 
in costly vehicle down-time and increased labor expenses.'' \1293\ 
NHTSA disagrees that this is likely for HDPUV BEVs. While HD BEVs could 
require longer recharging times due to the need for much larger battery 
packs to accommodate heavy-duty use cycles, HDPUV BEVs are much closer 
to their light truck BEV counterparts given the sizes of their battery 
packs, and therefore NHTSA would expect similar charging needs for 
HDPUVs. Sections II.B and III.D of this preamble discuss these issues 
in more detail.
---------------------------------------------------------------------------

    \1293\ AFPM, Docket No. -2023-0022-61911, at 86.
---------------------------------------------------------------------------

    AFPM also commented that ``appropriate'' should encompass energy 
security considerations related specifically to electric 
vehicles.\1294\ As discussed in the proposal, NHTSA agrees that energy 
security considerations may be part of whether HDPUV standards are 
``appropriate,'' and NHTSA also agrees with AFPM that energy security 
considerations related to electric vehicles are relevant to this 
inquiry, given that NHTSA is allowed to consider electrification fully 
in determining maximum feasible HDPUV standards.
---------------------------------------------------------------------------

    \1294\ AFPM, Docket No. NHTSA-2023-0022-61911, at 21.
---------------------------------------------------------------------------

    However, NHTSA disagrees with AFPM that energy security issues 
specific to BEVs should necessarily change our decision for this final 
rule. As discussed above in Section VI.A.5.a.(4)(d) for passenger cars 
and light trucks, the energy security considerations associated with 
the supply chains for internal combustion engine vehicles and for BEVs 
are being actively addressed through a variety of public and private 
measures. AFPM's comments identified potential problems but did not 
acknowledge the many efforts currently underway to address them. Based 
on all of the above, NHTSA finds that the energy security benefits of 
more stringent HDPUV standards outweigh any potential energy security 
drawbacks that are being actively addressed by numerous government and 
private sector efforts.
(2) Cost-Effective
    Congress' use of the term ``cost-effective'' in 32902(k) appears to 
have a more specific aim than the broader term ``economic 
practicability'' in 32902(f). In past rulemakings covering HDPUVs, 
NHTSA has considered the ratio of estimated technology (or regulatory) 
costs to the estimated value of GHG emissions avoided, and also to 
estimated fuel savings. In setting passenger car and light truck 
standards, NHTSA often looks at consumer costs and benefits, like the 
estimated additional upfront cost of the vehicle (as above, assuming 
that the cost of additional technology required to meet standards gets 
passed forward to consumers) and the estimated fuel savings. Another 
way to consider cost-effectiveness could be total industry-wide 
estimated compliance costs compared to estimated societal benefits. 
Other similar comparisons of costs and benefits may also be relevant. 
NHTSA interprets ``cost-effective'' as encompassing these kinds of 
comparisons.
    NHTSA received no specific comments regarding this interpretation 
of ``cost-effective,'' and thus finalizes the interpretation as 
proposed.
(3) Technologically Feasible
    Technological feasibility in the HDPUV context is similar to how 
NHTSA interprets it in the passenger car and light truck context. NHTSA 
has previously interpreted ``technological feasibility'' to mean 
``whether a particular method of improving fuel economy can be 
available for commercial application in the model year for which a 
standard is being established,'' as discussed above. NHTSA has further 
clarified that the consideration of technological feasibility ``does 
not mean that the technology must be available or in use when a 
standard is proposed or issued.'' \1295\ Consistent with these previous 
interpretations, NHTSA believes that a technology does not necessarily 
need to be currently available or already in use for all regulated 
parties to be ``technologically feasible'' for these standards, as long 
as it is reasonable to expect, based on the evidence before us, that 
the technology will be available in the model year in which the 
relevant standard takes effect.
---------------------------------------------------------------------------

    \1295\ Center for Auto Safety v. NHTSA, 793 F.2d 1322, 1325 n. 
12 (D.C. Cir. 1986), quoting 42 FR 63, 184 (1977).
---------------------------------------------------------------------------

    ACEEE commented that while NHTSA did account for many hybrid and 
electric HDPUV technologies, NHTSA did not ``take full advantage of the 
full range of available fuel saving technologies in setting the 
standards for HDPUVs.'' \1296\ NHTSA interprets this comment as 
suggesting that ACEEE would have preferred to see higher penetration 
rates for SHEVs and PHEVs (and BEVs) in the analysis in response to 
NHTSA's proposed and final standards. This is less a question of 
technological feasibility--of course NHTSA agrees that SHEVs and PHEVs 
will be available for deployment in the rulemaking time frame--and more 
a question of cost-effectiveness. NHTSA's analysis for both the 
proposal and the final rule illustrates that BEVs are cost-effective 
for certain portions of the HDPUV fleet. If it is cost-effective for 
vehicles to turn from ICE to BEV, there is no need for them to turn 
SHEV or PHEV instead. PHEVs do, however, play an important role for 
heavy-duty pickup trucks, which tend on average to have use cases 
currently well-suited to a dual-fuel technology. Moreover, if fleetwide 
standards can be met cost-effectively with certain penetrations of BEVs 
and PHEVs, setting more stringent standards that could necessitate 
additional (and perhaps not cost-effective) penetration of SHEVs or 
advanced ICEV technologies could be technologically feasible, but could 
well be beyond maximum feasible.
---------------------------------------------------------------------------

    \1296\ ACEEE, Docket No. NHTSA-2023-0022-60684, at 7.
---------------------------------------------------------------------------

    MCGA commented that NHTSA should conduct additional analysis of 
whether the volumes of BEVs it projected for HDPUVs were 
technologically feasible, and specifically asked whether critical 
minerals supplies and charging infrastructure were adequate to render 
the standards technologically feasible.\1297\ Critical minerals 
supplies and charging infrastructure considerations could potentially 
bear on whether technology may be deployable in the rulemaking time 
frame. As with the discussion above regarding energy security, on 
critical minerals, the available evidence gives NHTSA confidence that 
supplies will be even more broadly available from stable locations 
within the rulemaking time frame. Regarding infrastructure, as above, 
NHTSA

[[Page 52838]]

believes that the use case for HDPUVs is similar enough to light trucks 
that charging needs for HDPUV BEVs should be similar to charging needs 
for light truck BEVs, and that extensive public and private efforts to 
build out that infrastructure are ongoing. Moreover, the HDPUV 
standards do not begin until model year 2030, by which time NHTSA would 
expect infrastructure to be even more developed than model year 2027.
---------------------------------------------------------------------------

    \1297\ MCGA, Docket No. NHTSA-2023-0022-60208, at 16-17.
---------------------------------------------------------------------------

    NHTSA has concluded that a 10 percent increase in model years 2030-
2032 and an 8 percent increase in model years 2033-2035 for the HDPUV 
fleet (HDPUV108) is maximum feasible. To determine what levels of fuel 
efficiency standards for HDPUVs would be maximum feasible, EISA 
requires NHTSA to consider three factors--whether a given fuel 
efficiency standard would be appropriate, cost-effective, and 
technologically feasible. Because EISA directs NHTSA to establish the 
maximum feasible standard, the most stringent alternative that 
satisfies these three factors is the standard that should be finalized.
    In evaluating whether HDPUV standards are technologically feasible, 
NHTSA considers whether the standards could be met using technology 
expected to be available in the rulemaking time frame. For HDPUVs, 
NHTSA takes into account the full fuel efficiency of BEVs and PHEVs, 
and considers the availability and use of overcompliance credits in 
this final rule. Given the ongoing transition to electrification, most 
technology applications between now and model year 2035 would be 
occurring as a result of reference baseline efforts and would not be an 
effect of new NHTSA standards. Under the reference baseline, as early 
as model year 2033, nearly 80 percent of the fleet would be 
electrified, including SHEV, PHEV, and BEV.
    However, both HDPUV10 and HDPUV108 will encourage technology 
application for some manufacturers while functioning as a backstop for 
the others, and it remains net beneficial for consumers. When 
considering harmonization between the HDPUV GHG rules recently 
finalized by EPA and these fuel efficiency standards, HDPUV108 will 
best harmonize with EPA's recently finalized standards, realigning with 
EPA's model year 2032 standards by model year 2034. Moreover, HDPUV108 
produces the highest benefit-cost rations for aggregate societal 
effects as well as when narrowing the focus to private benefits and 
costs.

B. Comments Regarding the Administrative Procedure Act (APA) and 
Related Legal Concerns

    The APA governs agency rulemaking generally and provides the 
standard of judicial review for agency actions. To be upheld under the 
``arbitrary and capricious'' standard of judicial review under the APA, 
an agency rule must be rational, based on consideration of the relevant 
factors, and within the scope of authority delegated to the agency by 
statute. The agency must examine the relevant data and articulate a 
satisfactory explanation for its action, including a ``rational 
connection between the facts found and the choice made.'' \1298\ The 
APA also requires that agencies provide notice and comment to the 
public when proposing regulations,\1299\ as NHTSA did during the NPRM 
and comment period that preceded this final rule and its accompanying 
materials.
---------------------------------------------------------------------------

    \1298\ Burlington Truck Lines, Inc. v. United States, 371 U.S. 
156, 168 (1962).
    \1299\ 5 U.S.C. 553.
---------------------------------------------------------------------------

    In a sense, all comments to this (or any) proposed rule raise 
issues that concern compliance with the APA's requirements. Comments 
challenging our technical or economic findings imply that the rule was 
``arbitrary, capricious, an abuse of discretion, or otherwise not in 
accordance with law,'' and comments challenging our interpretations 
imply that the rule is ``in excess of statutory jurisdiction, authority 
or limitations, or short of statutory right.'' \1300\ However, nearly 
all of those comments are about, or build off of, various substantive 
issues that commenters have with the rule (e.g., whether the standards 
are ``maximum feasible'' or whether our technology assumptions are 
reasonable). Those comments are considered and responded to in the 
relevant parts of the final rule and accompanying documents. A small 
number of comments, however, raised issues that were unique to APA 
compliance. Two commenters, a group led by the Clean Fuels Development 
Coalition and a separate group led by the Renewable Fuels 
Association,1301 1302 argued that the agency should change 
its approach to modeling BEVs in the reference baseline and in the 
years after the rulemaking time frame and that, if the agency adopted 
this change, NHTSA would be prohibited from finalizing the rule without 
further comment due to logical outgrowth concerns. As discussed in 
Section VI.A.5.a(5), NHTSA continues to believe that its proposed 
approach on these issues is correct; thus, the procedural questions 
that might arise if NHTSA adopted a new interpretation are not present. 
Separately, the Landmark Legal Foundation argued that the agency's use 
of SC-GHG values produced by the Interagency Working Group (IWG) 
violated the APA because the ``SC-GHG values never underwent the normal 
and legal required comment and notice period.'' \1303\ NHTSA, however, 
took comment on the appropriate SC-GHG value in the NPRM, and responds 
to those comments in this final rule. The SC-GHG value used in this 
final rule is therefore the product of the notice-and-comment process.
---------------------------------------------------------------------------

    \1300\ 5 U.S.C. 706(a), (c).
    \1301\ CFDC et al., Docket No. NHTSA-2023-0022-62242, at 9.
    \1302\ RFA et al., Docket No. NHTSA-2023-0022-57625, at 13-14.
    \1303\ Landmark, Docket No. NHTSA-2023-0022-48725, at 3.
---------------------------------------------------------------------------

    NHTSA also received a few comments that argued that the rule, in 
general, violated the ``major questions doctrine,'' as it has been 
developed by the Supreme Court. Several of these comments raised this 
question specifically in relation to the agency's interpretation of 49 
U.S.C. 32902(h); those questions are addressed in Section VI.A.5.a(5) 
above. Two commenters made more general arguments. CEI argued that the 
rule is intended to ``backstop the administration's electrification 
agenda,'' which CEI believes is a ``policy decision of vast economic 
and political significance for which no clear congressional 
authorization exist.'' \1304\ Similarly, NACS argues that ``[b]y 
effectively mandating the production of EVs, the Proposal violates this 
judicial doctrine.'' \1305\ As NHTSA has explained throughout this 
final rule, the agency is not mandating electrification, and in fact 
due to the limitations in 32902(h), cannot take such an action. The 
rule simply sets slightly increased CAFE standards that are based on 
the agency's long-established and clear authority to set these 
standards and administer this program. Regardless of how much certain 
commenters may disagree with the agency's interpretations and 
conclusions, the agency has ``clear congressional authorization'' to 
set CAFE standards.
---------------------------------------------------------------------------

    \1304\ CEI, Docket No. NHTSA-2023-0022-61121, at 1.
    \1305\ NACS, Docket No. NHTSA-2023-0022-61070, at 11-12.
---------------------------------------------------------------------------

    Finally, the agency received a small number of comments that raised 
constitutional concerns. First, Valero commented that the proposed rule 
violated numerous constitutional provisions. Valero argued that the 
rule

[[Page 52839]]

violated ``the Takings Clause of the Fifth Amendment, which precludes 
the taking of private property (or the elimination of entire 
industries) for public use without just compensation, as contemplated 
by the Proposal with regard to traditional and renewable liquid fuels 
and related industries (e.g., asphalt, sulfur, etc.).'' \1306\ NHTSA 
disagrees that this rule could constitute a ``taking'' in this regard, 
as it simply sets CAFE standards at a marginally higher level than 
those finalized for model year 2026, nor does it eliminate the 
``entire'' ``renewable liquid fuels and related industries,'' given 
that ICE vehicles remain a valid compliance option available to 
manufacturers. Valero also commented that ``to the extent the final 
rule relies on and/or incorporates state ZEV mandates,'' NHTSA violates 
the Dormant Commerce Clause; the equal sovereignty clause; the Import-
Export Clause; the Privileges and Immunities Clause; and the Full Faith 
and Credit Clause.\1307\ To the extent that these claims raise 
cognizable constitutional concerns, they are with the existence of the 
ZEV program, which NHTSA neither administers nor approves, and thus are 
outside the scope of this rulemaking and NHTSA's authority. Landmark 
Legal Foundation, similar to its comment on APA concerns discussed 
above, argued that the proposed rule was unconstitutional because it 
``relies heavily on SC-GHG valuations which have been created by the 
IWG[, which was] created unconstitutionally by executive order.''\1308\ 
The SC-GHG developed by the IWG and used in the proposal was simply a 
value used by the agency that was subject to notice-and-comment, and 
NHTSA is using a different value developed by EPA for this final rule, 
as discussed in Chapter 6.2.1 of the accompanying TSD. Moreover, as 
discussed below, NHTSA recognizes that PC2LT002 does not 
comprehensively maximize net benefits and concludes that it is 
nevertheless maximum feasible for economic practicability reasons. 
Further, the Federal government routinely establishes interagency 
groups for a wide variety of issues to ensure appropriate coordination 
across the Federal government; \1309\ thus, there is nothing unique 
about an IWG being established related to climate change, which affects 
the equities of many Federal agencies. Finally, Our Children's Trust 
requested that, based on their view of the Public Trust Doctrine, 
``NHTSA incorporate[ ] the protection of children's fundamental rights 
to a safe climate system, defined by the best available science, into 
future rulemaking, policies, and initiatives,'' \1310\ and that, 
generally, standards be set at a more stringent level.\1311\ NHTSA has 
addressed Our Children's Trust's substantive comments elsewhere in this 
final rule with regard to their broader constitutional concerns. NHTSA 
notes that, though it must act consistent with the Constitution, the 
extent of the agency's authority is limited to what is provided by 
Congress in statute.
---------------------------------------------------------------------------

    \1306\ Valero, Docket No. NHTSA-2023-0022-58547, at 15.
    \1307\ Id.
    \1308\ Landmark, Docket No. NHTSA-2023-0022-48725, at 3.
    \1309\ To use but one high-profile example among many, the 
recent Executive Order on artificial intelligence provides that 
``the Director of OMB shall convene and chair an interagency council 
to coordinate the development and use of AI in agencies' programs 
and operations, other than the use of AI in national security 
systems.'' E.O. 14110, ``Safe, Secure, and Trustworthy Development 
and Use of Artificial Intelligence,'' at Section 10.1 (Oct. 30, 
2023).
    \1310\ OCT, Docket No. NHTSA-2023-0022-51242, at 7.
    \1311\ Id. at 1-2.
---------------------------------------------------------------------------

C. National Environmental Policy Act

    The National Environmental Policy Act (NEPA) directs that 
environmental considerations be integrated into Federal decision making 
process, considering the purpose and need for agencies' actions.\1312\ 
As discussed above, EPCA requires NHTSA to determine the level at which 
to set CAFE standards for passenger cars and light trucks by 
considering the four factors of technological feasibility, economic 
practicability, the effect of other motor vehicle standards of the 
Government on fuel economy, and the need of the U.S. to conserve 
energy, and to set fuel efficiency standards for HDPUVs by adopting and 
implementing appropriate test methods, measurement metrics, fuel 
economy standards,\1313\ and compliance and enforcement protocols that 
are appropriate, cost-effective, and technologically feasible.\1314\ To 
explore the potential environmental consequences of this rulemaking 
action, NHTSA prepared a Draft EIS for the NPRM and a and Final EIS for 
the final rule. The purpose of an EIS is to ``. . .provide full and 
fair discussion of significant environmental impacts and [to] inform 
decision makers and the public of reasonable alternatives that would 
avoid or minimize adverse impacts or enhance the quality of the human 
environment.'' \1315\ This section of the preamble describes results 
from NHTSA's Final EIS, which is being publicly issued simultaneously 
with this final rule.
---------------------------------------------------------------------------

    \1312\ NEPA is codified at 42 U.S.C. 4321-47. The Council on 
Environmental Quality (CEQ) NEPA implementing regulations are 
codified at 40 CFR parts 1500 through 1508.
    \1313\ In the Phase 1 HD Fuel Efficiency Improvement Program 
rulemaking, NHTSA, aided by the National Academies of Sciences 
report, assessed potential metrics for evaluating fuel efficiency. 
NHTSA found that fuel economy would not be an appropriate metric for 
HD vehicles. Instead, NHTSA chose a metric that considers the amount 
of fuel consumed when moving a ton of freight (i.e., performing 
work). As explained in the Phase 2 HD Fuel Efficiency Improvement 
Program Final Rule, this metric, delegated by Congress to NHTSA to 
formulate, is not precluded by the text of the statute. The agency 
concluded that it is a reasonable way by which to measure fuel 
efficiency for a program designed to reduce fuel consumption. 
Greenhouse Gas Emissions and Fuel Efficiency Standards for Medium- 
and Heavy-Duty Engines and Vehicles--Phase 2; Final Rule, 81 FR 
73478, 73520 (Oct. 25, 2016).
    \1314\ 49 U.S.C. 32902(k)(2).
    \1315\ 40 CFR 1502.1.
---------------------------------------------------------------------------

    EPCA and EISA require that the Secretary of Transportation 
determine the maximum feasible levels of CAFE standards in a manner 
that sets aside the potential use of CAFE credits or application of 
alternative fuel technologies toward compliance in model years for 
which NHTSA is issuing new standards. NEPA, however, does not impose 
such constraints on analysis; instead, its purpose is to ensure that 
``Federal agencies consider the environmental impacts of their actions 
in the decision-making process.'' \1316\ As the environmental impacts 
of this action depend on manufacturers' actual responses to standards, 
and those responses are not constrained by the adoption of alternative 
fueled technologies or the use of compliance credits, the Final EIS is 
based on ``unconstrained'' modeling rather than ``standard setting'' 
modeling. The ``unconstrained'' analysis considers manufacturers' 
potential use of CAFE credits and application of alternative fuel 
technologies in order to disclose and allow consideration of the real-
world environmental consequences of the final standards and 
alternatives.
---------------------------------------------------------------------------

    \1316\ 40 CFR 1500.1(a).
---------------------------------------------------------------------------

    NHTSA conducts modeling both ways in order to reflect the various 
statutory requirements of EPCA/EISA and NEPA. The rest of the preamble, 
and importantly, NHTSA's balancing of relevant EPCA/EISA factors 
explained in Section VI.D, employs the ``standard setting'' modeling in 
order to aid the decision-maker in avoiding consideration of the 
prohibited items in 49 U.S.C. 32902(h) in determining maximum feasible 
standards, but as a result, the impacts reported here may

[[Page 52840]]

differ from those reported elsewhere in the preamble.\1317\
---------------------------------------------------------------------------

    \1317\ ``Unconstrained'' modeling results are presented for 
comparison purposes only in some sections of the FRIA and 
accompanying databooks.
---------------------------------------------------------------------------

    NHTSA's overall EIS-related obligation is to ``take a `hard look' 
at the environmental consequences'' as appropriate.\1318\ 
Significantly, ``[i]f the adverse environmental effects of the proposed 
action are adequately identified and evaluated, the agency is not 
constrained by NEPA from deciding that other values outweigh the 
environmental costs.'' \1319\ The agency must identify the 
``environmentally preferable'' alternative but need not adopt it.\1320\ 
``Congress in enacting NEPA . . . did not require agencies to elevate 
environmental concerns over other appropriate considerations.'' \1321\ 
Instead, NEPA requires an agency to develop and consider alternatives 
to the proposed action in preparing an EIS.\1322\ The statute and 
implementing regulations do not command an agency to favor an 
environmentally preferable course of action, only that it makes its 
decision to proceed with the action after taking a hard look at the 
potential environmental consequences and consider the relevant factors 
in making a decision among alternatives.\1323\ As such, NHTSA 
considered the impacts reported in the Final EIS, in addition to the 
other information presented in this preamble, the TSD, and the FRIA, as 
part of its decision-making process.
---------------------------------------------------------------------------

    \1318\ Baltimore Gas & Elec. Co. v. Natural Resources Defense 
Council, Inc., 462 U.S. 87, 97 (1983).
    \1319\ Robertson v. Methow Valley Citizens Council, 490 U.S. 
332, 350 (1989).
    \1320\ See 40 CFR 1505.2(a)(2). Vermont Yankee Nuclear Power 
Corp. v. Nat. Res. Def. Council, Inc., 435 U.S. 519, 558 (1978).
    \1321\ Baltimore Gas, 462 U.S. at 97.
    \1322\ 42 U.S.C. 4332(2)(c)(iii).
    \1323\ See 40 CFR 1505.2(a)(2).
---------------------------------------------------------------------------

    The agency received several comments on the Draft EIS. Comments 
regarding the Draft EIS, including the environmental analysis, are 
addressed in Appendix B of the Final EIS. NHTSA addresses substantive 
comments that concern the rule but that are not related to the EIS in 
this preamble and its associated documents in the public docket.
    When preparing an EIS, NEPA requires an agency to compare the 
potential environmental impacts of its proposed action and a reasonable 
range of alternatives. Because NHTSA is setting standards for passenger 
cars, light trucks, and HDPUVs,\1324\ and because evaluating the 
environmental impacts of this rulemaking requires consideration of the 
impacts of the standards for all three vehicle classes, the main 
analyses of direct and indirect effects of the action alternatives 
presented in the Final EIS reflect: (1) the environmental impacts 
associated with the CAFE standards for LDVs, and (2) the environmental 
impacts associated with the HDPUV FE standards. The analyses of 
cumulative impacts of the action alternatives presented in this EIS 
reflect the cumulative or combined impact of the two sets of standards 
that are being set by NHTSA in this final rule, in addition to the 
model year 2032 augural year standards being set forth.
---------------------------------------------------------------------------

    \1324\ Under EPCA, as amended by EISA, NHTSA is required to set 
the fuel economy standards for passenger cars in each model year at 
the maximum feasible level and to do so separately for light trucks. 
Separately, and in accordance with EPCA, as amended by EISA, NHTSA 
is required to set FE standards for HDPUVs in each model year that 
are ``designed to achieve the maximum feasible improvement'' (49 
U.S.C. 32902(k)(2)).
---------------------------------------------------------------------------

    In the DEIS, NHTSA analyzed a CAFE No-Action Alternative and four 
action alternatives for passenger cars and light trucks, along with a 
HDPUV FE No-Action Alternative and three action alternatives for HDPUV 
FE standards. In the Final EIS, NHTSA has analyzed a CAFE No-Action 
Alternative and five action alternatives for passenger car and light 
truck standards, along with a HDPUV FE No-Action Alternative and four 
action alternatives for HDPUV FE standards.\1325\ The alternatives 
represent a range of potential actions NHTSA could take, and they are 
described more fully in Section IV of this preamble, Chapter 1 of the 
TSD, and Chapter 3 of the FRIA. The estimated environmental impacts of 
these alternatives, in turn, represent a range of potential 
environmental impacts that could result from NHTSA's setting maximum 
feasible fuel economy standards for passenger cars and light trucks and 
fuel efficiency standards for HDPUVs.
---------------------------------------------------------------------------

    \1325\ In its scoping notice, NHTSA indicated that the action 
alternatives analyzed would bracket a range of reasonable standards, 
allowing the agency to select an action alternative in its final 
rule from any stringency level within that range. 87 FR 50386, 50391 
(Sept. 15, 2022).
---------------------------------------------------------------------------

    To derive the direct, indirect, and cumulative impacts of the CAFE 
standard action alternatives and the HDPUV FE standard action 
alternatives, NHTSA compared each action alternative to the relevant 
No-Action Alternative, which reflects reference baseline trends that 
would be expected in the absence of any further regulatory action. More 
specifically, the CAFE No-Action Alternative in the Draft and Final EIS 
assumes that the model year 2026 CAFE standards finalized in 2022 
continue in perpetuity. 1326 1327 The HDPUV FE No-Action 
Alternative in the Draft and Final EIS assumes that the model year 2027 
HDPUV FE standards finalized in the Phase 2 program continue in 
perpetuity.\1328\ Like all of the action alternatives, the No-Action 
Alternatives also include other considerations that will foreseeably 
occur during the rulemaking time frame, as discussed in more detail in 
Section IV above. The No-Action Alternatives assume that manufacturers 
will comply with ZEV programs set by California and other Section 177 
states and their deployment commitments consistent with ACC II's 
targets.\1329\ The No-Action Alternatives also assume that 
manufacturers would make production decisions in response to estimated 
market demand for fuel economy or fuel efficiency, considering 
estimated fuel prices; estimated product development cadence; estimated 
availability, applicability, cost, and effectiveness of fuel-saving 
technologies; and available tax credits. The No-Action Alternatives 
further assume the applicability of recently passed tax credits for 
battery-based vehicle technologies, which improve the attractiveness of 
those technologies to consumers. The No-Action Alternatives provide a 
reference baseline (i.e., an illustration of what would be occurring in 
the world in the absence of new Federal regulations) against which to 
compare the environmental impacts of other alternatives presented in 
the Draft and Final EIS.\1330\
---------------------------------------------------------------------------

    \1326\ Corporate Average Fuel Economy Standards for Model Years 
2024-2026 Passenger Cars and Light Trucks; Final Rule, 87 FR 25710 
(May 2, 2022). Revised 2023 and Later Model Year Light-Duty Vehicle 
Greenhouse Gas Emissions Standards; Final Rule, 86 FR 74434 (Dec. 
30, 2021).
    \1327\ In the last CAFE analysis, the No-Action Alternative also 
included five manufacturers' voluntary agreements with the State of 
California to achieve more stringent GHG standards through model 
year 2026. The stringency in the California Framework Agreement 
standards were superseded with EPA's revised GHG rule. Revised 2023 
and Later Model Year Light-Duty Vehicle Greenhouse Gas Emissions 
Standards; Final Rule, 86 FR 74434 (Dec. 30, 2021).
    \1328\ Greenhouse Gas Emissions Standards and Fuel Efficiency 
Standards for Medium- and Heavy-Duty Engines and Vehicles; Final 
Rule, 76 FR 57106 (Sept. 15, 2011).
    \1329\ Section 177 of the CAA allows states to adopt motor 
vehicle emissions standards California has put in place to make 
progress toward attainment of national ambient air quality 
standards. At the time of writing, Colorado, Connecticut, Maine, 
Maryland, Massachusetts, New Jersey, New York, Oregon, Rhode Island, 
Vermont, and Washington have adopted California's ZEV program. See 
CARB. 2022. States that have Adopted California's Vehicle Standards 
under section 177 of the Federal CAA. Available at: https://ww2.arb.ca.gov/resources/documents/states-have-adopted-californias-vehicle-standards-under-section-177-federal. (Accessed: Feb. 28, 
2024).
    \1330\ See 40 CFR 1502.2(e), 1502.14(d). CEQ has explained that 
``[T]he regulations require the analysis of the No-Action 
Alternative even if the agency is under a court order or legislative 
command to act. This analysis provides a benchmark, enabling 
decision makers to compare the magnitude of environmental effects of 
the action alternatives [See 40 CFR 1502.14(c).] . . . Inclusion of 
such an analsyis in the EIS is necessary to inform Congress, the 
public, and the President as intended by NEPA. [See 40 CFR 
1500.1(a).]'' Forty Most Asked Questions Concerning CEQ's NEPA 
Regulations, 46 FR 18026 (Mar. 23, 1981).

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[[Page 52841]]

    The range of CAFE and HDPUV FE standard action alternatives, as 
well as the relevant No-Action Alternative in the Final EIS, 
encompasses a spectrum of possible fuel economy and fuel efficiency 
standards that NHTSA could determine were maximum feasible based on the 
different ways NHTSA could weigh the applicable statutory factors. 
NHTSA analyzed five CAFE standard action alternatives, Alternative 
PC2LT002,\1331\ Alternative PC1LT3, Alternative PC2LT4, Alternative 
PC3LT5, and Alternative PC6LT8 for passenger cars and light trucks, and 
four HDPUV FE standard action alternatives, Alternative HDPUV4,\1332\ 
Alternative HDPUV108, Alternative HDPUV10, and Alternative HDPUV14 for 
HDPUVs. Under Alternative PC2LT002, fuel economy stringency would 
increase, on average, 2 percent per year, year over year for model year 
2027-2031 passenger cars, and 0 percent increase per year, year over 
year for model year 2027-2028 light trucks, and 2 percent increase per 
year, year over year for model year 2029-2031 light trucks (Alternative 
PC2LT002 is NHTSA's Preferred Alternative for CAFE standards). Under 
Alternative PC1LT3, fuel economy stringency would increase, on average, 
1 percent per year, year over year for model year 2027--2031 passenger 
cars, and 3 percent per year, year over year for model year 2027-2031 
light trucks. Under Alternative PC2LT4, fuel economy stringency would 
increase, on average, 2 percent per year, year over year for model year 
2027-2031 passenger cars, and 4 percent per year, year over year for 
model year 2027-2031 light trucks. Under Alternative PC3LT5, fuel 
economy stringency would increase, on average, 3 percent per year, year 
over year for model year 2027-2031 passenger cars, and 5 percent per 
year, year over year for model year 2027-2031 light trucks. Under 
Alternative PC6LT8, fuel economy stringency would increase, on average, 
6 percent per year, year over year for model year 2027-2031 passenger 
cars, and 8 percent per year, year over year for model year 2027-2031 
light trucks. Under Alternative HDPUV4, FE stringency would increase, 
on average, 4 percent per year, year over year, for model year 2030-
2035 HDPUVs. Under Alt. HDPUV108, FE stringency would increase, on 
average, 10 percent per year, year over year for model year 2030-2032 
and 8 percent per year, year over year for model year 2033-2035 HDPUVs 
(Alt. HDPUV108 is NHTSA's Preferred Alternative for HDPUV FE 
standards). Under HDPUV10, FE stringency would increase, on average, 10 
percent per year, year over year, for model year 2030-2035 HDPUVs 
(Alternative HDPUV10 is NHTSA's Preferred Alternative for HDPUV FE 
standards). Under Alternative HDPUV14, FE stringency would increase on 
average, 14 percent per year, year over year for model year 2030-2035 
HDPUVs. NHTSA also analyzed three CAFE and HDPUV FE alternative 
combinations for the cumulative impacts analysis, Alternatives PC2LT002 
and HDPUV4 (the least stringent and highest fuel-use CAFE and HDPUV FE 
standard action alternatives), Alternatives PC2LT002 and HDPUV108 (the 
Preferred CAFE and HDPUV FE alternatives), and Alternatives PC6LT8 and 
HDPUV14 (the most stringent and lowest fuel-use CAFE and HDPUV FE 
standard action alternatives). The primary differences between the 
action alternatives considered for the Draft EIS and the Final EIS is 
that the Final EIS added an alternative, Alternative PC2LT002 for CAFE 
standard and Alternative HDPUV108 for HDPUV FE standard. Both of the 
ranges of action alternatives, as well as the No-Action alternative, in 
the Draft EIS and Final EIS encompassed a spectrum of possible 
standards the agency could determine was maximum feasible, or 
represented the maximum feasible improvement for HDPUVs, based on the 
different ways the agency could weigh EPCA's four statutory factors. 
Throughout the Final EIS, estimated impacts were shown for all of these 
action alternatives, as well as for the relevant No-Action Alternative. 
For a more detailed discussion of the environmental impacts associated 
with the alternatives, see Chapters 3-8 of the EIS, as well as Section 
IV.C of this preamble.
---------------------------------------------------------------------------

    \1331\ The abbreviation PC2LT002 is meant to reflect a 2 percent 
increase for passenger cars, a 0 percent increase for light trucks 
for model year 2027-2028, and a 2 percent increase for light trucks, 
including SUVs, for model year 2029-2031. PC2LT002 is formatted 
differently than the other CAFE alternatives because the rate of 
stringency increase changes across years, whereas in the other 
alternatives, the rate of increase is constant year over year.
    \1332\ The abbreviation HDPUV4 is meant to reflect a 4 percent 
increase for HDPUVs. The abbreviation for each HDPUV action 
alternative uses the same naming convention.
---------------------------------------------------------------------------

    The agency's Final EIS describes potential environmental impacts to 
a variety of resources, including fuel and energy use, air quality, 
climate, EJ, and historic and cultural resources. The EIS also 
describes how climate change resulting from global GHG emissions 
(including CO2 emissions attributable to the U.S. LD 
transportation sector under the alternatives considered) could affect 
certain key natural and human resources. Resource areas are assessed 
qualitatively and quantitatively, as appropriate, in the Final EIS, and 
the findings of that analysis are summarized here. As explained above, 
the qualitative impacts presented below come from the EIS' 
``unconstrained'' modeling so that NHTSA is appropriately informed 
about the potential environmental impacts of this action. Qualitative 
discussions of impacts related to life-cycle assessment of vehicle 
materials, EJ, and historic and cultural resources are located in the 
EIS, while the impacts summarized here focus on energy, air quality, 
and climate change.
1. Environmental Consequences
a. Energy
(1) Direct and Indirect Impacts
    As the stringency of the CAFE standard alternatives increases, 
total U.S. passenger car and light truck fuel consumption for the 
period of 2022 to 2050 decreases. Total LD vehicle fuel consumption 
from 2022 to 2050 under the CAFE No-Action Alternative is projected to 
be 2,774 billion gasoline gallon equivalents (GGE). LD vehicle fuel 
consumption from 2022 to 2050 under the action alternatives is 
projected to range from 2,760 billion GGE under Alternative PC2LT002 to 
2,596 billion GGE under Alternative PC6LT8. Under Alternative 
AlternativePC1LT3, LD vehicle fuel consumption from 2022 to 2050 is 
projected to be 2,736 billion GGE. Under Alternative PC2LT4, LD vehicle 
fuel consumption from 2022 to 2050 is projected to be 2,729 billion 
GGE. Under Alternative PC3LT5, LD vehicle fuel consumption from 2022 to 
2050 is projected to be 2,695 billion GGE. All of the CAFE standard 
action alternatives would decrease fuel consumption compared to the 
relevant No-Action Alternative, with fuel consumption decreases that 
range from 14 billion GGE under Alternative PC2LT002 to 179 billion GGE 
under Alternative PC6LT8. For the preferred alternative, fuel 
consumption decreases by 14 billion GGE.
    As the stringency of the HDPUV FE standard alternatives increases, 
total U.S. HDPUV fuel consumption for the period of 2022 to 2050 
decreases. Total

[[Page 52842]]

HDPUV vehicle fuel consumption from 2022 to 2050 under the No-Action 
Alternative is projected to be 418.9 billion GGE. HDPUV fuel 
consumption from 2022 to 2050 under the action alternatives is 
projected to range from 418.6 billion GGE under Alternative HDPUV4 to 
401.9 billion GGE under Alternative HDPUV14. Under Alternative 
HDPUV108, HDPUV vehicle fuel consumption from 2022 to 2050 is projected 
to be 415 billion GGE. Under Alternative HDPUV10, HDPUV vehicle fuel 
consumption from 2022 to 2050 is projected to be 412 billion GGE. All 
of the HDPUV standard action alternatives would decrease fuel 
consumption compared to the relevant No-Action Alternative, with fuel 
consumption decreases that range from 0.3 billion GGE under Alternative 
HDPUV4 to 17.0 billion GGE under HDPUV14. For the preferred 
alternative, fuel consumption decreases by 4 billion GGE.
(2) Cumulative Impacts
    Energy cumulative impacts are composed of both LD and HDPUV energy 
use in addition to other past, present, and reasonably foreseeable 
future actions. As the CAFE Model includes many foreseeable trends, 
NHTSA examined two AEO 2023 side cases that could proxy a range of 
future outcomes where oil consumption is lower based on a range of 
macroeconomic factors. Since the results of the CAFE and HDPUV FE 
standards are a decline in oil consumption, examining side cases that 
also result in lower oil consumption while varying macroeconomic 
factors provides some insights into the cumulative effects of CAFE 
standards paired with other potential future events. Energy production 
and consumption from those side cases is presented in comparison to the 
AEO 2023 reference case qualitatively in the EIS. Below, we present the 
combined fuel consumption savings from the LD CAFE and HDPUV FE 
standards. These results also include impacts from the model year 2032 
augural year standard that the agency is setting forth.
    Total LD vehicle and HDPUV fuel consumption from 2022 to 2050 under 
the No-Action Alternatives is projected to be 3,193 billion GGE. LD 
vehicle and HDPUV fuel consumption from 2022 to 2050 under the action 
alternatives is projected to range from 3,178 billion GGE under 
Alternatives PC2LT002 and HDPUV4 to 2,955 billion GGE under 
Alternatives PC6LT8 and HDPUV14. Under Alternatives PC2LT002 and 
HDPUV108, the total LD vehicle and HDPUV fuel consumption from 2022 to 
2050 is projected to be 3,174 billion GGE. All of the action 
alternatives would decrease fuel consumption compared to the No-Action 
Alternatives, with decreases ranging from 15 billion GGE under 
Alternatives PC2LT002 and HDPUV4 to 238 billion GGE under Alternatives 
PC6LT8 and HDPUV14. For the preferred alternatives, fuel consumption 
decreases by 19 billion GGE.
    Changing CAFE and HDPUV FE standards are expected to reduce 
gasoline and diesel fuel use in the transportation sector but are not 
expected to have any discernable effect on energy consumption by other 
sectors of the U.S. economy because petroleum products account for a 
very small share of energy use in other sectors. Gasoline and diesel 
(distillate fuel oil) account for less than 5 percent of energy use in 
the industrial sector, less than 4 percent of energy use in the 
commercial building sector, 2 percent of energy use in the residential 
sector, and only about 0.2 percent of energy use in the electric power 
sector.
b. Air Quality
(1) Direct and Indirect Impacts
    The relationship between stringency and criteria and air toxics 
pollutant emissions is less straightforward than the relationship 
between stringency and energy use, because it reflects the complex 
interactions among the vehicle-based emissions rates of the various 
vehicle types (passenger cars and light trucks, HDPUVs, ICE vehicles 
and EVs, older and newer vehicles, etc.), the technologies assumed to 
be incorporated by manufacturers in response to CAFE and HDPUV FE 
standards, upstream emissions rates, the relative proportions of 
gasoline, diesel, and electricity in total fuel consumption, and 
changes in VMT from the rebound effect. In general, emissions of 
criteria air pollutants decrease, with some exceptions, in both the 
short and long term. The decreases get larger as the stringency 
increases across action alternatives, with some exceptions. In general, 
emissions of toxic air pollutants remain the same or decrease in both 
the short and long term. The decreases stay the same or get larger as 
the stringency increases across action alternatives, with some 
exceptions. In addition, the action alternatives would result in 
decreased incidence of PM2.5-related health impacts in most 
years and alternatives due to the emissions decreases. Decreases in 
adverse health impacts include decreased incidences of premature 
mortality, acute bronchitis, respiratory emergency room visits, and 
work-loss days.
(a) Criteria Pollutants
    In 2035, emissions of CO, NOX, PM2.5, and 
VOCs decrease under all CAFE standard action alternatives compared to 
the CAFE No-Action Alternative, while emissions of SO2 
increase. Relative to the No-Action Alternative, the modeling results 
suggest CO, NOX, PM2.5, and VOC emissions 
decreases in 2035 that get larger from Alternative PC2LT002 through 
Alternative PC6LT8. There are also increases in SO2 
emissions that reflect the projected increase in EV use in the later 
years. However, note that modeled increases are very small relative to 
reductions from the historical levels.
    In 2050, emissions of CO, NOX, PM2.5, and 
VOCs decrease under all CAFE standard action alternatives compared to 
the CAFE No-Action Alternative. Relative to the No-Action Alternative, 
the modeling results suggest CO, NOX, PM2.5, and 
VOC emissions decreases in 2050 that get larger from Alternative 
PC2LT002 to Alternative PC1LT3, and from Alternative PC2LT4 through 
Alternative PC6LT8, but the decreases get smaller from Alternative 
PC1LT3 to PC2LT4. Emissions of SO2 increase under all CAFE 
standard action alternatives, except for Alternative PC2LT4, compared 
to the CAFE No-Action Alternative, and the increases get larger from 
Alternative PC2LT002 to Alternative PC1LT3 and from Alternative PC3LT5 
to Alternative PC6LT8. In 2050, as in 2035, the increases in 
SO2 emissions reflect the projected increase in EV use in 
the later years. Further, any modeled increases were very small 
relative to reductions from the historical levels represented in the 
current CAFE standard. Under each CAFE standard action alternative 
compared to the CAFE No-Action Alternative, the largest relative 
increases in emissions among the criteria pollutants would occur for 
SO2, for which emissions would increase by as much as 3.0 
percent under Alternative PC6LT8 in 2050 compared to the CAFE No-Action 
Alternative. The largest relative decreases in emissions would occur 
for CO, for which emissions would decrease by as much as 18.3 percent 
under Alternative PC6LT8 in 2050 compared to the CAFE No-Action 
Alternative. Percentage increases and decreases in emissions of 
NOX, PM2.5, and VOCs would be less. The smaller 
differences are not expected to lead to measurable changes in 
concentrations of criteria pollutants in the ambient air. The larger 
differences in emissions could lead to changes in ambient pollutant 
concentrations.

[[Page 52843]]

    In 2035 and 2050, emissions of SO2 increase under the 
HDPUV FE standard action alternatives compared to the HDPUV FE No-
Action Alternative, while emissions of CO, NOX, 
PM2.5, and VOCs decrease. Relative to the HDPUV FE No-Action 
Alternative, the modeling results suggest SO2 emissions 
increases get larger from Alternative HDPUV4 through Alternative 
HDPUV14. The increases in SO2 emissions reflect the 
projected increase in EV use in the later years. Further, any modeled 
increases were very small relative to reductions from the historical 
levels represented in the current HDPUV FE standard. For CO, 
NOX, PM2.5, and VOCs, the emissions decreases get 
larger from Alternative HDPUV4 through Alternative HDPUV14 relative to 
the No-Action Alternative.
    Under each HDPUV FE standard action alternative compared to the 
HDPUV FE No-Action Alternative, the largest relative increases in 
emissions among the criteria pollutants would occur for SO2, 
for which emissions would increase by as much as 6.7 percent under 
Alternative HDPUV14 in 2050 compared to the No-Action Alternative. The 
largest relative decreases in emissions would occur for CO, for which 
emissions would decrease by as much as 13.5 percent under Alternative 
HDPUV14 in 2050 compared to the No-Action Alternative. Percentage 
reductions in emissions of NOX, PM2.5, and VOCs 
would be less, though the reductions in VOCs in 2035 (by as much as 3.3 
percent under Alternative HDPUV14) would be greater than those of CO in 
2035 (by as much as 1.7 percent under Alternative HDPUV14). The smaller 
differences are not expected to lead to measurable changes in 
concentrations of criteria pollutants in the ambient air. The larger 
differences in emissions could lead to changes in ambient pollutant 
concentrations.
(b) Toxic Air Pollutants
    Under each CAFE standard action alternative in 2035 and 2050 
relative to the CAFE No-Action Alternative, emissions would remain the 
same or decrease for all toxic air pollutants. The decreases stay the 
same or get larger from Alternative PC2LT002 through Alternative 
PC6LT8, except that for acetaldehyde, acrolein, 1,3-butadiene, and 
formaldehyde for which emissions would decrease by as much as 23 
percent under Alternative PC6LT8 in 2050 compared to the CAFE No-Action 
Alternative. Percentage decreases in emissions of benzene and DPM would 
be less. The smaller differences are not expected to lead to measurable 
changes in concentrations of toxic air pollutants in the ambient air. 
For such small changes, the impacts of those action alternatives would 
be essentially equivalent. The larger differences in emissions could 
lead to changes in ambient pollutant concentrations.
    Under each HDPUV FE standard action alternative in 2035 and 2050 
relative to the HDPUV FE No-Action Alternative, emissions either remain 
the same or decrease for all toxic air pollutants. The decreases get 
larger from Alternative HDPUV4 through Alternative HDPUV14. The largest 
relative decreases in national emissions of toxic air pollutants among 
the HDPUV FE standard action alternatives, compared to the HDPUV FE No-
Action Alternative, generally would occur for 1,3-butadiene and 
formaldehyde for which emissions would decrease by as much as 14.5 
percent under Alternative HDPUV14 in 2050 compared to the HDPUV FE No-
Action Alternative. The largest percentage decreases in emissions of 
acetaldehyde, acrolein, and benzene would be similar, decreasing as 
much as 13.6 to 14.2 percent under Alternative HDPUV14 in 2050 compared 
to the No-Action Alternative. Percentage decreases in emissions of DPM 
would be less, in some cases less than 1 percent. The smaller 
differences are not expected to lead to measurable changes in 
concentrations of toxic air pollutants in the ambient air. For such 
small changes, the impacts of those action alternatives would be 
essentially equivalent. The larger differences in emissions could lead 
to changes in ambient pollutant concentrations.
(c) Health Impacts
    In 2035 and 2050, all CAFE standard action alternatives would 
result in decreases in adverse health impacts (mortality, acute 
bronchitis, respiratory emergency room visits, and other health 
effects) nationwide compared to the CAFE No-Action Alternative, due to 
decreases in downstream emissions, particularly of PM2.5. 
The improvements to health impacts (or decreases in health incidences) 
would stay the same or get larger from Alternative PC2LT002 to 
Alternative PC6LT8 in 2035 and 2050, except that in 2050 the decrease 
from Alternative PC1LT3 to Alternative PC2LT4 is smaller. These 
decreases reflect the generally increasing stringency of the action 
alternatives as they become implemented.
    In 2035 and 2050, all HDPUV FE standard action alternatives would 
decrease adverse health impacts nationwide compared to the HDPUV FE No-
Action Alternative. The improvements to health impacts (or decreases in 
health incidences) would get larger from Alternative HDPUV4 to 
Alternative HDPUV14 in 2035 and 2050.
(2) Cumulative Impacts
(a) Criteria Pollutants
    In 2035 and 2050, emissions of SO2 increase under the 
CAFE and HDPUV FE alternative combinations compared to the No-Action 
Alternatives, while emissions of CO, NOX, PM2.5, 
and VOCs decrease. However, any modeled increases are very small 
relative to reductions from the historical levels represented in the 
current CAFE and HDPUV FE standards. Relative to the No-Action 
Alternatives, the modeling results suggest SO2 emissions 
increases that get larger with increasing stringency of alternative 
combinations compared to the No-Action Alternatives. For CO, 
NOX, PM2.5, and VOCs, the emissions decreases get 
larger with increasing stringency of alternative combinations compared 
to the No-Action Alternatives.
    Under each CAFE and HDPUV FE alternative combination compared to 
the No-Action Alternatives, the largest relative increases in emissions 
among the criteria pollutants would occur for SO2, for which 
emissions would increase by as much as 5.2 percent under Alternatives 
PC6LT8 and HDPUV14 in 2050, compared to the No-Action Alternatives. The 
largest relative decreases in emissions would occur for CO, for which 
emissions would decrease by as much as 24 percent under Alternatives 
PC6LT8 and HDPUV14 in 2050, compared to the No-Action Alternatives. 
Percentage decreases in emissions of NOX, PM2.5, 
and VOCs would be less, though reductions in PM2.5 in 2035 
(by as much as 4.1 percent under Alternatives PC6LT8 and HDPUV14) and 
VOCs in 2035 (by as much as 6.1 percent under Alternatives PC6LT8 and 
HDPUV14) would be greater than those of CO in 2035 (by as much as 3.7 
percent under Alternatives PC6LT8 and HDPUV14). The smaller differences 
are not expected to lead to measurable changes in concentrations of 
criteria pollutants in the ambient air. The larger differences in 
emissions could lead to changes in ambient pollutant concentrations.
(b) Toxic Air Pollutants
    Toxic air pollutant emissions across the CAFE and HDPUV FE 
alternative combinations decrease in 2035 and 2050, relative to the No-
Action Alternatives. The decreases remain the same or get larger with 
increasing stringency of alternative combinations. The largest relative 
decreases in

[[Page 52844]]

emissions generally would occur for 1,3-butadiene and formaldehyde for 
which emissions would decrease by as much as 28 percent under 
Alternatives PC6LT8 and HDPUV14 in 2050, compared to the No-Action 
Alternatives. The largest percentage decreases in emissions of 
acetaldehyde, acrolein, and benzene would be similar, decreasing as 
much as 26 to 27 percent under Alternatives PC6LT8 and HDPUV14 in 2050 
compared to the No-Action Alternative. Percentage decreases in 
emissions of DPM would be less.
(c) Health Impacts
    Adverse health impacts (mortality, acute bronchitis, respiratory 
emergency room visits, and other health effects) from criteria 
pollutant emissions would decrease nationwide in 2035 and 2050 under 
all CAFE and HDPUV FE alternative combinations, relative to the No-
Action Alternatives. The improvements to health impacts (or decreases 
in health incidences) in 2035 and 2050 would stay the same or get 
larger from Alternatives PC2LT002 and HDPUV4 to Alternatives PC6LT8 and 
HDPUV14. These decreases reflect the generally increasing stringency of 
the CAFE and HDPUV FE standard action alternatives as they become 
implemented.
    As mentioned above, changes in assumptions about modeled technology 
adoption; the relative proportions of gasoline, diesel, and other fuels 
in total fuel consumption changes; and changes in VMT from the rebound 
effect would alter these health impact results; however, NHTSA believes 
that assumptions employed in the modeling supporting these final 
standards are reasonable.
c. Greenhouse Gas Emissions and Climate Change
(1) Direct and Indirect Impacts
    In terms of climate effects, the action alternatives would decrease 
both U.S. passenger car and light truck and HDPUV fuel consumption and 
CO2 emissions compared with the relevant No-Action 
Alternative, resulting in reductions in the anticipated increases in 
global CO2 concentrations, temperature, precipitation, sea 
level, and ocean acidification that would otherwise occur. They would 
also, to a small degree, reduce the impacts and risks associated with 
climate change. The impacts of the action alternatives on atmospheric 
CO2 concentration, global mean surface temperature, 
precipitation, sea level, and ocean pH would be small in relation to 
global emissions trajectories. Although these effects are small, they 
occur on a global scale and are long lasting; therefore, in aggregate, 
they can have large consequences for health and welfare and can make an 
important contribution to reducing the risks associated with climate 
change.
(a) Greenhouse Gas Emissions
    The CAFE standard action alternatives would have the following 
impacts related to GHG emissions: Passenger cars and light trucks are 
projected to emit 46,500 million metric tons of carbon dioxide 
(MMTCO2) from 2027 through 2100 under the CAFE No-Action 
Alternative. Compared to the No-Action Alternative, projected emissions 
reductions from 2027 to 2100 under the CAFE standard action 
alternatives would range from 400 to 7,000 MMTCO2. Under 
Alternative PC2LT002, emissions reductions from 2027 to 2100 are 
projected to be 400 MMTCO2. The CAFE standard action 
alternatives would reduce total CO2 emissions from U.S. 
passenger cars and light trucks by a range of 0.9 to 15.1 percent from 
2027 to 2100 compared to the CAFE No-Action Alternative. Alternative 
PC2LT002 would decrease these emissions by less than 1 percent through 
2100. All CO2 emissions estimates associated with the CAFE 
standard action alternatives include upstream emissions.
    The HDPUV FE standard action alternatives would have the following 
impacts related to GHG emissions: HDPUVs are projected to emit 9,700 
MMTCO2from 2027 through 2100 under the HDPUV FE No-Action 
Alternative. Compared to the No-Action Alternative, projected emissions 
reductions from 2027 to 2100 under the HDPUV action alternatives would 
range from 0 to 1,100 MMTCO2. Under Alternative HDPUV108, 
emissions reductions from 2027 to 2100 are projected to be 300 
MMTCO2. The HDPUV FE standard action alternatives would 
decrease these emissions by a range of 0.0 to 11.3 percent from 2027 to 
2100 compared to the HDPUV FE No-Action Alternative. Alternative 
HDPUV108 would decrease these emissions by 3.1 percent through 2100. 
All CO2 emissions estimates associated with the HDPUV FE 
standard action alternatives include upstream emissions.
    Compared with total projected CO2 emissions of 468 
MMTCO2 from all passenger cars and light trucks under the 
CAFE No-Action Alternative in the year 2100, the CAFE standard action 
alternatives are expected to decrease CO2 emissions from 
passenger cars and light trucks in the year 2100 by 2 percent under 
Alternative PC1LT3, less than 2 percent under Alternative PC2LT4, 6 
percent under Alternative PC3LT5, and 19 percent under Alternative 
PC6LT8. Under Alternative PC2LT002, the 2100 total projected 
CO2 emissions for all passenger cars and light trucks are 
464 MMTCO2, reflecting a 1 percent decrease.
    Compared with total projected CO2 emissions of 116 
MMTCO2 from all HDPUVs under the HDPUV FE No-Action 
Alternative in the year 2100, the HDPUV FE standard action alternatives 
are expected to decrease CO2 emissions from HDPUVs in the 
year 2100 by a range of less than 1 percent under Alternative HDPUV4 to 
13 percent under Alternative HDPUV14. Under Alternative HDPUV108, the 
2100 total projected CO2 emissions for all HDPUVs are 112 
MMTCO2, reflecting a 4 percent decrease.
    To estimate changes in CO2 concentrations and global 
mean surface temperature, NHTSA used a reduced-complexity climate model 
(MAGICC). The reference scenario used in the direct and indirect 
analysis is the SSP3-7.0 scenario, which the Intergovernmental Panel on 
Climate Change (IPCC) describes as a high emissions scenario that 
assumes no successful, comprehensive global actions to mitigate GHG 
emissions and yields atmospheric CO2 levels of 800 ppm and 
an effective radiative forcing (ERF) of 7.0 watts per square meter (W/
m\2\) in 2100. Compared to the SSP3-7.0 total U.S. emissions projection 
of 619,064 MMTCO2 under the CAFE No-Action Alternative from 2027 to 
2100, the CAFE standard action alternatives are expected to reduce U.S. 
emissions by .06 percent under Alternative PC2LT002, 0.18 percent under 
Alternative PC1LT3, 0.16 percent under Alternative PC2LT4, 0.40 percent 
under Alternative PC3LT5, and 1.13 percent under Alternative PC6LT8 by 
2100. Global emissions would also be reduced to a lesser extent. 
Compared to SSP3-7.0 total global CO2 emissions projection 
of 4,991,547 MMTCO2 under the CAFE No-Action Alternative 
from 2027 through 2100, the CAFE standard action alternatives are 
expected to reduce global CO2 by 0.01 percent under 
Alternative PC2LT002, 0.02 percent under Alternative PC1LT3, 0.02 
percent under Alternative PC2LT4, 0.05 percent under Alternative 
PC3LT5, and 0.14 percent under Alternative PC6LT8 by 2100. Additional 
information about the range of alternatives' emissions decreases 
compared to U.S. emissions projections is located in Chapter 5 of the 
Final EIS.
    Compared to the SSP3-7.0 total U.S. emissions projection of 619,064

[[Page 52845]]

MMTCO2 under the HDPUV No-Action Alternative from 2027 to 2100, the 
HDPUV standard action alternatives are expected to reduce U.S. 
emissions by 0.00 percent under Alternative HDPUV4, 0.05 percent under 
Alternative HDPUV108, 0.08 percent under Alternative HDPUV10, and 0.18 
percent under Alternative HDPUV14 by 2100. Global emissions would also 
be reduced to a lesser extent. Compared to SSP3-7.0 total global 
CO2 emissions projection of 4,991,547 MMTCO2 
under the HDPUV No-Action Alternative from 2027 through 2100, the HDPUV 
action alternatives are expected to reduce global CO2 by 
less than 0.01 percent under Alternative HDPUV4, 0.01 percent under 
Alternative HDPUV108, 0.01 percent under Alternative HDPUV10, and 0.02 
percent under Alternative HDPUV14 by 2100.
    The emissions reductions from all passenger cars and light trucks 
in 2035 compared with emissions under the CAFE No-Action Alternative 
are approximately equivalent to the annual emissions from 2,282,379 
vehicles under Alternative PC2LT002 to 25,343,679 passenger cars and 
light trucks (Alternative PC6LT8) in 2035, compared to the annual 
emissions under the No-Action Alternative. A total of 260,932,626 
passenger cars and light trucks are projected to be on the road in 2035 
under the No-Action Alternative.\1333\ The emissions reductions from 
HDPUVs in 2032 compared with emissions under the HDPUV FE No-Action 
Alternative are approximately equivalent to the annual emissions from 
16,180 HDPUVs (Alternative HDPUV4) to 785,474 HDPUVs (Alternative 
HDPUV14) in 2035, compared to the annual emissions under the No-Action 
Alternative. A total of 18,299,639 HDPUVs are projected to be on the 
road in 2035 under the No-Action Alternative.\1334\
---------------------------------------------------------------------------

    \1333\ Values for vehicle totals have been rounded. The 
passenger car and light truck equivalency is based on an average 
per[hyphen]vehicle emissions estimate, which includes both tailpipe 
CO2 emissions and associated upstream emissions from fuel 
production and distribution. The average passenger car and light 
truck is projected to account for 3.94 metric tons of CO2 
emissions in 2035 based on MOVES, the GREET model, and EPA analysis.
    \1334\ Values for vehicle totals have been rounded. The average 
HDPUV is projected to account for 8.46 metric tons of CO2 
emissions in 2035 based on MOVES, the GREET model, and EPA analysis.
---------------------------------------------------------------------------

(b) Climate Change Indicators (Carbon Dioxide Concentration, Global 
Mean Surface Temperature, Sea Level, Precipitation, and Ocean pH)
    CO2 emissions affect the concentration of CO2 
in the atmosphere, which in turn affects global temperature, sea level, 
precipitation, and ocean pH. For the analysis of direct and indirect 
impacts, NHTSA used the SSP3-7.0 scenario to represent the reference 
case emissions scenario (i.e., future global emissions assuming no 
comprehensive global actions to mitigate GHG emissions). NHTSA selected 
the SSP3-7.0 scenario for its incorporation of a comprehensive suite of 
GHG and pollutant gas emissions, including carbonaceous aerosols and a 
global context of emissions with a full suite of GHGs and ozone 
precursors.
    The CO2 concentrations under the SSP3-7.0 emissions 
scenario in 2100 are estimated to be 838.31 ppm under the CAFE No-
Action Alternative. CO2 concentrations under the CAFE 
standard action alternatives could reach 837.65 ppm under Alternative 
PC6LT8, indicating a maximum atmospheric CO2 decrease of 
approximately 0.67 ppm compared to the CAFE No-Action Alternative. 
Atmospheric CO2 concentrations under Alternative PC2LT002 
would decrease by 0.04 ppm compared with the CAFE No-Action 
Alternative. Under the HDPUV FE standard action alternatives, 
CO2 concentrations under the SSP3-7.0 emissions scenario in 
2100 are estimated to decrease to 838.21 ppm under Alternative HDPUV14, 
indicating a maximum atmospheric CO2 decrease of 
approximately 0.10 ppm compared to the HDPUV FE No-Action Alternative. 
Atmospheric CO2 concentrations under Alternative HDPUV108 
would decrease by 0.03 ppm compared with the HDPUV FE No-Action 
Alternative.
    Under the SSP3-7.0 emissions scenario, global mean surface 
temperature is projected to increase by approximately 4.34 [deg]C (7.81 
[deg]F) under the CAFE No-Action Alternative by 2100. Implementing the 
most stringent alternative (Alternative PC6LT8) would decrease this 
projected temperature rise by 0.003 [deg]C (0.005 [deg]F), while 
Alternative PC2LT002 would decrease the projected temperature rise by 
0.001 [deg]C (0.002 [deg]F).
    Under the SSP3-7.0 emissions scenario, global mean surface 
temperature is projected to increase by approximately 4.34 [deg]C (7.81 
[deg]F) under the HDPUV FE No-Action Alternative by 2100. The range of 
temperature increases under the HDPUV FE standard action alternatives 
would decrease this projected temperature rise by a range of less than 
0.0001 [deg]C (0.0002 [deg]F) under Alternative HDPUV4 to 0.0004 [deg]C 
(0.0007 [deg]F) under Alternative HDPUV14.
    Under the CAFE standard action alternatives, projected sea-level 
rise in 2100 under the SSP3-7.0 scenario ranges from a high of 83.24 
centimeters (32.77 inches) under the CAFE No-Action Alternative to a 
low of 83.19 centimeters (32.75 inches) under Alternative PC6LT8. 
Alternative PC6LT8 would result in a decrease in sea-level rise equal 
to 0.06 centimeter (0.02 inch) by 2100 compared with the level 
projected under the CAFE No-Action Alternative. Alternative PC2LT002 
would result in a decrease of less than 0.01 centimeter (0.004 inch) 
compared with the CAFE No-Action Alternative. Under the HDPUV FE 
standard action alternatives, projected sea-level rise in 2100 under 
the SSP3-7.0 scenario varies less than 0.01 centimeter (0.004 inch) 
under Alternative HDPUV14 from a high of 83.24 centimeters (32.77 
inches) under HDPUV FE No-Action Alternative. Under the SSP3-7.0 
scenario, global mean precipitation is anticipated to increase by 7.42 
percent by 2100 under the CAFE No-Action Alternative. Under the CAFE 
standard action alternatives, this increase in precipitation would be 
reduced by less than 0.01 percent.
    Under the SSP3-7.0 scenario, global mean precipitation is 
anticipated to increase by 7.42 percent by 2100 under the HDPUV FE No-
Action Alternative. HDPUV FE standard action alternatives would see a 
reduction in precipitation of less than 0.01 percent.
    Under the SSP3-7.0 scenario, ocean pH in 2100 is anticipated to be 
8.1936 under Alternative PC6LT8, about 0.0003 more than the CAFE No-
Action Alternative. Under Alternative PC2LT002, ocean pH in 2100 would 
be 8.1933, or less than 0.0001 more than the CAFE No-Action 
Alternative.
    Under the SSP3-7.0 scenario, ocean pH in 2100 is anticipated to be 
8.1933 under Alternative HDPUV108, or less than 0.0001 more than the 
HDPUV FE No-Action Alternative.
    The action alternatives for both CAFE and HDPUV FE standards would 
reduce the impacts of climate change that would otherwise occur under 
the No-Action Alternative. Although the projected reductions in 
CO2 and climate effects are small compared with total 
projected future climate change, they are quantifiable and 
directionally consistent and would represent an important contribution 
to reducing the risks associated with climate change.
(2) Cumulative Impacts
(a) Greenhouse Gas Emissions
    For the analysis of cumulative impacts, NHTSA used the SSP2-4.5 
scenario to represent a reference case global emissions scenario that 
assumes a moderate level of global actions to address climate change 
and predicts CO2 emissions would remain around

[[Page 52846]]

current levels before starting to fall mid-century. The IPCC refers to 
SSP2-4.5 as an intermediate emissions scenario. NHTSA chose this 
scenario as a plausible global emissions baseline for the cumulative 
analysis because of the potential impacts of these reasonably 
foreseeable actions, yielding a moderate level of global GHG reductions 
from the SSP3-7.0 baseline scenario used in the direct and indirect 
analysis.
    The CAFE and HDPUV alternative combinations would have the 
following impacts related to GHG emissions: Projections of total 
emissions reductions from 2027 to 2100 under the CAFE and HDPUV 
alternative combinations and other reasonably foreseeable future 
actions compared with the No-Action Alternatives range from 500 
MMTCO2 under Alternatives PC2LT002 and HDPUV4 to 10,500 
MMTCO2 under Alternatives PC6LT8 and HDPUV14. Under 
Alternatives PC2LT002 and HDPUV108, emissions reductions from 2027 to 
2100 are projected to be 800 MMTCO2. The action alternatives 
would decrease total vehicle emissions by between 0.9 percent under 
Alternatives PC2LT002 and HDPUV4 and 18.7 percent under Alternatives 
PC6LT8 and HDPUV14 by 2100. Alternatives PC2LT002 and HDPUV108 would 
decrease these emissions by 1.4 percent over the same period. Compared 
with projected total global CO2 emissions of 2,484,191 
MMTCO2 from all sources from 2027 to 2100 using the moderate 
climate scenario, the incremental impact of this rulemaking is expected 
to decrease global CO2 emissions between 0.01 percent under 
Alternatives PC2LT002 and HDPUV4 and 0.21 percent under Alternatives 
PC6LT8 and HDPUV14 by 2100. Alternatives PC2LT002 and HDPUV108 would 
decrease these emissions by 0.02 percent over the same period.
(b) Climate Change Indicators (Carbon Dioxide Concentration, Global 
Mean Surface Temperature, Sea Level, Precipitation, and Ocean pH)
    Estimated atmospheric CO2 concentrations in 2100 range 
from 587.78 ppm under the No-Action Alternatives to 586.89 ppm under 
Alternatives PC6LT8 and HDPUV14 (the combination of the most stringent 
CAFE and HDPUV FE standard alternatives). This is a decrease of 0.89 
ppm compared with the No-Action Alternatives.
    Global mean surface temperature decreases for the CAFE and HDPUV 
alternative combinations compared with the No-Action Alternatives in 
2100 range from a low of less than 0.0001 [deg]C (0.002 [deg]F) under 
Alternatives PC2LT002 and HDPUV4 to a high of 0.0042 [deg]C (0.007 
[deg]F) under Alternatives PC6LT8 and HDPUV14.
    Global mean precipitation is anticipated to increase 6.11 percent 
under the No-Action Alternatives, with the CAFE and HDPUV alternative 
combinations reducing this effect up to 0.01 percent.
    Projected sea-level rise in 2100 ranges from a high of 67.12 
centimeters (26.42 inches) under the No-Action Alternatives to a low of 
67.03 centimeters (26.39 inches) under Alternatives PC6LT8 and HDPUV14, 
indicating a maximum decrease in projected sea-level rise of 0.08 
centimeter (0.03 inch) by 2100.
    Ocean pH in 2100 is anticipated to be 8.3334 under Alternatives 
PC6LT8 and HDPUV14, about 0.0006 more than the No-Action Alternatives.
(c) Health, Societal, and Environmental Impacts of Climate Change
    The Proposed Action and action alternatives would reduce the 
impacts of climate change that would otherwise occur under the No-
Action Alternatives. The magnitude of the changes in climate effects 
that would be produced by the most stringent action alternatives 
combination (Alternatives PC6LT8 and HDPUV14) using the three-degree 
sensitivity analysis by the year 2100 is 0.89 ppm lower concentration 
of CO2, a four-thousandths-of-a-degree decrease in the 
projected temperature rise, a small percentage change in precipitation 
increase, a 0.08 centimeter (0.03 inch) decrease in projected sea-level 
rise, and an increase of 0.0006 in ocean pH. Although the projected 
reductions in CO2 and climate effects are small compared 
with total projected future climate change, they are quantifiable, 
directionally consistent, and would represent an important contribution 
to reducing the risks associated with climate change. As discussed 
below, one significant risk associated with climate change is reaching 
a level of atmospheric greenhouse gas concentrations that cause large-
scale, abrupt changes in the climate system and lead to significant 
impacts on human and natural systems. We do not know what level of 
atmospheric concentrations will trigger a tipping point--only that the 
risk increases significantly as concentrations rise. As such, even the 
relatively small reductions achieved by this rule could turn out to be 
the reductions that avoid triggering a tipping point, and thereby avoid 
the highly significant deleterious climate impacts that would have 
followed.
    Although NHTSA does quantify the changes in monetized damages that 
can be attributable to each action alternative with its use of the 
social cost of carbon metric, many specific impacts of climate change 
on health, society, and the environment cannot be estimated 
quantitatively. Economists have estimated the incremental effect of GHG 
emissions, and monetized those effects, to express the social costs of 
carbon, CH4, and N2O in terms of dollars per ton 
of each gas. By multiplying the emissions reductions of each gas by 
estimates of their social cost, NHTSA derived a monetized estimate of 
the benefits associated with the emissions reductions projected under 
each action alternative. NHTSA has estimated the monetized benefits 
associated with GHG emissions reductions in its Final Regulatory Impact 
Analysis Chapter 6.5.1. See Chapter 6.2.1 of the Technical Support 
Document (TSD) for a description of the methods used for these 
estimates.
    NHTSA also provides a qualitative discussion of these impacts by 
presenting the findings of peer-reviewed panel reports including those 
from IPCC, the Global Change Research Program (GCRP), the Climate 
Change Science Program (CCSP), the National Resource Council (NRC), and 
the Arctic Council, among others. While the action alternatives would 
decrease growth in GHG emissions and reduce the impact of climate 
change across resources relative to the No-Action Alternative, they 
would not themselves prevent climate change and associated impacts. 
Long-term climate change impacts identified in the scientific 
literature are briefly summarized below, and vary regionally, including 
in scope, intensity, and directionality (particularly for 
precipitation). While it is difficult to attribute any particular 
impact to emissions that could result from this rulemaking, the 
following impacts are likely to be beneficially affected to some degree 
by reduced emissions from the action alternatives:
     Freshwater Resources: Projected risks to freshwater 
resources are expected to increase due to changing temperature and 
precipitation patterns as well as the intensification of extreme events 
like floods and droughts, affecting water security in many regions of 
the world and exacerbating existing water-related vulnerabilities.
     Terrestrial and Freshwater Ecosystems: Climate change is 
affecting terrestrial and freshwater ecosystems, including their 
component species and the services they provide. This impact can range 
in scale (from individual to population to species) and can affect all 
aspects of an organism's life, including

[[Page 52847]]

its range, phenology, physiology, and morphology.
     Ocean Systems, Coasts, and Low-Lying Areas: Climate 
change-induced impacts on the physical and chemical characteristics of 
oceans (primarily through ocean warming and acidification) are exposing 
marine ecosystems to unprecedented conditions and adversely affecting 
life in the ocean and along its coasts. Anthropogenic climate change is 
also worsening the impacts on non-climatic stressors, such as habitat 
degradation, marine pollution, and overfishing.
     Food, Fiber, and Forest Products: Through its impacts on 
agriculture, forestry and fisheries, climate change adversely affects 
food availability, access, and quality, and increases the number of 
people at risk of hunger, malnutrition, and food insecurity.
     Urban Areas: Extreme temperatures, extreme precipitation 
events, and rising sea levels are increasing risks to urban 
communities, their health, wellbeing, and livelihood, with the 
economically and socially marginalized being most vulnerable to these 
impacts.
     Rural Areas: A high dependence on natural resources, 
weather-dependent livelihood activities, lower opportunities for 
economic diversity, and limited infrastructural resources subject rural 
communities to unique vulnerabilities to climate change impacts.
     Human Health: Climate change can affect human health, 
directly through mortality and morbidity caused by heatwaves, floods 
and other extreme weather events, changes in vector-borne diseases, 
changes in water and food-borne diseases, and impacts on air quality as 
well as through indirect pathways such as increased malnutrition and 
mental health impacts on communities facing climate-induced migration 
and displacement.
     Human Security: Climate change threatens various 
dimensions of human security, including livelihood security, food 
security, water security, cultural identity, and physical safety from 
conflict, displacement, and violence. These impacts are interconnected 
and unevenly distributed across regions and within societies based on 
differential exposure and vulnerability.
     Stratospheric Ozone: There is strong evidence that 
anthropogenic influences, particularly the addition of GHGs and ozone-
depleting substances to the atmosphere, have led to a detectable 
reduction in stratospheric ozone concentrations and contributed to 
tropospheric warming and related cooling in the lower stratosphere. 
These changes in stratospheric ozone have further influenced the 
climate by affecting the atmosphere's temperature structure and 
circulation patterns.
     Compound events: Compound events consist of combinations 
of multiple hazards that contribute to amplified societal and 
environmental impacts. Observations and projections show that climate 
change may increase the underlying probability of compound events 
occurring. To the extent the action alternatives would decrease the 
rate of CO2 emissions relative to the relevant No-Action 
Alternative, they would contribute to the general decreased risk of 
extreme compound events. While this rulemaking alone would not 
necessarily decrease compound event frequency and severity from climate 
change, it would be one of many global actions that, together, could 
reduce these effects.
     Tipping Points and Abrupt Climate Change: Tipping points 
represent thresholds within Earth systems that could be triggered by 
continued increases in the atmospheric concentration of GHGs, 
incremental increases in temperature, or other relatively small or 
gradual changes related to climate change. For example, the melting of 
the Greenland ice sheet, Arctic sea-ice loss, destabilization of the 
West Antarctic ice sheet, and deforestation in the Amazon and dieback 
of boreal forests are seen as potential tipping points that can cause 
large-scale, abrupt changes in the climate system and lead to 
significant impacts on human and natural systems. We note that all of 
these adverse effects would be mitigated to some degree by our 
standards.
(d) Qualitative Impacts Assessment
    In cases where quantitative impacts assessment is not possible, 
NHTSA presents the findings of a literature review of scientific 
studies in the Final EIS, such as in Chapter 6, where NHTSA provides a 
literature synthesis focusing on existing credible scientific 
information to evaluate the most significant lifecycle environmental 
impacts from some of the technologies that may be used to comply with 
the alternatives. In Chapter 6, NHTSA describes the life-cycle 
environmental implications related to the vehicle cycle phase 
considering the materials and technologies (e.g., batteries) that NHTSA 
forecasts vehicle manufacturers might use to comply with the CAFE and 
HDPUV FE standards. In Chapter 7, NHTSA discusses EJ and qualitatively 
describes potential disproportionate impacts on low-income and minority 
populations. In Chapter 8, NHTSA qualitatively describes potential 
impacts on historic and cultural resources. In these chapters, NHTSA 
concludes that impacts would vary between the action alternatives.
2. Conclusion
    Based on the foregoing, NHTSA concludes from the Final EIS that 
Alternative PC6LT8 is the overall environmentally preferable 
alternative for model years 2027-2031 CAFE standards and Alternative 
HDPUV14 is the overall environmentally preferable alternative for model 
years 2030-2035 HDPUV FE standards because, assuming full compliance 
were achieved regardless of NHTSA's assessment of the costs to industry 
and society, it would result in the largest reductions in fuel use and 
CO2 emissions among the alternatives considered. In 
addition, Alternative PC6LT8 and Alternative HDPUV14 would result in 
lower overall emissions levels over the long term of criteria air 
pollutants and of the toxic air pollutants studied by NHTSA. Impacts on 
other resources would be proportional to the impacts on fuel use and 
emissions, as further described in the Final EIS, with Alternative 
PC6LT8 and Alternative HDPUV14 being expected to have the fewest 
negative environmental impacts. Although the CEQ regulations require 
NHTSA to identify the environmentally preferable alternative, NHTSA 
need not adopt it, as described above. The following section explains 
how NHTSA balanced the relevant factors to determine which alternative 
represented the maximum feasible standards, including why NHTSA does 
not believe that the environmentally preferable alternative is maximum 
feasible.
    NHTSA is informed by the discussion above and the Final EIS in 
arriving at its conclusion that Alternative PC2LT002 and HDPUV108 is 
maximum feasible, as discussed below. The following section (Section 
VI.D) explains how NHTSA balanced the relevant factors to determine 
which alternatives represented the maximum feasible standards for 
passenger cars, light trucks, and HDPUVs.

D. Evaluating the EPCA/EISA Factors and Other Considerations To Arrive 
at the Final Standards

    Accounting for all of the information presented in this preamble, 
in the TSD, in the FRIA, and in the EIS, consistent with our statutory 
authorities, NHTSA continues to approach the decision of what standards 
would be ``maximum feasible'' as a balancing of relevant factors and 
information, both for passenger cars and light trucks, and for

[[Page 52848]]

HDPUVs. The different regulatory alternatives considered in this final 
rule represent different balancing of the factors--for example, 
PC2LT002, the preferred alternative, would represent a balancing in 
which NHTSA determined that economic practicability significantly 
outweighed the need of the U.S. to conserve energy for purposes of the 
rulemaking time frame. By contrast, PC6LT8, a more stringent 
alternative, would represent a balancing in which NHTSA determined that 
the need of the U.S. to conserve energy significantly outweighed 
economic practicability during the same period. Because the statutory 
factors that NHTSA must consider are slightly different between 
passenger cars and light trucks on the one hand, and HDPUVs on the 
other, the following sections separate the segments and describe 
NHTSA's balancing approach for each final rule.
1. Passenger Cars and Light Trucks
    NHTSA's purpose in setting CAFE standards is to conserve energy, as 
directed by EPCA/EISA. Energy conservation provides many benefits to 
the American public, including better protection for consumers against 
changes in fuel prices, significant fuel savings and reduced impacts 
from harmful pollution. NHTSA continues to believe that fuel economy 
standards can function as an important insurance policy against oil 
price volatility, particularly to protect consumers even as the U.S. 
has improved its energy independence over time. The U.S. participates 
in the global market for oil and petroleum fuels. As a market 
participant--on both the demand and supply sides--the nation is exposed 
to fluctuations in that market. The fact that the U.S. may produce more 
petroleum in a given period does not in and of itself protect the 
nation from the consequences of these fluctuations. Accordingly, the 
nation must conserve petroleum and reduce the oil intensity of the 
economy to insulate itself from the effects of market volatility. The 
primary mechanism for doing so in the transportation sector is to 
continue to improve fleet fuel economy. In addition, better fuel 
economy saves consumers money at the gas pump. For example, our 
analysis estimates that the preferred alternative would reduce fuel 
consumption by 64 billion gallons through calendar year 2050 and save 
buyers of new model year 2031 vehicles an average of $639 in gasoline 
over the lifetime of the vehicle. Moreover, as climate change 
progresses, the U.S. may face new energy-related security risks if 
climate effects exacerbate geopolitical tensions and destabilization. 
Thus, mitigating climate effects by increasing fuel economy standards, 
as all of the action alternatives in this final rule would do over 
time, can also potentially improve energy security.
    Maximum feasible CAFE standards look to balance the need of the 
U.S. to conserve energy with the technological feasibility and economic 
impacts of potential future standards, while also considering other 
motor vehicle standards of the Government that may affect automakers' 
ability to meet CAFE standards. To comply with our statutory 
constraints, NHTSA disallows the application of BEVs (and other 
dedicated AFVs) in our analysis in response to potential new CAFE 
standards, and PHEVs are applied only with their charge-sustaining mode 
fuel economy.
    In considering this final rule, NHTSA is mindful of the fact that 
the standards for model years 2024-2026 included year-by-year 
improvements compared to the standards established in 2020 that were 
faster than had been typical since the inception of the CAFE program in 
the late 1970s and early 1980s. Those standards were intended to 
correct for the lack of adequate consideration of the need for energy 
conservation in the 2020 rule and were intended to reestablish the 
appropriate level of consideration of these effects that had been 
included in the initial 2012 rule. Thus, though the standards increased 
significantly when compared to the 2020 rule, they were comparable to 
the standards that were initially projected as augural standards for 
the model years included in the 2012 final rule. The world has changed 
considerably in some ways, but less so in others. Since May 2022, the 
U.S. economy continues to have strengths and weaknesses; the auto 
industry remains in the middle of a major transition for a variety of 
reasons besides the CAFE program. NHTSA is prohibited from considering 
the fuel economy effects of this transition, but industry commenters 
argue that NHTSA must not fail to account for the financial effects of 
this transition. Upon considering the comments, NHTSA agrees that 
diverting manufacturer resources to paying CAFE non-compliance 
penalties, as our statutorily-constrained analysis shows manufacturers 
doing under the more stringent regulatory alternatives, would not aid 
manufacturers in the transition and would not ultimately improve energy 
conservation, since non-compliance means that manufacturers are 
choosing to pay penalties rather than to save fuel. Further stringency 
increases at a comparable rate, immediately on the heels of the 
increases for model years 2024-2026, may therefore be beyond maximum 
feasible for model years 2027-2032.
    In the NPRM, NHTSA tentatively concluded that Alternative PC2LT4 
was the maximum feasible alternative that best balanced all relevant 
factors for passenger cars and light trucks built in model years 2027-
2032. NHTSA explained that energy conservation was still our paramount 
objective, for the consumer benefits, energy security benefits, and 
environmental benefits that it provides. NHTSA expressed its belief 
that a large percentage of the fleet would remain propelled by ICEs 
through 2032, despite the potential significant transformation being 
driven by reasons other than the CAFE standards and stated that the 
proposal would encourage those ICE vehicles produced during the 
standard-setting time frame to achieve and maintain significant fuel 
economies, improve energy security, and reduce GHG emissions and other 
air pollutants. At the same time, NHTSA stated that our estimates 
suggest that the proposal would continue to reduce petroleum 
dependence, saving consumers money and fuel over the lifetime of their 
vehicles, particularly light truck buyers, among other benefits, while 
being economically practicable for manufacturers to achieve.
    NHTSA further explained that although Alternatives PC3LT5 and 
PC6LT8 would conserve more energy and provide greater fuel savings 
benefits and carbon dioxide emissions reductions, NHTSA believed that 
those alternatives may simply not be achievable for many manufacturers 
in the rulemaking time frame, particularly given NHTSA's statutory 
restrictions on the technologies we may consider when determining 
maximum feasible standards. Additionally, NHTSA expressed concern that 
compliance with those more stringent alternatives would impose 
significant costs on individual consumers without corresponding fuel 
savings benefits large enough to, on average, offset those costs. 
Within that framework, NHTSA's NPRM analysis suggested that the more 
stringent alternatives could push more technology application than 
would be economically practicable, given the rate of increase for the 
model years 2024-2026 standards, given anticipated reference baseline 
activity on which our standards would be building, and given a 
realistic consideration of the rate of response that industry is 
capable of achieving. In contrast to Alternatives PC3LT5 and PC6LT8, 
NHTSA argued that Alternative PC2LT4 appeared to come at a cost that 
the market can bear,

[[Page 52849]]

appeared to be much more achievable, and would still result in consumer 
net benefits on average. NHTSA also stated that PC2LT4 would achieve 
large fuel savings benefits and significant reductions in carbon 
dioxide emissions. NHTSA therefore tentatively concluded Alternative 
PC2LT4 was a better proposal than PC3LT5 and PC6LT8 given these 
factors.
    Comments on this tentative conclusion varied widely. In general, 
automotive and oil industry commenters and conservative think tanks 
argued that the proposal was beyond maximum feasible,\1335\ while 
environmental and some state commenters argued that a more stringent 
alternative was likely to be maximum feasible.
---------------------------------------------------------------------------

    \1335\ For example, Subaru, Docket No. NHTSA-2023-0022-58655, at 
3; Heritage Foundation, Docket No. NHTSA-2023-0022-61952, at 2; 
American Consumer Institute, Docket No. NHTSA-2023-0022-50765, at 1; 
BMW, Docket No. NHTSA-2023-0022-58614, at 2.
---------------------------------------------------------------------------

    Some commenters supported the proposed PC2LT4 alternative as 
maximum feasible.\1336\ ICCT stated, for example, that ``Substantial 
public and private sector investments and a comprehensive package of 
federal and state level policies make the timing and stringency of the 
proposed rule achievable, feasible, and cost-effective. ICCT recommends 
its finalization as quickly as possible. Doing so will provide a clear 
long-term signal that automakers, suppliers, and other stakeholders 
need to make needed investments with confidence.'' \1337\ MEMA agreed 
with the proposal that light truck stringency could be advanced faster 
than passenger car stringency, stating that ``The current passenger car 
and light truck markets have different levels of advanced technology 
penetration and differ in terms of the extent of technological 
improvements that can be made.'' \1338\
---------------------------------------------------------------------------

    \1336\ For example, Arconic, Docket No. NHTSA-2023-0022-48374, 
at 3; DC Government Agencies, Docket No. NHTSA-2023-0022-27703, at 
1.
    \1337\ ICCT, Docket No. NHTSA-2023-0022-54064, at 3, 4.
    \1338\ MEMA, Docket No. NHTSA-2023-0022-59204-A1, at 2-3.
---------------------------------------------------------------------------

    Other commenters argued that more stringent standards were likely 
to be maximum feasible. Many stakeholders commented that standards 
should be at least as high as PC2LT4.\1339\ ACEEE argued that more 
stringent standards than PC2LT4 are feasible because automakers have 
stated that they will build more BEVs and the IRA tax credits will spur 
more BEVs, and if automakers build more BEVs than NHTSA projects, 
NHTSA's standards would be ineffective.\1340\ NESCAUM and OCT commented 
that more stringent standards are economically practicable, 
technologically feasible, and would keep better pace with standards 
from EPA and California.\1341\
---------------------------------------------------------------------------

    \1339\ Individual citizen form letters, Docket No. NHTSA-2023-
0022-63051; MPCA, Docket No. NHTSA-2023-0022-60666, at 1; ELPC, 
Docket No. NHTSA-2023-0022-60687, at 3.
    \1340\ ACEEE, Docket No. NHTSA-2023-0022-60684, at 2.
    \1341\ NESCAUM, Docket No. NHTSA-2023-0022-57714, at 2; OCT, 
Docket No. NHTSA-2023-0022-51242, at 3.
---------------------------------------------------------------------------

    A number of commenters relatedly argued that NHTSA should 
prioritize energy conservation and weigh the need of the U.S. to 
conserve energy more heavily, and find that more stringent standards 
than the proposal were maximum feasible.\1342\ Commenters focused on 
issues such as the urgency of climate crisis, its unequal impacts, the 
need to meet the U.S.'s Paris Accord targets, public health effects, 
environmental justice, and consumer fuel costs (where more stringent 
standards ``make a meaningful difference to low-income households and 
households of color that generally spend a greater proportion of their 
income on transportation costs'').\1343\ Some state commenters, like 
Wisconsin DNR, urged NHTSA to set the most stringent standards due to 
concerns about criteria and GHG emissions, and stated that Wisconsin 
plans to support these efforts through electrification planning and 
infrastructure investments.\1344\
---------------------------------------------------------------------------

    \1342\ See, e.g., EDF, Docket No. NHTSA-2023-0022-62360, at 1-2; 
Tesla, Docket No. NHTSA-2023-0022-60093, at 10; IEC, Docket No. 
NHTSA-2023-0022-24513, at 1.
    \1343\ SELC, Docket No. NHTSA-2023-0022-60224, at 4, 6; IEC, 
Docket No. NHTSA-2023-0022-24513, at 1; Chispa LCV, Docket No. 
NHTSA-2023-0022-24464, at 1; LCV, Docket No. NHTSA-2023-0022-27796, 
at 1.
    \1344\ Wisconsin DNR, Docket No. NHTSA-2023-0022-21431, at 2.
---------------------------------------------------------------------------

    Some commenters stated that light truck stringency should increase 
faster than passenger car stringency, arguing that the current design 
of the standards encourages companies to build trucks instead of cars, 
with resulting worse outcomes for both fuel savings and safety, due to 
the proliferation of larger vehicles on the roads.\1345\ The States and 
Cities commenters argued that NHTSA is allowed to set standards that 
increase faster for light trucks than for passenger cars, and that 
therefore NHTSA should consider PC3LT5 or PC2.5LT7, depending on what 
the record indicated would be maximum feasible.\1346\ These commenters 
stated that although net benefits for passenger cars may be negative, 
net benefits for light trucks were positive, with a peak at the most 
stringent alternative, and therefore NHTSA should pick PC3LT5,\1347\ 
and that either PC3LT5 or PC2.5LT7 ``are technologically feasible, 
economically practicable, and effectuate the purpose of EPCA to 
conserve energy, thus satisfying the `maximum feasible' mandate.'' 
\1348\ These commenters further argued that NHTSA should not rely on an 
``uncertain'' concern about consumer demand to such an extent that it 
ignored the ``overarching goal of fuel conservation,'' 793 F.2d 1322, 
1340 (D.C. Cir. 1986), and noted that the estimated per-vehicle costs 
for PC3LT5 were actually lower than what NHTSA had described as 
economically practicable for the model years 2024-2026 standards.\1349\ 
These commenters stated that NHTSA must not give so much weight to 
economic practicability as to reject PC3LT5, because NHTSA is afraid of 
possibly burdening sales through extra cost.
---------------------------------------------------------------------------

    \1345\ SELC, Docket No. NHTSA-2023-0022-60224, at 6; Public 
Citizen, Docket No. NHTSA-2023-0022-57095, at 2.
    \1346\ States and Cities, Docket No. NHTSA-2023-0022-61904, 
Attachment 2, at 2.
    \1347\ States and Cities, Docket No. NHTSA-2023-0022-61904, 
Attachment 2, at 32.
    \1348\ States and Cities, Docket No. NHTSA-2023-0022-61904, 
Attachment 2, at 43.
    \1349\ States and Cities, Docket No. NHTSA-2023-0022-61904, 
Attachment 2, at 31.
---------------------------------------------------------------------------

    SELC also supported NHTSA choosing PC3LT5, arguing that its 
societal benefits were higher than the proposal, and that choosing a 
more stringent alternative than the proposal would provide a buffer 
against uncertainty in the value of the SC-GHG and against the risk 
that compliance flexibilities could end up undermining fuel 
savings.\1350\
---------------------------------------------------------------------------

    \1350\ SELC, Docket No. NHTSA-2023-0022-60224, at 7.
---------------------------------------------------------------------------

    A number of other commenters stated that NHTSA should choose 
PC6LT8, because that alternative would result in the largest fuel 
savings and climate benefits,\1351\ and would be most beneficial for 
public health.\1352\ NHTSA

[[Page 52850]]

received over 70,000 form letters and comments from individuals in 
favor of NHTSA choosing PC6LT8.\1353\ Public Citizen commented that 
PC6LT8 is technologically and economically feasible, because the 
technology is available and it can be afforded by companies, who are 
making record profits.\1354\ ACEEE similarly argued that PC6LT8 can be 
met with SHEVs and a variety of ICE-improving technology that will save 
consumers money at the pump, and concluded that therefore PC6LT8 is 
maximum feasible.\1355\ Several commenters cited a Ceres study finding 
that the most stringent standards would be best for the competitiveness 
of the auto industry.\1356\ ZETA commented that PC6LT8 is cost-
effective and feasible, and best for energy security.\1357\
---------------------------------------------------------------------------

    \1351\ Lucid, Docket No. NHTSA-2023-0022-50594, at 5; Colorado 
State Agencies, Docket No. NHTSA-2023-0022-57625, at 2; Green 
Latinos, Docket No. NHTSA-2023-0022-59638, at 1; BICEP Network, 
Docket No. NHTSA-2023-0022-61135, at 1; Blue Green Alliance, Docket 
No. NHTSA-2023-0022-61668, at 1; Minnesota Rabbinical Association, 
Docket No. NHTSA-2023-0022-28117, at 1; ZETA, Docket No. NHTSA-2023-
0022-60508, at 18; CALSTART, Docket No. NHTSA-2023-0022-61099, at 1.
    \1352\ Public Citizen, Docket No. NHTSA-2023-0022-57095, at 1; 
Colorado State Agencies, Docket No. NHTSA-2023-0022-57625, at 2; 
Green Latinos, Docket No. NHTSA-2023-0022-59638, at 1; ZETA, Docket 
No. NHTSA-2023-0022-60508, at 18; CALSTART, Docket No. NHTSA-2023-
0022-61099, at 1; Mothers & Others for Clean Air, Docket No. NHTSA-
2023-0022-60614, at 1.
    \1353\ NRDC form letter, Docket No. NHTSA-2023-0022-57375; 
Consumer Reports, Docket No. NHTSA-2023-0022-61098, Attachment 3; 
Climate Hawks, Docket No. NHTSA-2023-0022-61094, at 1.
    \1354\ Public Citizen, Docket No. NHTSA-2023-0022-57095, at 2.
    \1355\ ACEEE, Docket No. NHTSA-2023-0022-60684, at 3.
    \1356\ Ceres, Docket No. NHTSA-2023-0022-28667, at 1; 
Conservation Voters of South Carolina, Docket No. NHTSA-2023-0022-
27800, at 1; Minnesota Rabbinical Association, Docket No. NHTSA-
2023-0022-28117, at 1; CALSTART, Docket No. NHTSA-2023-0022-61099, 
at 1.
    \1357\ ZETA, Docket No. NHTSA-2023-0022-60508, at 1.
---------------------------------------------------------------------------

    OCT found even PC6LT8 to be insufficiently stringent, arguing that 
internal combustion engines should be reduced to zero by 2027 in order 
to achieve climate targets. In lieu of this, that commenter requested 
that NHTSA align the CAFE standards with California's target of 100% 
ZEV for the light-duty fleet by 2035.\1358\
---------------------------------------------------------------------------

    \1358\ OCT, Docket No. NHTSA-2023-0022-51242, at 2-4.
---------------------------------------------------------------------------

    In contrast, many other commenters expressed concern that the 
proposed standards were too stringent, and many commenters encouraged 
NHTSA to balance the factors differently for the final rule and find 
that less stringent standards were maximum feasible. Some commenters 
encouraged NHTSA to weigh technological feasibility and economic 
practicability more heavily.\1359\ For example, the Alliance argued 
that ``When the majority of manufacturers and a significant portion of 
the fleet (or worse yet the fleet on average) are projected to be 
unable to meet (a question of technological feasibility) or unwilling 
to meet (a question of economic practicability) the proposed standards, 
the proposal clearly exceeds maximum feasibility for both passenger 
cars and light trucks.'' \1360\ The American Consumer Institute stated 
that economic practicability and consumer choice were more important 
than environmental concerns, and argued that EPCA focuses on direct 
consumer benefits rather than environmental benefits.\1361\ The 
Alliance stated that the proposed standards were too stringent because 
the average per-vehicle price increase was estimated to be $3,000, 
which ``ignored'' economic practicability.\1362\
---------------------------------------------------------------------------

    \1359\ The Alliance, Docket No. NHTSA-2023-0022-60652, 
Attachment 2, at 2; Nissan, Docket No. NHTSA-2023-0022-60696, at 10; 
U.S. Chamber of Commerce, Docket No. NHTSA-2023-0022-61069, at 6.
    \1360\ The Alliance, Docket No. NHTSA-2023-0022-60652, 
Attachment 2, at 6-7.
    \1361\ American Consumer Institute, Docket No. NHTSA-2023-0022-
50765, at 2; NADA, Docket No. NHTSA-2023-0022-58200, at 5.
    \1362\ The Alliance, Docket No. NHTSA-2023-0022-60652, 
Attachment 2, at 2.
---------------------------------------------------------------------------

    Many of these commenters also mentioned compliance shortfalls and 
estimated penalties associated with the proposed standards. Volkswagen 
argued that it was arbitrary and capricious to set standards that 
result in nearly everyone being out of compliance.\1363\ Toyota stated 
that the estimated $14 billion in penalties demonstrates ``that the 
technology being relied upon is insufficient to achieve the proposed 
standards,'' \1364\ and Volkswagen and Jaguar commented that 
effectively mandating penalties diverts resources for no environmental 
or energy benefit.\1365\ POET commented that ``The D.C. Circuit has 
found that `a standard with harsh economic consequences for the auto 
industry . . . would represent an unreasonable balancing of EPCA's 
policies,''' and has previously approved NHTSA stating that ``If 
manufacturers had to restrict the availability of large trucks and 
engines in order to adhere to CAFE standards, the effects . . . would 
go beyond the realm of `economic practicability' as contemplated in the 
Act.'' \1366\ Toyota further argued that while NHTSA had stated in the 
NPRM that automakers could manufacture more BEVs rather than pay 
penalties, ``The preferred alternative standards do not account for the 
cost of a manufacturer to pursue higher levels of electrification than 
currently in the baseline assumption. Further, the expectation that 
manufacturers can simply make and sell more EVs ignores the abrupt jump 
in 2027 model year stringency,'' due to FCIV and PEF changes, as well 
as the uncertainty of the market.\1367\ Jaguar also commented that the 
stringency of the early years of the proposed standards was 
particularly problematic.\1368\
---------------------------------------------------------------------------

    \1363\ Volkswagen, Docket No. NHTSA-2023-0022-58702, at 5.
    \1364\ Toyota, Docket No. NHTSA-2023-0022-61131, at 2.
    \1365\ Volkswagen, Docket No. NHTSA-2023-0022-58702, at 5; 
Jaguar, Docket No. NHTSA-2023-0022-57296, at 4.
    \1366\ POET, Docket No. NHTSA-2023-0022-61561, at 16, citing 
Center for Auto Safety v. NHTSA, 793 F.2d 1322 (D.C. Cir. 1986).
    \1367\ Toyota, Docket No. NHTSA-2023-0022-61131, at 20.
    \1368\ Jaguar, Docket No. NHTSA-2023-0022-57296, at 4.
---------------------------------------------------------------------------

    The Heritage Foundation commented that ``In administering the fuel 
economy program, NHTSA must (i) respect the practical needs and desires 
of American car buyers; (ii) take into account the economic realities 
of supply and demand in the auto markets; (iii) protect the 
affordability of vehicle options for American families; (iv) preserve 
the vitality of the domestic auto industry, which sustains millions of 
good-paying American jobs; (v) maintain highway traffic safety for the 
country; (vi) consider the nation's need to conserve energy; and (vii) 
advance the goal of reducing America's dependence on foreign supplies 
of critical inputs.'' \1369\ The America First Policy Institute 
commented that fuel economy standards do not save consumers enough 
money, and that a better way to help consumers save money on fuel is 
``creating a regulatory environment that is more amenable to oil 
production and refining.'' \1370\ CEA commented that fuel efficiency 
standards are a bad way to reduce carbon from the transport sector, 
because the compliance cost per ton is much larger than the SC-GHG you 
used.\1371\
---------------------------------------------------------------------------

    \1369\ Heritage Foundation, Docket No. NHTSA-2023-0022-61952, at 
4.
    \1370\ America First Policy Institute, Docket No. NHTSA-2023-
0022-61447, at 4.
    \1371\ CEA, Docket No. NHTSA-2023-0022-61918, at 12. NHTSA notes 
that the purpose of the CAFE standards is energy conservation and 
reduction of fuel consumption, and that reducing CO2 
emissions is a co-benefit of the standards. While NHTSA accounts for 
the economic benefit of reducing CO2 emissions in our 
cost-benefit analysis, NHTSA's decision regarding maximum feasible 
stringency is merely informed by and not driven by the cost-benefit 
analysis, and therefore NHTSA disagrees that cost per ton would be a 
relevant metric for distinguishing regulatory alternatives.
---------------------------------------------------------------------------

    Some comments focused on the feasibility of the proposed passenger 
car standards. For example, Volkswagen pointed to an analysis from the 
Alliance stating that most of the industry would be unable to comply 
with the passenger car standards in model years 2027-2031.\1372\ The 
West Virginia Attorney General's Office argued that NHTSA ``even admits 
that massive EV increases are necessary to comply with the

[[Page 52851]]

Proposed Rule--after all, `manufacturers will find it difficult to 
improve fuel economy with [internal combustion] engine technologies.' 
(citing NPRM at 88 FR at 56259)'' \1373\ CEA commented that NHTSA had 
not independently justified the passenger car standards and was 
attempting to downplay their difficulty by bundling the results with 
those for the light truck standards.\1374\ Several commenters noted 
that net benefits for the passenger car alternatives were 
negative,\1375\ with Valero arguing that NHTSA was attempting to bypass 
the negative net benefits by asserting that the costs to consumers are 
outweighed by the environmental benefits, which Valero stated were very 
minor and which would disappear if NHTSA had conducted a full life-
cycle analysis of BEV production.\1376\ POET argued that net benefits 
should be positive for passenger car drivers,\1377\ and a number of 
commenters requested that the passenger car standards be set at the No-
Action level for the final rule because of net benefits (both societal 
and to consumers).\1378\ Porsche further argued that ``In this specific 
proposal, where costs so dramatically outweigh consumer private 
benefits, it would appear NHTSA is not balancing economic 
practicability, but rather may be inappropriately minimizing it.'' 
\1379\
---------------------------------------------------------------------------

    \1372\ Volkswagen, Docket No. NHTSA-2023-0022-58702, at 3.
    \1373\ West Virginia Attorney General's Office, Docket No. 
NHTSA-2023-0022-63056, at 6, 12. NHTSA notes that this comment 
incompletely quotes the agency's discussion in the NPRM, in which 
NHTSA explained on the same page that it was not proposing to set 
passenger car standards higher than 2 percent per year because NHTSA 
is prohibited from considering the fuel economy of BEVs or the full 
fuel economy of PHEVs, and so NHTSA realized that expecting 
manufacturers to achieve more stringent standards with ICEVs and 
maintain reasonable costs was unrealistic.
    \1374\ CEA, NHTSA-2023-0022-61918, at 25-26.
    \1375\ For example, KCGA, Docket No. NHTSA-2023-0022-59007, at 
4.
    \1376\ Valero, Docket No. NHTSA-2023-0022-58547, Attachment A, 
at 14.
    \1377\ POET, Docket No. NHTSA-2023-0022-61561, at 12.
    \1378\ MCGA, Docket No. NHTSA-2023-0022-60208, at 14-15; 
Porsche, Docket No. NHTSA-2023-0022-59240, at 3; AmFree, Docket No. 
NHTSA-2023-0022-62353, at 5; RFA et al. 2, Docket No. NHTSA-2023-
0022-57625, at 14.
    \1379\ Porsche, Docket No. NHTSA-2023-0022-59240, at 3.
---------------------------------------------------------------------------

    Other comments focused on the feasibility of the proposed light 
truck standards. Volkswagen argued that manufacturers will have to 
decrease utility to meet the proposed light truck standards.\1380\ 
Porsche expressed concern that raising light truck stringency faster 
than passenger car stringency was unfair and ``creates inequity among 
products, and ultimately among OEMs who sell different types of 
vehicles.'' \1381\ Stellantis similarly argued that ``Under an 
appropriate rule, multiple manufacturers should be able to readily meet 
standards in a category as large as the light truck/SUV category, so as 
to maintain competition and consumer choice and avoid unduly benefiting 
a single manufacturer. A rule where only one manufacturer can 
comfortably comply is arbitrary and capricious, at least a `relevant 
factor' that NHTSA has failed to consider.'' \1382\
---------------------------------------------------------------------------

    \1380\ Volkswagen, Docket No. NHTSA-2023-0022-58702, at 2.
    \1381\ Stellantis, Docket No. NHTSA-2023-0022-61107, at 3; AAPC, 
Docket No. NHTSA-2023-0022-60610, at 1.
    \1382\ POET, Docket No. NHTSA-2023-0022-61561, at 12.
---------------------------------------------------------------------------

    The Alliance provided extensive comments as to why the stringency 
of light truck standards should not increase faster than the stringency 
of passenger car standards. First, they stated that light trucks are 
bigger and heavier with generally larger frontal area (decreasing their 
fuel economy), and they can perform work like off-roading, towing and 
hauling, which also decrease their fuel economy.\1383\ Second, they 
commented that S&P Global Mobility data shows that from model year 2012 
to model year 2022, setting aside alternative fuel vehicles, passenger 
car fuel consumption improved 12 percent, while light truck fuel 
consumption improved 18 percent.\1384\ And third, they disagreed at 
length that light trucks had less fuel economy-improving technology 
than passenger cars, stating that
---------------------------------------------------------------------------

    \1383\ The Alliance, Docket No. NHTSA-2023-0022-60652, Appendix 
C, at 24; U.S. Chamber of Commerce, Docket No. NHTSA-2023-0022-
61069, at 2.
    \1384\ The Alliance, Docket No. NHTSA-2023-0022-60652, Appendix 
C, at 24-25.
---------------------------------------------------------------------------

     The powertrain efficiency of the car and truck fleets, 
excluding EVs, are the same--24 percent.\1385\
---------------------------------------------------------------------------

    \1385\ The Alliance, Docket No. NHTSA-2023-0022-60652, Appendix 
C, at 26.
---------------------------------------------------------------------------

     Light trucks have also generally decreased roadload more 
quickly than passenger cars over the last decade, and the passenger car 
fleet (and cars as a subfleet) increased roadload.\1386\ Passenger cars 
have more aero and MR in the reference baseline, but light trucks have 
more low rolling resistance technology, and light trucks are limited in 
their ability to apply aero technologies because of pickup 
trucks.\1387\
---------------------------------------------------------------------------

    \1386\ The Alliance, Docket No. NHTSA-2023-0022-60652, Appendix 
C, at 26.
    \1387\ The Alliance, Docket No. NHTSA-2023-0022-60652, Appendix 
C, at 32.
---------------------------------------------------------------------------

     Light trucks have greater electrification tech levels (12v 
start-stop, SHEV) than passenger cars, which have a higher proportion 
of BEVs, which NHTSA is prohibited from considering anyway, so light 
trucks are more electrified for NHTSA's purposes than passenger cars, 
and these trends are projected to continue.\1388\ (Ford similarly 
argued that LT4 was too stringent because NHTSA did not account for the 
``likely [slower] rates of [full] electrification in the Truck segments 
as compared to Car segments,'' nor for the transfer cap--in EPA's 
program, manufacturers can just overcomply with passenger car standards 
and transfer as many credits as needed to offset light truck 
shortfalls, but NHTSA's program doesn't allow this, so LT4 is beyond 
maximum feasible.\1389\)
---------------------------------------------------------------------------

    \1388\ The Alliance, Docket No. NHTSA-2023-0022-60652, Appendix 
C, at 27.
    \1389\ Ford, Docket No. NHTSA-2023-0022-60837, at 7.
---------------------------------------------------------------------------

     ``While NHTSA projects that light trucks have a somewhat 
higher usage of basic ICE technologies than passenger cars, 
manufacturers may be using engine stop-start systems in combination 
with basic engine technologies to achieve similar benefits as passenger 
cars see with low-level ICE technologies. Light trucks make higher use 
of mid-level ICE technologies than passenger cars, and both fleets 
exhibit similar use of high-level ICE technologies. Based on these 
trends, it appears that baseline ICE technology penetration is similar 
or higher for light trucks as compared to passenger cars.'' \1390\
---------------------------------------------------------------------------

    \1390\ The Alliance, Docket No. NHTSA-2023-0022-60652, Appendix 
C, at 29-30.
---------------------------------------------------------------------------

     ``Transmission technology in the non-strongly electrified 
fleet is similar for both passenger cars and light trucks.'' \1391\
---------------------------------------------------------------------------

    \1391\ The Alliance, Docket No. NHTSA-2023-0022-60652, Appendix 
C, at 31.
---------------------------------------------------------------------------

    Based on all of these points, the Alliance concluded that light 
trucks have similar or more technology than passenger cars, and argued 
that it was unfair of NHTSA to assert that light trucks have more room 
to improve and should increase in stringency faster.\1392\ Several 
commenters argued that NHTSA should finalize PC2/LT2, because such an 
alternative would be more fair to manufacturers of trucks who would 
otherwise have to work harder than manufacturers who build more cars, 
and because ``If NHTSA applies the same 2% rate of increase to both car 
and truck fleets, that 2% increase in mpg on vehicles included in the 
truck fleet will

[[Page 52852]]

save significantly more gallons per year than the car fleet.'' \1393\
---------------------------------------------------------------------------

    \1392\ The Alliance, Docket No. NHTSA-2023-0022-60652, Appendix 
C, at 33; Volkswagen, Docket No. NHTSA-2023-0022-58702, at 3.
    \1393\ AAPC, Docket No. NHTSA-2023-0022-60610, at 1; Ford, 
Docket No. NHTSA-2023-0022-60837, at 4; Missouri Farm Bureau, Docket 
No. NHTSA-2023-0022-61601, at 2.
---------------------------------------------------------------------------

    Several commenters discussed the interaction of NHTSA's proposal 
with EPA's proposal and other government statements and programs. The 
Alliance commented that CAFE standards should be expressly offset from 
EPA's GHG standards ``considering the agencies' differences in the 
treatment of EVs and compliance flexibilities.'' \1394\ AVE and Nissan 
stated that NHTSA must align with EPA's rule.\1395\ The U.S. Chamber of 
Commerce stated that all agencies should work together to ensure 
manufacturers can build a single fleet of compliant vehicles with 
sufficient lead time and regulatory certainty.\1396\ Toyota argued that 
the CAA is a better tool to ``support the shift to electrification,'' 
and instead NHTSA should ``focus on economically practicable ICE 
improvements considering the resources being diverted to 
electrification.'' \1397\ Volkswagen commented that NHTSA should ``make 
the CAFE target and framework consistent with'' E.O. 14037.\1398\ 
Jaguar commented that the proposal was too stringent, and that NHTSA 
should follow the ``U.S. Blueprint for Transportation Decarbonization'' 
published in early 2023, which built on E.O. 14037 and called for 50 
percent of all new passenger cars and light trucks in model year 2030 
to be zero-emission vehicles, including BEVs, PHEVs, and FCEVs.\1399\ 
In contrast, the West Virginia Attorney General's Office and the 
Motorcycle Riders Foundation commented that CAFE rules are part of a 
coordinated Biden Administration strategy to force a full transition to 
BEVs.\1400\
---------------------------------------------------------------------------

    \1394\ The Alliance, Docket No. NHTSA-2023-0022-27803, at 2.
    \1395\ AVE, Docket No. NHTSA-2023-0022-60213, at 2; Nissan, 
Docket No. NHTSA-2023-0022-60696, at 10.
    \1396\ U.S. Chamber of Commerce, Docket No. NHTSA-2023-0022-
61069, at 6.
    \1397\ Toyota, Docket No. NHTSA-2023-0022-61131, at 2.
    \1398\ Volkswagen, Docket No. NHTSA-2023-0022-58702, at 2.
    \1399\ Jaguar, Docket No. NHTSA-2023-0022-57296, at 2, 3.
    \1400\ West Virginia Attorney General's Office, Docket No. 
NHTSA-2023-0022-63056, at 6; Motorcycle Riders Foundation, Docket 
No. NHTSA-2023-0022-63054, at 1.
---------------------------------------------------------------------------

    A number of commenters continued with the theme of CAFE standards 
somehow forcing a full transition to BEVs. NAM and the Motorcycle 
Riders Foundation commented that NHTSA was forcing manufacturers to 
build only BEVs, that consumers should have choices, like strong 
hybrids and PHEVs, and that the market should decide whether and when 
BEVs should be introduced.\1401\ MOFB expressed concern that NHTSA was 
forcing farmers to purchase BEVs, and argued that BEVs would not work 
well for farmers due to insufficient rural charging infrastructure and 
the time necessary for recharging, lack of range, inability to haul 
loads or perform in extreme temperatures, and a lack of available 
service technicians.\1402\ CEI, BMW, Jaguar, and Nissan commented that 
the proposal would force manufacturers both to build more BEVs and to 
improve their ICEVs,\1403\ and Jaguar stated that manufacturers may 
have to stop offering certain of their vehicles in order to 
comply.\1404\ Volkswagen, Jaguar, Kia, and Hyundai commented that 
requiring improvements in ICEVs hindered their efforts to transition to 
full electrification.\1405\ In contrast, POET stated that the proposal 
was forcing manufacturers to build BEVs and restricting their ability 
to build ICEVs, and argued that this effort was contrary to West 
Virginia v. EPA which says agencies cannot ``substantially restructure 
the American energy market'' in a way that ``Congress had conspicuously 
and repeatedly declined to enact itself.'' \1406\ API stated that NHTSA 
does not have authority to impose standards that effectively require a 
portion of the fleet to be BEV.\1407\ KCGA argued that BEVs are heavier 
than ICE vehicles and thus worse for safety,\1408\ while the Missouri 
Corn Growers Association argued that the proposal would significantly 
hurt working farmers because in combination with EPA's proposal, it 
``may cost the U.S. corn industry nearly one-billion bushels annually 
in lost corn demand,'' and it would force farmers to buy BEVs when they 
need ICEVs.\1409\ Several commenters stated that forcing a full 
transition to BEVs would be more expensive and less effective than 
requiring ICE improvements or high-octane low-carbon fuels.\1410\
---------------------------------------------------------------------------

    \1401\ NAM, Docket No. NHTSA-2023-0022-59203-A1, at 1; 
Motorcycle Riders Foundation, Docket No. NHTSA-2023-0022-63054, at 
1.
    \1402\ Missouri Farm Bureau, Docket No. NHTSA-2023-0022-61601, 
at 2.
    \1403\ CEI, Docket No. NHTSA-2023-0022-61121, at 6; BMW, Docket 
No. NHTSA-2023-0022-58614, at 2; Jaguar, Docket No. NHTSA-2023-0022-
57296, at 4; Nissan, Docket No. NHTSA-2023-0022-60696, at 10.
    \1404\ Jaguar, Docket No. NHTSA-2023-0022-57296, at 4.
    \1405\ Volkswagen, Docket No. NHTSA-2023-0022-58702, at 3; 
Jaguar, Docket No. NHTSA-2023-0022-58702, at 4; Kia, Docket No. 
NHTSA-2023-0022-58542-A1, at 2; Hyundai, Docket No. NHTSA-2023-0022-
48991, at 1.
    \1406\ POET, Docket No. NHTSA-2023-0022-61561, at 16-17.
    \1407\ API, Docket No. NHTSA-2023-0022-60234, at 4.
    \1408\ KCGA, Docket No. NHTSA-2023-0022-59007, at 3.
    \1409\ Missouri Corn Growers Association, Docket No. NHTSA-2023-
0022-58413, at 1.
    \1410\ KCGA, Docket No. NHTSA-2023-0022-59007, at 5; POET, 
Docket No. NHTSA-2023-0022-61561, at 17; RFA et al. 2, Docket No. 
NHTSA-2023-0022-57625, at 2.
---------------------------------------------------------------------------

    Commenters also focused on the effect that they believed NHTSA's 
inclusion of BEVs in the analysis (generally, in the regulatory 
reference baseline) had on NHTSA's decision to propose PC2LT4. Valero 
commented that ``The more EVs are assumed to penetrate the market in 
the baseline scenario, the easier it is for vehicle manufacturers to 
comply with the [proposed CAFE] standards . . . , because an EV 
receives the maximum compliance credit possible in the CAFE program. To 
help justify highly stringent CAFE standards, the agency paints a 
picture of the baseline where state-level ZEV mandates in sixteen 
states are implemented without difficulty and lead to a dramatic 
increase in EV sales from 2022 to 2032.'' \1411\ Several commenters 
asserted that the proposed standards would not be feasible if BEVs were 
excluded from the analysis,\1412\ while other commenters expressed 
concern that building the number of BEVs assumed in NHTSA's analysis 
would be more difficult than NHTSA acknowledged, due to uncertainty in 
future battery prices, charging infrastructure, available manufacturer 
capital resources, and so on.\1413\ Toyota commented that while NHTSA 
claimed that BEVs in the reference baseline would happen regardless of 
new CAFE standards, NHTSA then went on to assume that strong hybrids 
would replace ICEs, when those ICEs existed because of the BEVs in the 
reference baseline.\1414\ The Alliance commented

[[Page 52853]]

that when it ran the model taking BEVs out of the reference baseline, 
setting PHEV electric operation to zero for all years, setting fine 
payments to zero, and otherwise keeping standard-setting restrictions, 
``Over a third of passenger cars are in fleets that do not meet the 
proposed standard in model years 2027-2032. For light trucks almost a 
third of production is in fleets that do not meet standards in model 
year 2027. In model year 2028, over three quarters of vehicles are in 
fleets that do not meet the proposed standard, and in model year 2029 
and later nine out of every ten vehicles are in a fleet that do not 
meet the proposed standard.'' \1415\ CEA argued that even though NHTSA 
stated in the NPRM that based on the sensitivity analysis, NHTSA would 
have made the same decision even if state ZEV programs were excluded, 
NHTSA still acknowledges that less stringent alternatives would have 
had higher net benefits in that case, and it would be arbitrary and 
capricious to decide to pick a more stringent alternative for no good 
reason.\1416\ RFA et al. 2 argued that NHTSA had based the maximum 
feasible determination on allowing BEVs starting in model year 2033, 
which they stated was contrary to 32902(h).\1417\
---------------------------------------------------------------------------

    \1411\ Valero, Docket No. NHTSA-2023-0022-58547, Attachment C, 
at 1.
    \1412\ Volkswagen, Docket No. NHTSA-2023-0022-58702, at 3; The 
Alliance, Docket No. NHTSA-2023-0022-60652, Attachment 2, at 2; 
Nissan, Docket No. NHTSA-2023-0022-60696, at 6; SEMA, Docket No. 
NHTSA-2023-0022-57386, at 3-4; Toyota, Docket No. NHTSA-2023-0022-
61131, at 9; U.S. Chamber of Commerce, Docket No. NHTSA-2023-0022-
61069, at 2-3.
    \1413\ Valero, Docket No. NHTSA-2023-0022-58547, Attachment D, 
at 1, 7; Subaru, Docket No. NHTSA-2023-0022-58655, at 3; KCGA, 
Docket No. NHTSA-2023-0022-59007, at 3; NAM, Docket No. NHTSA-2023-
0022-59203-A1, at 1; AFPM, Docket No. NHTSA-2023-0022-61911, 
Attachment 2, at 36. NHTSA notes that it always has authority to 
amend CAFE standards based on new information and as appropriate, as 
long as statutory lead time requirements are met.
    \1414\ Toyota, Docket No. NHTSA-2023-0022-61131, at 9.
    \1415\ The Alliance, Docket No. NHTSA-2023-0022-60652, Appendix 
A, at 7-8.
    \1416\ CEA, Docket No. NHTSA-2023-0022-61918, at 8.
    \1417\ RFA et al. 2, Docket No. NHTSA-2023-0022-57625, at 11.
---------------------------------------------------------------------------

    A number of commenters expressed further concern that DOE's 
proposed revisions to the PEF, combined with the inclusion of BEVs in 
NHTSA's reference baseline, made the proposed standards 
infeasible.\1418\ Jaguar commented that the proposed standards were too 
difficult with the proposed PEF revision ``step change,'' especially 
for manufacturers who were already at the cap for AC/OC,\1419\ and 
stated that NHTSA must ``stop the step change.'' \1420\ Subaru, 
Stellantis, BMW, and Toyota also commented that the proposed new PEF 
would make CAFE compliance significantly more difficult, and the 
proposed standards beyond maximum feasible.\1421\ Subaru and Stellantis 
argued that NHTSA should not have accounted for the proposed PEF 
revisions in the NPRM analysis.\1422\ Volkswagen and AAPC commented 
that the proposed new PEF raises lead time concerns in terms of how 
manufacturers would comply with CAFE standards, because manufacturer 
plans had been based on the then-existing PEF value and revisions would 
mean that more BEVs (by accelerating capital investments) would be 
necessary to achieve the same compliance levels or face 
penalties.\1423\ Jaguar added that the proposed new PEF plus the 
agencies' proposals to remove/reduce AC/OC would make compliance more 
expensive and imperil the industry's transition to full 
electrification.\1424\ Volkswagen and AAPC also expressed concern that 
the proposed new PEF would lead to different compliance answers for 
NHTSA and EPA.\1425\ GM stated that if the proposed new PEF is 
finalized, GM would not support PC2LT4; that if the PEF remained at the 
then-existing value, GM would support PC2LT4; and that if the proposed 
new PEF took effect in model year 2030, GM could support PC2LT4 but 
still had concern regarding ``substantial CAFE/GHG alignment issues 
starting'' whenever the new PEF goes into effect.\1426\
---------------------------------------------------------------------------

    \1418\ Kia, Docket No. NHTSA-2023-0022-58542-A1, at 2; AAPC, 
Docket No. NHTSA-2023-0022-60610, at 3-5; Honda, Docket No. NHTSA-
2023-0022-61033, at 6.
    \1419\ Jaguar, Docket No. NHTSA-2023-0022-57296, at 4.
    \1420\ Jaguar, Docket No. NHTSA-2023-0022-57296, at 6.
    \1421\ Subaru, Docket No. NHTSA-2023-0022-58655, at 3; 
Stellantis, Docket No. NHTSA-2023-0022-61107, at 3-8; BMW, Docket 
No. NHTSA-2023-0022-58614, at 2; Toyota, Docket No. NHTSA-2023-0022-
61131, at 2, 14.
    \1422\ Subaru, Docket No. NHTSA-2023-0022-5865, at 4; 
Stellantis, Docket No. NHTSA-2023-0022-61107, at 4.
    \1423\ Volkswagen, Docket No. NHTSA-2023-0022-58702, at 3; AAPC, 
Docket No. NHTSA-2023-0022-60610, at 5.
    \1424\ Jaguar, Docket No. NHTSA-2023-0022-57296, at 3, 4.
    \1425\ Volkswagen, Docket No. NHTSA-2023-0022-58702, at 6; AAPC, 
Docket No. NHTSA-2023-0022-60610, at 3-5.
    \1426\ GM, Docket No. NHTSA-2023-0022-60686, at 6.
---------------------------------------------------------------------------

    NHTSA has considered these comments carefully, although we note 
that some of them are beyond our ability to consider--specifically, if 
NHTSA is prohibited by statute from considering the fuel economy of 
electric vehicles in determining maximum feasible fuel economy 
standards, NHTSA does not believe that it can specifically consider the 
fact that changing the PEF value may change manufacturers' CAFE 
compliance strategies in future model years. The PEF value is literally 
the value that turns BEV energy consumption into fuel economy, and BEV 
fuel economy is exactly what NHTSA may not consider in determining 
maximum feasible standards (among other things).
    However, NHTSA finds some of the comments to be persuasive, 
particularly regarding the idea that the proposed light truck standards 
may well be too stringent if manufacturers are going to successfully 
undertake the technological transition that NHTSA cannot consider 
directly, and the idea that compliance shortfalls that result in civil 
penalties and no additional fuel savings benefit neither manufacturers, 
nor consumers, nor energy conservation.
    Comments regarding the stringency of the passenger car fleet were 
less contentious than those regarding stringency of the light truck 
fleet. NHTSA agreed with many of the commenters, including the 
Alliance, that maintaining the proposed stringency levels for the 
passenger car fleet was acceptable, when considered in conjunction with 
a less stringent light truck standard. GM, too, stated that it could 
accept the proposed stringency for passenger cars under certain 
circumstances.
    In response to these comments, for the final rule NHTSA created a 
new alternative, PC2LT002, combining elements of alternatives presented 
in the NPRM analysis, out of concern that existing manufacturer 
commitments to technology development make further improvements to the 
light truck fleet economically impracticable for model years 2027-2028, 
due to the need to reserve development and production funds for other 
purposes, and make light truck improvements at the proposed rate beyond 
economically practicable for model years 2029-2031.
    The following text will walk through the four statutory factors in 
more detail and discuss NHTSA's decision-making process more 
thoroughly. The balancing of factors presented here represents NHTSA's 
thinking based on all of the information presented by the commenters 
and in the record for this final rule.
    For context and the reader's reference, here again are the 
regulatory alternatives among which NHTSA has chosen maximum feasible 
CAFE standards for model years 2027-2031, representing different annual 
rates of stringency increase over the required levels in model year 
2026:

[[Page 52854]]

[GRAPHIC] [TIFF OMITTED] TR24JN24.223

    In evaluating the statutory factors to determine maximum feasible 
standards, EPCA's overarching purpose of energy conservation suggests 
that NHTSA should begin with the need of the U.S. to conserve energy. 
According to the analysis presented in Section V and in the 
accompanying FRIA, Alternative PC6LT8 is estimated to save consumers 
the most in fuel costs compared to any of the baselines.\1427\ Even in 
the rulemaking time frame of model years 2027-2032, when many forces 
other than CAFE standards will foreseeably be driving higher rates of 
passenger car and light truck electrification, NHTSA believes that 
gasoline will still likely be the dominant fuel used in LD 
transportation. This means that consumers, and the economy more 
broadly, remain subject to fluctuations in gasoline price that impact 
the cost of travel and, consequently, the demand for mobility. The 
American economy is largely built around the availability of affordable 
personal transportation. Vehicles are long-lived assets, and the long-
term price uncertainty and volatility of petroleum prices still 
represents a risk to consumers. By increasing the fuel economy of 
vehicles in the marketplace, more stringent CAFE standards help to 
better insulate consumers, and the economy more generally, against 
these risks over longer periods of time. Fuel economy improvements that 
reduce demand are an effective hedging strategy against price 
volatility because gasoline prices are linked to global oil prices. 
Continuing to reduce the amount of money that consumers spend on 
vehicle fuel thus remains an important consideration for the need of 
the U.S. to conserve energy. Additionally, by reducing U.S. 
participation in global oil markets, fuel economy standards also 
improve U.S. energy security and our national balance of payments. 
Again, by reducing the most fuel consumed, Alternative PC6LT8 would 
likely best serve the need of the U.S. to conserve energy in these 
respects.
---------------------------------------------------------------------------

    \1427\ See Table V-20 and Table V-21, which illustrate that fuel 
savings increase for passenger cars and light trucks as alternative-
stringency increases under both model year and calendar year 
accounting methods.
---------------------------------------------------------------------------

    With regard to pollution effects, Alternative PC6LT8 would also 
result in the greatest reduction in CO2 emissions over time, 
and thus have the largest (relative) impact on climate change, as 
assessed against any of the baselines.\1428\ The effects of other 
pollutants are more mixed--while the emissions of NOX and 
PM2.5 eventually decrease over time, with effects being 
greater as stringency increases, SOX emissions could 
marginally increase by 2050, after significant fluctuation, in all of 
the alternatives including the No-Action alternative, due to greater 
use of electricity for PHEVs and BEVs, although differences between the 
action alternatives are modest and SOx emissions would be 
significantly lower than they are at present.\1429\ Chapter 8.2.5 of 
the FRIA discusses estimated environmental effects of the regulatory 
alternatives in more detail.
---------------------------------------------------------------------------

    \1428\ See Table V-23, which illustrates that CO2 
emissions are further reduced as alternative-stringency increases, 
with PC6LT8 reducing the most CO2 over time.
    \1429\ See Section V.C of the preamble above for more discussion 
on these analytical results, as well as FRIA Chapter 8.2 and Chapter 
4 of the EIS.
---------------------------------------------------------------------------

    These results are a direct consequence of the input assumptions 
used for this analysis, as well as the uncertainty surrounding these 
assumptions. However, both relative and absolute effects for 
NOX, PM2.5, and SOX under each 
regulatory alternative are quite small in the context of overall U.S. 
emissions of these pollutants, and even in the context of U.S. 
transportation sector emissions of these pollutants. CAFE standards are 
not a primary driver for these pollutants; the estimated effects 
instead come largely from potential changes in travel demand that may 
result from improved fuel economy, rather than from the standards 
themselves. NHTSA would thus say, generally speaking, that Alternative 
PC6LT8 likely best meets the need of the U.S. to conserve energy in 
terms of environmental effects, because it saves the most fuel under 
either baseline considered, which consequently means that it (1) 
maximizes consumer savings on fuel costs, (2) reduces a variety of 
pollutant emissions by the greatest amount, and (3) most reduces U.S. 
participation in global oil markets, with attendant benefits to energy 
security and the national balance of payments.
    However, even though Alternative PC6LT8 may best meet the need of 
the U.S. to conserve energy, and even though other regulatory 
alternatives may also contribute more to the need of the U.S. to 
conserve energy than the preferred alternative, NHTSA concludes that 
those other alternatives are beyond maximum feasible in the rulemaking 
time frame. NHTSA is arriving at this conclusion based on the other 
factors that we consider, because all of the statutory factors must be 
considered in determining maximum feasible CAFE standards. The need of 
the U.S. to conserve energy nearly always works in NHTSA's balancing to 
push standards more stringent, while other factors may work in the 
opposite direction.
    Specifically, based on the information currently available, NHTSA 
concludes that the more stringent regulatory alternatives considered in 
this analysis land past the point of economic practicability in this 
time frame. In considering economic practicability, NHTSA tries to 
evaluate where the

[[Page 52855]]

tipping point in the balancing of factors might be through a variety of 
metrics and considerations, examined in more detail below.
    We underscore again that the modeling analysis does not dictate the 
``answer,'' it is merely one source of information among others that 
aids NHTSA's balancing of the standards. We similarly underscore that 
there is no single bright line beyond which standards might be 
economically impracticable, and that these metrics are not intended to 
suggest one; they are simply ways to think about the information before 
us. The discussion of trying to identify a ``tipping point'' is simply 
an attempt to grapple with the information, and the ultimate decision 
rests with the decision-maker's discretion.
    While the need of the U.S. to conserve energy may encourage NHTSA 
to be more technology-forcing in its balancing, regulatory alternatives 
that can only be achieved by the extensive application of advanced 
technologies besides BEVs are not economically practicable in the MY 
2027-2031 time frame and are thus beyond maximum feasible. Technology 
application can be considered as ``which technologies, and when''--both 
the technologies that NHTSA's analysis suggests would be used, and how 
that application occurs given manufacturers' product lifecycles. It is 
crucially important to remember that NHTSA's decision-making with 
regard to economic practicability and what standards are maximum 
feasible overall must be made in the context of the 32902(h) 
restrictions against considering the fuel economy of BEVs and the full 
fuel economy of PHEVs. Our results comply with those restrictions, and 
it is those results that inform NHTSA's decision-making.
    Additionally, as discussed in Section VI.A, NHTSA concludes in this 
final rule that many of the alternatives are beyond technologically 
feasible considering the technologies available to be considered under 
the statutorily-constrained analysis, and the constraints of planned 
redesign cycles, a point that was not a concern in prior rulemakings 
due to the state of technology development at that time. NHTSA has 
historically understood technological feasibility as referring to 
whether a particular method of improving fuel economy is available for 
deployment in commercial application in the model year for which a 
standard is being established. While all of the technology in NHTSA's 
analysis is already available for deployment, the statutory requirement 
to exclude fuel economy improvements due to BEVs (and the full fuel 
economy of PHEVs) from consideration of maximum feasible standards 
means that NHTSA must focus on technology available to improve the fuel 
economy of ICEs, and on the remaining vehicles that are not yet 
anticipated to be fully electric during the rulemaking time frame. Many 
commenters agreed that when these forms of electrification were 
excluded, more stringent standards were not technologically feasible 
considering the technologies available to be considered under the 
statutorily-constrained analysis and the constraints of planned 
redesign cycles.
    In terms of the levels of technology required and which 
technologies those may be, NHTSA's analysis estimates manufacturers' 
product ``cadence,'' representing them in terms of estimated schedules 
for redesigning and ``freshening'' vehicles, and assuming that 
significant technology changes will be implemented during vehicle 
redesigns--as they historically have been. Once applied, a technology 
will be carried forward to future model years until superseded by a 
more advanced technology, if one exists that NHTSA can consider in the 
statutorily-constrained analysis. If manufacturers are already applying 
technology widely and intensively to meet standards in earlier years, 
then during the model years subject to the rulemaking more technology 
may simply be unavailable to apply (having already been applied or 
being statutorily prohibited for purposes of NHTSA's analysis), or 
redesign opportunities may be very limited, causing manufacturers to 
fail to comply and making standards less economically practicable.
    In the rulemaking time frame, running out of available technology 
is the fundamental issue that distinguishes the regulatory 
alternatives. Per-vehicle cost,\1430\ according to the analysis, is 
relatively low as compared to what NHTSA determined was tolerable in 
prior rounds of rulemaking for both cars and trucks, for most 
alternatives in most model years, compared to the reference baseline or 
the No ZEV alternative baseline, although some manufacturers are 
affected more than others, and sales and employment effects are minimal 
and not dispositive.\1431\ Some commenters noted that per-vehicle costs 
for the proposal were lower than what NHTSA had considered to be still 
within the range of economic practicability in prior rules. NHTSA 
agrees that this is the case and recognizes that the per-vehicle costs 
for the final rule are significantly lower than for the proposal, but 
NHTSA also recognizes manufacturer concerns with retaining all 
available capital and resources for the technology transition that 
NHTSA cannot consider directly.
---------------------------------------------------------------------------

    \1430\ Because our analysis includes estimates of manufacturers' 
indirect costs and profits, as well as civil penalties that some 
manufacturers (as allowed under EPCA/EISA) might choose to pay in 
lieu of achieving compliance with CAFE standards, we report cost 
increases as estimated average increase in vehicle price (as MSRP). 
NHTSA does not expect that the prices of every vehicle would 
increase by the same amount; rather, the agency's underlying 
analysis shows unit costs varying widely between different vehicle 
models, as evident in the model output available on NHTSA's website. 
While we recognize that manufacturers will distribute regulatory 
costs throughout their fleet to maximize profit, we have not 
attempted to estimate strategic pricing as requested by some 
commenters, having insufficient data (which would likely be CBI) on 
which to base such an attempt. Additionally, even recognizing that 
manufacturers will distribute regulatory costs throughout their 
fleets, NHTSA still believes that average per-vehicle cost is useful 
for illustrating the possible broad affordability implications of 
new standards.
    The technology costs described here are what NHTSA elsewhere 
calls ``regulatory costs,'' which means the combination of 
additional costs of technology added to meet the standards, plus any 
civil penalties paid in lieu of meeting standards. This is not an 
assessment that manufacturers will pay civil penalties, it is simply 
an assumption for purposes of this analysis and subject to its 
constraints that some manufacturers could choose to pay civil 
penalties rather than apply additional technology if they deem that 
approach more cost-effective. Manufacturers are always free to 
choose their own compliance path.
    \1431\ See Section V.A. and FRIA 8.2.2 and 8.2.7.
---------------------------------------------------------------------------

    The tables below show additional regulatory (estimated technology 
plus estimated civil penalties) costs estimated to be incurred under 
each action alternative as compared to the No-Action Alternative, given 
the statutory restrictions under which NHTSA conducts its ``standard 
setting'' analysis:
BILLING CODE 4910-59-P

[[Page 52856]]

[GRAPHIC] [TIFF OMITTED] TR24JN24.224


[[Page 52857]]


[GRAPHIC] [TIFF OMITTED] TR24JN24.225


[[Page 52858]]


[GRAPHIC] [TIFF OMITTED] TR24JN24.226


[[Page 52859]]


[GRAPHIC] [TIFF OMITTED] TR24JN24.227

BILLING CODE 4910-59-C
    The figures above illustrate clearly that results vary by 
manufacturer, by year, and by fleet. NHTSA typically considers average 
results for a metric

[[Page 52860]]

like per-vehicle cost, in part because NHTSA has typically approached 
economic practicability as a question for the industry as a whole, such 
that standards can still be maximum feasible even if they are harder 
for some manufacturers than others.\1432\ The average passenger car 
cost increase under PC6LT8 is $537 in model year 2027 but rises rapidly 
thereafter, exceeding $2,300 by model year 2031. In contrast, the 
average passenger car cost increase under PC2LT002 reaches only $409 by 
model year 2031. This is a fairly stark difference between the least 
and most stringent action alternatives. Industry average passenger car 
costs are lower for PC1LT3 than for PC2LT002, as might be assumed given 
the slower rate of increase, but the increase for model years 2029-2031 
passenger cars under PC2LT4 as compared to PC2LT002 is about $100 more 
per vehicle in any given model year, even though the rate of increase--
2 percent per year for passenger cars--is the same for both 
alternatives. This is largely a function of higher average civil 
penalties for light trucks under LT4 being distributed across all of a 
manufacturer's fleets, rather than an inherent difference in passenger 
car technology costs under the two different PC2 alternatives. NHTSA 
believes that this approach to distributing civil penalties is 
reasonable, even though manufacturers may have different pricing 
strategies in the real world, but we lack more precise information to 
target penalty distribution more specifically and invite manufacturers 
to share whatever information might increase the specificity of our 
assumptions for future rounds of rulemaking. Industry average passenger 
car costs for PC3LT5 are nearly double those for PC2LT002 and PC2LT4. 
Under the No ZEV alternative baseline, average passenger car costs are 
higher for every alternative, ranging from $384 for PC1LT3 in MY 2031, 
to $2,948 for PC6LT8 in MY 2031. As under the reference baseline, 
industry average passenger car costs for PC3LT5 are nearly double those 
for PC2LT002 and PC2LT4, and PC2LT4 is slightly more expensive than 
PC2LT002 due to distribution of civil penalties as discussed above.
---------------------------------------------------------------------------

    \1432\ See, e.g., 87 FR at 25969 (``If the overarching purpose 
of EPCA is energy conservation, NHTSA believes that it is reasonable 
to expect that maximum feasible standards may be harder for some 
automakers than for others, and that they need not be keyed to the 
capabilities of the least capable manufacturer. Indeed, keying 
standards to the least capable manufacturer may disincentivize 
innovation by rewarding laggard performance.'').
---------------------------------------------------------------------------

    For light trucks, the average light truck cost increase under 
PC6LT8 is $541 in model year 2027, and (similarly to cars) rises 
rapidly thereafter, exceeding $3,000 by model year 2031. In contrast, 
the average light truck cost increase under PC2LT002 reaches only $409 
by model year 2032. As for cars, this is a fairly stark difference 
between these alternatives. Comparing average light truck cost 
increases between PC2LT002 and PC1LT3, industry average light truck 
costs more than double, and model year 2031 industry average light 
truck costs for PC2LT4 are triple those for PC2LT002. Under the No ZEV 
alternative baseline, average light truck costs are higher for every 
alternative, ranging from $677 for PC2LT002 in MY 2031, to $3,722 for 
PC6LT8 in MY 2031. As under the reference baseline, industry average 
light truck costs increase fairly rapidly as stringency increases. As 
discussed in Section VI.A, while NHTSA has no bright-line rule 
regarding the point at which per-vehicle cost becomes economically 
impracticable, when considering the stringency increases (and attendant 
costs) that manufacturers will be facing over the period immediately 
prior to these standards, in the form of the model years 2024-2026 
standards, NHTSA has concluded that the over-$3,000 per vehicle 
estimated for PC6LT8 by model year 2032 is too much. model year 2031 
average costs for PC2LT4 and PC3LT5 are more in line with the levels of 
per-vehicle costs that NHTSA has considered to be economically 
practicable over the last dozen years of rulemakings.
    However, average results may be increasingly somewhat misleading as 
manufacturers transition their fleets to the BEVs whose fuel economy 
NHTSA is prohibited from considering when setting the standards. This 
is because fuel economy in the fleet has historically been more of a 
normal distribution (i.e., a bell curve), and with more and more BEVs, 
it becomes more of a bimodal distribution (i.e., a two-peak curve). 
Attempting to average a bimodal distribution does not necessarily give 
a clear picture of what non-BEV-specialized manufacturers are capable 
of doing, and regardless, NHTSA is directed not to consider BEV fuel 
economy. Thus, examining individual manufacturer results more closely 
may be more illuminating, particularly the results for the 
manufacturers who have to deploy the most technology to meet the 
standards.
    Looking at per-manufacturer results for passenger cars, under 
PC6LT8, nearly every non-BEV-only manufacturer would exceed more than 
$2,000 per passenger car in regulatory costs by model year 2031 under 
the reference baseline analysis, with higher costs (over $3,000) for 
GM, Hyundai, Kia, Mazda, and Stellantis. Costs are somewhat higher 
under the No ZEV alternative baseline than under the reference 
baseline, as shown in Section VI.A above. In the standard-setting 
analysis which NHTSA must consider here, significant levels of advanced 
MR, SHEV, and advanced engine technologies tend to be driving many of 
these cost increases. These changes are best understood in context--
passenger car sales have been falling over recent years while prices 
have been rising, and most of the new vehicles sold in the last couple 
of years have been more expensive models.\1433\ NHTSA does not want to 
inadvertently burden passenger car sales by requiring too much 
additional cost for new vehicles, particularly given the performance of 
the passenger car fleet in comparison to the light truck fleet in terms 
of mileage gains; every mile driven in passenger cars is, on average, 
more fuel-efficient than miles driven in light trucks. While the costs 
of PC2LT002 or PC2LT4 may challenge some manufacturers of passenger 
cars, they will generally do so by much less than PC3LT5.\1434\
---------------------------------------------------------------------------

    \1433\ Tucker, S.2021. Automakers Carry Tight Inventories: What 
Does It Mean to Car Buyers? Kelly Blue Book. Available at: https://www.kbb.com/car-advice/automakers-carry-tight-inventories-what-does-it-mean-to-car-buyers/. (Accessed: Feb. 28, 2024).
    \1434\ This is particularly true for a manufacturer like GM who 
clearly struggles in the statutorily-constrained analysis to control 
costs as alternative stringency increases.
---------------------------------------------------------------------------

    Looking at per-manufacturer results for light trucks, under PC6LT8, 
every non-BEV-only manufacturer but Subaru and Toyota would exceed 
$2,000 in per-vehicle costs by model year 2031, with nearly all of 
those exceeding $3,000. This is likely due to a combination of high MR 
levels, advanced engines, advanced transmissions, SHEV, and (for 
PC6LT8, particularly) PHEV technologies being applied to trucks in 
order to meet PC6LT8. The only alternative with no manufacturer 
exceeding $2,000 in any model year under the reference baseline 
analysis is PC2LT002, because GM exceeds $2,000 in model year 2031 
under PC1LT3. Costs are somewhat higher under the No ZEV alternative 
baseline than under the reference baseline, as shown in Section VI.A 
above, with JLR exceeding $2,000 in MY 2031 even under PC2LT002. Again, 
this is not to say that $2,000 is a bright line threshold for economic 
practicability, but simply to recognize that manufacturers, including 
GM and

[[Page 52861]]

JLR, commented extensively about the need to retain resources for the 
technological transition that NHTSA cannot consider directly. NHTSA may 
consider availability of resources, and NHTSA would not want CAFE 
standards to complicate manufacturer efforts to save more fuel in the 
longer term by diverting resources in the shorter term.
    As discussed above, this is particularly the case for civil penalty 
payment--during this rulemaking time frame, given the technological 
transition underway, NHTSA agrees with industry commenters that civil 
penalty payments resulting from CAFE non-compliance would divert needed 
resources from that transition without conserving additional energy. 
NHTSA has typically considered shortfalls in the context of economic 
practicability, but as discussed in Section VI.A, as the fleet 
approaches the technological limits of what NHTSA may consider by 
statute in setting standards, manufacturers appearing in the analysis 
to run out of technology may increasingly be an issue of technological 
feasibility as well. Some commenters suggested that NHTSA was 
conflating these two factors in considering them this way, btu NHTSA 
believes it is still giving full effect to all relevant factors even if 
they begin to blend somewhat as the world changes and as the statutory 
constraints become more constraining on NHTSA's ability to account for 
the real world in its decision-making.
    Section VI.A discussed the phenomenon in the analysis that 
manufacturers attempting to comply with future CAFE standards could 
``run out of technology'' just because opportunities were lacking to 
redesign enough of their vehicles consistent with their normal redesign 
schedule. NHTSA does not account for the possibility that manufacturers 
would choose to ``break'' their redesign schedules to keep pace with 
more stringent standards, in large part because the costs to do so 
would be significant and NHTSA does not have the information needed to 
reflect such an effort. The figures below illustrate, for passenger 
cars and light trucks, how technology application (in this case, SHEVs, 
which are essentially the end of the powertrain decision tree for 
purposes of the constrained analysis \1435\) lack of redesign 
opportunity and manufacturer likelihood of shortfalls interact. The 
number for any given manufacturer, model year, and regulatory 
alternative is the portion of the fleet that is lower on the decision 
trees than SHEV (typically MHEV or ICEV). Cells with boxes around them 
indicate shortfalls. For nearly every instance where a manufacturer is 
unable to achieve the standard, their fleet has already been converted 
to SHEV or above (represented by a darker box with a zero 
inside).\1436\
---------------------------------------------------------------------------

    \1435\ Other non-powertrain technologies are, of course, 
available to manufacturers to apply in the analysis, but in terms of 
meeting the higher stringency alternatives under the constrained 
analysis, no other technology besides SHEV is as cost-effective. 
NHTSA therefore uses SHEVs for this illustration because it is the 
technology that the model is most likely to choose for manufacturer 
compliance, even if it is not necessarily the technology path that 
all manufacturers will choose in the future.
    \1436\ There are a few instances in these illustrations where a 
manufacturer-fleet combination is not in compliance and appears to 
have some vehicles eligible for powertrain redesign (as shown with a 
non-zero value inside the box). These are cases in which compliance 
logic restricts certain SHEV technology, tech conversion is not 
cost-effective, or where the domestic fleet is not in compliance but 
the only vehicles eligble for redesign are in the imported car fleet 
(or vice versa).
[GRAPHIC] [TIFF OMITTED] TR24JN24.228


[[Page 52862]]


[GRAPHIC] [TIFF OMITTED] TR24JN24.229

    The figures show that for some manufacturers, for some fleets, some 
shortfalls are almost inevitable (in the constrained analysis) no 
matter the alternative. In the passenger car fleet, Stellantis clearly 
would be expected to routinely default to penalty payments under all 
alternatives but particularly those more stringent than PC2LT002; in 
the light truck fleet, BMW, GM, Jaguar, Mercedes, Stellantis, and 
Volkswagen shortfall repeatedly given redesign cycle constraints under 
all alternatives except PC2LT002, and even under PC2LT002, GM 
particularly continues to struggle for multiple model years, due to 
earlier redesigns that responded to the model years 2024-2026 standards 
and an otherwise relatively long redesign schedule. NHTSA believes that 
this lends more support to the conclusion that PC2LT002 is maximum 
feasible.
    Shortfall trends are slightly exacerbated for all action 
alternatives (although results vary by manufacturer) under the No ZEV 
alternative baseline analysis, as follows:

[[Page 52863]]

[GRAPHIC] [TIFF OMITTED] TR24JN24.230


[[Page 52864]]


[GRAPHIC] [TIFF OMITTED] TR24JN24.231

    As under the reference baseline analysis, the figures show that for 
some manufacturers, for some fleets, shortfalls are almost inevitable 
(in the constrained analysis) under the No ZEV alternative baseline, no 
matter the action alternative. In the passenger car fleet, Stellantis 
would be expected to routinely default to penalty payments under all 
alternatives; in the light truck fleet, BMW, GM, Jaguar, Mercedes, 
Stellantis, Volvo, and Volkswagen shortfall repeatedly given redesign 
constraints under all alternatives except PC2LT002, and even under 
PC2LT002, GM particularly continues to default to penalty payments for 
multiple model years, due to earlier redesigns that responded to the 
model years 2024-2026 standards and an otherwise relatively long 
redesign schedule. Toyota, Volvo, and Subaru also see powertrain 
constraints in PC1LT3, where they did not when the alternative was run 
relative to the reference baseline case. NHTSA believes that this lends 
more support to the conclusion that PC2LT002 is maximum feasible.
    The following tables help to illustrate that in many cases, 
manufacturers simply lack redesign opportunities during the rulemaking 
time frame, and as stringency increases across the alternatives, that 
lack of redesign opportunities becomes more dire in terms of civil 
penalties consequently owed. ``Share eligible'' means the percent of 
this manufacturer's fleet that can be redesigned in this model year and 
are conventional or MHEV powertrain,\1437\ ``compliance position'' 
means the mpg amount by which the manufacturer's fleet performance 
exceeds or falls short of the manufacturer's fleet target, and ``civil 
penalties'' means the average amount of civil penalties per vehicle of 
the passenger car or light truck fleet that the manufacturer would owe 
as a consequence of a shortfall. These tables provide results estimated 
versus the reference baseline; results estimated against the No ZEV 
alternative baseline are generally similar, although some 
manufacturers' estimated results vary.
---------------------------------------------------------------------------

    \1437\ These tables present eligibility results based on 
powertrain technology, and vehicle powertrain changes are only 
available at vehicle redesigns. Manufacturers also apply non-
powertrain technology to improve vehicle fuel economy, and likely do 
so in these examples. To simplify the discussion, these changes are 
omitted from the table and we are only showing technologies that 
have the highest cost effectiveness, and likely to drive compliance.

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    Under the No ZEV alternative baseline analysis, the light truck 
fleet is more impacted, but not significantly more impacted than under 
the reference baseline analysis. NHTSA believes that this lends more 
support to the importance of reducing light truck standard stringency 
relative to the proposal.
    For purposes of the constrained analysis that NHTSA considers for 
determining maximum feasible standards, manufacturer shortfalls lead 
necessarily to civil penalties during the model years covered by the 
rulemaking when manufacturers are prohibited from using credit reserves 
in a given fleet. As the tables above show, civil penalties increase 
rapidly as the stringency of regulatory alternatives increase, with 
some manufacturers facing (in the constrained analysis) penalties of 
over $2,000 per vehicle for some fleets by model year 2031 under 
PC6LT8. GM in particular faces penalties of over $1,000 per light truck 
even under PC2LT4, and roughly an additional $600 per light truck in 
each model year 2029 through 2031 as stringency increases from PC2LT002 
to PC1LT3. For model year 2031 alone, this equates to an increase of 
$907 million in penalties for GM if NHTSA were to choose PC1LT3 over 
PC2LT002. Civil penalties for GM increase by a similar magnitude ($895 
million) between PC2LT002 and PC1LT3 under the No ZEV alternative 
baseline. As industry commenters pointed out, civil penalties are 
resources diverted from the technological transition that NHTSA cannot 
consider directly--but NHTSA is not prohibited from considering the 
resources necessary to make that transition, and NHTSA accepts the 
premise that manufacturers need maximum available resources now to 
potentially conserve more energy in the longer run. NHTSA has thus also 
examined civil penalties as a share of regulatory costs as a potential 
metric for economic practicability in this rulemaking. Table VI-11 and 
Table VI-12 in Section VI.A.5.a(2) above illustrate civil penalties as 
a share of regulatory costs for the entire industry for each fleet 
under each regulatory alternative. NHTSA concluded there that PC2LT002 
represents the alternative considered with the lowest economic impacts 
on manufacturers. With nearly half of light truck manufacturers facing 
shortfalls under PC1LT3, and over 30 percent of regulatory costs being 
attributable to civil penalties, given the concerns raised by 
manufacturers regarding their ability to finance the ongoing 
technological transition if they must divert funds to paying CAFE 
penalties, NHTSA believes that PC1LT3 is beyond economically 
practicable in this particular rulemaking time frame. Given that the 
proposal, PC2LT4, is even more stringent and results in even higher 
civil penalties, it too must be beyond economically practicable in this 
particular rulemaking time frame, when evaluated relative to either the 
reference baseline analysis or the No ZEV alternative baseline.\1438\
---------------------------------------------------------------------------

    \1438\ NHTSA recognizes that the Alliance provided extensive 
comments as to why it believed the stringency of light truck 
standards should not increase faster than the stringency of 
passenger car standards. Given NHTSA's decision to reduce the 
stringency of the light truck standards, NHTSA considers these 
comments overtaken by events.
---------------------------------------------------------------------------

    NHTSA received comments from industry stakeholders arguing with 
NHTSA's reflection of DOE's proposed revisions to the PEF in CAFE 
analysis. Industry stakeholders expressed concern about the effects of 
a revised

[[Page 52871]]

PEF value on their CAFE compliance positions,\1439\ and stated that 
NHTSA should reduce the final rule stringency relative to the proposal 
to account for these effects. In response, NHTSA notes that it cannot 
consider the fuel economy of BEVs in determining maximum feasible CAFE 
standards, and the PEF value exists to translate energy consumed by 
electric and partially-electric vehicles into miles per gallon. NHTSA 
interprets 49 U.S.C. 32902(h) as therefore expressly prohibiting NHTSA 
from considering how the PEF revisions affect manufacturers' CAFE 
compliance positions as part of its determination of new maximum 
feasible CAFE standards. NHTSA interprets 32902(h) as allowing the 
agency to consider the resources needed to build BEVs for reasons other 
than CAFE, but as prohibiting direct consideration of BEV fuel economy 
(as calculated using the PEF, whatever the PEF value is) in the 
standard-setting decision. NHTSA reflects the now-final revised PEF 
value in the final rule analysis in order to properly calculate 
manufacturers' reference baseline fuel economy positions but cannot use 
the revised PEF value as an excuse to set less stringent CAFE 
standards. NHTSA did conduct a sensitivity analysis run with the prior 
PEF value,\1440\ and found that the manufacturers' relative behavior 
under the alternatives remained similar to the central analysis. While 
the specific model results did (predictably) change, the underlying 
mechanisms as discussed in Section VI.A driving the feasibilities of 
the alternatives under consideration remained the same. As a result, 
NHTSA believes the use of the prior PEF value would likely not have 
produced a change in final standard selection. Moreover, as discussed 
above, there are adequate reasons in the constrained analysis for NHTSA 
to find that less stringent standards than the proposal reach the 
limits of economic practicability in the rulemaking time frame.
---------------------------------------------------------------------------

    \1439\ NHTSA has no authority to ``stop'' DOE's process of 
revising the PEF, as some commenters requested.
    \1440\ See Chapter 9 of the FRIA.
---------------------------------------------------------------------------

    As also discussed above and in the TSD and FRIA accompanying this 
final rule, the No-Action Alternative includes a considerable amount of 
fuel-saving technology applied in response to (1) the reference 
baseline (set in 2022) CAFE and CO2 standards, (2) fuel 
prices and technology cost-effectiveness (which accounts for recently-
developed tax incentives), (3) the California Framework Agreements 
(albeit only for some intervening model years), (4) ZEV programs in 
place in California and other States, and (5) manufacturer voluntary 
deployment of ZEVs consistent with ACC II, regardless of whether it 
becomes legally binding. The effects of this reference baseline 
application of technology are not attributable to this action, and 
NHTSA has therefore excluded these from our estimates of the 
incremental technology application, benefits, and costs that could 
result from each action alternative considered here. NHTSA's obligation 
is to understand and evaluate the effects of potential future CAFE 
standards, as compared to what is happening in the reference baseline. 
We realize that manufacturers face a combination of regulatory 
requirements simultaneously, which is why NHTSA seeks to account for 
those in its analytical reference baseline, and to determine what the 
additional incremental effects of different potential future CAFE 
standards would be, within the context of our statutory restrictions. 
Additionally, for both passenger cars and light trucks, NHTSA notes 
that in considering the various technology penetration rates for 
fleets, readers (and NHTSA) must keep in mind that due to the statutory 
restrictions, NHTSA's analysis considers these technologies as 
applicable to the remaining ICE vehicles that have not yet electrified 
for reasons reflected in the reference baseline. This means that the 
rates apply to only a fraction of each overall fleet, and thus 
represent a higher rate for that fraction.
    However, NHTSA also recognizes that technology applied in the 
reference baseline, or technological updates made in response to the 
reference baseline, may limit the technology available to be applied 
during the rulemaking time frame. As discussed above, if a manufacturer 
has already widely applied SHEV (for example) in the reference 
baseline, then the SHEV vehicles cannot be improved further under the 
constrained analysis. If a manufacturer has redesigned vehicles in 
order to meet reference baseline obligations and does not have another 
(or many) redesign opportunity during the rulemaking time frame, then 
the manufacturer may be unable to meet its CAFE standard and may face 
civil penalties. NHTSA's final standards, which are less stringent than 
the proposal, respond to these considerations. So too does NHTSA's 
analysis of the standards as assessed against the alternative baseline.
    With regard to lead time and timing of technology application, 
NHTSA acknowledges that there is more lead time for these standards 
than manufacturers had for the model years 2024-2026 standards. That 
said, NHTSA also recognizes that we have previously stated that if the 
standards in the years immediately preceding the rulemaking time frame 
do not require significant additional technology application, then more 
technology should theoretically be available for meeting the standards 
during the rulemaking time frame--but this is not necessarily the case 
here. The SHEV penetration rates shown in Figure VI-15 and Figure VI-16 
suggest that, at least for purposes of what NHTSA may consider by 
statute, industry would be running up against the limits of 
statutorily-available technology deployment, considering planned 
redesign cycles, for the more stringent regulatory alternatives, in a 
way that has not occurred in prior rulemakings. Lead time may not be 
able to overcome the costs of applying additional technology at a high 
rate, beyond what is already being applied to the fleet for other 
reasons during the rulemaking time frame and, in the years immediately 
preceding it, when considered in the context of the constrained 
analysis.
    As discussed above, when manufacturers do not achieve required fuel 
economy levels, NHTSA describes them as ``in shortfall.'' NHTSA's 
analysis reflects several possible ways that manufacturers could fail 
to meet required fuel economy levels. For some companies that NHTSA 
judges willing to pay civil penalties in lieu of compliance, usually 
based on past history of penalty payment, NHTSA assumes that they will 
do so as soon as it becomes more cost-effective to pay penalties rather 
than add technology. For other companies whom NHTSA judges unwilling to 
pay civil penalties, if they have converted all vehicles available to 
be redesigned in a given model year to SHEV or PHEV and still cannot 
meet the required standard, then NHTSA does not assume that these 
companies will break redesign or refresh cycles to convert even more 
(of the remaining ICE) vehicles to SHEV or PHEV.\1441\ In these 
instances, a manufacturer would be ``in shortfall'' in NHTSA's 
analysis. Shortfall rates can also be informative for determining 
economic practicability, because if manufacturers simply are not 
achieving the required levels, then that suggests that manufacturers 
have generally judged it more cost-effective not to

[[Page 52872]]

comply by adding technology. Moreover, the standards would not be 
accomplishing what they set out to accomplish, which would mean that 
the standards are not meeting the need of the U.S. to conserve energy 
as originally expected.
---------------------------------------------------------------------------

    \1441\ Ensuring that technology application occurs consistent 
with refresh/redesign schedules is part of how NHTSA accounts for 
economic practicability. Forcing technology application outside of 
those schedules would be neither realistic from a manufacturing 
perspective nor cost-effective. See Chapter 2.2.1.7 of the TSD for 
more information about product timing cycles.
---------------------------------------------------------------------------

    The following figures illustrate shortfalls by fleet, model year, 
manufacturer, and regulatory alternative:
BILLING CODE 4910-59-P

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BILLING CODE 4910-59-C
    Under both the reference baseline and the No ZEV alternative 
baseline analyses, for passenger cars, the industry average again 
obscures more

[[Page 52877]]

serious shortfall trends among individual manufacturers, with results 
slightly intensified for some manufacturers under the No ZEV 
alternative baseline analysis. Many manufacturers' passenger car fleets 
are estimated to fall significantly short of required levels under 
PC6LT8, with only one non-BEV manufacturer achieving compliance for 
most of the model years covered by the rulemaking. Even for PC3LT5, a 
large part of the sales volume of non-BEV-only manufacturers still 
appears to be falling short in most model years. Passenger car 
shortfalls are much less widespread under PC2LT4 and PC2LT002. For 
light trucks, under both the reference baseline and the No ZEV 
alternative baseline analyses, the shortfalls are extensive under 
PC6LT8, and most of non-BEV-only manufacturers fall short in most if 
not all model years under PC3LT5. Even PC2LT4 and PC1LT3 appears 
challenging, if not simply unattainable, under the standard-setting 
runs for a large portion of the light truck sales volume of non-BEV-
only manufacturers. Given all of the data examined, and the unique 
circumstances of this rulemaking discussed above, NHTSA believes that 
PC2LT002 may represent the upper limit of economic practicability 
during the rulemaking time frame.
    Of course, CAFE standards are performance-based, and NHTSA does not 
dictate specific technology paths for meeting them, so it is entirely 
possible that individual manufacturers and industry as a whole will 
take a different path from the one that NHTSA presents here.\1442\ 
Nonetheless, this is a path toward compliance, relying on known, 
existing technology, and NHTSA believes that our analysis suggests that 
the levels of technology and cost required by PC2LT002 are reasonable 
and economically practicable in the rulemaking time frame.
---------------------------------------------------------------------------

    \1442\ NHTSA acknowledges that compliance looks easier and more 
cost-effective for many manufacturers under the ``unconstrained'' 
analysis as compared to the ``standard-setting'' analysis discussed 
here, but emphasizes that NHTSA's decision on maximum feasible 
standards must be based on the standard-setting analysis reflecting 
the 32902(h) restrictions.
---------------------------------------------------------------------------

    The tables and discussion also illustrate that, for purposes of 
this final rule, economic practicability points in the opposite 
direction of the need of the U.S. to conserve energy. It is within 
NHTSA's discretion to forgo the potential prospect of additional energy 
conservation benefits if NHTSA believes that more stringent standards 
would be economically impracticable, and thus, beyond maximum feasible.
    Changes in costs for new vehicles are not the only costs that NHTSA 
considers in balancing the statutory factors. Fuel costs for consumers 
are relevant to the need of the U.S. to conserve energy, and NHTSA 
believes that consumers themselves weigh expected fuel savings against 
increases in purchase price for vehicles with higher fuel economy, 
although the extent to which consumers value fuel economy improvements 
is hotly debated, as discussed in Chapter 2.1.4 of the TSD. Fuel costs 
(or savings) continue, for now, to be the largest source of benefits 
for CAFE standards. Comparing private costs to private benefits, the 
estimated results for American consumers are as follows:
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[[Page 52878]]


[GRAPHIC] [TIFF OMITTED] TR24JN24.243

    Looking simply at the effects for consumers, our analysis suggests 
that private benefits would outweigh private costs for passenger cars 
under PC2LT002, PC1LT3, and PC2LT4, with PC2LT002 being the most 
beneficial for passenger car purchasers. For light trucks, all of the 
action alternatives appear net beneficial for consumers, with PC2LT4 
and PC3LT5 being the most beneficial. Under the No ZEV alternative 
baseline analysis, comparing private costs to private benefits, the 
estimated results for American consumers are as follows:

[[Page 52879]]

[GRAPHIC] [TIFF OMITTED] TR24JN24.244

[GRAPHIC] [TIFF OMITTED] TR24JN24.245

    Again, looking simply at the effects for consumers, our analysis 
suggests that private benefits would outweigh private costs for 
passenger cars under PC2LT002, PC1LT3, PC2LT4, and PC3LT5, with 
PC2LT002 being by far the most beneficial for passenger car purchasers. 
For light trucks, all of the action alternatives appear net beneficial 
for consumers, with PC1LT3 being the most beneficial.

[[Page 52880]]

    Broadening the scope to consider external/governmental benefits as 
well, we see the following:
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[[Page 52881]]


[GRAPHIC] [TIFF OMITTED] TR24JN24.247

    Adding external/social costs and benefits does not change the 
direction of NHTSA's analytical findings. Net benefits for passenger 
cars become negative across all alternatives except for PC2LT002.\1443\ 
Net benefits for light trucks remain positive across alternatives, with 
a peak at PC2LT4.
---------------------------------------------------------------------------

    \1443\ This behavior is discussed in Section VI.A.5.a.(2).
---------------------------------------------------------------------------

    Under the No ZEV alternative baseline analysis, adding external/
social costs and benefits still does not change the direction of 
NHTSA's analytical findings, as the tables illustrate:

[[Page 52882]]

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[[Page 52883]]


[GRAPHIC] [TIFF OMITTED] TR24JN24.249

    Under the No ZEV alternative baseline analysis, net benefits for 
passenger cars also become negative across all alternatives except for 
PC2LT002.\1444\ Net benefits for light trucks remain positive across 
alternatives, with a peak at PC1LT3.
---------------------------------------------------------------------------

    \1444\ This behavior is discussed in Section VI.A.5.a.(2).
---------------------------------------------------------------------------

    Because NHTSA considers multiple discount rates in its analysis, 
and because analysis also includes multiple values for the SC-GHG, we 
also estimate the following cumulative values for each regulatory 
alternative:

[[Page 52884]]

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[[Page 52885]]


[GRAPHIC] [TIFF OMITTED] TR24JN24.251

    While the results shown in the tables above range widely--
underscoring that DR assumptions significantly affect benefits 
estimates--the ordering of alternatives generally remains the same 
under most discounting scenarios. In most cases the greatest net 
benefits are a function of overall alternative stringency, with PC6LT8 
having the highest net benefits in most cases. Only in the higher SC-
GHG discount rates do the lower stringencies start to show a higher net 
benefit. Under the No ZEV alternative baseline analysis, results chart 
a similar path:

[[Page 52886]]

[GRAPHIC] [TIFF OMITTED] TR24JN24.252


[[Page 52887]]


[GRAPHIC] [TIFF OMITTED] TR24JN24.253

    Again, the results shown in the tables above range widely--
underscoring that DR assumptions significantly affect benefits 
estimates. Under the MY accounting approach, PC2LT4 has the greatest 
net benefits under the various SC-GHG discount rates, and under the CY 
accounting approach, PC6LT8 has the highest net benefits under the 
various SC-GHG discount rates.
    E.O. 12866 and Circular A-4 direct agencies to consider maximizing 
net benefits in rulemakings whenever possible and consistent with 
applicable law. Because it can be relevant to balancing the statutory 
factors and because it is directed by E.O. 12866 and OMB guidance, 
NHTSA does evaluate and consider net benefits associated with different 
potential future CAFE standards. As the tables above show, our analysis 
suggests that for passenger cars, under either baseline analysis, net 
benefits tend to be higher when standards are less stringent (and thus 
anticipated costs are lower). For light trucks, net benefits are higher 
when standards are more stringent, although not consistently. Looking 
solely at net benefits, under the reference baseline analysis, PC6LT8 
looks best overall and across all DRs, as well as for light trucks 
specifically, although PC2LT002 is the only non-negative alternative 
for passenger cars. Under the No ZEV alternative baseline analysis, 
PC2LT002 is still the only non-negative alternative for passenger cars, 
but PC1LT3 produces the largest net benefits for the light truck fleet.
    That said, while maximizing net benefits is a valid decision 
criterion for choosing among alternatives, provided that appropriate 
consideration is given to impacts that cannot be monetized, it is not 
the only reasonable decision perspective, and we recognize that what we 
include in our cost-benefit analysis affects our estimates of net 
benefits. We also note that important benefits cannot be monetized--
including the full health and welfare benefits of reducing climate 
emissions and other pollution, which means that the benefits estimates 
are underestimates. Thus, given the uncertainties associated with many 
aspects of this analysis, NHTSA does not rely solely on net benefit 
maximization, and instead considers it as one piece of information that 
contributes to how we balance the statutory factors, in our 
discretionary judgment. NHTSA recognizes that the need of the U.S. to 
conserve energy weighs importantly in the overall balancing of factors, 
and thus believes that it is reasonable to at least consider choosing 
the regulatory alternative that produces the largest reduction in fuel 
consumption, while still remaining net beneficial. Of course, the 
benefit-cost analysis is not the sole factor that NHTSA considers in 
determining the maximum feasible stringency, though it informs NHTSA's 
conclusion that Alternative PC2LT002 is the maximum feasible 
stringency. Importantly, the shortfalls discussion above suggests that 
even if more stringent alternatives appear net beneficial, under the 
constraints of our standard-setting analysis which is the analysis that 
NHTSA is statutorily required to

[[Page 52888]]

consider, hardly any manufacturers would be able to achieve the fuel 
economy levels required by PC6LT8 considering technologies available 
under the constrained analysis and planned redesign cycles, and even 
under the proposal PC2LT4, more than half of manufacturers could not 
achieve the light truck standards considering technologies available 
under the constrained analysis and planned redesign cycles. 
Unachievable standards would not be accomplishing their goals and thus 
be beyond maximum feasible for purposes of this final rule.
    As with any analysis of sufficient complexity, there are a number 
of critical assumptions here that introduce uncertainty about 
manufacturer compliance pathways, consumer responses to fuel economy 
improvements and higher vehicle prices, and future valuations of the 
consequences from higher CAFE standards. Recognizing that uncertainty, 
NHTSA prepared an alternative baseline and also conducted more than 60 
sensitivity analysis runs for the passenger car and light truck fleet 
analysis. The entire sensitivity analysis is presented in the FRIA, 
demonstrating the effect that different assumptions would have on the 
costs and benefits associated with the different regulatory 
alternatives. NHTSA's assessment of the final standards as compared to 
the alternative baseline ensures that the determination that the 
standards are maximum feasible is robust to the different futures 
represented by the reference baseline ZEV deployment and the lack of 
ZEV deployment to satisfy state ZEV standards and non-regulatory 
manufacturer ZEV deployment in the No ZEV alternative baseline, and 
thus also to scenarios in between these poles. While NHTSA considers 
dozens of sensitivity cases to measure the influence of specific 
parametric assumptions and model relationships, only a small number of 
them demonstrate meaningful impacts to net benefits under the different 
alternatives.\1445\
---------------------------------------------------------------------------

    \1445\ For purposes of this table, the IWG SC-GHG sensitivtiy 
case uses a 2.5% discount rate.
---------------------------------------------------------------------------

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BILLING CODE 4910-59-C
    The results of the sensitivity analysis runs suggest that 
relatively few metrics make major differences to cost and benefit 
outcomes, and the ones that do, act in relatively predictable ways. 
Some changes in values (fuel prices, removing ZEV, IRA tax credits) act 
on the reference baseline, increasing or reducing the amount of fuel 
economy improvements available for CAFE standards. Other changes in 
values (for example, fuel prices) affect benefits, and thus net 
benefits. However, NHTSA's determination of maximum feasible standards 
does not solely rely on net benefits. That said, it is notable that net 
benefits remain positive in the vast majority of sensitivity cases, 
including the most stringent EPCA constraints cases, for the standards 
being finalized in this notice, PC2LT002, and for the proposed 
standards, PC2LT4. NHTSA therefore disagrees with commenters that 
alleged not including EPCA

[[Page 52894]]

standard setting year constraints in model years other than the 
standard-setting years affected our decision.
    NHTSA is statutorily prohibited from considering the fuel economy 
of BEVs in determining maximum feasible stringency but notes in passing 
that the case changing the value of DOE's PEF reduces net benefits 
somewhat, although not significantly, and that changing assumptions 
about the value of electrification tax credits that reach consumers 
also changes net benefits slightly. However, because NHTSA cannot 
consider the fuel economy of BEVs in determining maximum feasible fuel 
economy standards, these are effects that happen only in the reference 
baseline of our analysis and are not considered in our determination. 
Moreover, regardless of net benefits, NHTSA believes that its 
conclusion would be the same that Alternative PC2LT002 is economically 
practicable, based on manufacturers' apparent ability to reach 
compliance in most model years, considering statutory constraints on 
technology available to be considered as well as planned redesign cycle 
constrains, as compared to Alternative PC2LT4 or PC1LT3.
    The Alliance created its own sensitivity run by modifying a number 
of model settings and inputs, including taking BEVs out of the 
reference baseline, setting PHEV electric operation to zero for all 
years, setting fine payments to zero, and otherwise keeping standard-
setting restrictions. The Alliance noted that compliance appeared much 
more difficult for a number of manufacturers' fleets under these 
settings and with these input assumptions. As explained in Section VI.A 
above, NHTSA modeled an alternative baseline and additional 
sensitivities similar to the Alliance's test, to evaluate the 
sensitivity of assumptions surrounding BEVs, including a no ZEV 
alternative baseline, a reduced ZEV compliance case (which allows for 
increased use of banked credits in modeling the ACC I program), and 
three cases that extend EPCA standard setting year constraints (no 
application of BEVs and no credit use) beyond years considered in the 
reference baseline.
    In the no ZEV alternative baseline, the industry, as a whole, 
overcomplies with the final standards in every year covered by the 
standards. The passenger car fleet overcomplies handily, and the light 
truck fleet overcomplies in model years 2027-2030, until model year 
2031 when the fleet exactly meets the standard. Individual 
manufacturers' compliance results are also much less dramatically 
affected than comments would lead one to believe; while some 
manufacturers comply with the 4 percent per year light truck stringency 
increases from the proposal without ZEV in the baseline, a majority of 
manufacturers comply in most or all years under the final light truck 
standards. In general, the manufacturers that have to work harder to 
comply with CAFE standards without ZEV in the baseline are the same 
manufacturers that have to work harder to comply with CAFE standards 
with ZEV in the reference baseline. For example, General Motors sees 
higher technology costs and civil penalties to comply with the CAFE 
standards over the five years covered by the standards; however, this 
is expected as they are starting from a lower baseline compliance 
position. However, General Motors seems to be the only outlier, and for 
the rest of the industry technology costs are low and civil penalty 
payments are nonexistent in many cases.
    Similar trends hold true for the EPCA standard setting year 
constraints cases. Examining the most restrictive case, which does not 
allow BEV adoption in response to CAFE standards in any year when the 
CAFE Model adds technology to vehicles (2023-2050, as 2022 is the 
baseline fleet year), the industry, as a whole, overcomplies in every 
year from model year 2027-2031, in both the passenger car and light 
truck fleets. Some manufacturers again struggle in individual model 
years or compliance categories, but the majority comply or overcomply 
in both compliance categories of vehicles. Again, General Motors is the 
only manufacturer that sees notable increases in their technology costs 
over the reference baseline, however their civil penalty payments are 
low, at under $500 million total over the five-year period covered by 
the new standards. Net benefits attributable to CAFE standards do 
decrease from the central analysis under the EPCA constraints case, but 
remain significantly positive. In addition, as discussed in more detail 
below, net benefits are just one of many factors considered when NHTSA 
sets fuel economy standards.
    These alternative baseline and sensitivity cases offer two 
conclusions. First, contrary to the Alliance's and other commenter's 
concerns, the difference between including BEVs for non-CAFE reasons 
and excluding them are not great--thus, NHTSA would make the same 
determination of what standards are maximum feasible under any of the 
analyzed scenarios.\1446\ NHTSA does not mean that it is considering 
the electric vehicles in these various baselines (and thus the fuel 
economy inherent in the BEVs they include or do not include) in 
determining the maximum feasible CAFE standards; NHTSA means instead 
that it developed an alternative baseline in response to comments and 
that the inclusion or exclusion of BEVs in the analytical reference 
baseline would not lead NHTSA to make a different decision on maximum 
feasible standards. And second, this lack of dispositive difference in 
the various baselines shows that the interpretive concerns raised by 
commenters, even if correct, would not lead to a different decision by 
NHTSA on the question of what is maximum feasible.
---------------------------------------------------------------------------

    \1446\ See RIA Chapter 9 for sensitivity run results.
---------------------------------------------------------------------------

    Finally, as discussed in Section IV.A, NHTSA accounts for the 
effects of other motor vehicle standards of the Government in its 
balancing, often through their incorporation into our regulatory 
reference baseline.\1447\ NHTSA believes that this approach accounts 
for these effects reasonably and appropriately. Some commenters 
requested that NHTSA ``keep pace'' with EPA's standards specifically, 
(i.e., that NHTSA should choose a more stringent alternative in the 
final rule), while other commenters requested that NHTSA set CAFE 
standards such that no additional investment in fuel economy-improving 
technologies would be necessary beyond what manufacturers intended to 
make to meet EPA's GHG standards (i.e., that NHTSA should choose a less 
stringent alternative in the final rule). NHTSA can only ``keep pace'' 
with EPA's standards (or government-wide transportation decarbonization 
plans, or even Executive Orders) to the extent permitted by statute, 
specifically to the extent permitted by our statutory restrictions on 
considering the fuel economy of BEVs in determining what levels of CAFE 
standards would be maximum feasible. Conversely, while NHTSA 
coordinates closely with EPA in developing and setting CAFE standards, 
as discussed above, even when the standards of the two programs are 
coordinated closely, it is still foreseeable that there could be 
situations in which different agencies' programs could be binding for 
different

[[Page 52895]]

manufacturers in different model years. This has been true across 
multiple CAFE rulemakings over the past decade. Regardless of which 
agency's standards are binding given a manufacturer's chosen compliance 
path, manufacturers will choose a path that complies with both 
standards, and in doing so, will still be able to build a single fleet 
of vehicles--even if it is not exactly the fleet that the manufacturer 
might have preferred to build. This remains the case with this final 
rule.
---------------------------------------------------------------------------

    \1447\ NHTSA has carefully considered EPA's standards by 
including the baseline (i.e., model years 2024-2026) CO2 
standards in our analytical baseline. Because the EPA and NHTSA 
final rules were developed in coordination jointly, and stringency 
decisions were made in coordination, NHTSA did not include EPA's 
final rule for model years 2027 and beyond CO2 standards 
in our analytical baseline for this final rule. The fact that EPA 
issued its final rule before NHTSA is an artifact of circumstance 
only.
---------------------------------------------------------------------------

    NHTSA continues to disagree that it would be a reasonable 
interpretation of Congress' direction to set ``maximum feasible'' 
standards, as some commenters might prefer, at the fuel economy level 
at which no manufacturer need ever apply any additional technology or 
spend any additional dollar beyond what EPA's standards, with their 
many flexibilities, would require. NHTSA believes that CAFE standards 
can still be consistent with EPA's GHG standards even if they impose 
additional costs for certain manufacturers, although NHTSA is, of 
course, mindful of the magnitude of those costs and believes that the 
preferred alternative would impose minimal additional costs, if any, 
above compliance with EPA's standards.
    Some commenters also asked NHTSA to set standards that ``keep 
pace'' with CARB's programs, i.e. to set standards that mandate BEVs or 
lead to a ban on ICEVs. As discussed above, NHTSA cannot mandate BEVs 
or ban ICEVs, due to the statutory restrictions in 49 U.S.C. 
32902(h).\1448\ NHTSA continues to believe that accounting for CARB's 
programs that have been granted a waiver by including them in the 
regulatory reference baseline is reasonable. NHTSA has not included 
CARB's ACC II program (which includes the ZEV program) as a legal 
requirement by including it in the No-Action Alternative, because it 
has not been granted a Clean Air Act preemption waiver. However, NHTSA 
did use ACC II levels of electrification as a proxy for the electric 
vehicle deployment that automakers have committed to executing, 
regardless of legal requirements. Modeling anticipated manufacturer 
compliance with ACC I and ACT and the additional electric vehicles that 
manufacturers have committed to deploy enables NHTSA to make more 
realistic projections of how the U.S. vehicle fleet will change in the 
coming years independent of CAFE standards, which is foundational to 
our ability to set CAFE standards that reflect the maximum feasible 
fuel economy level achievable through improvements to internal 
combustion vehicles. Likewise, by creating a more accurate projection 
of how manufacturers might modify their fleets even in the absence of 
new CAFE standards, we are better able to identify the effects of new 
CAFE standards, which is the task properly before us. If NHTSA could 
not account for the ACC I program and could not be informed about its 
reference baseline effects, then NHTSA could overestimate the 
availability of internal combustion engine vehicles that can be 
improved to meet potential new CAFE standards, and thus end up setting 
a fuel economy standard that requires an infeasible level of 
improvement. Moreover, as the No ZEV alternative baseline shows, the 
effect of including the ACC I program and additional electric vehicle 
deployment that manufacturers intend to implement in the reference 
baseline is simply to decrease costs and benefits attributable to 
potential future CAFE standards. Removing these electric vehicles from 
the reference baseline increases costs and benefits for nearly every 
alternative, but even so, we note that net benefits change relatively 
little for that alternative baseline, as shown in more detail in Table 
VI-43. While PC2LT4 looks slightly more net beneficial than PC2LT002 
under that case, it is relatively slightly, and it is not so great an 
effect as to change NHTSA's balancing of the statutory factors in this 
final rule. NHTSA continues to believe, even under this scenario, that 
PC2LT002 is maximum feasible for the rulemaking time frame.
---------------------------------------------------------------------------

    \1448\ NHTSA thus also cannot be part of any supposed strategy 
to force manufacturers to produce BEVs or consumers to purchase 
BEVs. On the compliance side of this equation, just as NHTSA cannot 
force manufacturers to use BEVs to comply, so NHTSA cannot force 
manufacturers not to use BEVs to comply (and instead improve the 
fuel economy of their ICEV models), contrary to the assertions of 
several industry commenters. Manufacturers are always free to use 
whatever technology they choose to meet the CAFE standards.
---------------------------------------------------------------------------

    Even though NHTSA is statutorily prohibited from considering the 
possibility that manufacturers would produce additional BEVs to comply 
with CAFE standards, and even though manufacturers have stated their 
intention to rely more and more heavily on those BEVs for compliance, 
CAFE standards still have an important role to play in meeting the 
country's ongoing need to conserve energy. CAFE standards can also 
ensure continued improvements in energy conservation by requiring 
ongoing fuel economy improvements even if demand for more fuel economy 
flags unexpectedly, or if other regulatory pushes change in unexpected 
ways. Saving money on fuel and reducing CO2 and other 
pollutant emissions by reducing fuel consumption are also important 
equity goals. As discussed by some commenters, fuel expenditures are a 
significant budget item for consumers who are part of lower-income and 
historically disadvantaged communities. By increasing fuel savings to 
consumers (given estimated effects on new vehicle costs), CAFE 
standards can help to improve equity. NHTSA believes, moreover, that 
the final CAFE standards will improve the affordability of new vehicles 
relative to the proposal, and will continue to preserve consumer 
choice, while still contributing to the nation's need to conserve 
energy and improve energy security.
    That said, NHTSA continues to acknowledge the statute-driven 
cognitive dissonance, and NHTSA's task in approaching the determination 
of maximum feasible standards is the same as ever, to evaluate 
potential future CAFE stringencies in light of statutory constraints. 
NHTSA has listened carefully to commenters and is establishing final 
standards that it believes are technologically feasible and 
economically practicable within the context of the statutory 
constraints. The rate of increase in the standards may be slower than 
in the last round of rulemaking, but NHTSA believes that is reasonable 
and appropriate given the likely state of the fleet by model year 
2027.\1449\ Consider, for example, the non-linear relationship between 
fuel economy and fuel consumption (in the absence of new technological 
innovations) as illustrated below:
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    \1449\ Moreover, if future information indicates that NHTSA's 
conclusions in this regard are incorrect, NHTSA always has authority 
to amend fuel economy as long as lead-time requirements are 
respected, if applicable. See 49 U.S.C. 32902(g).

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[[Page 52896]]

[GRAPHIC] [TIFF OMITTED] TR24JN24.261

    As fleet fuel economy improves, there are simply fewer further 
improvements to ICEs available to be made (in the absence of further 
technological innovation), and the amount of fuel consumers actually 
save is smaller, and the remaining available improvements are 
increasingly expensive. This is even more true given the statutory 
restrictions that NHTSA must observe, which precludes NHTSA from 
incorporating the set of technologies deployed in electric vehicles 
that is evolving most rapidly right now. CAFE standards can still help 
industry further improve internal combustion engine vehicles, and as 
such, based on all of the information contained in this record, NHTSA 
concludes that PC2LT002 represents the maximum feasible standards for 
passenger cars and light trucks in the model years 2027 to 2031 time 
frame.
    NHTSA also conducted an analysis using an alternative baseline, 
under which NHTSA removed not only the electric vehicles that would be 
deployed to comply with ACC I, but also those that would be deployed 
consistent with manufacturer commitments to deploy additional electric 
vehicles regardless of legal requirements, consistent with the levels 
under ACC II. NHTSA describes this as the ``No ZEV alternative 
baseline.'' Under the No ZEV alternative baseline, NHTSA generally 
found that benefits and costs attributable to the CAFE standards were 
higher than under the reference case baseline, and that net benefits 
were also higher. Removing some electric vehicles, as under the No ZEV 
alternative baseline, increases the share of other powertrains in the 
No Action alternative. The preferred alternative results in more SHEVs 
and fewer PHEVs than when compared to the reference baseline case. 
Relative to the reference baseline, total technology costs and civil 
penalties for the passenger car and light truck fleets increase 
somewhat under PC2LT002, but not by enough to alter NHTSA's conclusion. 
Chapter 8.2.7 of the FRIA presents these results in more detail. Based 
on these results, NHTSA concludes that it would continue to find 
PC2LT002 to be maximum feasible fuel economy level that manufacturers 
can achieve even under the No ZEV alternative baseline.
    NHTSA's conclusion, after consideration of the factors described 
below and information in the administrative record for this action, is 
that 2 percent increases in stringency for passenger cars for model 
years 2027-2031, 0 percent increases in stringency for light trucks in 
model years 2027-2028, and 2 percent increases in stringency for model 
years 2029-2031 (Alternative PC2LT002) are maximum feasible. EPCA 
requires NHTSA to consider four factors in determining what levels of 
CAFE standards (for passenger cars and light trucks) would be maximum 
feasible--technological feasibility, economic practicability, the 
effect of other motor vehicle standards

[[Page 52897]]

of the Government on fuel economy, and the need of the United States to 
conserve energy.
    ``Technological feasibility'' refers to whether a particular method 
of improving fuel economy is available for deployment in commercial 
application in the model year for which a standard is being 
established. The technological feasibility factor allows NHTSA to set 
standards that force the development and application of new fuel-
efficient technologies, recognizing that NHTSA may not consider the 
fuel economy of BEVs when setting standards. Given the statutory 
constraints under which NHTSA must operate, and constraining technology 
deployment to what is feasible under expected redesign cycles, NHTSA 
does not see a technology path to reach the higher fuel economy levels 
that would be required by the more stringent alternatives, in the time 
frame of the rulemaking. NHTSA's final rule (constrained) analysis 
illustrates that a number of manufacturers do not have enough 
opportunities to redesign enough vehicles during the rulemaking time 
frame in order to achieve the levels estimated to be required by the 
more stringent alternatives. NHTSA also finds that using the No ZEV 
alternative baseline would not change our conclusions regarding the 
technological feasibility of the various action alternatives--rather, 
it reinforces those conclusions. NHTSA therefore concludes that the 
final standards are technologically feasible, but the most stringent 
alternatives are not technologically feasible, considering redesign 
cycles, without widespread payment of penalties.
    ``Economic practicability'' has consistently referred to whether a 
standard is one ``within the financial capability of the industry, but 
not so stringent as to'' lead to ``adverse economic consequences, such 
as a significant loss of jobs or unreasonable elimination of consumer 
choice.''\1450\ While NHTSA is prohibited from considering the fuel 
economy of BEVs in determining maximum feasible CAFE standards, NHTSA 
does not believe that it is prohibited from considering the industry 
resources needed to build BEVs, and industry is adamant that the 
resource load it faces as part of this technological transition to 
electric vehicles is unprecedented. Specifically, NHTSA believes it can 
consider the reality that given the ongoing transition to electric 
vehicles, fuel economy standards set at a level that resulted in 
widespread payment of penalties rather than compliance would be 
counterproductive to the core aim of the statute we are implementing, 
which is improving energy conservation. Such widespread payment of 
penalties at the precise time when manufacturers are concentrating 
available resources on a transition to electrification which will 
itself dramatically improve fuel economy and energy conservation would 
be at cross purposes with the statute. Further, while NHTSA does not 
believe that economic practicability mandates that zero penalties be 
modeled to occur in response to potential future standards, NHTSA does 
believe that economic practicability cannot reasonably include the idea 
that high percentages of the cost of compliance would be attributed to 
shortfall penalties across a wide group of manufacturers, because 
penalties are not compliance. The number of manufacturers facing 
shortfalls (particularly in their imported car fleets) and the 
percentage of regulatory costs represented by civil penalties rapidly 
increase for the highest stringency scenarios considered, PC3LT5 and 
PC6LT8, such that at the highest stringency 43 percent of the 
regulatory cost is attributed to penalties and approximately three 
quarters of the 19 manufacturers are facing shortfalls. The three less 
stringent alternatives show only one manufacturer facing shortfalls for 
each of the alternatives PC2LT002, PC1LT3, and PC2LT4. Moreover, civil 
penalties represent higher percentages of regulatory costs under PC1LT3 
and PC2LT4 than under PC2LT002. Evaluating the alternatives against the 
No ZEV alternative baseline further reinforces these trends. Optimizing 
the use of resources for technology improvement rather than penalties 
suggests PC2LT002 as the best option of the three for the passenger car 
fleet. Considering this ratio as an element of economic practicability 
for purposes of this rulemaking, then, NHTSA believes that PC2LT002 
represents the least harmful alternative considered given the need for 
industry resources to be dedicated to the ongoing transition to 
electrification.
---------------------------------------------------------------------------

    \1450\ 67 FR 77015, 77021 (Dec. 16, 2002).
---------------------------------------------------------------------------

    ``The effect of other motor vehicle standards of the Government on 
fuel economy'' involves analysis of the effects of compliance with 
emission, safety, noise, or damageability standards on fuel economy 
capability, and thus on industry's ability to meet a given level of 
CAFE standards. In many past CAFE rulemakings, NHTSA has said that it 
considers the adverse effects of other motor vehicle standards on fuel 
economy. Because the EPA and NHTSA programs were developed in 
coordination, and stringency decisions were made in coordination, NHTSA 
has not incorporated EPA's CO2 standards for model years 
2027-2032 as part of the analytical reference baseline for this final 
rule's main analysis. The fact that EPA finalized its rule before NHTSA 
is an artifact of circumstance only. NHTSA recognizes, however, that 
the CAFE standards thus sit alongside EPA's light-duty multipollutant 
emission standards that were issued in March. NHTSA also notes that any 
electric vehicles deployed to comply with EPA's standards will count 
toward real-world compliance with these fuel economy standards. In this 
final rule, NHTSA's goal has been to establish regulations that achieve 
energy conservation per its statutory mandate and consistent with its 
statutory constraints, and that work in harmony with EPA's regulations 
addressing air pollution. NHTSA believes these standards meet that 
goal.
    NHTSA has consistently interpreted ``the need of the United States 
to conserve energy'' to mean ``the consumer cost, national balance of 
payments, environmental, and foreign policy implications of our need 
for large quantities of petroleum, especially imported petroleum.'' As 
discussed above, when considered in isolation, the more stringent 
alternatives better satisfy this objective, whether compared against 
the reference baseline or the No ZEV alternative baseline. However, 
taking the widespread penalty payment that is projected to occur under 
the more stringent alternatives into account, and the resulting 
diversion of resources from the electrification transition to penalty 
payments, the more stringent alternatives would not likely further 
energy conservation in implementation.
    In summary, when compared to either the reference case baseline or 
the No ZEV alternative baseline, NHTSA believes that the technology 
``available'' for manufacturers to comply under the statutory 
constraints, combined with the relatively few opportunities for vehicle 
redesigns, simply put the more stringent action alternatives out of 
reach for certain manufacturers during the rulemaking time frame and 
resulted in unacceptably high levels of penalty payments rather than 
fuel economy improvements. NHTSA further notes that these penalty 
payments would divert resources from the ongoing electrification 
transition, in a manner that would be at cross-purposes with the energy 
conservation aims of the statute. Finally, NHTSA finds that the 
economic practicability factor is not satisfied where penalty payments 
are projected to comprise such a high penalty payment levels would also 
reduce resources

[[Page 52898]]

available to manufacturers to invest in the transition to electric 
vehicles, which they have indicated they are undertaking and which will 
have very significant fuel economy benefits. NHTSA therefore concludes 
that PC2LT002 is maximum feasible for passenger cars and light trucks 
for MYs 2027-2031.
2. Heavy-Duty Pickups and Vans
    NHTSA has not set new HDPUV standards since 2016. The redesign 
cycles in this segment are slightly longer than for passenger cars and 
light trucks, roughly 6-7 years for pickups and roughly 9 years for 
vans.\1451\ To our knowledge, technology for pickups in this segment 
has been relatively slow to advance compared to in the light truck 
segment, and there are still no hybrid HD pickups. That said, 
electrification is beginning to appear among the vans in this segment, 
perhaps especially among vans typically used for deliveries,\1452\ and 
under NHTSA's distinct statutory authority for setting HDPUV standards, 
expanding BEV technologies are part of NHTSA's standard setting 
consideration. The Ford E-Transit, for example, is based on the Mach-E 
platform and uses similar battery architecture; \1453\ other 
manufacturers have also shown a willingness to transition to electric 
vans and away from conventional powertrains.\1454\ NHTSA is aware that 
some historic light truck applications now being offered as BEVs may be 
heavy enough to fall outside the light truck segment and into the HDPUV 
segment,\1455\ but NHTSA expects manufacturers to find strategies to 
return them to the CAFE light truck fleet in the coming years. This 
could include development in battery design or electrified powertrain 
architecture that could reduce vehicle weight. The vehicles in these 
segments are purpose-built for key applications and we expect 
manufacturers will cater electrified offerings for businesses that 
maximize benefits in small volumes. However, until these technologies 
materialize, NHTSA assumes in its analysis there will continue to be 
`spill-over' of vehicles that exist as edge cases, and that they will 
count toward HDPUV compliance.
---------------------------------------------------------------------------

    \1451\ See TSD Chapter 2.2.1.7. HDPUVs have limited makes and 
models. Assumptions about their refresh and redesign schedules have 
an outsized impact on our modeling of HDPUVs, where a single 
redesign can have a noticeable effect on technology penetration, 
costs, and benefits.
    \1452\ North American Council for Freight Efficiency (NACFE). 
2022. Electric Trucks Have Arrived: The Use Case For Vans and Step 
Vans. Available at: https://nacfe.org/research/run-on-less-electric/#vans-step-vans. (Accessed: Feb. 28, 2024).
    \1453\ Martinez, M. 2023. Ford to Sell EVs With 2 Types of 
Batteries, Depending On Customer Needs. Automotive News. Last 
revised: Mar. 5, 2023. Available at: https://www.autonews.com/technology/ford-will-offer-second-ev-battery-type-lower-cost-and-range. (Accessed: Feb. 28, 2024).
    \1454\ Hawkins, T. 2023. Mercedes-Benz eSprinter Unveiled As 
BrightDrop Zevo Rival. GM Authority. Available at: https://gmauthority.com/blog/2023/02/mercedes-benz-esprinter-unveiled-as-brightdrop-zevo-rival/. (Accessed: Feb. 28, 2024).
    \1455\ Gilboy, J. 2023.Massive Weight Could Push Past EPA's 
Light-Duty Rules. The Drive. Available at: https://www.thedrive.com/news/the-2025-ram-1500-revs-massive-weight-could-push-past-epas-light-duty-rules. (Accessed Feb. 27, 2024); See also Arbelaez, R. 
2023. IIHS Insight. As Heavy EVs Proliferate, Their Weight May Be a 
Drag on Safety. Available at: https://www.iihs.org/news/detail/as-heavy-evs-proliferate-their-weight-may-be-a-drag-on-safety. 
(Accessed Feb. 27, 2024).
---------------------------------------------------------------------------

    NHTSA proposed HDPUV standards that would increase at 10 percent 
per year, each year, for the 3-year periods of model years 2030-2032 
and model years 2033-2035 (the preferred alternative in the proposal 
was designated as ``HDPUV10''). NHTSA acknowledged in the proposal that 
more stringent standards, as represented by HDPUV14, appeared to be 
potentially appropriate, cost-effective, and technologically feasible. 
However, NHTSA was concerned that the nature of the HDPUV fleet--with 
many fewer different models than the passenger car and light truck 
fleets over which improvements could be spread--could lead to 
significant negative implications if certain of NHTSA's assumptions 
turned out to be incorrect, such as assumptions about battery costs or 
future gasoline prices, significantly raising costs and reducing 
benefits.\1456\ Significantly different cost and benefit assumptions 
can change both the cost-effectiveness and the appropriateness of 
potential new HDPUV standards. NHTSA therefore proposed HDPUV10 rather 
than HDPUV14 out of an abundance of caution given the wish to support 
and not hinder the technological transition anticipated to occur 
leading up to and during the rulemaking time frame.\1457\
---------------------------------------------------------------------------

    \1456\ See 88 FR at 56358 (Aug. 17, 2023).
    \1457\ NHTSA reminds readers that 49 U.S.C. 32902(h) does not 
apply to HDPUV standards set under 32902(k) and (b), and thus that 
NHTSA may, in setting HDPUV standards, consider the reality of the 
electric vehicle transition.
---------------------------------------------------------------------------

    Some commenters encouraged NHTSA to finalize more stringent HDPUV 
standards. MPCA commented that NHTSA should finalize standards at least 
as stringent as proposed, because more stringent standards would reduce 
fossil fuel use, save consumers money, and be better for the 
environment.\1458\ A number of commenters urged NHTSA to finalize more 
stringent standards on the basis that the ``appropriate'' factor 
includes ``a variety of factors related to energy conservation, 
including average estimated fuel savings to consumers, average 
estimated total fuel savings, benefits to U.S. energy security, and 
environmental benefits, including avoided emissions of criteria 
pollutants, air toxics, and CO2 emissions,'' stating that 
all of these point toward higher standards.\1459\ Commenters also noted 
environmental justice benefits, and that reductions in consumer fuel 
costs ``make a meaningful difference to low-income households and 
households of color that generally spend a greater proportion of their 
income on transportation costs.'' \1460\ Public Citizen focused on 
public health concerns, stating that ``Vehicle pollution is a major 
contributor to the unhealthy air pollution levels affecting more than 1 
in 3 Americans, which is linked to numerous health problems and 
thousands of premature deaths. Heavy duty vehicles are particularly 
problematic. Their fumes create ``diesel death zones'' with elevated 
levels of asthma rates and cancer risks.'' \1461\ Ceres commented that 
it had found that HDPUV14 would be best for the competitiveness of the 
auto industry.\1462\
---------------------------------------------------------------------------

    \1458\ MPCA, Docket No. NHTSA-2023-0022-60666, at 1.
    \1459\ NESCAUM, Docket No. NHTSA-2023-0022-57714, at 4; SELC, 
Docket No. NHTSA-2023-0022-60224, at 4, 6; Public Citizen, Docket 
No. NHTSA-2023-0022-57095, at 1; Colorado State Agencies, Docket No. 
NHTSA-2023-0022-57625, at 2; OCT, Docket No. NHTSA-2023-0022-51242, 
at 2-4; BICEP Network, Docket No. NHTSA-2023-0022-61135, at 1.
    \1460\ SELC, Docket No. NHTSA-2023-0022-60224, at 4, 6; Public 
Citizen, Docket No. NHTSA-2023-0022-57095, at 1; Colorado State 
Agencies, Docket No. NHTSA-2023-0022-57625, at 2; OCT, Docket No. 
NHTSA-2023-0022-51242, at 2-4; BICEP Network, Docket No. NHTSA-2023-
0022-61135, at 1.
    \1461\ Public Citizen, Docket No. NHTSA-2023-0022-57095, at 2.
    \1462\ Ceres, Docket No. NHTSA-2023-0022-28667, at 1.

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[[Page 52899]]

    Tesla and ZETA stated that HDPUV14 is best for the environment, 
energy security, and has the largest net benefits.\1463\ Rivian also 
commented that NHTSA should finalize HDPUV14, because ``(1) NHTSA shows 
that, of the alternatives considered, HDPUV14 delivers the greatest net 
benefits; (2) The agency's analysis acknowledges that HDPUV14 is 
feasible; (3) NHTSA does not appear to account for Rivian's Class 2b 
commercial van or the impact of the Advanced Clean Fleets (`ACF') 
rule.'' \1464\ Several commenters argued that NHTSA should finalize 
more stringent standards because they would be technologically feasible 
and cost-effective, and because NHTSA is allowed to consider BEVs, 
PHEVs, FCEVs, and other technologies for HDPUV.\1465\
---------------------------------------------------------------------------

    \1463\ Tesla, Docket No. NHTSA-2023-0022-60093, at 14; ZETA, 
Docket No. NHTSA-2023-0022-60508, at 1.
    \1464\ Rivian, Docket No. NHTSA-2023-0022-59765, at 11.
    \1465\ NESCAUM, Docket No. NHTSA-2023-0022-57714, at 4; Public 
Citizen, Docket No. NHTSA-2023-0022-57095, at 2; OCT, Docket No. 
NHTSA-2023-0022-51242, at 3.
---------------------------------------------------------------------------

    IPI agreed that HDPUV14 was clearly the most ``appropriate,'' and 
argued that NHTSA should not have proposed HDPUV10 based only on 3 of 
dozens of sensitivities, without explaining why those are the relevant 
or likely ones or reporting net benefits under those sensitivities. IPI 
stated that NHTSA should have conducted a Monte Carlo analysis for 
HDPUV instead. IPI also argued that NHTSA's cost estimates for the 
proposal and alternatives were inflated because NHTSA holds 
manufacturer fleet share fixed in response to the standards.\1466\
---------------------------------------------------------------------------

    \1466\ IPI, Docket No. NHTSA-2023-0022-60485, at 12-16. NHTSA 
discusses the topic of fleet share in more detail in Section III, 
but notes here that IPI's suggested approach is currently not 
congruent with our analytical structure and the information we have 
from manufacturers.
---------------------------------------------------------------------------

    Some commenters supported standards closer to the proposal. Some 
commenters supported HDPUV10 as maximum feasible.\1467\ The Alliance 
stated that HDPUV10 could be acceptable, but only through model year 
2032, because of the uncertainty that NHTSA had discussed in the NPRM, 
especially regarding consumer acceptance and infrastructure 
development.\1468\ The Alliance further stated that if NHTSA must set 
standards through model year 2035, then standards should increase only 
4 percent per year for model years 2033-2035, or 7 percent per each 
year for model years 2030-2035.\1469\ MEMA agreed that 10 percent per 
year increases in model years 2033-2035 were challenging and stated 
that NHTSA should ``more carefully analyze the assumptions and 
conditions needed.''\1470\
---------------------------------------------------------------------------

    \1467\ Arconic, Docket No. NHTSA-2023-0022-48374, at 3; DC 
Government Agencies, Docket No. NHTSA-2023-0022-27703, at 1.
    \1468\ The Alliance, Docket No. NHTSA-2023-0022-60652, Appendix 
F, at 63.
    \1469\ The Alliance, Docket No. NHTSA-2023-0022-60652, Appendix 
F, at 63.
    \1470\ MEMA, Docket No. NHTSA-2023-0022-59204-A1, at 3.
---------------------------------------------------------------------------

    Other commenters argued that the proposed standards were too 
stringent,\1471\ for a variety of reasons. NTEA commented that NHTSA 
should finalize the No-Action alternative because today's trucks are 
already 98 percent cleaner than pre-2010 trucks, and making trucks more 
expensive will discourage consumers from buying them.\1472\ Valero 
commented that the proposed fuel efficiency standards for CI engines 
are beyond maximum feasible and reduce the number of CI HDPUV models to 
zero by model year 2031. Valero stated that NHTSA also eliminates any 
diesel engine hybridization from the model entirely, which is neither 
technologically feasible nor economically practicable as not a single 
CI HDPUV in the model year 2030 analysis fleet would meet the proposed 
standards without becoming a BEV or a gasoline SHEV.\1473\ Valero 
concluded that ``The rule effectively kills diesel engines for eternity 
without ever once addressing whether NHTSA even has the legal authority 
to work such a huge transformation on the transportation sector in the 
United States--clearly a question of ``vast economic and political 
significance,'' and argued that NHTSA has recognized that under all its 
scenarios, its modeling has reduced ``the use of ICE technology . . . 
to only a few percentage points'' with most of the new technology 
penetration coming from BEVs. The baseline HDPUV fleet had 0% hybrids 
and only 6% BEVs. This is nothing short of a momentous shift in only 8 
years.'' \1474\ Elsewhere, Valero argued that the proposed standards 
relied entirely on changes in the reference baseline, and that the 
proposed standards themselves contribute nothing (i.e., that the 
reference baseline assumptions are excessive).\1475\ API argued that 
NHTSA does not have authority to impose standards that effectively 
require a portion of the fleet to be BEV.\1476\ AVE stated that NHTSA 
should align with EPA's rule.\1477\
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    \1471\ See, e.g., Heritage Foundation, Docket No. NHTSA-2023-
0022-61952, at 2; The Alliance, Docket No. NHTSA-2023-0022-60652, 
Attachment 2, at 13.
    \1472\ NTEA--The Work Truck Association, Docket No. NHTSA-2023-
0022-60167, at 2.
    \1473\ Valero, Docket No. NHTSA-2023-0022-58547, Attachment A, 
at 11, and Attachment G, at 9.
    \1474\ Valero, Docket No. NHTSA-2023-0022-58547, Attachment A, 
at 11.
    \1475\ Valero, Docket No. NHTSA-2023-0022-58547, Attachment G, 
at 1.
    \1476\ API, Docket No. NHTSA-2023-0022-60234, at 4.
    \1477\ AVE, Docket No. NHTSA-2023-0022-60213, at 2.
---------------------------------------------------------------------------

    RFA et al. 2 argued that NHTSA is required to analyze critical 
mineral supply and charging infrastructure as part of technological 
feasibility because the standards are based on the reference baseline, 
and NHTSA had not proven that the reference baseline is feasible even 
though ``comparing regulatory alternatives to a baseline is 
customary.'' \1478\ These commenters also stated that NHTSA did not 
address consumer demand for BEVs.\1479\ RVIA expressed concern that 
motor homes would not recoup the cost increases estimated for the 
proposed standards because they are only driven sparingly.\1480\
---------------------------------------------------------------------------

    \1478\ RFA et al. 2, Docket No. NHTSA-2023-0022-57625, at 16-18.
    \1479\ RFA et al. 2, Docket No. NHTSA-2023-0022-57625, at 16-18.
    \1480\ RVIA, Docket No. NHTSA-2023-0022-51462, at 2. As 
discussed above, motor homes fall under NHTSA's vocational vehicle 
standards per the Phase 2 HD rule, and therefore they are not 
subject to the HDPUV standards being finalized as part of this 
rulemaking.
---------------------------------------------------------------------------

    The following text will walk through the three statutory factors in 
more detail and discuss NHTSA's decision-making process more 
thoroughly. The balancing of factors presented here represents NHTSA's 
thinking at the present time, based on all of the information presented 
in the public comments and in the record for this final rule.
    For the reader's reference, the regulatory alternatives under 
consideration for HDPUVs are presented again below:

[[Page 52900]]

[GRAPHIC] [TIFF OMITTED] TR24JN24.262

    As discussed in Section VI.A, the three statutory factors for HDPUV 
standards are similar to and yet somewhat different from the four 
factors that NHTSA considers for passenger car and light truck 
standards, but they still modify ``feasible'' in ``maximum feasible.'' 
NHTSA also interprets the HDPUV factors as giving us broad authority to 
weigh potentially conflicting priorities to determine maximum feasible 
standards. It is firmly within NHTSA's discretion to weigh and balance 
the HDPUV factors in a way that is technology-forcing, although NHTSA 
would find a balancing of the factors in a way that would require the 
application of technology that will not be available in the lead time 
provided by this final rule, or that is not cost-effective, to be 
beyond maximum feasible.
    That said, because HDPUV standards are set in accordance with 49 
U.S.C. 32902(k), NHTSA is not bound by the 32902(h) factors when it 
determines maximum feasible HDPUV standards.\1481\ That means that 
NHTSA may, and does, consider the full fuel efficiency of BEVs and 
PHEVs, and that NHTSA may consider the availability and use of 
overcompliance credits, in this final rule. These considerations thus 
play a role in NHTSA's balancing of the HDPUV factors, as described 
below.
---------------------------------------------------------------------------

    \1481\ 49 U.S.C. 32902(h) clearly states that it applies only to 
actions taken under subsections (c), (f), and (g) of 49 U.S.C. 
32902.
---------------------------------------------------------------------------

    In evaluating whether HDPUV standards are appropriate, NHTSA could 
begin by seeking to isolate the effects of new HDPUV standards from 
NHTSA, by understanding effects in the industry that appear to be 
happening for reasons other than potential new NHTSA regulations. NHTSA 
explained in Chapter 1.4.1 of the TSD that the No-Action Alternative 
for HDPUV accounts for existing technology on HDPUVs, technology 
sharing across platforms, manufacturer compliance with existing HDPUV 
standards from NHTSA and EPA (i.e., those standards set in the Phase 2 
final rule in 2016 for model year 2021 to model year 2029), 
manufacturer compliance with California's ACT and ZEV programs, and 
foreseeable voluntary manufacturer application of fuel efficiency-
improving technologies (whether because of tax credits or simply 
because the technologies are estimated to pay for themselves within 30 
months). One consequence of accounting for these effects in the No-
Action Alternative is that the effects of the different regulatory 
alternatives under consideration appear less cost-beneficial than they 
would otherwise. Nonetheless, NHTSA believes that this is reasonable 
and appropriate to better ensure that NHTSA has the clearest possible 
understanding of the effects of the decision being made, as opposed to 
the effects of many things that will be occurring simultaneously. All 
estimates of effects of the different regulatory alternatives presented 
in this section are thus relative to the No-Action Alternative.
    GM stated that it believed the proposed model years 2030-2032 HDPUV 
standards were appropriate, and it suggested that NHTSA reconsider the 
model years 2033-2035 standards at a later time, to determine whether 
they were still appropriate ``consider[ing] availability, reliability, 
and cost of zero emissions vehicle fuel and refueling infrastructure, 
and consider[ing] demand for zero emission vehicles as the Clean 
Commercial Vehicle tax credits under the Inflation Reduction Act 
expire.'' \1482\ NHTSA is setting HDPUV standards through model year 
2035 for the reasons discussed in Section VI.A, but agrees that it 
always has authority to reconsider standards based on new information, 
as long as statutory lead time requirements are met.
---------------------------------------------------------------------------

    \1482\ GM, Docket No. NHTSA-2023-0022-60686, at 7.
---------------------------------------------------------------------------

    Other information that are relevant to whether HDPUV standards are 
appropriate could include how much energy we estimate they would 
conserve; the magnitude of emissions reductions; possible safety 
effects, if any; and estimated effects on sales and employment. NHTSA 
agrees with commenters that ``appropriate'' encompasses many different 
concerns related to energy conservation and that reducing fuel use and 
emissions are important goals of EPCA/EISA. Simultaneously, NHTSA bears 
in mind that HDPUV is a much smaller fleet (with much lower total VMT) 
than passenger cars and light trucks, so while we seek to conserve 
energy with the HDPUV standards, the effects are inevitably relatively 
small compared to the effects resulting from CAFE standards.
    In terms of energy conservation, Alternative HDPUV14 would conserve 
the most energy and produce the greatest reduction in fuel expenditure, 
as shown below:

[[Page 52901]]

[GRAPHIC] [TIFF OMITTED] TR24JN24.263

[GRAPHIC] [TIFF OMITTED] TR24JN24.264

[GRAPHIC] [TIFF OMITTED] TR24JN24.265

    Assuming that benefits to energy security correlate directly with 
fuel consumption avoided, Alternative HDPUV14 would also contribute the 
most to improving U.S. energy security. The discussion about energy 
security effects of passenger car and light truck standards applies for 
HDPUVs as well.
    In terms of environmental benefits, Alternative HDPUV14 is also 
estimated to be the most beneficial for most metrics:

[[Page 52902]]

[GRAPHIC] [TIFF OMITTED] TR24JN24.266

    The criteria pollutant effects demonstrate that increased 
electrification (which increases faster under more stringent 
alternatives) reduces vehicle-based emissions while increasing upstream 
emissions due to increased demand for electricity. SELC commented that 
``The significant environmental, public health, and equity impacts of 
improved fuel [efficiency] must be given substantial weight in setting 
. . . HDPUV standards.'' \1483\ NHTSA agrees that these are important 
effects and weighs them carefully in determining maximum feasible HDPUV 
standards.
---------------------------------------------------------------------------

    \1483\ SELC, Docket No. NHTSA-2023-0022-60224, at 1.
---------------------------------------------------------------------------

    Some other effects are fairly muted, possibly due to the relatively 
small size of the HDPUV fleet. The safety effects associated with the 
HDPUV alternatives are extremely small, too small to affect our 
decision-making in this final rule. Readers may refer to Chapter 
8.3.4.5 of the FRIA for specific information. For sales and employment, 
readers may refer to Chapter 8.3.2.3 of the FRIA for more specific 
information, but there is very little difference in sales between HDPUV 
alternatives, less than one percent relative to the No-Action 
Alternatives. Employment effects are of similar relative magnitude; 
HDPUV108, HDPUV10, and HDPUV14 all subtract very slightly from the 
reference baseline employment utilization, as sales declines produce a 
small decrease in labor utilization that are not offset by technology 
effects (i.e., that development and deployment of new fuel-efficient 
technologies increases demand for labor). Estimated safety, sales, and 
employment effects are thus all too small to be dispositive.
    In evaluating whether HDPUV standards are cost-effective, NHTSA 
could consider different ratios of cost versus the primary benefits of 
the standards, such as fuel saved and GHG emissions avoided. Table VI-
48 and Table VI-49 include a number of informative metrics of the HDPUV 
alternatives relative to the No-Action Alternative. None of the action 
alternatives emerges as a clearly

[[Page 52903]]

superior option when evaluated along this dimension. When considering 
aggregate societal effects, as well as when narrowing the focus to 
private benefits and costs, HDPUV108 produces the highest benefit-cost 
ratios, although HDPUV4 is also the most cost-effective under several 
metrics.
[GRAPHIC] [TIFF OMITTED] TR24JN24.267

[GRAPHIC] [TIFF OMITTED] TR24JN24.268

    Because NHTSA considers multiple discount rates in its analysis, 
and because analysis also includes multiple values for the SC-GHG, we 
also estimate the following cumulative values for each regulatory 
alternative:

[[Page 52904]]

[GRAPHIC] [TIFF OMITTED] TR24JN24.269

    E.O. 12866 and Circular A-4 direct agencies to consider maximizing 
net benefits in rulemakings whenever possible and consistent with 
applicable law. Because it can inform NHTSA's consideration of the 
statutory factors and because it is directed by E.O. 12866 and OMB 
guidance, NHTSA does evaluate and consider net benefits associated with 
different potential future HDPUV standards. As Table VI-50 shows, our 
analysis suggests that HDPUV14 produces the largest net benefits, 
although we note that the step from both HDPUV10 and HDPUV108 to 
HDPUV14 results in a substantial jump in total costs.
    Our analysis also suggests that all alternatives will result in 
fuel savings for consumers, and that all alternatives will be cost-
effective under nearly every listed metric of comparison and at either 
discount rate. Overall, avoided climate damages are lower and with each 
alternative the ratio of cost to benefits for this metric decreases due 
to increased cost and diminishing climate benefits. As discussed 
earlier, the HDPUV fleet is a smaller fleet compared to passenger cars 
and light trucks, and so for a manufacturer to meet standards that are 
more or less stringent, they must transition a relatively larger 
portion of that smaller fleet to new technologies. Thus, under some 
comparisons, HDPUV108 appears the most cost-effective; under others, 
HDPUV4 appears the most cost-effective. ZETA commented that NHTSA 
should finalize HDPUV14 as ``a feasible and optimal way to cost-
effectively improve fleet fuel efficiency and reduce petroleum 
consumption,'' because it would maximize fuel savings while providing 
regulatory certainty to the supply chain.\1484\ ICCT commented that 
costs were likely lower for many HDPUV technologies than NHTSA had 
modeled, and stated that many gasoline and diesel-efficiency improving 
technologies have yet to be broadly implemented among HDPUVs.\1485\ 
ACEEE argued that the IRA would hasten learning cost reductions for 
electric HDPUVs and thus more stringent final standards would be cost-
effective if these cost reductions were reflected in NHTSA's 
analysis.\1486\ NHTSA believes that the costs for HDPUV technologies, 
including BEVs, are based on the best information available to the 
agency at the present time, and thus are reasonable and accurate for 
the rulemaking time frame. While HDPUV14 may maximize fuel savings, 
NHTSA's information presented in the tables above does not support 
ZETA's assertion that it is the most cost-effective by all metrics.
---------------------------------------------------------------------------

    \1484\ ZETA, Docket No. NHTSA-2023-0022-60508, at 28.
    \1485\ ICCT, Docket No. NHTSA-2023-0022-54064, at 25.
    \1486\ ACEEE, Docket No. NHTSA-2023-0022-60684, at 8.
---------------------------------------------------------------------------

    As discussed above for passenger car and light truck standards, 
while maximizing net benefits is a valid decision criterion for 
choosing among alternatives, provided that appropriate consideration is 
given to impacts that cannot be monetized, it is not the only 
reasonable decision perspective. We recognize that what we include in 
our cost-benefit analysis affects our estimates of net benefits. We 
also note that important benefits cannot be monetized--including the 
full health and welfare benefits of reducing climate and other 
pollution, which means that the benefits estimates are underestimates. 
Thus, given the uncertainties associated with many aspects of this 
analysis, NHTSA does not rely solely on net benefit maximization, and 
instead considers it as one piece of information that contributes to 
how we balance the

[[Page 52905]]

statutory factors, in our discretionary judgment.
    In evaluating whether HDPUV standards are technologically feasible, 
NHTSA could consider whether the standards represented by the different 
regulatory alternatives could be met using technology expected to be 
available in the rulemaking time frame.
    On the one hand, the HDPUV analysis employs technologies that we 
expect will be available, and our analysis suggests widespread 
compliance with all regulatory alternatives, which might initially 
suggest that technological feasibility is not at issue for this final 
rule. At the industry level, technology penetration rates estimated to 
meet the different regulatory alternatives in the different MYs would 
be as follows:
BILLING CODE 4910-59-P

[[Page 52906]]

[GRAPHIC] [TIFF OMITTED] TR24JN24.270

BILLING CODE 4910-59-C

[[Page 52907]]

    As Table VI-51 \1487\ shows, it is immediately clear that most 
technology application between now and model year 2038 would be 
occurring as a result of reference baseline efforts and would not be an 
effect of new NHTSA standards. Under the reference baseline, as early 
as model year 2033, nearly 80 percent of the fleet would be electrified 
(including SHEV, PHEV, and BEV). As mentioned above, Valero argued that 
the proposed standards relied entirely on changes in the reference 
baseline, and that the proposed standards themselves contributed 
nothing (i.e., that the reference baseline assumptions are excessive). 
NHTSA agrees that the reference baseline technology penetration rates 
were high for the proposal and remain high for the final rule. 
Nevertheless, NHTSA believes that these reference baseline technology 
penetration rates, while high, are feasible and the best available 
projection of reference case technology deployment in this time frame, 
given projected trends for HD vans in particular (vans are roughly 40 
percent of the HDPUV fleet during the rulemaking time frame). Due to 
the relatively small number of models in the HDPUV fleet as compared to 
the passenger car and light truck fleets, just a few models becoming 
electrified can have large effects in terms of the overall fleet. NHTSA 
also recognizes that these reference baseline technology penetration 
rates result from our assumptions about battery costs and available tax 
credits, among other things.\1488\ Some commenters argued that NHTSA 
was itself obligated to prove that sufficient U.S.-derived critical 
minerals, sufficient vehicle charging infrastructure, and sufficient 
consumer demand for BEV HDPUVs would exist by the rulemaking time 
frame, in order for NHTSA to establish that the HDPUV standards were 
technologically feasible. NHTSA continues to believe that it is 
reasonable to assume that critical minerals and charging infrastructure 
will be sufficient to support BEV volume assumptions in the analysis by 
the rulemaking time frame. NHTSA bases this belief on the U.S. 
government sources cited in TSD Chapter 6.2.4 and discussed above in 
Section VI.A.5.a(4)(d) of this preamble. NHTSA agrees with the 
conclusion of these sources that the BIL will contribute significantly 
toward resolving these concerns by the rulemaking time frame. With 
regard to consumer demand for BEVs, NHTSA believes that it is evident 
from sales that consumer demand continues to grow, especially for the 
van segment of the HDPUV fleet, and that the IRA tax credits will 
continue to encourage consumer demand as battery costs continue to 
decrease and cost parity is eventually reached.
---------------------------------------------------------------------------

    \1487\ The list of these engines is discussed in TSD Chapter 
3.1.
    \1488\ All EVs have zero emissions and are asisgned the fuel 
consumption test group result to a value of zero gallons per 100 
miles per 49 CFR 535.6(a)(3)(iii).
---------------------------------------------------------------------------

    Against the backdrop of the reference baseline, HDPUV4 would 
require no additional technology at all, on average, which explains why 
the per-vehicle fuel cost savings associated is low. HDPUV108 could be 
met with an additional 4.4 percent increase in PHEVs in MY2038. HDPUV10 
could be met with an additional 6 percent increase in PHEVs, and very 
slight increases in BEVs in the later years rulemaking time frame. 
HDPUV14 could be met with an additional 11-12 percent increase in 
PHEVs, an additional 6 percent increase in BEVs, and a 13 percent 
decrease in advanced engines by model year 2038.
    As in the analysis for passenger cars and light trucks, however, 
NHTSA finds manufacturer-level results to be particularly informative 
for this analysis. Of the five manufacturers modeled for HDPUV, 
Mercedes-Benz, Nissan, and Stellantis would be able to meet all 
regulatory alternatives with reference baseline technologies--only Ford 
and GM show any activity in response to any of the regulatory 
alternatives. HDPUV14 pushes Ford to increase volumes of PHEVs and 
BEVs. Alternatives more stringent than HDPUV4 result in higher 
penetration rates of PHEVs and BEVs for GM, with most change coming 
from PHEVs, especially for HDPUV108 and HDPUV10.
BILLING CODE 4910-59-P

[[Page 52908]]

[GRAPHIC] [TIFF OMITTED] TR24JN24.271

BILLING CODE 4910-59-C
    Again, it is clear that a great deal of technology application is 
expected in response to the reference baseline, as evidenced by the 
fact that technology penetration rates for most manufacturers do not 
change between alternatives. For example, Stellantis is assumed to go 
from 0 percent strong hybrids in its

[[Page 52909]]

HDPUV fleet in model year 2030 to 47 percent strong hybrids by model 
year 2038 under each regulatory alternative, which means that the 
regulatory alternatives are not influencing that decision--because if 
they were, we would see technology differences between the 
alternatives. Ford and GM show more responsiveness to the alternatives, 
especially for stringencies beyond HPDUV4. Technology solutions for 
Ford are similar for HDPUV108 and HDPUV10, up to HDPUV14, at which 
point a larger portion of the fleet is converted to BEVs to meet the 
more stringent standards. GM shows more movement across alternatives, 
but NHTSA continues to suspect that this may be an artifact of our 
relatively smaller data for the HDPUV fleet. It is very possible that 
the apparent increase in PHEVs and BEVs and decrease in advanced engine 
rates for GM could be due to the fact that technologies in the 
reference baseline fleet are based on Phase 1 standards and (for 
purposes of the analysis) manufacturers have not started adopting 
technologies to meet Phase 2 standards.
    We note also that NHTSA is allowed to consider banked 
overcompliance credits for the HDPUV fleet,\1489\ as well as the full 
fuel efficiency of AFVs like BEVs and PHEVs.\1490\ Combined with the 
fact that BEVs and the electric operation of PHEVs are granted 0 gal/
100 miles fuel consumption for compliance purposes, our analysis shows 
that even with one redesign we see large improvements in the fleet even 
at low volumes, because manufacturers have relatively fewer models, and 
lower volumes of those models, as compared to the passenger car/light 
truck fleet--so ``20 percent increase in BEVs'' could be a single model 
being redesigned in a given model year. While the analysis does show 
higher stringency alternatives as being slightly more challenging to GM 
in particular, nothing in EPCA/EISA suggests that for HDPUV standards, 
``technological feasibility'' should be interpreted as ``every 
manufacturer meets the standards without applying additional 
technology.'' Based on the information before us, NHTSA cannot conclude 
that technological feasibility is necessarily a barrier to choosing any 
of regulatory alternatives considered in this final rule.
---------------------------------------------------------------------------

    \1489\ See Manufacturers tab in the CAFE Model Input file 
market_data_HDPUV_ref.xlsx for HDPUV banked credits.
    \1490\ 49 CFR 535.6(a)(3)(iii).
---------------------------------------------------------------------------

    Valero commented that the proposed standards were not 
technologically feasible because NHTSA was ``killing diesel engines'' 
by not assuming that CI engines could be paired with SHEV or PHEV 
technology in our analysis. In response, we reiterate that our 
standards are performance-based, and that they do not serve as an edict 
to industry about how our standards must be met. NHTSA's technology 
tree did not simulate CI engines being paired with SHEV or PHEV 
technology, but that in no way precludes manufacturers from using that 
technology, nor does NHTSA mean to say that NHTSA does not believe that 
CI engines could be used with SHEV or PHEV systems. Instead, this 
technology decision was a simplifying assumption, as discussed in the 
TSD, where NHTSA decides how to represent a technology being applied 
but always recognizes that there will likely be a diverse 
representation of that technology in the actual vehicle fleet. Other 
similar simplifying assumptions include assuming future SHEVs will only 
be of the P2 variety in the future, because that was the specific 
technology form used to represent the technology in our analysis, when 
of course SHEV technology may be more diverse than that, or that all 
forced induction engines will only use exhaust-based turbo systems, 
with no superchargers. NHTSA therefore disagrees with Valero that the 
CI standard compels the elimination of CI engines and disagrees that 
the CI standard somehow prohibits SHEV and PHEV powertrains from using 
CI engines. The technology path that NHTSA shows to compliance is 
simply a path, not the path, as NHTSA endeavors to emphasize. NHTSA 
also disagrees that the final standards present a ``major question'' as 
Valero suggested, because (1) they do not mandate specific 
technologies, (2) they are incremental increases in stringency based on 
the agency's determination of maximum feasible fuel efficiency 
standards, consistent with the agency's direction in EPCA/EISA, and (3) 
even if the final standards do assume electrification in the analysis 
in response to the standards, 49 U.S.C. 32902(h) does not cover 
decisions made under 32902(k).
    The information presented thus far suggests that HDPUV14 would 
result in the best outcomes for energy conservation, including fuel 
consumption and fuel expenditure reduced, energy security, climate 
effects, and most criteria pollutant effects; that it would produce the 
largest net benefits, and that it is likely achievable with not much 
more technology than would be applied in the reference baseline 
regardless of new HDPUV standards from NHTSA; even if it would not 
necessarily be the most cost-effective, would result in the highest 
overall costs, and does not provide the largest consumer net benefits. 
Even if HDPUV14 would maximize energy conservation, for purposes of 
this final rule, however, NHTSA concludes that some conservatism may 
still be appropriate.
    As in the proposal, there are several reasons for this conservatism 
in this final rule. First, NHTSA recognizes that standards have 
remained stable for this segment for many years, since 2016. While on 
the one hand, that may mean that the segment has room for improvement, 
or at least for standards to catch up to where the fleet is, NHTSA is 
also mindful that the sudden imposition of stringency where there was 
previously little may require some adjustment time, especially with 
technologies like BEVs and PHEVs that have not been in mass production 
in the HDPUV space. Second, NHTSA acknowledges that our available data 
in this segment may be less complete than our data for passenger cars 
and light trucks. Compared to the CAFE program's robust data submission 
requirements, manufacturers submit many fewer data elements in the HD 
program, and the program is newer, so we have many fewer years of 
historical data. If NHTSA's technology or vehicle make/model 
assumptions in the reference baseline lags on road production, then our 
estimated manufacturer responses to potential new HDPUV standards could 
lack realism in important ways, particularly given the relatively 
smaller fleet and fewer numbers of make/models across which 
manufacturers can spread technology improvements in response to 
standards. Although NHTSA also relies on manufacturer media 
publications for announcements of new vehicles and technologies, we are 
considerate of how those will be produced in large quantities and if 
they can be considered by other competitors due to intellectual 
property issues and availability.
    Third, again perhaps because of the relatively smaller fleet and 
fewer numbers of make/models, the sensitivity analysis for HDPUVs 
strongly suggests that uncertainty in the input assumptions can have 
significant effects on outcomes. As with any analysis of sufficient 
complexity, there are a number of critical assumptions here that 
introduce uncertainty about manufacturer compliance pathways, consumer 
responses to fuel efficiency improvements and higher vehicle prices, 
and future valuations of the consequences from higher HDPUV standards. 
Recognizing that uncertainty, NHTSA also conducted 50 sensitivity

[[Page 52910]]

analysis runs for the HDPUV fleet analysis.\1491\ The entire 
sensitivity analysis is presented in Chapter 9 of the FRIA, 
demonstrating the effect that different assumptions would have on the 
costs and benefits associated with the different regulatory 
alternatives. While NHTSA considers dozens of sensitivity cases to 
measure the influence of specific parametric assumptions and model 
relationships, only a small number of them demonstrate meaningful 
impacts to net benefits under the different alternatives.
---------------------------------------------------------------------------

    \1491\ In response to IPI's suggestion that NHTSA should conduct 
Monte Carlo analysis rather than sensitivity analysis, NHTSA was 
unable to develop Monte Carlo capabilities in time for this final 
rule but will continue to develop our capabilities for subsequent 
rounds of rulemaking. Meanwhile, we continue to believe that 
sensitivity cases are illuminating and appropriate for consideration 
in determining the final standards.
---------------------------------------------------------------------------

    The results of the sensitivity analyses for HDPUVs are different 
from the sensitivity analysis results for passenger cars and light 
trucks. Generally speaking, for HDPUVs, varying the inputs seems either 
to make no difference at all, or to make a fairly major difference. As 
suggested above, NHTSA interprets this as likely resulting from the 
relatively smaller size and ``blockiness'' of the HDPUV fleet: there 
are simply fewer vehicles, and fewer models, so variation in input 
parameters may cause notable moves in tranches of the fleet that are 
large enough (as a portion of the total HDPUV fleet) to produce 
meaningful effects on the modeling results.
[GRAPHIC] [TIFF OMITTED] TR24JN24.272

    Figure VI-30 shows the magnitude of variation in sensitivity cases 
on per-vehicle costs for the HDPUV fleet. Each point in the figure 
represents the average per-vehicle cost for a given manufacturer, in a 
given alternative, for

[[Page 52911]]

one sensitivity case; each row includes one point for each of the 50 
sensitivity cases. While most sensitivity cases are represented by open 
circles, some specific cases of interest are highlighted with different 
shapes. For most manufacturers and alternatives, the sensitivity 
results are clustered around the reference baseline (represented by a 
square) and may overlap with other sensitivity results. Some cases, 
especially involving assumptions about higher costs of electrification 
or lower fuel prices, produce significant increases in per-vehicle cost 
relative to the Reference baseline. Table VI-53 shows estimated per-
vehicle costs by HDPUV manufacturer, by regulatory alternative, for the 
Reference baseline (the central analysis) and several selected 
influential sensitivity runs.
BILLING CODE 4910-59-P

[[Page 52912]]

[GRAPHIC] [TIFF OMITTED] TR24JN24.273

BILLING CODE 4910-59-C
    In this table, ``Oil Price (low)'' assumes EIA's AEO 2023 low oil 
price side case; ``Battery DMC (high)'' increases battery direct 
manufacturing costs 25 percent above Reference baseline levels; and 
``NPRM Battery Learning Curve'' retains the battery learning curve from 
NHTSA's NPRM. Dollar values for all action alternatives are incremental 
to the No-Action alternative. If they are negative, that means that the 
compliance solution for that action alternative reduces cost relative 
to no action in a given model

[[Page 52913]]

run.\1492\ These particular sensitivity runs were selected because they 
had the largest effect on costs of the alternatives considered, and 
cost is of primary interest to NHTSA given industry's stated need to 
retain all available capital for use in making the BEV transition.. The 
final standards for HDPUVs will result in an industry-wide FE 
improvement of approximately 25 percent in the rulemaking time frame of 
only 6 years. With the vehicles in this segment having the same if not 
longer redesign cycle time, our analysis shows that any change to these 
inputs could have a dramatic impact on the manufacturers. As shown in 
Table VI-53 above, the industry average incremental cost for HDPUV108 
is $226, but that increases to roughly $1,200 to over $1,500 with the 
change to an input that could be due to any number of global 
circumstances.
---------------------------------------------------------------------------

    \1492\ This occurs in some instances where incremental 
technology additions are less expensive than the value of any 
technology removed. For example, the engine and transmission 
component cost differences in converting from an advanced diesel to 
a gasoline turbo engine PHEV could produce negative net technology 
cost.
---------------------------------------------------------------------------

    Looking beyond HDPUV108, each of these sensitivity runs illustrate 
that per-vehicle costs for nearly every manufacturer to comply with 
HDPUV10 and HDPUV14 could be significantly higher under any of these 
cases. Looking at the industry average results, each of the three 
sensitivity runs presented here could bring per-vehicle costs to nearly 
$3,000 per vehicle in model year 2038 under HDPUV14, and nearly $2,000 
per vehicle under HDPUV10. While the effects of these assumptions are 
slightly less dramatic than in the NPRM analysis, they are still 
significant increases in costs for an industry grappling with a major 
technological transition. For nearly every manufacturer, the jump in 
cost from HDPUV4 to HDPUV108 is meaningful under each sensitivity run 
shown, and the jump from HDPUV108 to HDPUV10 and certainly to HDPUV14 
under each of the sensitivity runs shown would be greater than NHTSA 
would likely conclude was appropriate for this segment. The uncertainty 
demonstrated in these estimates aligns with comments NHTSA received on 
the NPRM and NHTSA believes it is relevant to our consideration of 
maximum feasible HDPUV standards. The Alliance commented that if NHTSA 
set standards through model year 2035, annual stringency increases in 
model years 2030-2032 should be 10% per year, and model years 2033-2035 
should be 4% per year, in recognition of ``market and technology 
uncertainty.''\1493\ Alternatively, the Alliance stated that stringency 
increases could be 7% per year, each year, for model years 2030-
2035.\1494\
---------------------------------------------------------------------------

    \1493\ The Alliance, Docket No. NHTSA-2023-0022-60652, Appendix 
F, at 63.
    \1494\ Id.
---------------------------------------------------------------------------

    NHTSA agrees that uncertainty exists, and it matters for this 
segment and the effects that new HDPUV standards would have on the 
affordability of these vehicles and the capital available for 
manufacturers for making the BEV transition. The nature of this fleet--
smaller, with fewer models--and the nature of the technologies that 
this fleet will be applying leading up to and during the rulemaking 
time frame, means that the analysis is very sensitive to changes in 
inputs, and the inputs are admittedly uncertain. If the uncertainty 
causes NHTSA to set standards higher than they would otherwise have 
been, and industry is unable to meet the standards, the resources they 
would have to expend on civil penalties (which can potentially be much 
higher for HDPUVs than for passenger cars and light truck) would be 
diverted from their investments in the technological transition, and 
the estimated benefits would not come to pass anyway. To provide some 
margin for that uncertainty given the technological transition that 
this segment is trying to make, NHTSA believes that some conservatism 
is reasonable and appropriate for this round of standards. However, the 
further conservatism that the Alliance and other commenters request--4 
percent standards for model years 2033-2035, or 7 percent standards for 
model years 2030-2035--would have NHTSA setting standards below the 
point of maximum feasibility. In response to this comment, NHTSA 
conducted some initial analysis of these suggested rates of increase 
and this exploratory analysis indicated technology choices, and hence 
regulatory costs, were very similar to those of HDPUV4. Based on that 
initial analysis, NHTSA concluded that the effects of these suggested 
rates of increase would have fallen close enough to HDPUV4 that a full 
examination would not have provided much additional information beyond 
what including HDPUV4 in the analysis already includes.
    We also note, that because NHTSA does consider BEV technologies in 
the HDPUV analysis, and because our current regulations assign BEVs a 
fuel consumption value for compliance purposes of 0 gal/100 miles, this 
significantly influences our modeling results. This is an artifact of 
the mathematics of averaging, where including a ``0'' value in the 
calculation effectively reduces other values by as much as 50 percent 
(depending on sample size) and is exaggerated when BEV-only 
manufacturers are considered in industry-average calculations. This 
effect creates the appearance of overcompliance at the industry level. 
As for the analysis for passenger cars and light trucks, examining 
individual manufacturer results can be more informative, and Chapter 
8.3 of the FRIA shows that non-BEV-only manufacturers are more 
challenged by, for example, HDPUV14, although overcompliance is still 
evident in many model years. This underscores the effect of BEVs on 
compliance, particularly when their fuel consumption is counted as 0 
even though their energy consumption is non-zero. It also indirectly 
underscores the effect of the 32902(h) restrictions on NHTSA's 
decision-making for passenger car and light truck standard stringency, 
which does not apply in the HDPUV context. While NHTSA did not propose 
to change this value and is not changing it in this final rule, we are 
aware that it adds to the appearance of overcompliance in NHTSA's 
analysis, and this is another potential reason to be conservative in 
our final rule.
    Based on the information in the record and consideration of the 
comments received, NHTSA therefore concludes that HDPUV108 represents 
the maximum feasible standards for HDPUVs in the model years 2030 to 
2035 time frame. While HDPUV14 could potentially save more fuel and 
reduce emissions further, it is less cost-effective than HDPUV108 by 
every metric that NHTSA considered, and the longer redesign cycles in 
this segment make NHTSA cautious of finalizing HDPUV14. Moreover, the 
effects of uncertainty for our analytical inputs are significant in 
this analysis, as discussed, and NHTSA believes some conservatism is 
appropriate for this rulemaking time frame. Both HDPUV10 and HDPUV108 
will encourage technology application for some manufacturers while 
functioning as a backstop for the others, and they remain net 
beneficial for consumers. However, in a final consideration of 
coordination between the HDPUV GHG rules recently finalized by EPA and 
these fuel consumption standards, NHTSA believes HDPUV108 provides a 
better approach.
    The HDPUV108 final rule will serve to re-align the two rules after 
being offset by statutory differences in lead time and standard years. 
HDPUV108

[[Page 52914]]

will best harmonize with EPA's recently finalized standards, realigning 
with EPA by model year 2034 and only slightly surpassing them in model 
year 2035 (assuming EPA does not later change its standards for the 
model years 2033-2035 time frame). The need for harmonization was 
frequently cited in comments, and NHTSA has sought to the best of its 
statutory ability to harmonize with EPA's broader authority under the 
Clean Air Act.
    Based on all of the reasons discussed above, NHTSA is finalizing 
HDPUV108 for HDPUVs.
3. Severability
    For the reasons described above, NHTSA believes that its authority 
to establish CAFE and HDPUV standards for the various fleets described 
is well-supported in law and practice and should be upheld in any legal 
challenge. NHTSA also believes that its exercise of its authority 
reflects sound policy.
    However, in the event that any portion of the final rule is 
declared invalid, NHTSA intends that the various aspects of the final 
rule be severable, and specifically, that each standard and each year 
of each standard is severable, as well as the various compliance 
changes discussed in the following section of this preamble. NYU IPI 
commented that NHTSA should provide further detail on why NHTSA 
believes that the standards are severable.\1495\ Furthermore, they 
identified a specific area of the analysis and state, ``Because 
changing manufacturing processes for one product class or model year 
could affect those processes for another, NHTSA should explain why 
these technical processes are sufficiently independent that individual 
standards for each year could be applied separately.''I. In response, 
EPCA/EISA is clear that standards are to be prescribed separately for 
each fleet, for each model year. 49 U.S.C. 32902(b) states expressly 
that DOT (by delegation, NHTSA) must set separate standards for 
passenger automobiles (passenger cars) in each model year, non-
passenger automobiles (light trucks) in each model year, and work 
trucks (HDPUVs) in accordance with 32902(k), which directs that 
standards be set in tranches of 3 model years at a time. When NHTSA 
sets these standards, it does so by publishing curve coefficients in 
the Federal Register, to be incorporated into the Code of Federal 
Regulations. The curve coefficients are incorporated into the same 
table, but they are clearly distinguishable for each year. NHTSA 
establishes several model years of standards at a time in order to 
provide improved regulatory certainty for industry, but standards for 
one year can still be met by any given fleet even if standards for a 
prior or subsequent year suddenly do not exist. We agree with IPI in 
that manufacturers do share components between vehicles and apply these 
components for different vehicle classes at different model years; 
however, we do acknowledge that manufacturers do not implement 
technologies all at once across their fleets within a given model year 
or subsequent model year. NHTSA does not set CAFE or FE standards at 
the vehicle level, but instead at the individual fleet levels. And so, 
adoption of technologies for meeting the standards are allowed in a 
cadence that reflects manufacturers capability to implement a 
reasonable time for PCs, LTs and HDPUVs. These assumptions for sharing 
of components between vehicles are considered as part of our analysis 
that considers refreshes/redesigns schedules that manufacturers adhere 
to. We discuss vehicle refreshes/redesigns cadences and other lead time 
assumptions in TSD Chapter 2 and in Section III.D of this preamble. The 
modeling captures decisions that manufacturers make in the real world 
that will happen regardless of whether NHTSA is considering one year of 
standards or five. Manufacturers will still only refresh or redesign a 
portion of their fleet in any given model year and even though our 
analysis shows one pathway to compliance, manufacturers make the 
ultimate decisions about which technologies to apply to which vehicles 
in a particular model year, also considering factors unrelated to fuel 
economy. Manufacturer comments may discuss the relative difficulty of 
complying with one standard or another, but since the inception of the 
program, compliance with each standard has been separately required.
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    \1495\ IPI, Docket No. NHTSA-2023-0022-60485, at 32-33.
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    Any of the standards could be implemented independently if any of 
the other standards were struck down, and NHTSA firmly believes that it 
would be in the best interests of the nation as a whole for the 
standards to be applicable in order to support EPCA's overarching 
purpose of energy conservation. Each standard is justified 
independently on both legal and policy grounds and could be implemented 
effectively by NHTSA.
VII. Compliance and Enforcement
    NHTSA is finalizing changes to its enforcement programs for light-
duty vehicles in the CAFE program as well as for HDPUVs in the Heavy-
Duty National Program. These changes include: (1) eliminating AC and 
off-cycle (OC) fuel consumption improvement values (FCIVs) for BEVs in 
the CAFE program; (2) adding a utility factor to the calculation of 
FCIVs for PHEVs; (3) phasing out the OC program for all vehicles in the 
CAFE program by model year 2033; (4) eliminating the 5-cycle and 
alternative approval pathways for OC FCIVs in the CAFE program; (5) 
adding additional deadlines for the alternative approval process for 
model years 2025-2026 for the CAFE program; (6) eliminating OC FCIVs 
for HDPUVs for model year 2030 and beyond; and (7) making an assortment 
of minor technical amendments, including technical amendments to the 
regulations pertaining to advanced technology credits and clarifying 
amendments to definitions in 49 part 523. To provide context for these 
changes, this section first provides an overview of NHTSA's enforcement 
programs. The section then discusses and addresses the comments 
received on the NPRM and discusses the changes NHTSA is finalizing with 
this rule. Finally, this section concludes with a discussion and 
response to comment on a requested program for EJ credits that NHTSA 
has decided is not practical to implement at this time, as well as a 
discussion and response to comments received that are relevant to 
NHTSA's compliance and enforcement programs for light-duty vehicles and 
HDPUVs but out of scope of this rulemaking.

A. Background

    NHTSA has separate enforcement programs for light-duty vehicles in 
the CAFE program and heavy-duty vehicles in the Heavy-Duty National 
program. NHTSA's CAFE enforcement program is largely established by 
EPCA, as amended by EISA, and is very prescriptive regarding 
enforcement. EPCA and EISA also clearly specify a number of 
flexibilities and incentives that are available to manufacturers to 
help them comply with the CAFE standards. EISA also provides DOT and 
NHTSA with the authority to regulate heavy-duty vehicles, and NHTSA 
structured the enforcement program for HDPUVs to be similar to its CAFE 
enforcement program.
    The light-duty CAFE program includes all vehicles with a Gross 
Vehicle Weight Rating (GVWR) of 8,500 pounds or less as well as 
vehicles between 8,501 and 10,000 pounds that are classified as medium-
duty passenger vehicles (MDPVs). As prescribed by 49 U.S.C. 
32901(a)(19)(B) and defined in 40

[[Page 52915]]

CFR 86.1803-01,\1496\ an MDPV means any heavy-duty vehicle with a GVWR 
of less than 10,000 pounds that is designed primarily for the 
transportation of persons and generally subject to requirements that 
apply for light-duty trucks.1497 1498 The MDHD Program 
includes all vehicles 8,501 pounds and up, and the engines that power 
them, except for MDPVs, which are covered under the CAFE program.
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    \1496\ As prescribed in 49 U.S.C. 32901(a)(19)(B), an MDPV is 
``defined in section 86.1803-01 of title 40, Code of Federal 
Regulations, as in effect on the date of the enactment of the Ten-
in-Ten Fuel Economy Act.''
    \1497\ 40 CFR 86.1803-01 excludes from the definition of MDPV 
``any vehicle which: (1) Is an ``incomplete truck'' as defined in 
this subpart; or (2) Has a seating capacity of more than 12 persons; 
or (3) Is designed for more than 9 persons in seating rearward of 
the driver's seat; or (4) Is equipped with an open cargo area (for 
example, a pick-up truck box or bed) of 72.0 inches in interior 
length or more. A covered box not readily accessible from the 
passenger compartment will be considered an open cargo area for 
purposes of this definition.''
    \1498\ See Heavy-duty vehicle definition in 40 CFR 86.1803-01. 
MDPVs are classified as either passenger automobiles or light trucks 
depending on whether they meet the critiera to be a non-passenger 
automobile under 49 CFR 523.5. If the MDPV is classified as a non-
passenger automobile, it is a light truck and subject ot the 
requirements in 49 CFR 533. If the MDPV does not meet the criteria 
in 49 CFR 523.5 to be a non-passenger automobile, then it is 
classified as a passenger automobile and subject to the requriements 
in 49 CFR 531.
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    NHTSA's authority to regulate heavy-duty vehicles under EISA 
directs NHTSA to establish fuel efficiency standards for commercial 
medium- and heavy-duty on-highway vehicles and work 
trucks.1499 1500 Under this authority, NHTSA has developed 
standards for three regulatory categories of heavy-duty vehicles: 
combination tractors; HDPUVs; and vocational vehicles. HDPUVs include 
heavy-duty vehicles with a GVWR between 8,501 pounds and 14,000 pounds 
(known as Class 2b through 3 vehicles) manufactured as complete 
vehicles by a single or final stage manufacturer or manufactured as 
incomplete vehicles as designated by a manufacturer.\1501\ The majority 
of these HDPUVs are 3- 4-ton and 1-ton pickup trucks, 12-and 15-
passenger vans, and large work vans that are sold by vehicle 
manufacturers as complete vehicles, with no secondary manufacturer 
making substantial modifications prior to registration and use. These 
vehicles can also be sold as cab-complete vehicles (i.e., incomplete 
vehicles that include complete or nearly complete cabs that are sold to 
secondary manufacturers).
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    \1499\ EISA added the following definition to the automobile 
fuel economy chapter of the U.S. Code: ``commercial medium- and 
heavy-duty on-highway vehicle'' means an on-highway vehicle with a 
gross vehicle weight rating of 10,000 pounds or more. 49 U.S.C. 
32901(a)(7).
    \1500\ EISA added the following definition to the automobile 
fuel economy chapter of the U.S. Code: ``work truck'' means a 
vehicle that--(A) is rated at between 8,500 and 10,000 pounds gross 
vehicle weight; and (B) is not a medium-duty passenger vehicle (as 
defined in section 86.1803-01 of title 40, Code of Federal 
Regulations, as in effect on the date of the enactment of [EISA]). 
49 U.S.C. 32901(a)(19).
    \1501\ See 49 CFR 523.7, 40 CFR 86.1801-12, 40 CFR 86.1819-14, 
40 CFR 1037.150.
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B. Overview of Enforcement

    This subsection is intended to provide a general overview of 
NHTSA's enforcement of its fuel economy and fuel efficiency standards 
in order to provide context for the discussion of the changes to these 
enforcement programs. At a high-level, NHTSA's fuel efficiency and fuel 
economy enforcement programs encompass how NHTSA determines whether 
manufacturers comply with standards for each model year, and how 
manufacturers may use compliance flexibilities and incentives, or 
alternatively address noncompliance through paying civil penalties. 
NHTSA's goal in administering these programs is to balance the energy-
saving purposes of the authorizing statutes against the benefits of 
certain flexibilities and incentives. More detailed explanations of 
NHTSA's enforcement programs have also been included in recent 
rulemaking documents.1502 1503
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    \1502\ For more detailed explanations of CAFE enforcement, see 
77 FR 62649 (October 15, 2012) and 87 FR 26025 (May 2, 2022).
    \1503\ For more detailed explanations of heavy-duty pickup 
trucks and vans fuel efficiency standards and enforcement, see 76 FR 
57256 (September 15, 2011) and 81 FR 73478 (October 25, 2016).
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1. Light Duty CAFE Program
    As mentioned above, there are three primary components to NHTSA's 
compliance program: (1) determining compliance; (2) using flexibilities 
and incentives; and (3) paying civil penalties for shortfalls. The 
following table provides an overview of the CAFE program for light-duty 
vehicles and MDPVs.
BILLING CODE 4910-59-P

[[Page 52916]]

[GRAPHIC] [TIFF OMITTED] TR24JN24.274


[[Page 52917]]


[GRAPHIC] [TIFF OMITTED] TR24JN24.275


[[Page 52918]]


[GRAPHIC] [TIFF OMITTED] TR24JN24.276


[[Page 52919]]


BILLING CODE 4910-59-C
a. Determining Compliance
    This first component of NHTSA's enforcement program pertains to how 
NHTSA determines compliance with its fuel economy standards. In 
general, as prescribed by Congress, NHTSA finalizes footprint-based 
fleet average standards for LDVs for fuel economy on a mpg basis. In 
that way, the standard applies to the fleet as a whole and not to a 
specific vehicle, and manufacturers can balance the performance of 
their vehicles and technologies in complying with standards. Also, as 
specified by Congress, light-duty vehicles is separated into three 
fleets for compliance purposes: passenger automobiles manufactured 
domestically (referred to as domestic passenger vehicles), passenger 
automobiles not manufactured domestically (referred to as import 
passenger vehicles), and non-passenger automobiles (which are referred 
to as light trucks and includes MDPVs that meet certain 
criteria).\1504\ Each manufacturer must comply with the fleet average 
standard derived from the model type target standards. These target 
standards are taken from a set of curves (mathematical functions) for 
each fleet. Vehicle testing for the light-duty vehicle program is 
conducted by EPA using the FTP (or ``city'' test) and HFET (or 
``highway'' test).\1505\
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    \1504\ 49 U.S.C. 32903(g)(6)(B).
    \1505\ 40 CFR part 600.
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    At the end of each model year, EPA determines the fleet average 
fuel economy performance for the fleets as determined by procedures set 
forth in 40 CFR part 600. NHTSA then confirms whether a manufacturer's 
fleet average performance for each of its fleets of LDVs exceeds the 
applicable target-based fleet standard. NHTSA makes its ultimate 
determination of a manufacturer's CAFE compliance obligation based on 
official reported and verified CAFE data received from EPA. Pursuant to 
49 U.S.C. 32904(e), EPA is responsible for calculating manufacturers' 
CAFE values so that NHTSA can determine compliance with its CAFE 
standards. The EPA-verified data is based on information from NHTSA's 
testing,\1506\ its own vehicle testing, and FMY data submitted by 
manufacturers to EPA pursuant to 40 CFR 600.512-12. A manufacturer's 
FMY report must be submitted to EPA no later than 90 days after 
December 31st of the model year including any adjustment for off-cycle 
credits for the addition of technologies that result in real-world fuel 
improvements that are not accounted for in the 2-cycle testing as 
specified in 40 CFR part 600 and 40 CFR part 86. EPA verifies the data 
submitted by manufacturers and issues final CAFE reports that are sent 
to manufacturers and to NHTSA electronically between April and October 
of each year. NHTSA's database system identifies which fleets do not 
meet the applicable CAFE fleet standards and calculates each 
manufacturer's credit amounts (credits for vehicles exceeding the 
standards), credit excesses (credits accrued for a fleet exceeding the 
standards), and shortfalls (amount by which a fleet fails to meet the 
standards). A manufacturer meets NHTSA's fuel economy standard if its 
fleet average performance is greater than or equal to its required 
standard or its MDPCS (whichever is greater). Congress enacted MDPCSs 
per 49 U.S.C. 32902. These standards require that domestic passenger 
car fleets meet a minimum level directed by statute and then projected 
by the Secretary at the time a standard is promulgated in a rulemaking. 
In addition, manufacturers are not allowed to use traded or transferred 
credits to resolve credit shortfalls resulting from failing to exceed 
the MDPCS.
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    \1506\ NHTSA conducts vehicle testing under its ``Footprint'' 
attribute conformity testing to verify track width and wheelbase 
measurements used by manufacturers to derive model type target 
standards. If NHTSA finds a discrepancy in its testing, 
manufacturers will need to make changes in their final reports to 
EPA.
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    If a manufacturer's fleet fails to meet a fuel economy standard, 
NHTSA will provide written notification to the manufacturer that it has 
not met the standard. The manufacturer will be required to confirm the 
shortfall and must either submit a plan indicating how to allocate 
existing credits, or if it does not have sufficient credits available 
in that fleet, how it will address the shortfall either by earning, 
transferring and/or acquiring credits or by paying the appropriate 
civil penalty. The manufacturer must submit a plan or payment within 60 
days of receiving agency notification. Credit allocation plans received 
from the manufacturer will be reviewed and approved by NHTSA. NHTSA 
will approve a credit allocation plan unless it finds the proposed 
credits are unavailable or that it is unlikely that the plan will 
result in the manufacturer earning sufficient credits to offset the 
shortfall. If a plan is approved, NHTSA will revise the manufacturer's 
credit account accordingly. If a plan is rejected, NHTSA will notify 
the manufacturer and request a revised plan or payment of the 
appropriate fine.
b. Flexibilities
    As mentioned above, there are flexibilities manufacturers can use 
in the CAFE program for compliance purposes. Two general types of 
flexibilities that exist for the CAFE program include (1) FCIVs that 
can be used to increase CAFE values; and (2) credit flexibilities. To 
provide context for the changes NHTSA is making, a discussion of two 
types of FCIVs is provided below. These credits are for the addition of 
technologies that improve air/conditioning efficiency (AC FCIVs) and 
other ``off-cycle'' technologies that reduce fuel consumption that are 
not accounted for in the 2-cycle testing (OC FCIVs).\1507\ NHTSA is not 
making any changes to the provisions regarding the flexibilities for 
how credits may be used. A discussion of these flexibilities can be 
found in previous rulemakings.\1508\
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    \1507\ Manufacturers may also earn FCIVs for full size pickup 
trucks which have hybrid or electric drivetrains or have advanced 
technologies as specified in 40 CFR 86.1870-12. NHTSA is not 
providing an overview of these credits because NHTSA is not making 
any changes for these credits. For an an explanation of these 
credits see the May 2, 2022 final rule (87 FR 25710, page 26025).
    \1508\ October 15, 2012 (77 FR 63125, starting at page 62649) 
and May 2, 2022 (87 FR 25710, starting at page 26025).
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    As mentioned above, the light-duty CAFE program provides FCIVs for 
improving the efficiency of AC systems.\1509\ Improving the efficiency 
of these systems is important because AC usage places a load on the 
Internal Combustion Engines (ICE) that results in additional fuel 
consumption, and AC systems are virtually standard automotive 
accessories, with more than 95 percent of new cars and light trucks 
sold in the U.S. equipped with mobile AC systems. Together, this means 
that AC efficiency can have a signifant impact on total fuel 
consumption. The AC FCIV program is designed to incentivize the 
adoption of more efficient systems, thereby reducing energy consumption 
across the fleet.
---------------------------------------------------------------------------

    \1509\ 40 CFR 1868-12.
---------------------------------------------------------------------------

    Manufacturers can improve the efficiency of AC systems through 
redesigned and refined AC system components and controls. These 
improvements, however, are not measurable or recognized using 2-cycle 
test procedures because the AC is turned off during the CAFE compliance 
2-cycle testing. Any AC system efficiency improvements that reduce load 
on the engine and improve fuel economy, therefore, cannot be accounted 
for in those tests.
    In the joint final rule for model year 2017-2025, EPA extended its 
AC

[[Page 52920]]

efficiency program to allow manufacturers to generate fuel consumption 
improvement values for NHTSA's CAFE compliance.\1510\ The program 
provides a technology menu that specifies improvement values for the 
addition of specific technologies and specifies testing requirements to 
confirm that the technologies provide emissions reductions when 
installed as a system on vehicles.\1511\ A vehicle's total AC 
efficiency FCIV is calculated by summing the individual values for each 
efficiency-improving technology used on the vehicle, as specified in 
the AC menu or by the AC17 test result.\1512\ The total AC efficiency 
FCIV sum for each vehicle is capped at 5.0 grams/mile for cars and 7.2 
grams/mile for trucks.\1513\ Related to AC efficiency improvements, the 
off-cycle program, discussed in the next section, contains fuel 
consumption improvement opportunities for technologies that help to 
maintain a comfortable air temparature of the vehicle interior without 
the use of the A/C system (e.g., solar reflective surface coating, 
passive cabin ventilation). These technologies are listed on a thermal 
control menu that provides a predefined improvement value for each 
technology.\1514\ If a vehicle has more than one thermal control 
technology, the improvement values are added together, but subject to a 
cap of 3.0 grams/mile for cars and 4.3 grams/mile for trucks.\1515\ 
Manufacturers seeking FCIVs beyond the regulated caps may request the 
added benefit for AC technology under the off-cycle program alternative 
approval pathway.
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    \1510\ October 15, 2012 final rule (77 FR 62624).
    \1511\ See 40 CFR 86.1868-12(e) through (g).
    \1512\ See 40 CFR 1868-12(g)(2)(iii).
    \1513\ See 40 CFR 1868-12(b)(2).
    \1514\ See 40 CFR 86.1869-12(b)(1)(viii)(A) through (E).
    \1515\ See 40 CFR 86.1869-12(b)(1)(viii).
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    In addition to allowing improvements for AC efficiency 
technologies, manufacturers may also generate FCIVs for off-cycle 
technologies. ``Off-cycle'' technologies are those that reduce vehicle 
fuel consumption in the real world, but for which the fuel consumption 
reduction benefits cannot be fully measured under the 2-cycle test 
procedures used to determine compliance with the fleet average 
standards. The FTP and HFET cycles are effective in measuring 
improvements in most fuel efficiency-improving technologies; however, 
they are unable to measure or do not adequately represent certain fuel 
economy-improving technologies because of limitations in the test 
cycles. For example, off-cycle technologies that improve emissions and 
fuel efficiency at idle (such as ``stop start'' systems) and those 
technologies that improve fuel economy to the greatest extent at 
highway speeds (such as active grille shutters that improve 
aerodynamics) are not fully accounted for in the 2-cycle tests.
    In the model year 2017-2025 CAFE rulemaking, EPA, in coordination 
with NHTSA, established regulations extending benefits for off-cycle 
technologies and created FCIVs for the CAFE program starting with model 
year 2017.\1516\ Under its EPCA authority for CAFE, EPA determined that 
the summation of the all the FCIVs values (for AC, OC, and advanced 
technology incentives for full size pickup trucks) in grams per mile 
could be converted to equivalent gallons per mile totals for improving 
CAFE values. More specifically, EPA normalizes the FCIVs values based 
on the manufacturer's total fleet production and then applies the 
values in an equation that can increase the manufacturer's CAFE values 
for each fleet instead of treating them as separate credits as they are 
in the GHG program.\1517\
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    \1516\ Off-cycle credits were extened to light-duty vehicles 
under the CAFE program in the October 15, 2012 final rule (77 FR 
62624).
    \1517\ FCIVAC and FCIVOC are each deducted 
as separately calculated credit values from the fleet fuel economy 
per 40 CFR 600.510-12(c)(1)(ii) and 40 CFR 600.510-12(c)(3)(i) 
through (ii). AC efficiency credit falls under FCIVAC, 
while thermal load improvement technology credit falls under 
FCIVOC.
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    For determining FCIV benefits, EPA created three compliance 
pathways for the off-cycle program: (1) menu technologies, (2) 2 to 5-
Cycle Testing, and (3) an alternative approval methodology. 
Manufacturers may generate off-cycle credits or improvements through 
the approved menu pathway without agency approval. Manufacturers report 
the inclusion of pre-defined technologies for vehicle configurations 
that utilize the technologies, from the pre-determined values listed in 
40 CFR 86.1869-12(b), in their PMY and MMY reports to NHTSA and then in 
their final reports to EPA.
    For off-cycle technologies both on and off the pre-defined 
technology list, EPA allows manufacturers to use 5-cycle testing to 
demonstrate off-cycle improvements.\1518\ Starting in model year 2008, 
EPA developed the ``five-cycle'' test methodology to measure fuel 
economy for the purpose of improving new car window stickers (labels) 
and giving consumers better information about the fuel economy they 
could expect under real-world driving conditions. The ``five-cycle'' 
methodology was also able to capture real-world fuel consumption 
improvements that weren't fully reflected on the ``two-cycle'' test and 
EPA established this methodology as a pathway for a manufacturer to 
obtain FCIVs. The additional testing allows emission benefits to be 
demonstrated over some elements of real-world driving not captured by 
the two-cycle testing, including high speeds, rapid accelerations, hot 
temperatures, and cold temperatures. Under this pathway, manufacturers 
submit test data to EPA, and EPA determines whether there is sufficient 
technical basis to approve the value of the off-cycle credit or fuel 
consumption improvement.
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    \1518\ See 40 CFR 86.1869-12(c).
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    The final pathway allows manufacturers to earn OC FCIVs is an 
alternative pathway that requires a manufacturer to seek EPA review and 
approval.\1519\ This path allows a manufacturer to submit an 
application to EPA to request approval of off-cycle benefits using an 
alternative methodology. The application must describe the off-cycle 
technology and how it functions to reduce CO2 emissions 
under conditions not represented in the 2-cycle testing, as well as 
provide a complete description of the methodology used to estimate the 
off-cycle benefit of the technology and all supporting data, including 
vehicle testing and in-use activity data. A manufacturer may request 
that EPA, in coordination with NHTSA, informally review their 
methodology prior to undertaking testing and/or data gathering efforts 
in support of their application. Once a manufacturer submits an 
application, EPA publishes a notice of availability in the Federal 
Register notifying the public of a manufacturer's proposed alternative 
off-cycle benefit calculation methodology.\1520\ EPA makes a decision 
whether to approve the methodology after consulting with NHTSA and 
considering the public comments.
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    \1519\ 40 CFR 86.1869-12(d).
    \1520\ EPA may waive the notice and comment requirements for 
technologies for which EPA has previously approved a methodology for 
determining credits. See 40 CFR 86.1869-12(d)(2)(ii).
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c. Civil Penalties
    If a manufacturer does not comply with a CAFE standard and cannot 
or chooses not to cover the shortfall with credits, EPCA provides for 
the assessment of civil penalties. The Act specifies a precise formula 
for determining the amount of civil penalties for such noncompliance. 
Starting in model year 2024, the penalty, as adjusted for inflation by 
law,

[[Page 52921]]

is $17 for each tenth of a mpg that a manufacturer's average fuel 
economy falls short of the standard multiplied by the total volume of 
those vehicles in the affected fleet (i.e., import passenger vehicles, 
domestic passenger vehicles, or light trucks), manufactured for that 
model year.\1521\ On November 2, 2015, the Federal Civil Penalties 
Inflation Adjustment Act Improvements Act (Inflation Adjustment Act or 
2015 Act), Public Law 114-74, Section 701, was signed into law. The 
2015 Act required Federal agencies to promulgate an interim final rule 
to make an initial ``catch-up'' adjustment to the civil monetary 
penalties they administer, and then to make subsequent annual 
adjustments. The amount of the penalty may not be reduced except under 
the unusual or extreme circumstances specified in the statute,\1522\ 
which have never been exercised by NHTSA in the history of the CAFE 
program.
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    \1521\ See 49 U.S.C. 32912(b) and 49 CFR 578.6(h)(2). For MYs 
before 2019, the penalty is $5.50; for MYs 2019 through 2021, the 
civil penalty is $14; for MY 2022, the civil penalty is $15; for MY 
2023, the civil penalty is $16.
    \1522\ See 49 U.S.C. 32913.
---------------------------------------------------------------------------

    NHTSA may also assess general civil penalties as prescribed by 
Congress under 49 U.S.C. 32912(a). A person that violates section 
32911(a) of title 49 is liable to the United States Government for a 
civil penalty of not more than $51,139 for each violation.\1523\ A 
separate violation occurs for each day the violation continues. These 
penalties apply in cases in which NHTSA finds a violation outside of 
not meeting CAFE standards, such as those that may occur due to 
violating information requests or reporting requirements as specified 
by Congress or codified in NHTSA's regulations.
---------------------------------------------------------------------------

    \1523\ The maximum civil penalty under Sec.  32912 is 
periodically adjusted for inflation.
---------------------------------------------------------------------------

2. Heavy-Duty Pickup Trucks and Vans
    As with the CAFE enforcement program, there are three primary 
components to NHTSA's compliance program for heavy-duty vehicles: (1) 
determining compliance; (2) using flexibilities and incentives; and (3) 
paying civil penalties for shortfalls. The following table provides an 
overview of the Heavy-Duty Fuel Efficiency Program for HDPUVs.
BILLING CODE 4910-59-P

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[[Page 52923]]


[GRAPHIC] [TIFF OMITTED] TR24JN24.277


[[Page 52924]]


[GRAPHIC] [TIFF OMITTED] TR24JN24.278


[[Page 52925]]


BILLING CODE 4910-59-C
a. Determining Compliance
    In general, NHTSA finalizes attribute-based fleet average standards 
for fuel consumption of HDPUVs on a gal/100-mile basis using a similar 
compliance strategy as required for light-vehicles in the CAFE program. 
For these vehicles, the agencies set standards based on attribute 
factors relative to the capability of each model to perform work, which 
the agencies defined as ``work factor.'' More specifically, the work-
factor of each model is a measure of its towing and payload capacities 
and whether equipped with a 4-wheel drive configuration. Each 
manufacturer must comply with the fleet average standard derived from 
the unique subconfiguration target standards (or groups of 
subconfigurations approved by EPA in accordance with 40 CFR 86.1819-
14(a)(4)) of the model types that make up the manufacturer's fleet in a 
given model year. Each subconfiguration has a unique attribute-based 
target standard, defined by each group of vehicles having the same work 
factor. These target standards are taken from a set of curves 
(mathematical functions), with separate performance curves for gasoline 
and diesel vehicles.\1524\ In general, in calculating HDPUVs, fleets 
with a mixture of vehicles with increased payloads or greater towing 
capacity (or utilizing four-wheel drive configurations) will face 
numerically less stringent standards than fleets consisting of less 
powerful vehicles. Vehicle testing for both the HDPUV and LDV programs 
is conducted on chassis dynamometers using the drive cycles from FTP 
and HFET.\1525\ While the FTP and the HFET driving patterns are 
identical to that of the light-duty test cycles, other test parameters 
for running them, such as test vehicle loaded weight, are specific to 
complete HDPUV vehicles.
---------------------------------------------------------------------------

    \1524\ However, both gasoline and diesel vehicles in this 
category are included in a single averaging set for generating and 
using credit flexibilities.
    \1525\ The light-duty FTP is a vehicle driving cycle that was 
originally developed for certifying light-duty vehicles and 
subsequently applied to heavy-duty chassis testing for criteria 
pollutants. This contrasts with the Heavy-duty FTP, which refers to 
the transient engine test cycles used for certifying heavy-duty 
engines (with separate cycles specified for diesel and spark-
ignition engines).
---------------------------------------------------------------------------

    Due to the variations in designs and construction processes, 
optional requirements were added to simplify testing and compliance 
burdens for cab-chassis Class 2b and 3 vehicles. Requirements were 
added to treat cab-chassis Class 2b and 3 vehicles (vehicles sold as 
incomplete vehicles with the cab substantially in place but without the 
primary load-carrying enclosure) as equivalent to the complete van or 
truck product from which they are derived. Manufacturers determine 
which complete vehicle configurations most closely matches the cab-
chassis product leaving its facility and include each of these cab-
chassis vehicles in the fleet averaging calculations, as though it were 
identical to the corresponding complete ``sister'' vehicle. The Phase 1 
MDHD program also added a flexibility known as the ``loose engine'' 
provision. Under the provision, spark-ignition (SI) engines produced by 
manufacturers of HDPUVs and sold to chassis manufacturers and intended 
for use in vocational vehicles need not meet the separate SI engine 
standard, and instead may be averaged with the manufacturer's HDPUVs 
fleet.\1526\ This provision was adopted primarily to address small 
volume sales of engines used in complete vehicles that are also sold to 
other manufacturers.
---------------------------------------------------------------------------

    \1526\ See 40 CFR 86.1819-14(k)(8).
---------------------------------------------------------------------------

    And finally, at the end of each model year NHTSA confirms whether a 
manufacturer's fleet average performance for its fleet of HDPUVs 
exceeds the applicable target-based fleet standard using the model type 
work factors. Compliance with the fleet average standards is determined 
using 2-cycle test procedures. However, manufacturers may also earn 
credits for the addition of technologies that result in real-world fuel 
improvements that are not accounted for in the 2-cycle testing. If the 
fleet average performance exceeds the standard, the manufacturer 
complies for the model year. If the manufacturer's fleet does not meet 
the standard, the manufacturer may address the shortfall by using a 
credit flexibility equal to the credit shortage in the averaging set. 
The averaging set balance is equal to the balance of earned credits in 
the account plus any credits that are traded into or out of the 
averaging set during the model year. If a manufacturer cannot meet the 
standard using credit flexibilities, NHTSA may assess a civil penalty 
for any violation of this part under 49 CFR 535.9(b).
b. Flexibilities
    Broadly speaking, there are two types of flexibilities available to 
manufacturers for HDPUVs. Manufacturers may improve fleet averages by 
(1) earning fuel consumption incentive benefits and by (2) transferring 
or trading in credits that were earned through overcompliance with the 
standards. First, as mentioned above, manufacturers may earn credits 
associated with fuel efficiencies that are not accounted for in the 2-
cycle testing.\1527\ Second, manufacturers may transfer credits into 
like fleets (i.e., averaging sets) from other manufacturers through 
trades.\1528\
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    \1527\ Off-cycle benefits were extened to heavy-duty pickup 
trucks and vans through the--MDHD--Phase 1 program in the September 
15, 2011 final rule (76 FR 57106).
    \1528\ See 49 CFR 535.7(a)(2)(iii) and 49 CFR 535.7(a)(4).
---------------------------------------------------------------------------

    Unlike the light-duty program, there is no AC credit program for 
HDPUVs. Currently, these vehicles may only earn fuel consumption 
improvement credits through an off-cycle program, which may include 
earning credits for AC efficiency improvements. In order to receive 
these credits, manufacturers must submit a request to EPA and NHTSA 
with data supporting that the technology will result in measurable, 
demonstrable, and verifiable real-world CO2 emission 
reductions and fuel savings. After providing an opportunity for the 
public to comment on the manufacturer's methodology, the agencies make 
a decision whether to approve the methodology and credits.\1529\
---------------------------------------------------------------------------

    \1529\ See 49 CFR 535.7(f)(2), 40 CFR 86.1819-14(d)(13), and 40 
CFR 86.1869-12(c) through (e).
---------------------------------------------------------------------------

    In addition to earning additional OC FCIVs, manufacturers have the 
flexibility to transfer credits into their fleet to meet the standards. 
Manufacturers may transfer in credits from past (carry-forward credits) 
model years of the same averaging set.\1530\ Manufacturers may also 
trade in credits earned by another manufacturer, as long as the credits 
are traded into the same averaging set/fleet type. Manufacturers may 
not transfer credits between light-duty CAFE fleets and heavy-duty 
fleets. Likewise, a manufacturer cannot trade in credits from another 
manufacturer's light-duty fleet to cover shortfalls in their heavy-duty 
fleets. NHTSA oversees these credit transfer and trades through 
regulations issued in 49 CFR 535.7, which includes reporting 
requirements for credit trades and transfers for medium- and heavy-duty 
vehicles.
---------------------------------------------------------------------------

    \1530\ See 49 CFR 535.7(a)(3)(i), 49 CFR 535.7(a)(3)(iv), 49 CFR 
535.7(a)(2)(v), and 49 CFR 535.7(a)(5).
---------------------------------------------------------------------------

c. Civil Penalties
    The framework established by Congress and codified by NHTSA for 
civil penalties for the heavy-duty program is quite different from the 
light-duty program.

[[Page 52926]]

Congress did not prescribe a specific rate for the fine amount for 
civil penalties but instead gave NHTSA general authority under EISA, as 
codified at 49 U.S.C. 32902(k), to establish requirements based upon 
appropriate measurement metrics, test procedures, standards, and 
compliance and enforcement protocols for HD vehicles. NHTSA interpreted 
its authority and developed an enforcement program to include the 
authority to determine and assess civil penalties for noncompliance 
that would impose penalties based on the following criteria, as 
codified in 49 CFR 535.9(b).
    In cases of noncompliance, NHTSA assesses civil penalties based 
upon consideration of the following factors:
     Gravity of the violation.
     Size of the violator's business.
     Violator's history of compliance with applicable fuel 
consumption standards.
     Actual fuel consumption performance related to the 
applicable standard.
     Estimated cost to comply with the regulation and 
applicable standard.
     Quantity of vehicles or engines not complying.
     Civil penalties paid under CAA section 205 (42 U.S.C. 
7524) for noncompliance for the same vehicles or engines.
    NHTSA considers these factors in determining civil penalties to 
help ensure, given NHTSA's wide discretion, that penalties would be 
fair and appropriate, and not duplicative of penalties that could be 
imposed by EPA. NHTSA goal is to avoid imposing duplicative civil 
penalties, and both agencies consider civil penalties imposed by the 
other in the case of non-compliance with GHG and fuel consumption 
regulations. NHTSA also uses the ``estimated cost to comply with the 
regulation and applicable standard,''\1531\ to ensure that any 
penalties for non-compliance will not be less than the cost of 
compliance. It would be contrary to the purpose of the regulation for 
the penalty scheme to incentivize noncompliance. Further, NHTSA set its 
maximum civil penalty amount not to exceed the limit that EPA is 
authorized to impose under the CAA. The agencies agreed that violations 
under either program should not create greater punitive damage for one 
program over the other. Therefore, NHTSA's maximum civil penalty for a 
manufacturer would be calculated as the: Aggregate Maximum Civil 
Penalty for a Non-Compliant Regulatory Category = (CAA Limit) x 
(production volume within the regulatory category). This approach 
applies for all HD vehicles including pickup trucks and vans as well as 
engines regulated under NHTSA's fuel consumption programs.
---------------------------------------------------------------------------

    \1531\ See 49 CFR 535.9(b)(4).
---------------------------------------------------------------------------

C. Changes Made by This Final Rule

    The following sections describe the changes NHTSA is finalizing in 
order to update its enforcement programs for light-duty vehicles and 
for HDPUVs. These changes include: (1) amending NHTSA's regulations to 
reflect the elimination of AC and OC FCIVs for BEVs in model year 2027 
and beyond; (2) adding a provision that references that a utility 
factor will be used for the calculation of FCIVs for PHEVs; (3) 
amending NHTSA's regulations to reflect the phasing out of OC FCIVs for 
all vehicles in the CAFE program by model year 2033 (10 g/mi for model 
year 2027-2030, 8 g/mi for model year 2031, 6 g/mi for model year 2032, 
and 0 g/mi for model year 2033 and beyond); (4) amending NHTSA's 
regulations to reflect the elimination of 5-cycle and alternative 
approval pathways for OC FCIVs in CAFE in model year 2027 and beyond; 
(5) adding language to NHTSA's regulations stating that NHTSA will 
recommend denial of requests for OC FCIVs under the alternative if 
requests for information are not responded to within set amounts of 
time for model years 2025-2026 for the CAFE program; (6) eliminating OC 
technology credits for HDPUVs in model year 2030 and beyond; and (7) 
making an assortment of minor technical amendments. These changes 
reflect experience gained in the past few years and are intended to 
improve the programs overall.
    NHTSA received comments from a variety of stakeholders related to 
compliance and enforcement. The commenters included manufacturers and 
trade groups, environmental groups, and groups involved in the supply 
of fuels and vehicle manufacturing resources. NHTSA received comments 
on all of our proposed changes as well as comments about other 
compliance issues that commenters believed should be addressed. NHTSA 
also received comments of general support or opposition to the changes 
proposed for the AC/OC program.1532 1533 The comments are 
discussed in more detail below.
---------------------------------------------------------------------------

    \1532\ Ceres BICEP, Docket No. NHTSA-2023-0022-61125, at 1; 
Joint NGOs, Docket No. NHTSA-2023-0022-61944, at 61.
    \1533\ DENSO, Docket No. NHTSA-2023-0022-60676-A1, at 3; Ford, 
Docket No. NHTSA-2023-0022-60837, at 10; Nissan, Docket No. NHTSA-
2023-0022-60696, at 9; Stellantis, Docket No. NHTSA-2023-0022-61107, 
at 3; Volkswagen, Docket No. NHTSA-2023-0022-58702, at 4; 
Mitsubishi, Docket No. NHTSA-2023-0022-61637, at 9.
---------------------------------------------------------------------------

1. Elimination of OC and AC Efficiency FCIVs for BEVs in the CAFE 
Program
    In the NPRM, NHTSA proposed removing AC and OC FCIVs for BEVs, 
which manufacturers can use to improve their fuel economy values to 
comply with CAFE standards. NHTSA proposed this change to align with 
EPA's May 5, 2023 proposal and because the FCIVs were based on 
information about energy savings for ICE vehicles and, therefore, are 
not representative of energy savings for BEVs.\1534\ The CAFE program 
currently allows manufacturers to increase their fleet average fuel 
economy performance with FCIVs for vehicles equipped with technologies 
that improve the efficiency of the vehicles' AC systems and otherwise 
reduce fuel consumption. The FCIVs were intended to incentize the 
adoption of fuel economy-improving technologies whose benefits are not 
accounted for in the 2-cycle testing required by 49 U.S.C. 32904(c) to 
be used for calculating fuel economy performance for CAFE compliance. 
NHTSA also sought comment on whether, instead of eliminating FCIVs for 
BEVs completely, new off-cycle and AC values for BEVs based on BEV 
powertrains rather than IC engines should be proposed, and, if so, how 
those proposed values should be calculated.
---------------------------------------------------------------------------

    \1534\ [thinsp]88 FR 29184.
---------------------------------------------------------------------------

    On April 18, 2024, EPA issued a final rule that eliminated, 
beginning in model year 2027, eligibility to gain FCIVs for any 
vehicles that do not have IC engines.\1535\ Thus, BEVs are no longer 
eligible for these FCIVs after model year 2026. NHTSA believes that 
eliminating AC and OC FCIVs was appropriate because BEVs are currently 
generating FCIVs in a program designed to account for fuel economy 
improvements that were based on reductions in emissions and fuel 
consumption of ICE vehicles. In the OC program specifically, we note 
that the values associated with menu technologies were based on ICE 
vehicles with exhaust emissions and fuel consumption. While there may 
be AC and other technologies that improve BEV energy consumption, the 
values associated with AC FCIVs and the OC menu FCIVs were based on ICE 
vehicles and, therefore, are not representative of energy consumption 
reductions in BEVs. When EPA and NHTSA adopted these flexibilities in 
the 2012 rule, there was little concern about this issue

[[Page 52927]]

because BEV sales were only a small fraction of total 
sales.1536 1537 Now, however, BEVs are gaining FCIVs as part 
of the fleet compliance that aren't representative of real-world energy 
consumption reduction. Therefore, NHTSA proposed changes to align its 
regulation with EPA's proposal to end off-cycle and AC efficiency FCIVs 
for light-duty vehicles with no IC engine beginning in model year 2027.
---------------------------------------------------------------------------

    \1535\ 89 FR 27842. See especially 40 CFR 86.1869-12 and 
600.510-12(c)(3)(ii).).
    \1536\ See 77 FR 62624, (October 15, 2012).
    \1537\ 2022 EPA Automotive Trends Report at Table 4.1 on page 
74.
---------------------------------------------------------------------------

    NHTSA received comments both supportive and in opposition of the 
proposal regarding the elimination of FCIVs for BEVs. While NHTSA 
appreciates these comments, NHTSA first notes that NHTSA's final rule 
changes on this matter are technical in nature. That is, while NHTSA's 
regulations reference a manufacturer's ability to generate FCIVs for 
CAFE compliance purposes, the authority for determining how to 
calculate fuel economy performance rests with EPA.\1538\ NHTSA's 
regulations merely reference EPA's provisions that stipulate how 
manufacturers may generate FCIVs. Therefore, the comments requesting 
NHTSA to make changes regarding FCIVs are, as a general matter, outside 
the scope of this rulemaking.
---------------------------------------------------------------------------

    \1538\ 49 U.S.C. 32904.
---------------------------------------------------------------------------

    Although NHTSA's regulatory changes to reflect the elimination of 
FCIVs for BEVs are technical in nature, NHTSA believes that it is still 
appropriate to summarize and discuss comments received and explain how 
NHTSA's views on this issue align with EPA's regulatory changes. NHTSA 
received several comments from vehicle manufacturers and trade groups 
expressing opposition of the proposal to eliminate AC and OC FCIVs for 
BEVs. Some of the comments expressed general opposition to the 
proposal, while others requested that the elimination of FCIVs for BEVs 
be delayed until model year 2032.\1539\ Ford suggested that FCIVs for 
BEVs be phased out over time, as they ``believe that the program can 
serve an important function during this transitional period towards 
electrification.'' \1540\ Other commenters noted the current incentives 
drive research and adoption of AC and OC efficiencies on all vehicles 
and that without the incentives the research may not be financially 
practical for OEMs.\1541\ DENSO also commented that if research and 
development of AC and OC efficiencies is not incentivized on all 
vehicles there may be less penetration of AC and OC technologies on ICE 
vehicles as manufacturers focus research and development on EVs.\1542\
---------------------------------------------------------------------------

    \1539\ The Alliance, Docket No. NHTSA-2023-0022-60652-A2, at 11; 
HATCI, Docket No. NHTSA-2023-0022-48991, at 1; Kia, Docket No, 
NHTSA-2023-0022-58542-A1, at 6; MEMA, Docket No. NHTSA-2023-0022-
59204-A1, at 7.
    \1540\ Ford, Docket No. NHTSA-2023-0022-60837, at 9.
    \1541\ HATCI, Docket No. NHTSA-2023-0022-48991-A1, at 3; Kia, 
Docket No. NHTSA-2023-0022-58542-A1, at 3, 6 and 7; MEMA, Docket No. 
NHTSA-2023-0022-59204-A1, at 7; Toyota, Docket No. NHTSA-2023-0022-
61131, at 2.
    \1542\ DENSO, Docket No. NHTSA-2023-0022-60676-A1, at 4.
---------------------------------------------------------------------------

    Commenters also noted that the technologies do still have a benefit 
in BEVs, particularly for AC efficiencies.\1543\ Lucid noted that ``AC 
efficiency improvements have a direct impact on tailpipe emissions for 
ICE vehicles'' \1544\ and that, as a corollary, ``improvements to AC 
efficiency in EVs yield benefits such as better vehicle range, 
increased vehicle efficiency, and less demand on the grid.'' \1545\ 
Lucid states that these benefits ``directly impact EV usage, vehicle 
miles traveled, and consumer sentiment toward the adoption of EVs.'' 
\1546\ BMW believes NHTSA should maintain the current OC and AC 
efficiency FCIVs for BEVs.\1547\ Volkswagenexpressed concern that the 
elimination of OC and AC efficiency FCIVs for BEVs would put BEVs and 
PHEVs at a disadvantage.\1548\
---------------------------------------------------------------------------

    \1543\ HATCI, Docket No. NHTSA-2023-0022-48991-A1, at 3; Kia, 
Docket No. NHTSA-2023-0022-58542-A1, at 7; MEMA, Docket No. NHTSA-
2023-0022-59204-A1, at 7; Toyota, Docket No. NHTSA-2023-0022-61131, 
at 2 and 25.
    \1544\ Lucid, Docket No. NHTSA-2023-0022-50594, at 6.
    \1545\ Lucid, Docket No. NHTSA-2023-0022-50594, at 6.
    \1546\ Lucid, Docket No. NHTSA-2023-0022-50594, at 6.
    \1547\ BMW, Docket No. NHTSA-2023-0022-58614, at 3
    \1548\ Volkswagen, Docket No. NHTSA-2023-0022-58702, at 4.
---------------------------------------------------------------------------

    Several commenters had suggestions for how to improve the accuracy 
of AC and off-cycle values for BEVs. DENSO proposed several options for 
improving the calculation of AC and OC FCIVs. \1549\ Rivian noted that 
BEVs can still benefit from improved AC systems in the form of less 
energy usage, and that as such, NHTSA should allow BEVs to earn AC 
credits.\1550\ ICCT, in contrast, commented that ``while BEVs also 
benefit from improved AC system efficiency and off-cycle technologies, 
BEVs do not require the additional incentive provided by AC and OC 
credits.'' ICCT recommended that NHTSA not introduce new OC and AC 
credits for BEVs and further recommended that ``if NHTSA decides to 
introduce such credits, they should be based on relative or percentage-
based reductions in 5-cycle energy consumption.'' \1551\
---------------------------------------------------------------------------

    \1549\ DENSO, Docket No. NHTSA-2023-0022-60676-A1, at 5.
    \1550\ Rivian, Docket No. NHTSA-2023-0022-59765, at 9.
    \1551\ ICCT, Docket No. NHTSA-2023-0022-54064, at 24.
---------------------------------------------------------------------------

    NHTSA also received several comments expressing support of the 
proposal to eliminate AC and OC efficiency FCIVs for BEVs, including 
Arconic, the Joint NGOs, ICCT, and ACEEE.\1552\
---------------------------------------------------------------------------

    \1552\ Arconic, Docket No. NHTSA-2023-0022-60684, at 4; ACEEE, 
Docket No. NHTSA-2023-0022-48374, at 2; Joint NGOs, Docket No. 
NHTSA-2023-0022-61944-A2, at 62; ICCT, Docket No. NHTSA-2023-0022-
54064, at 24.
---------------------------------------------------------------------------

    In light of EPA's April 18, 2024 final rule, NHTSA is finalizing 
its proposed regulatory changes that note that starting in 2027, 
manufacturers may not generate FCIVs for vehicles that lack an internal 
combustion engine. As mentioned earlier, the original AC and OC FCIVs 
were exclusively developed with IC engines efficiency assumptions and 
are not representative of energy consumption reductions for BEVs. They 
correspond to motor vehicle emissions reductions that occur when the AC 
systems on ICE vehicles are operated more efficiently, which in turn 
reduces their use of electricity produced by the alternator and engine, 
and which in turn reduces fuel consumption of the motor vehicle engine. 
The AC FCIV program provides an incentive for manufacturers to increase 
the efficiency of their AC systems and in turn reduce the fuel 
consumption by the vehicle engine. Also, OC FCIVs were intended to 
incentivize the adoption of technologies that would not have been 
adopted if the program didn't exist.
    NHTSA has also recently observed that BEVs that have received AC 
and OC FCIVs have increased their fuel economy compliance values by 
significant amounts due to the required use of the petroleum 
equivalence factor to determine the fuel economy of BEVs combined with 
the order of operation for calculating FCIVs per EPA's 
regulation.1553 1554 As a result, a manufacturer that is 
solely building electric vehicles may generate unrealistic FCIVs. For 
example, assuming the performance of a 2022 Tesla Model 3 Long Range 
AWD variant based on the 2-cycle test, NHTSA would calculate the same 
vehicle in model year 2031 to have a fuel economy of 154.3 MPGe based 
on the 2-cycle test and

[[Page 52928]]

DOE's revised PEF.\1555\ Assuming that the model year 2031 vehicle 
received the same amount of FCIVs as the model year 2022 vehicle (5 
grams/mile AC FCIVs and 5 grams/mile OC FCIVs, for a total of 10 grams/
mile), the FCIVs would increase the vehicle's CAFE fuel economy to 
186.7 MPGe. This is a difference of 32.4 MPGe. In comparison, if an ICE 
vehicle with a fuel economy of 35 MPG based on the 2-cycle test 
generated the same amount of AC and OC FCIVs (10 grams/mile), the FCIVs 
would only increase the vehicle's fuel economy to 36.4 MPG. This is 
just an increase of 1.4 mpg from an increase of 10 grams/mile of AC and 
OC. Not only is the increase in MPGe for the BEV in this example a 21% 
increase as compared to a 4% increase in the MPG for the ICE vehicle, 
but it is also unrealistic to believe that an increase of 32.4 MPGe is 
representative of the energy consumption savings provided by BEVs 
having the technology for which they generated the FCIVs. To provide 
perspective, the fuel savings for an ICE vehicle that increased its 
fuel economy by 32.4 MPG would be enormous if applied across a fleet of 
vehicles. While AC and OC technologies may increase the energy 
efficiency of BEVs, the current FCIVs generated by these vehicles are 
out of proportion to the real-world benefit they provide.
---------------------------------------------------------------------------

    \1553\ 40 CFR 600.116-12.
    \1554\ 40 CFR 600.510-12(c).
    \1555\ 89 FR 22041 (March 29, 2024).
---------------------------------------------------------------------------

2. Addition of a Utility Factor for Calculating FCIVs for PHEVs
    Additionally, in light of its proposal to eliminate FCIVs for BEVs, 
NHTSA sought comment on adjusting FCIVs for PHEVs based on a utility 
factor for the portion of usage where the vehicle is operated by the IC 
engine to align with EPA's May 5, 2023 NPRM. For CAFE compliance 
purposes, the fuel economy of dual-fueled vehicles, such as PHEVs, is 
calculated by EPA using a utility factor to account the portion of 
power energy consumption from the different energy sources.\1556\ A 
utility factor of 0.3, for example, means that the vehicle is estimated 
to operate as an IC Engine vehicle 70 percent of the vehicle's VMT. 
NHTSA requested comment on aligning NHTSA's regulations to align with 
EPA's proposal to reduce FCIVs for PHEVs proportional to the estimated 
percentage of VMT that the vehicles would be operated as EVs.
---------------------------------------------------------------------------

    \1556\ 40 CFR 600.116-12.
---------------------------------------------------------------------------

    We received only one comment on the proposal to adjust FCIVs for 
PHEVs using a utility factor calculation. The Joint NGOs commented that 
NHTSA should eliminate FCIVs for PHEVs when they are operating on 
electricity.\1557\
---------------------------------------------------------------------------

    \1557\ Joint NGOs, Docket No. NHTSA-2023-0022-61944-A2, at 62.
---------------------------------------------------------------------------

    On April 18, 2024, EPA issued a final rule that added a utility 
factor to the calculation of FCIVs for PHEVs.\1558\ Accordingly, 
starting in model year 2027, the calculated credit value for PHEVs will 
be scaled based on the vehicle's estimated utility factor.\1559\ In 
light of the changes made in EPA's final rule, NHTSA is finalizing 
technical amendments to note that FCIVs for PHEVs will be based on a 
utility factor starting in model year 2027. While PHEVs will remain 
eligible for off-cycle FCIVs under the CAFE program, EPA finalized, as 
a reasonable approach for addressing off-cycle FCIVs for PHEVs, to 
scale the calculated FCIVs for PHEVs based on the vehicle's assigned 
utility factor. For example, if a PHEV has a utility factor of 0.3, 
meaning the vehicle is estimated to operate as an ICE vehicle 70 
percent of the vehicle's VMT, the PHEV will earn an off-cycle FCIV that 
is 70 percent of the FCIV value of a fully ICE vehicle to properly 
account for the value of the off-cycle FCIVs corresponding to expected 
engine operation. This calculation methodology is consistent with EPA's 
decision to eliminate FCIVs for BEVs because the values are not 
representative of real-world improvements in energy consumption during 
electric operation. As has been the case for FCIVs under the existing 
regulations, individual vehicles may generate more FCIVs than the 
fleetwide cap value but the fleet average credits per vehicle must 
remain at or below the applicable menu cap.
---------------------------------------------------------------------------

    \1558\ 89 FR 27842, 27922.
    \1559\ 89 FR 27842, 27922.
---------------------------------------------------------------------------

3. Phasing Out OC FCIVs by MY 2033
    NHTSA also requested comment on phasing out OC FCIVs for all 
vehicles before MY 2031. As a possible approach, NHTSA sought comment 
on phasing out the off-cycle menu cap by reducing it to 10 g/mi in 
model year 2027, 8 g/mi in model year 2028, 6 g/mi in model year 2029, 
and 3 g/mi in model year 2030 before eliminating OC FCIVs in model year 
2031. As noted above, FCIVs were added to the CAFE program by the 
October 15, 2012 final rule and manufacturers were able to start 
earning OC FCIVs starting in model year 2017.\1560\
---------------------------------------------------------------------------

    \1560\ 77 FR 62624.
---------------------------------------------------------------------------

    The value of FCIVs for OC technologies listed on the predefined 
list are derived from estimated emissions reductions associated with 
the technologies which is then converted into an equivalent improvement 
in MPG. These values, however, were established based on model year 
2008 vehicles and technologies assessed during the 2012 rulemaking and 
may now be less representative of the fuel savings provided by the off-
cycle technologies as fuel economy has improved over time. While 
NHTSA's CAFE standards have increased over time, FCIVs for some menu 
technologies have remained the same, which may result in the FCIVs 
being less representative of MPG improvements provided by the off-cycle 
technologies. As fuel economy improves, FCIVs increasingly represent a 
larger portion of their fuel economy and there is not currently a 
mechanism to confirm that the off-cycle technologies provide fuel 
savings commensurate with the FCIVs the menu provides. Further, issues 
such as the synergistic effects and overlap among off-cycle 
technologies take on more importance as the FCIVs represent a larger 
portion of the vehicle fuel economy. Therefore, NHTSA requested comment 
on phasing out FCIVs for off-cycle technologies for ICE vehicles. 
Alternatively, NHTSA requested comment on whether new values should be 
established for off-cycle technologies that are more representative of 
the real-world fuel savings provided by these technologies, and if so, 
how the appropriate values for these technologies could be calculated.
    On April 18, 2024, EPA issued a final rule that phases out OC FCIVs 
between model years 2031-2033.\1561\ While EPA proposed phasing out OC 
FCIVs in model years 2027-2033,\1562\ EPA finalized provisions to 
retain the current 10 g/mile menu cap through model year 2030, with a 
phase-out of 8/6/0 g/mile in model years 2031-2033. As discussed above, 
while NHTSA's regulations reference a manufacturer's ability to 
generate FCIVs for CAFE compliance purposes, the authority for 
determining how to calculate fuel economy performance rests with 
EPA.\1563\ Therefore, EPA's final rule has already effectuated the 
phase-out of FCIVs for OC technology. As such, NHTSA is moving forward 
with finalizing amendments to update NHTSA's regulations to align with 
EPA's phase-out of FCIVs for OC technologies.
---------------------------------------------------------------------------

    \1561\ 89 FR 27842.
    \1562\ 88 FR 29184 (May 5, 2023).
    \1563\ 49 U.S.C. 32904.
---------------------------------------------------------------------------

    Although NHTSA's regulatory changes to reflect the phase out of OC 
FCIVs are technical in nature, NHTSA believes that it is still 
appropriate to summarize and discuss comments

[[Page 52929]]

received and explain how NHTSA's views on this issue align with EPA's 
regulatory changes.
    Several commenters wrote in support of phasing out OC FCIVs. ICCT 
\1564\ commented in support of phasing out the OC FCIVs by model year 
2031. ACEEE commented that ``[t]here is also limited evidence of the 
benefits of the credits in reducing real-world emissions so without any 
reforms NHTSA should similarly phase out the program.''\1565\ ACEEE 
also commented that the additional incentives currently provided by 
NHTSA weaken the standards. Lucid,\1566\ Rivian,\1567\ and Tesla 
submitted comments encouraging NHTSA to remove OC FCIVs in model year 
2027 along with the elimination of OC and AC efficiency FCIVs for 
BEVs.\1568\ Rivian also commented that if NHTSA does not eliminate OC 
FCIVs in model year 2027 they should phase out OC FCIVs before the 
proposed model year 2031 timeframe, reducing the menu cap to zero by 
model year 2030 since NHTSA does not currently have a mechanism to 
confirm that the off-cycle technologies provide fuel savings 
commensurate with the menu values.\1569\ Toyota also commented in 
support of NHTSA's proposal to phase out menu credits.\1570\
---------------------------------------------------------------------------

    \1564\ ICCT, Docket No. NHTSA-2023-0022-54064, at 24.
    \1565\ ACEEE, Docket No. NHTSA-2023-0022-60684, at 4.
    \1566\ Lucid, Docket No. NHTSA-2023-0022-50594, at 7.
    \1567\ Rivian, Docket No. NHTSA-2023-0022-28017, at 1.
    \1568\ Tesla, Docket No. NHTSA-2023-0022-60093, at 16.
    \1569\ Rivian, Docket No. NHTSA-2023-0022-59765, at 8.
    \1570\ Toyota, Docket No. NHTSA-2023-0022-61131, at 26.
---------------------------------------------------------------------------

    Other commenters requested to extend the phase out through model 
year 2032 and coordinate with EPA on the phase-out.\1571\ Porsche 
suggested that NHTSA extend the menu phase-out by allowing 
manufacturers to continue to apply for credits for menu items after the 
phase out of OC FCIVs.\1572\ Subaru commented requesting that ``already 
approved efficiency technologies are allowed to maintain their value 
for as long as they are applied to future vehicles.\1573\ Large 
investments were made into these technologies, which should be 
recognized for their real-world energy savings.''
---------------------------------------------------------------------------

    \1571\ The Alliance, Docket No. NHTSA-2023-0022-60652-A2, at 11; 
DENSO, Docket No. NHTSA-2023-0022-60676-A1, at 3.
    \1572\ Porsche, Docket No. NHTSA-2023-0022-59240, at 9.
    \1573\ Subaru, Docket No. NHTSA-2023-0022-58655, at 4.
---------------------------------------------------------------------------

    Commenters argued for maintaining menu OC FCIVs for several reasons 
including: (1) the incentives will help manufacturers as they 
transition to EVs, (2) the incentives support the development and 
application of technology which improves fuel economy, (3) OC 
technology provides real world benefits to fuel economy. Commenters 
noted that the incentives from the OC program help manufacturers to 
meet NHTSA's standards and will help manufacturers navigate the 
transition to EVs.\1574\ Other commenters noted that these incentives 
reflect real-world fuel economy improvements.\1575\ While these 
technologies do provide some real-world fuel economy improvements, it 
is difficult to quantify how much real world benefit they provide. 
Commenters \1576\ noted that without the incentives manufacturers will 
be less likely to develop new OC technology that could assist in 
NHTSA's overall goal of reducing fuel consumption. Additionally, 
manufacturers would be less likely to include OC technologies in their 
fleets without the incentives.\1577\
---------------------------------------------------------------------------

    \1574\ The Alliance, Docket No. NHTSA-2023-0022-60652-A3, at 34; 
Ford, Docket No. NHTSA-2023-0022-60837, at 9; MEMA, Docket No. 
NHTSA-2023-0022-59204-A1, at 7; NADA, NHTSA-2023-0022-58200, at 13.
    \1575\ MEMA, Docket No. NHTSA-2023-0022-59204-A1, at 3; Subaru, 
Docket No. NHTSA 2023-002-58655, at 4; Stellantis, Docket No. NHTS-
2023-0022-61107, at 10; BMW, Docket No. NHTSA-2023-0022-58614, at 4.
    \1576\ DENSO, Docket No. NHTSA-2023-0022-60676-A1, at 3; Ford, 
Docket No. NHTSA-2023-0022-60837, at 9; Kia, Docket No. NHTSA-2023-
0022-58542-A1, at 3.
    \1577\ Kia, Docket No. NHTSA-2023-002-58542-A1, at 6-7.
---------------------------------------------------------------------------

    Kia commented that they oppose NHTSA's proposal to phase out and 
eventually eliminate off-cycle technology menu FCIVs by MY2031 and 
instead urged NHTSA to retain existing off-cycle menu-based credits 
through at least 2032.\1578\ Kia noted that the increased off-cycle 
menu cap (from 10 g/mi to 15 g/mi) for model years 2023-2026 signaled 
to industry that EPA, and therefore NHTSA, would continue to encourage 
and account for these off-cycle technologies.\1579\ Kia further stated 
that it had made significant investments in these technologies and 
would appreciate the opportunity to earn a return on investment.\1580\
---------------------------------------------------------------------------

    \1578\ Kia, Docket No. NHTSA-2023-002-58542-A1, at 6-7.
    \1579\ Kia, Docket No. NHTSA-2023-002-58542-A1, at 6-7.
    \1580\ Kia, Docket No. NHTSA-2023-002-58542-A1, at 6-7.
---------------------------------------------------------------------------

    As discussed above, NHTSA is finalizing minor regulatory changes to 
align with EPA's phase-out of menu credits over the model year 2030-
2033 timeframe. NHTSA believes the slower phase-out schedule provided 
in EPA's regulation will provide additional time for manufacturers who 
have made substantial use of off-cycle credits in their product 
planning to pursue alternative pathways for improving fuel economy. The 
extended phase-out schedule also will address lead time in the early 
years of the program. Instead of the proposed menu cap phase-out of 10/
8/6/3/0 g/mile in model years 2027-2031, EPA finalized provisions that 
retain the 10 g/mile menu cap through model year 2030, with a phase-out 
of 8 g/mi in model year 2031, 6 g/mi in model year 2032 and 0 g/mi in 
model year 2033. We believe this phase-out schedule is an appropriate 
way to address concerns that the off-cycle credits may not be 
reflective of the real-world emissions impact of the off-cycle 
technologies.
4. Elimination of the 5-Cycle and Alternative Approval Pathways for 
CAFE
    In the NPRM, NHTSA proposed eliminating both the 5-cycle pathway 
and the alternative pathway for off-cycle FCIVs for light-duty vehicles 
starting in model year 2027. NHTSA proposed this change to align with 
EPA and believes it to be appropriate because we do not believe that 
the benefit to manufacturers is significant enough to justify the 
significant amount of time and resources required to be committed to 
reviewing and approving requests. Further, based on the general degree 
of robustness of data provided by manufacturers to EPA and NHTSA for 
approval consideration, the analysis is often delayed and may 
ultimately result in a denial, causing undesirable and often 
unnecessary delays to final compliance processing.
    In the NPRM, NHTSA stated that it does not believe that the 5-cycle 
pathway is beneficial to manufacturers or to NHTSA, as the pathway is 
used infrequently, provides minimal benefits, and requires a 
significant amount of time for review. Historically, only a few 
technologies have been approved for FCIVs through 5-cycle testing. The 
5-cycle demonstrations are less frequent than the alternative pathway 
due to the complexity and cost of demonstrating real-world emissions 
reductions for technologies not listed on the menu. NHTSA's proposal 
aligned with EPA's proposed rule issued on May 5, 2023.\1581\
---------------------------------------------------------------------------

    \1581\ 88 FR 29184.
---------------------------------------------------------------------------

    NHTSA also proposed eliminating the alternative approval process 
for off-

[[Page 52930]]

cycle FCIVs starting in model year 2027. This proposal also aligned 
with EPA's May 5, 2023 NPRM.\1582\ Manufacturers currently seek EPA 
review, in consultation with NHTSA, through a notice and comment 
process, to use an alternative methodology other than the menu or 5-
cycle methodology.\1583\ Manufacturers must provide supporting data on 
a case-by-case basis demonstrating the benefits of the off-cycle 
technology on their vehicle models. Manufacturers may also use the 
alternative approval pathway to apply for FCIVs for menu technologies 
where the manufacturer is able to demonstrate FCIVs greater than those 
provided by the menu.
---------------------------------------------------------------------------

    \1582\ 88 FR 29184.
    \1583\ 40 CFR 86.1869-12(d).
---------------------------------------------------------------------------

    NHTSA proposed eliminating the alternative approval process for 
off-cycle credits starting in model year 2027 to align with EPA's 
proposal. The alternative approval process has been used successfully 
by several manufacturers for high efficiency alternators, resulting in 
EPA adding them to the off-cycle menu beginning in model year 
2021.\1584\ The program has resulted in a number of concepts for 
potential off-cycle technologies over the years, but few have been 
implemented, at least partly due to the difficulty in demonstrating the 
quantifiable real-world fuel consumption reductions associated with 
using the technology. Many FCIVs sought by manufacturers have been 
relatively small (less than 1 g/mile). Manufacturers have commented 
several times that the process takes too long, but the length of time 
is often associated with the need for additional data and information 
or issues regarding whether a technology is eligible for FCIVs. NHTSA 
has been significantly impacted in conducting its final compliance 
processes due to the untimeliness of OC approvals. For these reasons, 
NHTSA proposed edits to update NHTSA's regulations to align with EPA's 
proposal to eliminate the alternative approval process for earning off-
cycle fuel economy improvements starting in model year 2027.
---------------------------------------------------------------------------

    \1584\ 85 FR 25236 (April 30, 2020).
---------------------------------------------------------------------------

    On April 18, 2024, EPA issued a final rule that eliminated the 5-
cycle and alternative pathways, starting in model year 2027 for earning 
off-cycle fuel economy improvements.\1585\ Under EPA's final rule, 
manufacturers may no longer generate credits under the 5-cycle and 
alternative pathways starting in model year 2027.\1586\ Therefore, 
NHTSA is moving forward with the proposed amendments to its regulations 
to align with the changes in EPA's regulations.
---------------------------------------------------------------------------

    \1585\ 89 FR 27842.
    \1586\ See changes to 40 CFR 86.1869-12 (89 FR 27842, 28199).
---------------------------------------------------------------------------

    While NHTSA received comments both supporting and opposing NHTSA's 
proposed regulatory changes, NHTSA's regulatory changes are technical 
in nature. That is, the elimination of FCIVs for BEVs starting in model 
year 2027 was effectuated as part of EPA's April 18, 2024 rule.\1587\ 
While NHTSA's regulations reference a manufacturer's ability to 
generate FCIVs in the CAFE program, the authority for determining how 
to calculate fuel economy performance rests with EPA.\1588\ NHTSA's 
regulations merely reference EPA's provisions that stipulate how 
manufacturers may generate FCIVs. Therefore, the comments requesting 
NHTSA to make changes regarding FCIVs are, as a general matter, outside 
the scope of this rulemaking.
---------------------------------------------------------------------------

    \1587\ 89 FR 27842.
    \1588\ 49 U.S.C. 32904.
---------------------------------------------------------------------------

    Although NHTSA's regulatory changes to reflect the elimination of 
5-cycle and alternative approval pathways are technical in nature, 
NHTSA believes that it is still appropriate to respond to comments and 
explain how NHTSA's views on this issue align with EPA's. NHTSA 
received comments both supporting and opposing the proposals to 
eliminate the 5-cycle and alternative approval 
pathways.1589 1590
---------------------------------------------------------------------------

    \1589\ Arconic, Docket No. NHTSA-2023-0022-48374-A1, at 2.
    \1590\ DENSO, Docket No. NHTSA-2023-0022-60676-A1, at 4.
---------------------------------------------------------------------------

    Hyundai America Technical Center, Inc. (HATCI), Kia, Mitsubishi and 
MECA expressed concerns with the removal of the 5-cycle and alternative 
approval pathways. MECA commented acknowledging the complexity of the 
5-cycle and alternative approval processes and the fact that not many 
manufacturers have used these pathways. MECA also stated that they 
believe that there might be increased adoption of the 5-cycle and 
alternative approval pathways with other incentives being sunset and, 
for this reason, requested that NHTSA keep these pathways available for 
OEMs.\1591\ HATCI requested that NHTSA extend the 5-cycle and 
alternative pathways through at least 2032, believing that if these 
pathways are eliminated manufacturers will abandon these 
technologies.\1592\ Kia commented that the alternative and 5-cycle 
approaches would be helpful to manufacturers during the transition to 
EVs.\1593\ Mitsubishi also requested that NHTSA extend the 5-cycle and 
alternative approval method past model year 2032.\1594\ In response to 
these comments, NHTSA notes that the requested changes are outside of 
the scope of this rulemaking. With EPA's April 18, 2024 final rule, 
manufacturers may not generate FCIVs through either the 5-cycle or 
alternative approval pathways beginning in model year 2027. NHTSA 
further notes that due to the limited use of these pathways to date, 
NHTSA does not believe this change will have a substantial negative 
impact on manufacturers.
---------------------------------------------------------------------------

    \1591\ MECA, Docket No. NHTSA-2023-0022-63053- A1, at 7.
    \1592\ HATCI, Docket No. NHTSA-2023-0022-48991, at 3.
    \1593\ Kia, Docket No. NHTSA-2023-0022-58542-A1, at 7.
    \1594\ Mitsubishi, Docket No. NHTSA-2023-0022-61637, at 8.
---------------------------------------------------------------------------

    Some commenters requested that technologies approved via the 
alternative approval or 5-cycle pathway prior to model year 2027 that 
are not included on the menu credit still be eligible for the credit 
amount for which they were approved.\1595\ NHTSA understands these 
commenters to be asking that manufacturers be permitted to generate 
FCIVs that were approved through the alternative approval and 5-cycle 
pathways as long as FCIVs are permitted to be generated for 
technologies on the menu even though new technologies would not be able 
to be approved. NHTSA notes, however, that EPA's final rule precludes 
manufacturers from generating FCIVs through the alternative approval 
and 5-cycle pathways starting in model year 2027 and does not merely 
prevent new technologies to be approved.
---------------------------------------------------------------------------

    \1595\ BMW, Docket No. NHTSA-2023-0022-58614, at 4; DENSO, 
Docket No. NHTSA-2023-0022-60676-A1, at 4.
---------------------------------------------------------------------------

    Commenters also requested that NHTSA add to the off-cycle credits 
menu list all of the previously approved 5-cycle and public process 
pathway credits with an associated increase in the cap.\1596\ HATCI 
also requested that, after adding the previously approved technologies 
to the menu, the menu cap be adjusted accordingly.\1597\ In response to 
these comments, NHTSA notes that the menu for FCIVs is found within 
EPA's regulations and that the authority for determining how fuel 
economy performance is calculated rests with EPA.\1598\ NHTSA has not 
identified authority that would allow it to establish new technologies 
to a menu

[[Page 52931]]

for FCIVs. NHTSA further notes that the few credits that have been 
approved under the 5-cycle and alternative approval pathways have been 
specific to individual vehicle models and there is not sufficient data 
on the real-world emissions impact of these technologies across a wide 
range of vehicle segments to determine an appropriate menu credit for 
these technologies.
---------------------------------------------------------------------------

    \1596\ HATCI, Docket No. NHTSA-2023-002-48991, at 3; BMW, Docket 
No. NHTSA-2023-0022-58614, at 4; DENSO, Docket No. NHTSA-2023-002-
60676-A1, at 4.
    \1597\ HATCI, Docket No. NHTSA-2023-002-48991, at 3.
    \1598\ 49 U.S.C. 32904.
---------------------------------------------------------------------------

    For the foregoing reasons, NHTSA is finalizing its proposed 
amendments to align with EPA's April 18, 2024 final rule, which 
eliminated the generation of FCIVs through the 5-cycle and alternative 
approvals process starting in model year 2027.
5. Requirement To Respond To Requests for Information Regarding Off-
Cycle Requests Within 60 Days for LDVs for MYs 2025 and 2026
    For model year 2025 and model year 2026, NHTSA proposed creating a 
time limit to respond to requests for information regarding OC 
petitions for light-duty vehicles. This limit was proposed to allow for 
the timelier processing of OC petitions. In the last rule, NHTSA added 
provisions clarifying and outlining the deadlines for manufacturers to 
submit off-cycle requests.\1599\ Since laying out those new 
requirements, NHTSA has identified another point in the OC request 
process that is delaying the timely processing of the requests. When 
considering OC petitions, NHTSA and EPA frequently need to request 
additional information from the manufacturer, and NHTSA observes that 
it has sometimes taken OEMs an extended amount of time to respond to 
these requests.
---------------------------------------------------------------------------

    \1599\ See 49 CFR 531.6(b)(3)(i) and 49 CFR 533.6(c)(4)(i).
---------------------------------------------------------------------------

    NHTSA proposed to create a deadline of 60 days for responding to 
requests for additional information regarding OC petitions. If the 
manufacturer does not respond within the 60-day limit with the 
requested information, NHTSA may recommend that EPA deny the petition 
for the petitioned model year. NHTSA may grant an extension for 
responding if the manufacturer responds within 60 days with a 
reasonable timeframe for when the requested information can be provided 
to the agencies. If an OEM does not respond to NHTSA's call for 
additional data regarding the request within a timely manner, the 
request may be denied. If the request is denied, it will no longer be 
considered for the model year in question. If the denied petition is 
for model year 2025 the OEM may still request consideration of the 
credits for the following year. A manufacturer may request 
consideration for later model years by responding to NHTSA/EPA's data 
request and expressing such interest.
    NHTSA received one comment in support of the proposal, from the 
Joint NGOs,\1600\ and one comment opposing the proposal, from 
Toyota.\1601\ Toyota stated that NHTSA ``should not add additional 
requirements to the FCIV application process as these alternative 
methods wind down over the 2025-2026 model years.'' \1602\ Toyota 
stated that approval of applications has taken years in some cases with 
the loss of planned FCIVs due to no fault of the manufacturer.\1603\ 
Toyota also stated that an application for an off-cycle technology is 
often followed by several rounds of additional data requests from NHTSA 
and EPA with long delays between each submission of data by the 
manufacturer and requested that if NHTSA were to enact a deadline on 
manufacturers, they establish a commensurate deadline for agency action 
on the requested data submissions.''\1604\
---------------------------------------------------------------------------

    \1600\ Joint NGOs, Docket No. NHTSA-2023-0022-61944-A2, at 66.
    \1601\ Toyota, Docket No. NHTSA-2023-0022-61131, at 26.
    \1602\ Id.
    \1603\ Id.
    \1604\ Id.
---------------------------------------------------------------------------

    After considering the comments, NHTSA has decided to move forward 
with adopting the 60-day deadline for responding in an attempt to 
streamline the process for manufacturers as well as NHTSA. While NHTSA 
understands manufacturers frustration with the extended time period the 
application review can take, the FCIV approval process involves 
significant agency review to confirm that technologies for which the 
manufacturer is requesting FCIVs provides real world benefits and that 
the FCIV value is appropriate. Since the manufacturers are petitioning 
for the FCIVs, NHTSA does not believe it is appropriate for the 
manufacturer to delay the process by not responding to agency requests 
for information in a timely manner. Accordingly, NHTSA is finalizing a 
change to the regulation to notify manufacturers that NHTSA may 
recommend denial of their OC FCIV petition if the manufacturer does not 
respond within 60-days. This change applies for model year 2025-26.
6. Elimination of OC Technology Credits for Heavy-Duty Pickup Trucks 
and Vans Starting in Model Year 2030
    In the NPRM, NHTSA proposed eliminating OC technology credits for 
HDPUVs for the same reasons discussed above for eliminating the 5-cycle 
and alternative pathways for OC technology credits in the CAFE program 
starting in model year 2030. Currently, manufacturers of HDPUVs may 
only earn credits through an off-cycle program that involves requesting 
public comment and case-by-case review and approval. Since its 
inception, the program has involved lengthy and resource-intensive 
processes that have not resulted in significant benefits to the HDPUV 
fleet. At this time, NHTSA does not believe the benefit provided by 
these credits justifies NHTSA's time and resources. Accordingly, NHTSA 
proposed to end the off-cycle program for HDPUVs starting in model year 
2030. NHTSA also requested comment on eliminating OC technology credits 
for BEVs if NHTSA did not eliminate OC technology credits for all 
HDPUVs. In the current regulation, we consider all BEVs and PHEVs to 
have no fuel usage and we assume zero fuel consumption for compliance. 
Accordingly, these vehicles would go to negative compliance values if 
we allowed OC technology credits for BEVs.
    NHTSA received only one comment specific to the proposal to remove 
OC FCIVs for HDPUVs. In the comment, Arconic\1605\ expressed support of 
eliminating OC FCIVs for HDPUVs.
---------------------------------------------------------------------------

    \1605\ Arconic, Docket No. NHTSA-2023-0022-48374, at 2.
---------------------------------------------------------------------------

    After considering the comments received, NHTSA has decided to move 
forward with the elimination of OC technology credits for heavy-duty 
pickup trucks and vans starting in model year 2030. As stated above, 
NHTSA believes the lengthy and resource-intensive processes involved 
with approving OC credits for HDPUVs has not resulted in significant 
benefits to the HDPUV fleet. Additionally, NHTSA believes that, even 
apart from process considerations, it is appropriate to eliminate OC 
FCIVs for HDPUV BEVs and PHEVs because they are considered to have no 
fuel usage and zero g/mile for compliance and allowing FCIVs to apply 
to these vehicles would result in negative compliance values.
7. Technical Amendments for Advanced Technology Credits
    In addition to the changes discussed above, NHTSA is also making 
several minor technical amendments to 49 CFR parts 523, 531, 533, 535, 
536 and 537. These amendments include technical amendments related to 
advanced technology credits in the Heavy-Duty National program as well 
as an assortment of technical amendments to update statutory citations 
and cross-references and to update language regarding medium-duty 
passenger

[[Page 52932]]

vehicles. Although some of these technical amendments were not included 
in the NPRM, NHTSA finds that notice and comment would be unnecessary. 
Pursuant to the Administrative Procedure Act (APA), a Federal agency 
must generally provide the public and notice and an opportunity to 
comment on agency rulemakings.\1606\ The APA, however, creates an 
exception in cases where an agency for good cause determines ``that 
notice and public procedure thereon are impractical, unnecessary, or 
contrary the public interest.'' \1607\ Because all of the changes 
discussed below involve only minor, technical amendments to NHTSA's 
regulations, the agency has determined that notice and comment are 
unnecessary. NHTSA will briefly discuss each of these technical 
amendments below.
---------------------------------------------------------------------------

    \1606\ 5 U.S.C. 553(b).
    \1607\ 5 U.S.C. 553(b)(4)(B).
---------------------------------------------------------------------------

    In the NPRM, NHTSA proposed to make technical amendments to the 
current regulations pertaining to advanced technology credits. In the 
Phase 2 rule for the Heavy-Duty National Program, NHTSA and EPA jointly 
explained that we were adopting advanced technology credit multipliers 
for three types of advanced technologies. As described in the 2016 
final rule, there would be a 3.5 multiplier for advanced technology 
credits for plug-in hybrid vehicles, a 4.5 multiplier for advanced 
technology credits for all-electric vehicles, and a 5.5 multiplier for 
advanced technology credits for fuel cell vehicles. The agencies stated 
that their intention in adopting these multipliers was to create a 
meaningful incentive to manufacturers considering adopting these 
technologies in their vehicles. The agencies further noted that the 
adoption rates for these advanced technologies in heavy vehicles was 
essentially non-existent at the time the final rule was issued and 
seemed unlikely to grow significantly within the next decade without 
additional incentives. Because of their large size, the agencies 
decided to adopt them as an interim program that would continue through 
model year 2027. These changes, however, were not accurately reflected 
in the regulatory changes made by the final rule. Since issuing the 
NPRM, NHTSA published a final rule which made technical amendments to 
the regulations for the heavy-duty fuel efficiency program and 
finalized the proposed change.\1608\ The current text of 49 CFR 535.7 
now states that for Phase 2, advanced technology credits may be 
increased by the corresponding multiplier through model year 2027.
---------------------------------------------------------------------------

    \1608\ March 15, 2024 (89 FR 18808).
---------------------------------------------------------------------------

    Additionally, the final rule also explained that because of the 
adoption of the large multipliers, the agencies were discontinuing the 
allowance to use advanced technology credits across averaging 
sets.\1609\ This change was also not accurately reflected in the 
regulatory changes. NHTSA proposed making a technical amendment to 
reflect the intended change.
---------------------------------------------------------------------------

    \1609\ ``Averaging set'' is defined at 49 CFR 535.4.
---------------------------------------------------------------------------

    NHTSA received several comments about this technical amendment. 
Rivian Automotive, LLC (Rivian) suggests that NHTSA should accelerate 
the phase out of advanced technology multipliers ``in recognition of a 
much-changed industry and vehicle technology landscape.'' \1610\ The 
Auto Innovators,\1611\ GM,\1612\ MECA,\1613\ and Stellantis commented 
supporting NHTSA's clarification that the advanced technology 
multipliers will extend through model year 2027, with Stellantis adding 
that this ``avoids disrupting OEM product plans by changing a 
previously published final rule.'' \1614\ The Strong PHEV Coalition 
commented that NHTSA ``should provide a small credit multiplier in 
model year 2027 to 2030 for several advanced technologies including 
PHEVs with a long all-electric range that are not being produced today 
because they need extra lead time to develop.'' \1615\
---------------------------------------------------------------------------

    \1610\ Rivian, NHTSA-2023-0022-59765, at 14.
    \1611\ The Alliance, Docket No. NHTSA-2023-0022-60652-A2, at 12.
    \1612\ GM, Docket No. NHTSA-2023-0022-60686-A1, at 7.
    \1613\ MECA, Docket No. NHTSA-2023-0022-63053- A1, at 7.
    \1614\ Stellantis, NHTSA-2023-0022-61107, at 11.
    \1615\ Strong PHEV Coalition, NHTSA-2023-0022-60193, at 5.
---------------------------------------------------------------------------

    In response to the comments received, NHTSA notes that substantive 
changes to the advanced technology multiplier are out of scope of this 
rulemaking. Accordingly, NHTSA is not phasing out the advanced 
technology multipliers sooner than model year 2027, as Rivian 
requested, nor is NHTSA extending the multipliers through model year 
2030, as the Strong PHEV Coalition requested. NHTSA is instead making 
the technical amendments that were proposed in the NPRM, which 
clarifies that advanced technology multipliers may be used through 
model year 2027, but they may not be used across averaging sets.
    While NHTSA added clarifying language to 49 CFR 535.7 in the final 
rule published on March 15, 2024, which made technical amendments to 
the regulations for heavy-duty fuel efficiency program, NHTSA is making 
additional corrections, as proposed in the NPRM, to clarify that only 
advanced technology credits earned in Phase 1 may be used across 
averaging sets. Specifically, NHTSA is amending 49 CFR 535.7 
(a)(2)(iii) to clarify that positive credits, other than advanced 
technology credits earned in Phase 1, generated and calculated within 
an averaging set may only be used to offset negative credits within the 
same averaging set. NHTSA is adding the same type of clarification to 
Sec.  535.7(a)(4)(i) by clarifying that other than advanced technology 
credits earned in phase 1, traded FCCs may be used only within the 
averaging set in which they were generated and clarifying that Sec.  
535.7(a)(4)(ii) only applies to advanced technology credits earned in 
Phase 1.
8. Technical Amendments to Part 523
    NHTSA is making technical amendments to part 523 to provide clarity 
regarding medium-duty passenger vehicles. Although these amendments 
were not included in the NPRM, NHTSA has since identified a need to 
update NHTSA's regulation regarding medium-duty passenger vehicles by 
making minor changes. Specifically, these amendments are made to 
provide consistency throughout the regulation and to align with the 
statutory definition of medium-duty passenger vehicle.
a. 49 CFR 523.2 Definitions
    NHTSA is updating the definitions of definitions of base tire (for 
passenger automobiles, light trucks, and medium duty passenger 
vehicles), basic vehicle frontal area, and emergency vehicle to change 
reference to ``medium duty passenger vehicles'' to ``medium-duty 
passenger vehicles'' for consistency with the term used in NHTSA's 
authorizing statute.
    NHTSA is also updating the definitions of full-size pickup truck 
and light truck to change reference to ``medium duty passenger 
vehicles'' to ``medium-duty passenger vehicles'' for consistency. 
Additionally, NHTSA is updating both terms to clarify that the terms 
include medium-duty passenger vehicles that meet the criteria for those 
vehicles.
    NHTSA is also replacing the term the term medium duty passenger 
vehicle with the term medium-duty passenger vehicle for consistency and 
is updating the definition to align with the statutory definition. The 
term medium-duty passenger vehicle is defined at 49 U.S.C. 32901(a)(19) 
as being defined in 40 CFR 86.1803-01 as in effect on the date of the 
enactment of the Ten-in-Ten Fuel Economy Act (Pub. L. 110-140, enacted

[[Page 52933]]

on December 19, 2007). Since the existing definition is not in complete 
alignment with the statutory definition, NHTSA is updating the 
regulatory definition. This change also provides greater clarity to 
manufacturers in regard to applicability of fuel economy standards to 
these vehicles.
b. 49 CFR 523.3 Automobile
    NHTSA is amending Sec.  523.3 to remove outdated language currently 
found in paragraph (b) that may cause confusion as to which vehicles 
are included as automobiles for purposes of CAFE standards. The text 
found in paragraph (b) was superseded by statutory changes in the Ten-
in-Ten Fuel Economy Act (Pub. L. 110-140). With these statutory 
changes, all vehicles with a GVWR of 10,000 lbs. or less are subject to 
the CAFE standards with the exception of work trucks. A work truck is 
defined at 49 U.S.C. (a)(19) as a vehicle that is rated at between 
8,500 and 10,000 lbs. gross vehicle weight and is not a medium-duty 
passenger vehicle. With this statutory change, all medium-duty 
passenger vehicles became subject to NHTSA's authority for setting CAFE 
standards. Medium-duty passenger vehicles are classified as either 
passenger cars or light trucks depending on whether the vehicle meets 
the requirements for light trucks found at Sec.  523.5.
c. 49 CFR 523.4 Passenger Automobile
    NHTSA is amending Sec.  523.4 to add a sentence to clarify that a 
medium-duty passenger vehicle that does not meet the criteria for non-
passenger motor vehicles in Sec.  523.5 is a passenger automobile. As 
discussed above, since issuing the NPRM, NHTSA identified a need to 
provide greater clarity to the applicability of the CAFE standards to 
medium-duty passenger vehicles. NHTSA believes this technical amendment 
helps to provide that needed clarity.
d. 49 CFR 523.5 Non-Passenger Automobile
    NHTSA is amending Sec.  523.5 to add a sentence to clarify that a 
medium-duty passenger vehicle that meets the criteria for non-passenger 
motor vehicles in Sec.  523.5 is a non-passenger automobile. This 
change, like the change to Sec.  523.4, is intended to greater clarity 
regarding the applicability of the CAFE standards to medium-duty 
passenger vehicles.
e. 49 CFR 523.6 Heavy-Duty Vehicle
    NHTSA is amending Sec.  523.6 to correct a typo involving a missing 
hyphen after the word ``medium'' and to remove ``Heavy-duty trailers'' 
from the list of four regulatory categories. NHTSA is removing heavy-
duty trailers from the list consistent with a November 2021 decision by 
the United States Court of Appeals for the District of Columbia 
Circuit.\1616\ The D.C. Circuit decision vacated all portions of NHTSA 
and EPA's joint 2016 rule that apply to trailers.\1617\ The underlying 
statute authorizes NHTSA to examine the fuel efficiency of and 
prescribe fuel economy standards for ``commercial medium-duty [and/or] 
heavy-duty on-highway vehicles.'' 49 U.S.C. 32902(b)(1)(C); 49 U.S.C. 
32902(k)(2). The Court reasoned that trailers do not qualify as 
``vehicles'' when that term is used in the fuel economy context because 
trailers are motorless and use no fuel.\1618\ Accordingly, the Court 
held that NHTSA does not have the authority to regulate the fuel 
economy of trailers.\1619\ Consistent with this decision, NHTSA is 
removing reference to heavy-duty trailers in Sec.  523.6.
---------------------------------------------------------------------------

    \1616\ Truck Trailer Mfrs. Ass'n, Inc. v. EPA, 17 F.4th 1198, 
1200 (D.C. Cir. 2021).
    \1617\ 81 FR 73478
    \1618\ Truck Trailer Mfrs. Ass'n, Inc., 17 F.4th at 1200, at 
1204-08.
    \1619\ Id. at 1208. For similar reasons, the Court also held 
that the statute authorizing EPA to regulate the emissions of 
``motor vehicles'' does not encompass trailers. Id. at 1200-03. The 
Court affirmed, however, that both agencies still ``can regulate 
tractors based on the trailers they pull.'' Id. at 1208. Moreover, 
NHTSA is still authorized to regulate trailers in other contexts, 
such as under 49 U.S.C. chapter 301. See 49 U.S.C. 30102(a)(7) 
(defining ``motor vehicle'' to include ``a vehicle . . . drawn by 
mechanical power''); Truck Trailer Mfrs. Ass'n, Inc., 17 F.4th at 
1207 (``A trailer is `drawn by mechanical power.' '').
---------------------------------------------------------------------------

f. 49 CFR 523.8 Heavy-Duty Vocational Vehicle
    NHTSA is making a minor amendment to Sec.  523.8(b) to replace the 
term ``Medium duty passenger vehicles'' with ``Medium-duty passenger 
vehicles''. This minor technical amendment is being made for 
consistency.
9. Technical Amendments to Part 531
    NHTSA is making several technical amendments to update references 
in the existing regulation and to include a definition for a term used 
in the regulation.
a. 49 CFR 531.1 Scope
    NHTSA is amending Sec.  531.1 to change the reference to section 
502(a) and (c) of the Motor Vehicle Information and Cost Savings Act, 
to the appropriate codified provisions at 49 U.S.C. 32902. This change 
is intended to allow the reader to more easily identify the statutory 
definitions referenced in this section.
b. 49 CFR 531.4 Definitions
    NHTSA is amending Sec.  531.4 to change references to section 502 
of the Motor Vehicle Information and Cost Savings Act, as amended by 
Public Law 94-163, to the appropriate codified provisions at 49 U.S.C. 
32901. This change is to allow the reader to more easily identify the 
statutory definitions referenced in this section. NHTSA is also adding 
the term domestically manufactured passenger automobile and defining it 
as a vehicle that is deemed to be manufactured domestically under 49 
U.S.C. 32904(b)(3) and 40 CFR 600.511-08. This second change is to 
provide greater clarity regarding a term that is used in the existing 
part 531.
c. 49 CFR 531.5 Fuel Economy Standards
    NHTSA is making technical amendments to Sec.  531.5(a) to correct a 
cross reference to NHTSA's alternative fuel economy standards for 
manufacturers who have petitioned and received exemptions from fuel 
economy standards under part 525. The correct cross-reference should be 
to paragraph (e). NHTSA is also making a technical amendment to Sec.  
531.5(b), (c), and (d) to add language clarifying that requirements in 
those paragraphs do not apply to manufacturers subject to alternative 
fuel economy standards in paragraph (e). These technical amendments 
clarify that manufacturers that have petitioned for and received 
exemptions from average fuel economy standards under 49 CFR part 525 
are only subject to the alternative fuel economy standards set forth at 
Sec.  531.5(e).
10. Technical Amendments to Part 533
    NHTSA is making a few minor technical amendments to part 533 to 
update references to statutory authority.
a. 49 CFR 533.1 Scope
    NHTSA is amending Sec.  533.1 to change the reference to section 
502(a) and (c) of the Motor Vehicle Information and Cost Savings Act, 
to the appropriate codified provisions at 49 U.S.C. 32902. This change 
is intended to allow the reader to more easily identify the statutory 
definitions referenced in this section.
b. 49 CFR 533.4 Definitions
    NHTSA is amending Sec.  533.4 to change references to section 501 
of the Motor Vehicle Information and Cost Savings Act, as amended by 
Public Law 94-163, to the appropriate codified provisions at 49 U.S.C. 
32901. This change is to allow the reader to more easily identify the 
statutory definitions referenced in this section. NHTSA is also 
removing the

[[Page 52934]]

term domestically manufactured from Sec.  533.4 because it not used 
within part 533. As discussed above, NHTSA is defining the term in 
Sec.  531.4 because the term is used in part 531. NHTSA is also 
updating the term captive import to include reference to where the term 
is defined in section 502(b)(2)(E) of the Motor Vehicle Information and 
Cost Savings Act. This change is to allow the reader to more readily 
find the statutory definition of the term.
11. Technical Amendments to Part 535
    NHTSA is making a few minor technical amendments to part 535 to 
update references to statutory authority and to update a cross 
reference to an EPA provision.
a. 49 CFR 535.4 Definitions
    NHTSA is amending Sec.  535.4 to change a reference to section 501 
of the Motor Vehicle Information and Cost Savings Act, as amended by 
Public Law 94-163, to the appropriate codified definitions at 49 U.S.C. 
32901. NHTSA is making this change to indicate that the terms 
manufacture and manufacturer are also codified at 49 U.S.C. 32901. 
NHTSA is also amending the introductory text of Sec.  535.4 to remove 
the term ``commercial medium-duty and heavy-duty on highway vehicle'' 
because the term is not used in part 535, nor are the terms 
``commercial medium-duty on highway vehicle'' or ``commercial heavy-
duty on highway vehicle'' used in part 535. NHTSA is also adding a 
comma after the term ``fuel'' to indicate that it is a separate term 
from ``work truck.''
b. 49 CFR 535.7 Average, Banking, and Trading (ABT) Credit Program
    NHTSA is amending Sec.  535.7(a)(1)(iii) to remove outdated and 
unnecessary cross references. Specifically, the paragraph, which 
describes advanced technology credits, is being updated to remove 
reference to the credits being generated under EPA's regulations and 
instead will just reference NHTSA's relevant provisions at Sec.  
535.7(f)(1).
    NHTSA is amending Sec.  535.7(b)(2) to correct a cross-reference to 
the EPA's provision regarding fuel consumption values for advanced 
technologies. The current regulation references ``40 CFR 86.1819-
14(d)(7)'' and NHTSA is correcting it read ``40 CFR 86.1819-
14(d)(6)(iii).''
12. Technical Amendments to Part 536
    NHTSA is making a technical amendment to part 536 to correct a date 
in Table 1 Sec.  536.4(c)--Lifetime Vehicle Miles Traveled. The years 
covered in the final column of the table have been updated from ``2017-
2026'' to ``2017-2031.'' This change is being made to reflect updates 
made in the Final Rulemaking for Model Years 2027-2031 Light-Duty 
Corporate Average Fuel Economy Standards.
13. Technical Amendments to Part 537
    NHTSA is making a few technical amendments to part 537 to correct a 
typo and update statutory references to include the appropriate 
codified provisions.
a. 49 CFR 537.2 Scope
    NHTSA is amending Sec.  537.2 to correct a typo by changing 
``valuating'' to ``evaluating.''
b. 49 CFR 537.3 Applicability
    NHTSA is amending Sec.  537.3 to replace the reference to ``section 
502(c) of the Act'' to instead reference 49 U.S.C. 32902(d). This 
change is to aid the reader in finding the relevant statutory 
provision.
c. 49 CFR 537.4 Definitions
    NHTSA is amending Sec.  537.4 to change references to section 501 
of the Motor Vehicle Information and Cost Savings Act, as amended by 
Public Law 94-163, to the appropriate codified provisions at 49 U.S.C. 
32901. This change is to allow the reader to more easily identify the 
statutory definitions referenced in this section. With this change, 
NHTS is also removing the definition of Act as meaning the Motor 
Vehicle Information and Cost Savings Act (Pub. L. 92-513), as amended 
by the Energy Policy and Conservation Act (Pub. L. 94-163).
d. 49 CFR 537.7 Pre-Model Year and Mid-Model Year Reports
    NHTSA is amending Sec.  537.7(c)(7)(i), (ii), and (iii) to provide 
clarity and to note, in subparagraph (iii) that the reporting 
requirements for reporting full-size trucks that meet the mild and 
strong hybrid vehicle definitions end after model year 2024, to 
coincide with the sunset date for FCIVs for advanced full-size pickup 
trucks.

D. Non-Fuel Saving Credits or Flexibilities

    In a comment to the August 16, 2022 EIS scoping notice for model 
year 2027 and beyond CAFE standards,\1620\ Hyundai requested that NHTSA 
consider developing an optional credit program for vehicle 
manufacturers selling certain types of vehicles in environmental 
justice (EJ) communities.\1621\ Because creation of any such program 
would be a part of NHTSA's CAFE Compliance and Enforcement program, 
NHTSA responded to Hyundai's comment in the proposal rather than in the 
EIS.\1622\ NHTSA reaffirmed its commitment to considering communities 
with EJ concerns but declined to propose an EJ credit program in 
response to Hyundai's comment, for several reasons. In brief, NHTSA's 
concerns about Hyundai's proposed program included whether EPCA/EISA 
included the relevant authority to construct such a program, whether 
such a program would provide a credit windfall to manufacturers without 
providing verifiable benefits for communities with EJ concerns, and 
whether such a program would ensure EPCA/EISA's goal of saving fuel.
---------------------------------------------------------------------------

    \1620\ Notice of Intent To Prepare an Environmental Impact 
Statement for MYs 2027 and Beyond Corporate Average Fuel Economy 
Standards and MYs 2029 and Beyond Heavy-Duty Pickup Trucks and Vans 
Vehicle Fuel Efficiency Improvement Program Standards (87 FR 50386).
    \1621\ Hyundai, Docket No. NHTSA-2022-0075-0011.
    \1622\ 88 FR 56372 (August 17, 2023).
---------------------------------------------------------------------------

    In comments responding to NHTSA's response, Hyundai proposed 
additional clarifications to their environmental justice 
proposal.\1623\ Hyundai's concept, which they termed the Community 
Energy Savings Credit, would offer a maximum 25% discount on vehicles 
purchased by buyers with incomes at less than or equal to two times the 
Federal Poverty Level, if the buyers scrap an existing ICE vehicle that 
is at least ten model years old. Hyundai proposed credit earnings for 
the vehicles as follows: a 3x multiplier for HEVs and PHEVs, and a 5x 
multiplier for BEVs and FCEVs. The proposed program also includes 
annual OEM reporting requirements, in addition to OEM and scrappage 
companies being subject to agency audit.
---------------------------------------------------------------------------

    \1623\ Hyundai, Docket No. NHTSA-2023-0022-51701-A1, at 6-7.
---------------------------------------------------------------------------

    NHTSA thanks Hyundai for thoughtfully responding to the concerns 
that NHTSA raised in the proposal. NHTSA will not create this type of 
credit program at this time. NHTSA has extensive experience 
administering a vehicle scrappage program,\1624\ and is cognizant of 
the need to balance a program that achieves its stated goals against 
the program's administrative costs. NHTSA will continue to think of 
ways that EPCA/EISA and its other relevant authorities could allow the 
agency better consideration of EJ concerns in setting CAFE standards, 
beyond NHTSA's current

[[Page 52935]]

consideration.\1625\ That said, NHTSA wants to emphasize that nothing 
in today's decision should preclude Hyundai specifically, and the 
automotive industry as a whole,\1626\ from continuing to consider how 
it could better serve local communities, including those with EJ 
concerns. Aside from the potential to earn credits, NHTSA encourages 
automakers to deploy more fuel-efficient and cleaner vehicles in 
communities that have the potential to benefit from that deployment the 
most.
---------------------------------------------------------------------------

    \1624\ Consumer Assistance to Recycle and Save Act of 2009 (CARS 
Program), https://www.nhtsa.gov/fmvss/consumer-assistance-recycle-and-save-act-2009-cars-program.
    \1625\ See, e.g., all past CAFE EISs, the current Final EIS, 
Chapter 7, and all past CAFE preambles.
    \1626\ See 88 FR 56371-2 (August 17, 2023). As far as NHTSA is 
aware, Hyundai was the first OEM commenter in CAFE history to 
comment about environmental justice.
---------------------------------------------------------------------------

E. Additional Comments
    NHTSA received many additional comments related to NHTSA's 
compliance programs for CAFE and fuel efficiency that requested changes 
that were either outside of the scope of this rulemaking or outside of 
NHTSA's statutory authority. Specifically, NHTSA received many comments 
on credit flexibilities for which NHTSA had not proposed any changes. 
Many of these flexibilities are set by statute and cannot be changed 
through NHTSA rulemaking. NHTSA discusses these comments below.
1. AC FCIVs
    Some commenters may have misunderstood the proposal to phase out OC 
FCIVs and believed NHTSA was proposing changes to both AC and OC for 
ICE vehicles. Stellantis expressed concern that NHTSA was removing AC 
efficiencies for ICE.\1627\ To be clear, NHTSA only proposed amending 
its regulations to note that OC FCIVs would be phased out. Therefore, 
phasing out FCIVs for AC efficiencies is out of scope of this 
rulemaking and the existing provisions for AC FCIVs for ICE vehicles 
will remain as is. Stellantis also requested additions to AC 
efficiencies for ICE vehicles.\1628\ NHTSA didn't propose any changes 
to AC efficiencies for ICE vehicles for the NPRM, so this change would 
be outside the scope of this rulemaking.
---------------------------------------------------------------------------

    \1627\ Stellantis, Docket No. NHTSA-2023-0022-61107, at 9.
    \1628\ Stellantis, Docket No. NHTSA-2023-0022-61107, at 10.
---------------------------------------------------------------------------

2. Credit Transfer Cap AC
    Several commenters requested that NHTSA adjust the transfer cap for 
credit transfers between fleets based on the oil savings equivalent to 
2 mpg in 2018. In support of this request, the Auto Innovators urged 
NHTSA to ``interpret the statutory cap on credit transfers in terms of 
oil savings, a primary purpose of the CAFE program.'' \1629\ Several 
other commenters expressed agreement and support for Auto Innovators' 
proposal. As part of the rationale supporting this request, several 
commenters expressed concerns that the transfer cap compounds the 
misalignment between NHTSA and EPA. Hyundai expressed their view that 
adjusting the transfer cap would support the Administration's goals of 
bringing green manufacturing to the United States by allowing credits 
earned in the DP fleet as a result of IRA tax credits incentivizing 
domestic production of BEVs to be used in the IP fleet.\1630\ Ford 
commented stating that the ``[r]apid electrification of the light truck 
segment is much more expensive and difficult to achieve compared to 
passenger cars, and the transfer cap would limit its ability to use 
overcompliance in the Car fleet to meet the Truck fleet 
standards.\1631\ And GM more generally recommended that NHTSA ``allow 
full fungibility of credits across regulated vehicle classes or 
otherwise adjust standard stringency, if vehicle classes have 
constraints that prevent alignment.'' \1632\
---------------------------------------------------------------------------

    \1629\ The Alliance, NHTSA-2023-0022-60652, at 11-12.
    \1630\ HATCI, NHTSA-2023-0022-48991, at 2.
    \1631\ Ford, NHTSA-2023-022-60837, at 7.
    \1632\ GM, NHTSA-2023-0022-60686, at 5.
---------------------------------------------------------------------------

    In response to these comments, NHTSA notes that the transfer cap is 
set by statute in 49 U.S.C. 32903(g)(3). NHTSA does not have the 
authority to adjust the transfer cap in a manner that is inconsistent 
with the plain language of the statute. For the final rule, NHTSA is 
not making any changes to the existing provisions regarding 
transferring credits. NHTSA's view remains unchanged that the transfer 
cap in 49 U.S.C. 32903(g)(1) clearly limits the amount of performance 
increase for a manufacturer's fleet that fails to achieve the 
prescribed standards. Accordingly, the statute prevents NHTSA from 
changing the transfer cap for CAFE compliance to be consistent with 
EPA's program.
3. Credit Trading Between HDPUV and Light Truck Fleets
    Several commenters requested that NHTSA allow credit transfers 
between the HDPUV fleet and the light truck fleet. The Auto Innovators 
suggested that NHTSA create such transfer mechanism to ``address the 
likelihood of light trucks with heavy batteries moving to the Class 2b/
3 fleet, and to improve alignment with proposed EPA regulations.'' 
\1633\ The Auto Innovators assert that NHTSA's governing statutes do 
not prohibit it from creating a credit transfer program between HDPUVs 
and light truck fleets and suggested that NHTSA ``establish a transfer 
program from HDPUV to light truck by converting credits based on oil 
savings.'' \1634\
---------------------------------------------------------------------------

    \1633\ The Alliance, NHTSA-2023-0022-60652-A2, at 17.
    \1634\ The Alliance, NHTSA-2023-0022-60652-A2, at 13.
---------------------------------------------------------------------------

    NHTSA disagrees with the Auto Innovators interpretation of the 
statute and instead believes that the statutes preclude NHTSA from 
establishing a transfer program from the HDPUV to the light truck 
fleet. Specifically, NHTSA notes that 49 U.S.C. 32912(b) establishes 
how NHTSA calculates penalties for violations of fuel economy standards 
and permits NHTSA to only consider the fuel economy calculated under 49 
U.S.C. 32904(a)(1)(A) or (B) multiplied by the number of automobiles in 
the fleet and reduced by the credits available to the manufacturers 
under 49 U.S.C. 32903. Because credits for the HDPUV fleet would not be 
available to a manufacturer under 49 U.S.C. 32903, NHTSA would be 
precluded from considering those credits when evaluating whether a 
manufacturer complied with the fuel economy standards. Additionally, 
NHTSA notes that the authority for establishing requirements for light 
trucks and HDPUVs is provided under separate statutory provisions. 
NHTSA establishes requirements for light trucks pursuant to its 
authority for establishing CAFE standards at 49 U.S.C. 32902(b), 
whereas NHTSA's authority for establishing standards for fuel 
efficiency for HDPUVs comes from 49 U.S.C. 32902(k). Since the fuel 
economy and fuel efficiency programs are established under separate 
statutory provisions, NHTSA does not believe it has the authority to 
allow overcompliance in one program to offset shortfalls in the other.
4. Adjustment for Carry Forward and Carryback Credits
    Honda commented about the devaluation of CAFE credits when they are 
used by a manufacturer to address its own future compliance shortfalls 
and requested that NHTSA adjust carryback and carry forward credits 
based on oil savings.\1635\ Honda notes that while transferred or 
traded credits are appropriately adjusted into consumption-based 
equivalents before use, credits internally used within the

[[Page 52936]]

same compliance category are not similarly adjusted.\1636\ For 
consistency with both GHG credits and traded CAFE credits, Honda 
requested that credits used similarly carry a gallons-equivalent value 
based on the achieved value, standard, and fleet-specific VMT under 
which they were earned. Honda stated that not adjusting the credits 
results in a devaluation of internally used credits, since credits 
earned under a less-efficient fleet represent a higher gallon-per-
credit value and stated that it believes it is unlikely that Congress 
intended for such mathematical anomalies to persist in the CAFE 
average, banking, and trading (ABT) program.
---------------------------------------------------------------------------

    \1635\ Honda, NHTSA-2023-0022-61033, at 7.
    \1636\ Honda, NHTSA-2023-0022-61033, at 7.
---------------------------------------------------------------------------

    NHTSA thanks Honda for their comment but notes that changes to 
carryback and carry forward credits are out of scope of this 
rulemaking. Accordingly, NHTSA is not making any changes in response to 
Honda's comment.
5. Increasing Carryback Period
    HATCI commented requesting that NHTSA increase the carry-back 
period from 3 to 5 years.\1637\ HATCI stated that extending the 
carryback period by two years would encourage manufacturers to develop 
long-term fuel economy increasing technologies.\1638\ HATCI states that 
advanced technologies take years to develop, and the option to carry-
back credits up to 5 years provides more opportunities for a return on 
R&D investments, which would support ZEV and high-MPG vehicle 
development.'' \1639\
---------------------------------------------------------------------------

    \1637\ HATCI, NHTSA-2023-0022-48991, at 2.
    \1638\ HATCI, NHTSA-2023-0022-48991, at 2.
    \1639\ HATCI, NHTSA-2023-0022-48991, at 2.
---------------------------------------------------------------------------

    In response to Hyundai-Kia's comment, NHTSA notes that the time 
period for carryback is set in statute at 49 U.S. Code 32903(a)(1). 
Accordingly, NHTSA does not have the authority to make any changes to 
the carryback period. NHTSA also notes that it considers the time of 
refresh and redesign of vehicles required for development of new 
technologies into consideration when setting standards. For more 
discussion on this see TSD Chapter 2.
6. Flex Fuel Vehicle Incentives
    RFA et al., 2 and MCGA requested that NHTSA and EPA reinstitute 
incentives for flex-fueled vehicles (FFVs).1640 1641 RFA et 
al. 2 also discussed how a lack of CAFE incentives for FFVs may have 
contributed to the decrease in FFVs from 2014 to 2021.
---------------------------------------------------------------------------

    \1640\ RFA et al. 2, NHTSA-2023-0022-57625, at 18.
    \1641\ MCGA, NHTSA-2023-0022-60208, at 18.
---------------------------------------------------------------------------

    Per 49 U.S. Code 32906, the incentives for FFVs were phased out in 
model year 2020. While FFVs are still allowed to receive credits for 
exceeding CAFE standards under 49 U.S.C. 32903 based on EPA's 
calculation of fuel economy,\1642\ but are no longer eligible for an 
increase in fuel economy under 49 U.S.C. 32906. EPA has existing 
provisions to calculate the emissions weighting of FFVs, based on our 
projection of actual usage of gasoline vs. E85, referred to as the F-
factor.\1643\ Additionally, as NHTSA did not propose any FFV incentives 
in the final rule, adopting new incentives would be outside the scope 
of this rulemaking. Accordingly, NHTSA is not making any changes 
regarding FFV incentives.
---------------------------------------------------------------------------

    \1642\ 40 CFR 600.510-12(g).
    \1643\ 40 CFR 600.510-12(k) and 40 CFR 86.1819-14(d)(10)(i).
---------------------------------------------------------------------------

7. Reporting
    Volkswagen commented requesting an alternative mechanism for 
reporting to reduce reporting burden.\1644\ NHTSA thanks Volkswagen for 
its comment and would like to express its commitment to simplifying and 
streamlining reporting as much as possible. However, as NHTSA did not 
propose any changes to reporting in the NPRM, NHTSA will not be 
finalizing any changes to reporting at this time. NHTSA also notes 
that, as part of the previous CAFE rulemaking, it created templates for 
several of the required reports in order to simplify the reporting 
process and is open to continuing to work with manufacturers to 
simplify those reporting templates.
---------------------------------------------------------------------------

    \1644\ Volkswagen, NHTSA-2023-0022-58702, at 3.
---------------------------------------------------------------------------

8. Petroleum Equivalency Factor for HDPUVs
    In response to request on NHTSA's proposal to remove OC technology 
FCIVs for HDPUVs, several commenters seem to have misunderstood NHTSA's 
proposal and believed NHTSA intended to make changes to provision in 
the existing regulation that provides that BEVs and PHEVs are 
considered to have no fuel usage.\1645\ However, NHTSA did not propose 
and will not be finalizing any changes to the zero g/mile assumption 
for compliance. Several commenters also requested that NHTSA establish 
petroleum equivalency values for HDPUVs to reflect the fact that BEVs 
do require energy.\1646\ This request, however, is outside the scope of 
this rulemaking.
---------------------------------------------------------------------------

    \1645\ Rivian, NHTSA-2023-0022-59765, at 10; Stellantis, NHTSA-
2023-0022-61107-A1, at 12; The Aluminum Association, NHTSA-2023-
0022-58486, at 3; ZETA, NHTSA-2023-0022-60508, at 29; Volkswagen, 
NHTSA-2023-0022-58702, at 4.
    \1646\ Valero, NHTSA-2023-0022-58547-G, at 6; The Aluminum 
Association, NHTSA-2023-0022-58486, at 3.
---------------------------------------------------------------------------

9. Incentives for Fuel Cell Electric Vehicles
    BMW commented requesting additional incentives for hydrogen 
technology.\1647\ BMW stated that they believe that ``hydrogen 
technology will play a key role on the path to climate neutrality 
across all industries and has great potential, particularly for 
individual mobility'' and asked NHTSA to consider additional incentives 
to support this nascent technology.\1648\
---------------------------------------------------------------------------

    \1647\ BMW, NHTSA-2023-0022-58614, at 4.
    \1648\ BMW, NHTSA-2023-0022-58614, at 4.
---------------------------------------------------------------------------

    In response to BMW's comment, NHTSA notes that it did not propose 
any new incentives for vehicles with hydrogen technology and, 
therefore, any changes in this regard would be out of scope of the 
rulemaking. Additionally, BMW did not identify any specific authority 
that would allow NHTSA to create such new incentives and NHTSA has 
itself not identified statutory authority that would allow NHTSA to 
create new incentives. Accordingly, NHTSA is not finalizing any changes 
to add additional credit mechanisms for vehicles with hydrogen 
technology.
10. EV Development
    GM commented suggesting that NHTSA and EPA create an optional 
compliance path for manufacturers that deliver ``greater-than-projected 
EV volumes for greater multipollutant and fuel consumption reduction.'' 
\1649\ GM refers to this optional compliance path as a ``Leadership 
Pathway,'' and states that it believes that ``[a] voluntary program for 
companies with higher EV deployment has the potential to result in 
greater overall national EV volumes than the Executive Order 2030 goal 
(i.e., 50% EVs)''.\1650\
---------------------------------------------------------------------------

    \1649\ GM, NHTSA-2023-0022-60686, at 5.
    \1650\ GM, NHTSA-2023-0022-60686, at 5.
---------------------------------------------------------------------------

    In response to GM's comment, NHTSA notes that the agency did not 
propose any program to create new incentives for BEV production and, 
therefore, any such changes would be out of scope of this rulemaking. 
Additionally, NHTSA does not believe it has authority to establish the 
type of program GM describes.
11. PHEV in HDPUV
    The Strong PHEV Coalition commented requesting incentives for HDPUV 
PHEVs. Specifically, the Strong PHEV Coalition requested incentives

[[Page 52937]]

related to the use of the PHEV's battery to do work while the vehicle 
is stationary or to do bidirectional charging to the electric grid with 
on-board AC inverters. The Strong PHEV Coalition recommended that NHTSA 
``somehow encourage these two technology types (e.g., exemptions, 
advanced technology credit multiplier or some other type of special 
consideration) and include a robust discussion of these technologies.'' 
\1651\
---------------------------------------------------------------------------

    \1651\ Strong PHEV Coalition, NHTSA-2023-0022-60193, at 5.
---------------------------------------------------------------------------

    Since NHTSA did not propose any incentives for HDPUVs PHEVs with 
special off-road functionality, any changes in response to this comment 
would be outside the scope of this rulemaking. Additionally, NHTSA does 
not believe its authority for establishing fuel efficiency standards 
would permit the agency to establish incentives related to off-road use 
of the vehicles. The discussed examples of bidirectional charging to 
the grid and charging of other electric machinery may be saving energy, 
but these savings are not related to energy use for transportation 
purposes.

VIII. Regulatory Notices and Analyses

A. Executive Order 12866, Executive Order 13563, and Executive Order 
14094

    E.O. 12866, ``Regulatory Planning and Review'' (58 FR 51735, Oct. 
4, 1993), reaffirmed by E.O. 13563, ``Improving Regulation and 
Regulatory Review'' (76 FR 3821, Jan. 21, 2011), and amended by E.O. 
14094, ``Modernizing Regulatory Review'' (88 FR 21879), provides for 
determining whether a regulatory action is ``significant'' and 
therefore subject to the Office of Management and Budget (OMB) review 
process and to the requirements of the E.O. Under these E.O.s, this 
action is a ``significant regulatory action'' under section 3(f)(1) of 
E.O. 12866, as amended by E.O. 14094, because it is likely to have an 
annual effect on the economy of $200 million or more. Accordingly, 
NHTSA submitted this action to OMB for review and any changes made in 
response to interagency feedback submitted via the OMB review process 
have been documented in the docket for this action. The estimated 
benefits and costs of this final rule are described above and in the 
FRIA, which is located in the docket and on NHTSA's website.

B. DOT Regulatory Policies and Procedures

    This final rule is also significant within the meaning of the DOT's 
Regulatory Policies and Procedures. The estimated benefits and costs of 
the final rule are described above and in the FRIA, which is located in 
the docket and on NHTSA's website.

C. Executive Order 14037

    E.O. 14037, ``Strengthening American Leadership in Clean Cars and 
Trucks'' (86 FR 43583, Aug. 10, 2021), directs the Secretary of 
Transportation (by delegation, NHTSA) to consider beginning work on a 
rulemaking under EISA to establish new fuel economy standards for 
passenger cars and LD trucks beginning with model year 2027 and 
extending through and including at least model year 2030, and to 
consider beginning work on a rulemaking under EISA to establish new 
fuel efficiency standards for HDPUVs beginning with model year 2028 and 
extending through and including at least model year 2030.\1652\ The 
E.O. directs the Secretary to consider issuing any final rule no later 
than July 2024;\1653\ to coordinate with the EPA and the Secretaries of 
Commerce, Labor, and Energy;\1654\ and to, ``seek input from a diverse 
range of stakeholders, including representatives from labor unions, 
States, industry, environmental justice organizations, and public 
health experts.'' \1655\
---------------------------------------------------------------------------

    \1652\ 86 FR 43583 (Aug. 10, 2021), Sec. 2(b) and (c).
    \1653\ Id., Sec. 5(b).
    \1654\ Id., Sec. 6(a) and (b).
    \1655\ Id., Sec. 6(d).
---------------------------------------------------------------------------

    This final rule follows the directions of this E.O. It is issued 
pursuant to NHTSA's statutory authorities as set forth in EISA and sets 
new CAFE standards for passenger cars and light trucks beginning in 
model year 2027, and new fuel efficiency standards for HDPUVs beginning 
in model year 2030 due to statutory lead time and stability 
requirements. NHTSA coordinated with EPA, Commerce, Labor, and Energy, 
in developing this final rule, and the final rule also accounts for the 
views provided by labor unions, States, industry, environmental justice 
organizations, and public health experts.

D. Environmental Considerations

1. National Environmental Policy Act (NEPA)
    Concurrently with this final rule, NHTSA is releasing a Final EIS, 
pursuant to the National Environmental Policy Act, 42 U.S.C. 4321 et 
seq., and implementing regulations issued by the Council on 
Environmental Quality (CEQ), 40 CFR parts 1500-1508, and NHTSA, 49 CFR 
part 520. NHTSA prepared the Final EIS to analyze and disclose the 
potential environmental impacts of the CAFE and HDPUV FE standards and 
a range of alternatives. The Final EIS analyzes direct, indirect, and 
cumulative impacts and analyzes impacts in proportion to their 
significance. It describes potential environmental impacts to a variety 
of resources, including fuel and energy use, air quality, climate, 
historical and cultural resources, and environmental justice. The Final 
EIS also describes how climate change resulting from global carbon 
dioxide emissions (including CO2 emissions attributable to 
the U.S. LD and HDPUV transportation sectors under the alternatives 
considered) could affect certain key natural and human resources. 
Resource areas are assessed qualitatively and quantitatively, as 
appropriate, in the Final EIS.
    NHTSA has considered the information contained in the Final EIS as 
part of developing this final rule.\1656\ This preamble and final rule 
constitute the agency's Record of Decision (ROD) under 40 CFR 1505.2 
for its promulgation of CAFE standards for model years 2027-2031 
passenger cars and lights trucks and FE standards for model years 2030-
2035 heavy-duty pickup trucks and vans. The agency has the authority to 
issue its Final EIS and ROD simultaneously pursuant to 49 U.S.C. 
304a(b) and U.S. Department of Transportation, Office of Transportation 
Policy, Guidance on the Use of Combined Final Environmental Impact 
Statements/Records of Decision and Errata Sheets in National 
Environmental Policy Act Reviews (April 25, 2019).\1657\ NHTSA has 
determined that neither the statutory criteria nor practicability 
considerations preclude simultaneous issuance. For additional 
information on NHTSA's NEPA analysis, please see the Final EIS.
---------------------------------------------------------------------------

    \1656\ The Final EIS is available for review in the public 
docket for this action and in Docket No. NHTSA-2022-0075.
    \1657\ The guidance is available at https://www.transportation.gov/sites/dot.gov/files/docs/mission/transportation-policy/permittingcenter/337371/feis-rod-guidance-final-04302019.pdf.
---------------------------------------------------------------------------

    As required by the CEQ regulations,\1658\ this final rule (as the 
ROD) sets forth the following in Sections IV, V, and VI above: (1) the 
agency's decision; (2) alternatives considered by NHTSA in reaching its 
decision, including the environmentally preferable alternative; (3) the 
factors balanced by NHTSA in making its decision, including essential 
considerations of national policy (Section VIII.B above); (4) how these 
factors and considerations entered into its decision; and (5) the 
agency's

[[Page 52938]]

preferences among alternatives based on relevant factors, including 
economic and technical considerations and agency statutory missions. 
The Final EIS discusses comments received on the Draft EIS, NHTSA's 
range of alternatives, and other factors used in the decision-making 
process. The Final EIS also addresses mitigation efforts as required by 
NEPA.\1659\ NHTSA, as the lead agency, certifies that it has considered 
all of the alternatives, information, analyses, and objections 
submitted by cooperating agencies, and State, Tribal, and local 
governments and public commenters for consideration in developing the 
Final EIS, and that this final rule was informed by the summary of the 
submitted alternatives, information, and analyses in the Final EIS, 
together with any other material in the record that it has determined 
to be relevant.\1660\
---------------------------------------------------------------------------

    \1658\ 40 CFR 1505.2(a)(1) and (2).
    \1659\ The CEQ regulations specify that a ROD must ``[s]tate 
whether the agency has adopted all practicable means to avoid or 
minimize environmental harm from the alternative selected, and if 
not, why the agency did not.'' 40 CFR 1505.2(a)(3). See also 40 CFR 
1508.1(s) (``Mitigation includes . . . [m]inimizing impacts by 
limiting the degree or magnitude of the action and its 
implementation.'').
    \1660\ 40 CFR 1505.2(b).
---------------------------------------------------------------------------

2. Clean Air Act (CAA) as Applied to NHTSA's Final Rule
    The CAA (42 U.S.C.[thinsp]7401 et seq.) is the primary Federal 
legislation that addresses air quality. Under the authority of the CAA 
and subsequent amendments, EPA has established National Ambient Air 
Quality Standards (NAAQS) for six criteria pollutants, which are 
relatively commonplace pollutants that can accumulate in the atmosphere 
as a result of human activity. EPA is required to review NAAQS every 
five years and to revise those standards as may be appropriate 
considering new scientific information.
    The air quality of a geographic region is usually assessed by 
comparing the levels of criteria air pollutants found in the ambient 
air to the levels established by the NAAQS (also considering the other 
elements of a NAAQS: averaging time, form, and indicator). 
Concentrations of criteria pollutants within the air mass of a region 
are measured in parts of a pollutant per million parts (ppm) of air or 
in micrograms of a pollutant per cubic meter ([mu]g/m3) of air present 
in repeated air samples taken at designated monitoring locations using 
specified types of monitors. These ambient concentrations of each 
criteria pollutant are compared to the levels, averaging time, and form 
specified by the NAAQS to assess whether the region's air quality is in 
attainment with the NAAQS.
    When the measured concentrations of a criteria pollutant within a 
geographic region are below those permitted by the NAAQS, EPA 
designates the region as an attainment area for that pollutant, while 
regions where concentrations of criteria pollutants exceed Federal 
standards are called nonattainment areas. Former nonattainment areas 
that are now in compliance with the NAAQS are designated as maintenance 
areas. Each State with a nonattainment area is required to develop and 
implement a State Implementation Plan (SIP) documenting how the region 
will reach attainment levels within the time periods specified in the 
CAA. For maintenance areas, the SIP must document how the State intends 
to maintain compliance with the NAAQS. EPA develops a Federal 
Implementation Plan (FIP) if a State fails to submit an approvable plan 
for attaining and maintaining the NAAQS. When EPA revises a NAAQS, each 
State must revise its SIP to address how it plans to attain the new 
standard.
    No Federal agency may ``engage in, support in any way or provide 
financial assistance for, license or permit, or approve'' any activity 
that does not ``conform'' to a SIP or FIP after EPA has approved or 
promulgated it.\1661\ Further, no Federal agency may ``approve, accept 
or fund'' any transportation plan, program, or project developed 
pursuant to Title 23 or Chapter 53 of Title 49, U.S.C., unless the 
plan, program, or project has been found to ``conform'' to any 
applicable implementation plan in effect.\1662\ The purpose of these 
conformity requirements is to ensure that Federally sponsored or 
conducted activities do not interfere with meeting the emissions 
targets in SIPs or FIPs, do not cause or contribute to new violations 
of the NAAQS, and do not impede the ability of a State to attain or 
maintain the NAAQS or delay any interim milestones. EPA has issued two 
sets of regulations to implement the conformity requirements:
---------------------------------------------------------------------------

    \1661\ 42 U.S.C. 7506(c)(1).
    \1662\ 42 U.S.C. 7506(c)(2).
---------------------------------------------------------------------------

    (1) The Transportation Conformity Rule \1663\ applies to 
transportation plans, programs, and projects that are developed, 
funded, or approved under 23 U.S.C. (Highways) or 49 U.S.C. Chapter 53 
(Public Transportation).
---------------------------------------------------------------------------

    \1663\ 40 CFR part 51, subpart T, and part 93, subpart A.
---------------------------------------------------------------------------

    (2) The General Conformity Rule \1664\ applies to all other Federal 
actions not covered under the Transportation Conformity Rule. The 
General Conformity Rule establishes emissions thresholds, or de minimis 
levels, for use in evaluating the conformity of an action that results 
in emissions increases.\1665\ If the net increases of direct and 
indirect emissions exceed any of these thresholds, and the action is 
not otherwise exempt, then a conformity determination is required. The 
conformity determination can entail air quality modeling studies, 
consultation with EPA and state air quality agencies, and commitments 
to revise the SIP or to implement measures to mitigate air quality 
impacts.
---------------------------------------------------------------------------

    \1664\ 40 CFR part 51, subpart W, and part 93, subpart B.
    \1665\ 40 CFR 93.153(b).
---------------------------------------------------------------------------

    The CAFE and HDPUV FE standards and associated program activities 
are not developed, funded, or approved under 23 U.S.C. or 49 U.S.C. 
Chapter 53. Accordingly, this final action and associated program 
activities would not be subject to transportation conformity. Under the 
General Conformity Rule, a conformity determination is required where a 
Federal action would result in total direct and indirect emissions of a 
criteria pollutant or precursor originating in nonattainment or 
maintenance areas equaling or exceeding the rates specified in 40 CFR 
93.153(b)(1) and (2). As explained below, NHTSA's action results in 
neither direct nor indirect emissions as defined in 40 CFR 93.152.
    The General Conformity Rule defines direct emissions as ``those 
emissions of a criteria pollutant or its precursors that are caused or 
initiated by the Federal action and originate in a nonattainment or 
maintenance area and occur at the same time and place as the action and 
are reasonably foreseeable.''\1666\ NHTSA's action sets fuel economy 
standards for passenger cars and light trucks and fuel efficiency 
standards for HDPUVs. It therefore does not cause or initiate direct 
emissions consistent with the meaning of the General Conformity 
Rule.\1667\ Indeed, the agency's action in aggregate reduces emissions, 
and to the degree the model predicts small (and time-limited) 
increases, these increases are based on a theoretical response by 
individuals to fuel prices and savings, which are at best indirect.
---------------------------------------------------------------------------

    \1666\ 40 CFR 93.152.
    \1667\ Dep't of Transp. v. Pub. Citizen, 541 U.S. 752 at 772 
(``[T]he emissions from the Mexican trucks are not `direct' because 
they will not occur at the same time or at the same place as the 
promulgation of the regulations.''). NHTSA's action is to establish 
fuel economy standards for model year 2021-2026 passenger car and 
light trucks; any emissions increases would occur in a different 
place and well after promulgation of the final rule.
---------------------------------------------------------------------------

    Indirect emissions under the General Conformity Rule are ``those 
emissions of a criteria pollutant or its precursors (1)

[[Page 52939]]

that are caused or initiated by the federal action and originate in the 
same nonattainment or maintenance area but occur at a different time or 
place as the action; (2) that are reasonably foreseeable; (3) that the 
agency can practically control; and (4) for which the agency has 
continuing program responsibility.''\1668\ Each element of the 
definition must be met to qualify as indirect emissions. NHTSA has 
determined that, for purposes of general conformity, emissions (if any) 
that may result from its final fuel economy and fuel efficiency 
standards would not be caused by the agency's action, but rather would 
occur because of subsequent activities the agency cannot practically 
control. ``[E]ven if a Federal licensing, rulemaking or other approving 
action is a required initial step for a subsequent activity that causes 
emissions, such initial steps do not mean that a Federal agency can 
practically control any resulting emissions.''\1669\
---------------------------------------------------------------------------

    \1668\ 40 CFR 93.152.
    \1669\ 40 CFR 93.152.
---------------------------------------------------------------------------

    As the CAFE and HDPUV FE programs use performance-based standards, 
NHTSA cannot control the technologies vehicle manufacturers use to 
improve the fuel economy of passenger cars and light trucks and fuel 
efficiency of HDPUVs. Furthermore, NHTSA cannot control consumer 
purchasing (which affects average achieved fleetwide fuel economy and 
fuel efficiency) and driving behavior (i.e., operation of motor 
vehicles, as measured by VMT). It is the combination of fuel economy 
and fuel efficiency technologies, consumer purchasing, and driving 
behavior that results in criteria pollutant or precursor emissions. For 
purposes of analyzing the environmental impacts of the alternatives 
considered under NEPA, NHTSA has made assumptions regarding all of 
these factors. NHTSA's Final EIS projects that increases in air toxics 
and criteria pollutants would occur in some nonattainment areas under 
certain alternatives in the near term, although over the longer term, 
all action alternatives see improvements. However, the CAFE and HDPUV 
FE standards and alternative standards do not mandate specific 
manufacturer decisions, consumer purchasing, or driver behavior, and 
NHTSA cannot practically control any of them.\1670\
---------------------------------------------------------------------------

    \1670\ See, e.g., Dep't of Transp. v. Pub. Citizen, 541 U.S. 
752, 772-73 (2004); S. Coast Air Quality Mgmt. Dist. v. Fed. Energy 
Regulatory Comm'n, 621 F.3\d\ 1085, 1101 (9th Cir. 2010).
---------------------------------------------------------------------------

    In addition, NHTSA does not have the statutory authority or 
practical ability to control the actual VMT by drivers. As the extent 
of emissions is directly dependent on the operation of motor vehicles, 
changes in any emissions that would result from NHTSA's CAFE and HDPUV 
FE standards are not changes NHTSA can practically control or for which 
NHTSA has continuing program responsibility. Therefore, the final CAFE 
and HDPUV FE standards and alternative standards considered by NHTSA 
would not cause indirect emissions under the General Conformity Rule, 
and a general conformity determination is not required.
3. National Historic Preservation Act (NHPA)
    The NHPA (54 U.S.C. 300101 et seq.) sets forth government policy 
and procedures regarding ``historic properties''--that is, districts, 
sites, buildings, structures, and objects included on or eligible for 
the National Register of Historic Places. Section 106 of the NHPA 
requires Federal agencies to ``take into account'' the effects of their 
actions on historic properties.\1671\ NHTSA concludes that the NHPA is 
not applicable to this rulemaking because the promulgation of CAFE 
standards for passenger cars and light trucks and FE standards for 
HDPUVs is not the type of activity that has the potential to cause 
effects on historic properties. However, NHTSA includes a brief, 
qualitative discussion of the impacts of the action alternatives on 
historical and cultural resources in the Final EIS.
---------------------------------------------------------------------------

    \1671\ Section 106 is now codified at 54 U.S.C. 306108. 
Implementing regulations for the section 106 process are located at 
36 CFR part 800.
---------------------------------------------------------------------------

4. Fish and Wildlife Conservation Act (FWCA)
    The FWCA (16 U.S.C. 2901 et seq.) provides financial and technical 
assistance to States for the development, revision, and implementation 
of conservation plans and programs for nongame fish and wildlife. In 
addition, FWCA encourages all Federal departments and agencies to 
utilize their statutory and administrative authorities to conserve and 
to promote conservation of nongame fish and wildlife and their 
habitats. NHTSA concludes that the FWCA does not apply to this final 
rule because it does not involve the conservation of nongame fish and 
wildlife and their habitats. However, NHTSA conducted a qualitative 
review in its Final EIS of the related direct, indirect, and cumulative 
impacts, positive or negative, of the alternatives on potentially 
affected resources, including nongame fish and wildlife and their 
habitats.
5. Coastal Zone Management Act (CZMA)
    The CZMA (16 U.S.C. 1451 et seq.) provides for the preservation, 
protection, development, and (where possible) restoration and 
enhancement of the Nation's coastal zone resources. Under the statute, 
States are provided with funds and technical assistance in developing 
coastal zone management programs. Each participating State must submit 
its program to the Secretary of Commerce for approval. Once the program 
has been approved, any activity of a Federal agency, either within or 
outside of the coastal zone, that affects any land or water use or 
natural resource of the coastal zone must be carried out in a manner 
that is consistent, to the maximum extent practicable, with the 
enforceable policies of the State's program.\1672\
---------------------------------------------------------------------------

    \1672\ 16 U.S.C. 1456(c)(1)(A).
---------------------------------------------------------------------------

    NHTSA concludes that the CZMA does not apply to this rulemaking 
because it does not involve an activity within, or outside of, the 
nation's coastal zones that affects any land or water use or natural 
resource of the coastal zone. NHTSA has, however, conducted a 
qualitative review in the Final EIS of the related direct, indirect, 
and cumulative impacts, positive or negative, of the action 
alternatives on potentially affected resources, including coastal 
zones.
6. Endangered Species Act (ESA)
    Under section 7(a)(2) of the ESA, Federal agencies must ensure that 
actions they authorize, fund, or carry out are ``not likely to 
jeopardize the continued existence'' of any Federally listed threatened 
or endangered species (collectively, ``listed species'') or result in 
the destruction or adverse modification of the designated critical 
habitat of these species.\1673\ If a Federal agency determines that an 
agency action may affect a listed species or designated critical 
habitat, it must initiate consultation with the appropriate Service--
the U.S. Fish and Wildlife Service (FWS) of the Department of the 
Interior (DOI) or the National Oceanic and Atmospheric Administration's 
National Marine Fisheries Service of the Department of Commerce 
(together, ``the Services'') or both, depending on the species 
involved--in order to ensure that the action is not likely to 
jeopardize the species or destroy or adversely modify designated 
critical habitat.\1674\ Under this standard, the Federal agency taking 
action evaluates the possible

[[Page 52940]]

effects of its action and determines whether to initiate 
consultation.\1675\
---------------------------------------------------------------------------

    \1673\ 16 U.S.C. 1536(a)(2).
    \1674\ See 50 CFR 402.14.
    \1675\ See 50 CFR 402.14(a) (``Each Federal agency shall review 
its actions at the earliest possible time to determine whether any 
action may affect listed species or critical habitat.'').
---------------------------------------------------------------------------

    The section 7(a)(2) implementing regulations require consultation 
if a Federal agency determines its action ``may affect'' listed species 
or critical habitat.\1676\ The regulations define ``effects of the 
action'' as ``all consequences to listed species or critical habitat 
that are caused by the proposed action, including the consequences of 
other activities that are caused by the proposed action but that are 
not part of the action.\1677\ A consequence is caused by the proposed 
action if it would not occur but for the proposed action and it is 
reasonably certain to occur.'' \1678\ The definition makes explicit a 
``but for'' test and the concept of ``reasonably certain to occur'' for 
all effects.\1679\ The Services have defined ``but for'' causation to 
mean ``that the consequence in question would not occur if the proposed 
action did not go forward. . . In other words, if the agency fails to 
take the proposed action and the activity would still occur, there is 
no `but for' causation. In that event, the activity would not be 
considered an effect of the action under consultation.''\1680\
---------------------------------------------------------------------------

    \1676\ 50 CFR 402.14(a).
    \1677\ On April 5, 2024, the Services issued revised ESA 
consultation regulations. 89 FR 24268 (revisions to portions of 
regulations that implement section 7 of the Endangered Species Act 
of 1973, as amended). Among other amendments, the Services updated 
the definition of ``effects of action'' by adding the phrase ``but 
that are not part of the action'' to clarify that the scope of the 
analysis of the effects includes other activities caused by the 
proposed action that are reasonably certain to occur. Id. at 24273.
    \1678\ 50 CFR 402.02 (emphasis added).
    \1679\ The Services' prior regulations defined ``effects of the 
action'' in relevant part as ``the direct and indirect effects of an 
action on the species or critical habitat, together with the effects 
of other activities that are interrelated or interdependent with 
that action, that will be added to the environmental baseline.'' 50 
CFR 402.02 (as in effect prior to Oct. 28, 2019). Indirect effects 
were defined as ``those that are caused by the proposed action and 
are later in time, but still are reasonably certain to occur.'' Id.
    \1680\ 84 FR 44977 (Aug. 27, 2019) (``As discussed in the 
proposed rule, the Services have applied the `but for' test to 
determine causation for decades. That is, we have looked at the 
consequences of an action and used the causation standard of `but 
for' plus an element of foreseeability (i.e., reasonably certain to 
occur) to determine whether the consequence was caused by the action 
under consultation.''). We note that as the Services do not consider 
this to be a change in their longstanding application of the ESA, 
this interpretation applies equally under the prior regulations 
(which were effective through October 28, 2019) and the current 
regulations (as amended on April 5, 2024). See 89 FR 24268.
---------------------------------------------------------------------------

    The Services have previously provided legal and technical guidance 
about whether CO2 emissions associated with a specific 
proposed Federal action trigger ESA section 7(a)(2) consultation. NHTSA 
analyzed the Services' history of actions, analysis, and guidance in 
Appendix G of the model year 2012-2016 CAFE standards EIS and now 
adopts by reference that appendix here.\1681\ In that appendix, NHTSA 
looked at the history of the Polar Bear Special Rule and several 
guidance memoranda provided by FWS and the U.S. Geological Survey. 
Ultimately, DOI concluded that a causal link could not be made between 
CO2 emissions associated with a proposed Federal action and 
specific effects on listed species; therefore, no section 7(a)(2) 
consultation would be required.
---------------------------------------------------------------------------

    \1681\ Available on NHTSA's Corporate Average Fuel Economy 
website at https://static.nhtsa.gov/nhtsa/downloads/CAFE/2012-2016%20Docs-PCLT/2012-2016%20Final%20Environmental%20Impact%20Statement/Appendix_G_Endangered_Species_Act_Consideration.pdf.
---------------------------------------------------------------------------

    Subsequent to the publication of that appendix, a court vacated the 
Polar Bear Special Rule on NEPA grounds, though it upheld the ESA 
analysis as having a rational basis.\1682\ FWS then issued a revised 
Final Special Rule for the Polar Bear.\1683\ In that final rule, FWS 
provided that for ESA section 7, the determination of whether 
consultation is triggered is narrow and focused on the discrete effect 
of the proposed agency action. FWS wrote, ``[T]he consultation 
requirement is triggered only if there is a causal connection between 
the proposed action and a discernible effect to the species or critical 
habitat that is reasonably certain to occur. One must be able to 
`connect the dots' between an effect of a proposed action and an impact 
to the species and there must be a reasonable certainty that the effect 
will occur.'' \1684\ The statement in the revised Final Special Rule is 
consistent with the prior guidance published by FWS and remains valid 
today.\1685\ If the consequence is not reasonably certain to occur, it 
is not an ``effect of a proposed action'' and does not trigger the 
consultation requirement.
---------------------------------------------------------------------------

    \1682\ In re: Polar Bear Endangered Species Act Listing and 
Section 4(D) Rule Litigation, 818 F.Supp.2d 214 (D.D.C. Oct. 17, 
2011).
    \1683\ 78 FR 11766 (Feb. 20, 2013).
    \1684\ 78 FR 11784-11785 (Feb. 20, 2013).
    \1685\ See DOI. 2008. Guidance on the Applicability of the 
Endangered Species Act Consultation Requirements to Proposed Actions 
Involving the Emissions of Greenhouse Gases. Solicitor's Opinion No. 
M-37017. Oct. 3, 2008.
---------------------------------------------------------------------------

    In this NPRM for this action, NHTSA stated that pursuant to section 
7(a)(2) of the ESA, NHTSA considered the effects of the proposed CAFE 
and HDPUV FE standards and reviewed applicable ESA regulations, case 
law, and guidance to determine what, if any, impact there might be to 
listed species or designated critical habitat. NHTSA considered issues 
related to emissions of CO2 and other GHGs, and issues 
related to non-GHG emissions. NHTSA stated that, based on this 
assessment, the agency determined that the action of setting CAFE and 
HDPUV FE standards does not require consultation under section 7(a)(2) 
of the ESA. NHTSA's determination remains unchanged from the NPRM and 
has concluded the agency's review of this action under section 7 of the 
ESA.
7. Floodplain Management (Executive Order 11988 and DOT Order 5650.2)
    These Orders require Federal agencies to avoid the long- and short-
term adverse impacts associated with the occupancy and modification of 
floodplains, and to restore and preserve the natural and beneficial 
values served by floodplains. E.O. 11988, ``Floodplain management'' 
(May 24, 1977), also directs agencies to minimize the impacts of floods 
on human safety, health and welfare, and to restore and preserve the 
natural and beneficial values served by floodplains through evaluating 
the potential effects of any actions the agency may take in a 
floodplain and ensuring that its program planning and budget requests 
reflect consideration of flood hazards and floodplain management. DOT 
Order 5650.2, ``Floodplain Management and Protection'' (April 23, 
1979), sets forth DOT policies and procedures for implementing E.O. 
11988. The DOT Order requires that the agency determine if a proposed 
action is within the limits of a base floodplain, meaning it is 
encroaching on the floodplain, and whether this encroachment is 
significant. If significant, the agency is required to conduct further 
analysis of the proposed action and any practicable alternatives. If a 
practicable alternative avoids floodplain encroachment, then the agency 
is required to implement it.
    In this final rule, NHTSA is not occupying, modifying, and/or 
encroaching on floodplains. NHTSA therefore concludes that the Orders 
do not apply to this final rule. NHTSA has, however, conducted a review 
of the alternatives on potentially affected resources, including 
floodplains, in its Final EIS.
8. Preservation of the Nation's Wetlands (Executive Order 11990 and DOT 
Order 5660.1a)
    These Orders require Federal agencies to avoid, to the extent 
possible, undertaking or providing assistance for new construction 
located in wetlands

[[Page 52941]]

unless the agency head finds that there is no practicable alternative 
to such construction and that the proposed action includes all 
practicable measures to minimize harms to wetlands that may result from 
such use. E.O. 11990, ``Protection of Wetlands'' (May 24, 1977), also 
directs agencies to take action to minimize the destruction, loss, or 
degradation of wetlands in ``conducting Federal activities and programs 
affecting land use, including but not limited to water and related land 
resources planning, regulating, and licensing activities.'' DOT Order 
5660.1a, ``Preservation of the Nation's Wetlands'' (August 24, 1978), 
sets forth DOT policy for interpreting E.O. 11990 and requires that 
transportation projects ``located in or having an impact on wetlands'' 
should be conducted to assure protection of the Nation's wetlands. If a 
project does have a significant impact on wetlands, an EIS must be 
prepared.
    NHTSA is not undertaking or providing assistance for new 
construction located in wetlands. NHTSA therefore concludes that these 
Orders do not apply to this rulemaking. NHTSA has, however, conducted a 
review of the alternatives on potentially affected resources, including 
wetlands, in its Final EIS.
9. Migratory Bird Treaty Act (MBTA), Bald and Golden Eagle Protection 
Act (BGEPA), Executive Order 13186
    The MBTA (16 U.S.C. 703-712) provides for the protection of certain 
migratory birds by making it illegal for anyone to ``pursue, hunt, 
take, capture, kill, attempt to take, capture, or kill, possess, offer 
for sale, sell, offer to barter, barter, offer to purchase, purchase, 
deliver for shipment, ship, export, import, cause to be shipped, 
exported, or imported, deliver for transportation, transport or cause 
to be transported, carry or cause to be carried, or receive for 
shipment, transportation, carriage, or export'' any migratory bird 
covered under the statute.\1686\
---------------------------------------------------------------------------

    \1686\ 16 U.S.C. 703(a).
---------------------------------------------------------------------------

    The BGEPA (16 U.S.C. 668-668d) makes it illegal to ``take, possess, 
sell, purchase, barter, offer to sell, purchase or barter, transport, 
export or import'' any bald or golden eagles.\1687\ E.O. 13186, 
``Responsibilities of Federal Agencies to Protect Migratory Birds,'' 
helps to further the purposes of the MBTA by requiring a Federal agency 
to develop an MOU with FWS when it is taking an action that has (or is 
likely to have) a measurable negative impact on migratory bird 
populations.
---------------------------------------------------------------------------

    \1687\ 16 U.S.C. 668(a).
---------------------------------------------------------------------------

    NHTSA concludes that the MBTA, BGEPA, and E.O. 13186 do not apply 
to this rulemaking because there is no disturbance, take, measurable 
negative impact, or other covered activity involving migratory birds or 
bald or golden eagles involved in this rulemaking.
10. Department of Transportation Act (Section 4(f))
    Section 4(f) of the Department of Transportation Act of 1966 (49 
U.S.C. 303), as amended, is designed to preserve publicly owned park 
and recreation lands, waterfowl and wildlife refuges, and historic 
sites. Specifically, section 4(f) provides that DOT agencies cannot 
approve a transportation program or project that requires the use of 
any publicly owned land from a public park, recreation area, or 
wildlife or waterfowl refuge of national, State, or local significance, 
unless a determination is made that:
    (1) There is no feasible and prudent alternative to the use of 
land, and
    (2) The program or project includes all possible planning to 
minimize harm to the property resulting from the use.
    These requirements may be satisfied if the transportation use of a 
section 4(f) property results in a de minimis impact on the area.
    NHTSA concludes that section 4(f) does not apply to this rulemaking 
because this rulemaking is not an approval of a transportation program 
nor project that requires the use of any publicly owned land.
11. Executive Order 12898: ``Federal Actions To Address Environmental 
Justice in Minority Populations and Low-Income Populations''; Executive 
Order 14096: ``Revitalizing Our Nation's Commitment to Environmental 
Justice for All''
    E.O. 12898, ``Federal Actions to Address EJ in Minority Populations 
and Low-Income Populations'' (Feb. 16, 1994), directs Federal agencies 
to promote nondiscrimination in federal programs substantially 
affecting human health and the environment, and provide minority and 
low-income communities access to public information on, and an 
opportunity for public participation in, matters relating to human 
health or the environment. E.O. 14096, ``Revitalizing Our Nation's 
Commitment to Environmental Justice for All,'' (April 21, 2023), builds 
on and supplements E.O. 12898, and further directs Federal agencies to 
prioritize EJ initiatives in their core missions.\1688\ Additionally, 
the 2021 DOT Order 5610.2C, ``U.S. Department of Transportation Actions 
to Address Environmental Justice in Minority Populations and Low-Income 
Populations'' (May 16, 2021), describes the process for DOT agencies to 
incorporate EJ principles in programs, policies, and activities. 
Section VI and the Final EIS discuss NHTSA's consideration of EJ issues 
associated with this final rule.
---------------------------------------------------------------------------

    \1688\ E.O. 14096 on environmental justice does not rescind E.O. 
12898--``Federal Actions to Address Environmental Justice in 
Minority Populations and Low-Income Populations,'' which has been in 
effect since February 11, 1994 and is currently implemented through 
DOT Order 5610.2C. This implementation will continue until further 
guidance is provided regarding the implementation of the new E.O. 
14096 on environmental justice.
---------------------------------------------------------------------------

12. Executive Order 13045: ``Protection of Children From Environmental 
Health Risks and Safety Risks''
    This action is subject to E.O. 13045 (62 FR 19885, Apr. 23, 1997) 
because is a significant regulatory action under section 3(f)(1) of 
E.O. 12866, and NHTSA has reason to believe that the environmental 
health and safety risks related to this action, although small, may 
have a disproportionate effect on children. Specifically, children are 
more vulnerable to adverse health effects related to mobile source 
emissions, as well as to the potential long-term impacts of climate 
change. Pursuant to E.O. 13045, NHTSA must prepare an evaluation of the 
environmental health or safety effects of the planned action on 
children and an explanation of why the planned action is preferable to 
other potentially effective and reasonably feasible alternatives 
considered by NHTSA. Further, this analysis may be included as part of 
any other required analysis.
    All of the action alternatives would reduce CO2 
emissions relative to the reference baseline and thus have positive 
effects on mitigating global climate change, and thus environmental and 
health effects associated with climate change. While environmental and 
health effects associated with criteria pollutant and toxic air 
pollutant emissions vary over time and across alternatives, negative 
effects, when estimated, are extremely small. This preamble and the 
Final EIS discuss air quality, climate change, and their related 
environmental and health effects. In addition, Section VI of this 
preamble explains why NHTSA believes that the CAFE and HDPUV FE final 
standards are preferable to other alternatives considered. Together, 
this

[[Page 52942]]

preamble and Final EIS satisfy NHTSA's responsibilities under E.O. 
13045.

E. Regulatory Flexibility Act

    Pursuant to the Regulatory Flexibility Act (5 U.S.C. 601 et seq., 
as amended by the Small Business Regulatory Enforcement Fairness Act 
(SBREFA) of 1996), whenever an agency is required to publish a NPRM or 
final rule, it must prepare and make available for public comment a 
regulatory flexibility analysis that describes the effect of the rule 
on small entities (i.e., small businesses, small organizations, and 
small governmental jurisdictions). No regulatory flexibility analysis 
is required if the head of an agency certifies the rule will not have a 
significant economic impact on a substantial number of small entities. 
SBREFA amended the Regulatory Flexibility Act to require Federal 
agencies to provide a statement of the factual basis for certifying 
that a rule will not have a significant economic impact on a 
substantial number of small entities.
    NHTSA has considered the impacts of this final rule under the 
Regulatory Flexibility Act and the head of NHTSA certifies that this 
final rule will not have a significant economic impact on a substantial 
number of small entities. The following is NHTSA's statement providing 
the factual basis for this certification pursuant to 5 U.S.C. 605(b).
    Small businesses are defined based on the North American Industry 
Classification System (NAICS) code.\1689\ One of the criteria for 
determining size is the number of employees in the firm. For 
establishments primarily engaged in manufacturing or assembling 
automobiles, including HDPUVs, the firm must have less than 1,500 
employees to be classified as a small business. This rulemaking would 
affect motor vehicle manufacturers. As shown in Table VII-1, NHTSA has 
identified eighteen small manufacturers that produce passenger cars, 
light trucks, SUVs, HD pickup trucks, and vans of electric, hybrid, and 
ICEs. NHTSA acknowledges that some very new manufacturers may 
potentially not be listed. However, those new manufacturers tend to 
have transportation products that are not part of the LD and HDPUV 
vehicle fleet and have yet to start production of relevant vehicles. 
Moreover, NHTSA does not believe that there are a ``substantial 
number'' of these companies.\1690\
---------------------------------------------------------------------------

    \1689\ Classified in NAICS under Subsector 336--Transportation 
Equipment Manufacturing for Automobile and Light Duty Motor Vehicle 
Manufacturing (336110) and Heavy Duty Truck Manufacturing (336120). 
Available at: https://www.sba.gov/document/support--table-size-standards. (last accessed Feb. 22, 2024).
    \1690\ 5 U.S.C. 605(b).
    \1691\ Estimated number of employees as of February 2024, 
source: linkedin.com, zoominfo.com, rocketreach.co, and 
datanyze.com.
    \1692\ Rough estimate of LDV production for model year 2022.
    [GRAPHIC] [TIFF OMITTED] TR24JN24.280
    
    NHTSA believes that the final rule would not have a significant 
economic impact on small vehicle manufacturers, because under 49 CFR 
part 525 passenger car manufacturers building less than 10,000 vehicles 
per year can petition NHTSA to have alternative standards determined 
for them. Listed manufacturers producing ICE vehicles

[[Page 52943]]

do not currently meet the standard and must already petition NHTSA for 
relief. If the standard is raised, it has no meaningful impact on these 
manufacturers--they still must go through the same process and petition 
for relief. Given there already is a mechanism for relieving burden on 
small businesses, a regulatory flexibility analysis was not prepared.
    All HDPUV manufacturers listed in Table VIII-1 build BEVs, and 
consequently far exceed the fuel efficiency standards. We designate 
those vehicles to have no fuel consumption. NHTSA has researched the 
HDPUV manufacturing industry and found no small manufacturers of ICE 
vehicles that would be impacted by the final rule.
    Further, small manufacturers of EVs would not face a significant 
economic impact. The method for earning credits applies equally across 
manufacturers and does not place small entities at a significant 
competitive disadvantage. In any event, even if the rulemaking had a 
``significant economic impact'' on these small EV manufacturers, the 
number of these companies is not ``a substantial number.'' \1693\ For 
these reasons, their existence does not alter NHTSA's analysis of the 
applicability of the Regulatory Flexibility Act.
---------------------------------------------------------------------------

    \1693\ 5 U.S.C. 605.
---------------------------------------------------------------------------

F. Executive Order 13132 (Federalism)

    E.O. 13132, ``Federalism'' (64 FR 43255, Aug. 10, 1999), requires 
Federal agencies to develop an accountable process to ensure 
``meaningful and timely input by State and local officials in the 
development of regulatory policies that have federalism implications.'' 
The order defines the term ``[p]olicies that have federalism 
implications'' to include regulations that have ``substantial direct 
effects on the States, on the relationship between the national 
government and the States, or on the distribution of power and 
responsibilities among the various levels of government.'' Under the 
order, agencies may not issue a regulation that has federalism 
implications, that imposes substantial direct compliance costs, unless 
the Federal Government provides the funds necessary to pay the direct 
compliance costs incurred by the State and local governments, or the 
agencies consult with State and local officials early in the process of 
developing the final rule.
    Similar to the CAFE preemption final rule,\1694\ NHTSA continues to 
believe that this final rule does not implicate E.O. 13132, because it 
neither imposes substantial direct compliance costs on State, local, or 
Tribal governments, nor does it preempt State law. Thus, this final 
rule does not implicate the consultation procedures that E.O. 13132 
imposes on agency regulations that would either preempt State law or 
impose substantial direct compliance costs on State, local, or Tribal 
governments, because the only entities subject to this final rule are 
vehicle manufacturers. Nevertheless, NHTSA has complied with the 
Order's requirements and consulted directly with CARB in developing a 
number of elements of this final rule.
---------------------------------------------------------------------------

    \1694\ See 86 FR 74236, 74365 (Dec. 29, 2021).
---------------------------------------------------------------------------

    A few commenters (a comment from several states led by West 
Virginia,\1695\ Valero,\1696\ CEI,\1697\ a group of organizations by 
led by the Renewable Fuels Association (RFA),\1698\ and a group of 
organizations led by the Clean Fuels Development Coalition \1699\), 
though, claimed that this rule raised preemption issues, specifically 
NHTSA's consideration of California's ZEV program in the reference 
baseline and out years. In particular, these commenters believed that 
the ZEV program is a ``law or regulation related to fuel economy 
standards'' and, thus, preempted under section 32919(a).\1700\ A few of 
these commenters referenced NHTSA's 2019 attempt to dictate the 
contours EPCA preemption through the SAFE I rule, and criticized the 
agency's subsequent repeal of that rule. In particular, those 
commenters advocated for NHTSA to make a substantive determination of 
whether state programs are preempted by EPCA.\1701\
---------------------------------------------------------------------------

    \1695\ West Virginia Attorney General's Office, Docket No. 
NHTSA-2023-0022-63056 at 9-10.
    \1696\ Valero, Docket No. NHTSA-2023-0022-58547 at 13.
    \1697\ CEI, Docket No. NHTSA-2023-0022-61121 at 8.
    \1698\ RFA et al, Docket No. NHTSA-2023-0022-57625 at 12.
    \1699\ CFDC et al, NHTSA-2023-0022-62242 at 6.
    \1700\ See, e.g,. West Virginia Attorney General's Office, 
Docket No. NHTSA-2023-0022-63056 at 9 (``ZEV programs relate to fuel 
economy standards, so incorporating them into the Proposed Rule 
turns Congress's preemption judgment upside down.''); Valero, NHTSA-
2023-0022-58547 at 13 (``the state ZEV mandates that NHTSA 
incorporated into its regulatory baseline are independently unlawful 
under EPCA's preemption provision.'').
    \1701\ West Virginia Attorney General's Office, Docket No. 
NHTSA-2023-0022-63056 at 9 (``So one would think that California's 
program and others like it are `related to' fuel economy standards. 
But the agency refuses to `tak[e] a position on whether' ZEV 
`programs are preempted' here. . . . NHTSA is wrong.'')
---------------------------------------------------------------------------

    NHTSA is not taking any action regarding preemption in this final 
rule, as this rule's purpose is to establish new final CAFE and HDPUV 
standards. Nothing in EPCA or EISA provides that NHTSA must, or even 
should, make a determination or pronouncement on preemption.\1702\ As 
such, the agency continues to believe that it is not appropriate to 
opine in a sweeping manner on the legality of State programs--
particularly in a generalized rulemaking. Moreover, this type of legal 
determination is unnecessary for this action because the agency's 
decision to incorporate the ZEV program is not based on an assessment 
of its legality, but rather the agency's empirical observation that the 
program seems likely to have an actual impact on the compositions of 
vehicle fleets in California and other states that adopt similar 
programs. To date, a court has not determined that this program is 
preempted by EPCA. In fact, the D.C. Circuit recently rejected 
consolidated challenges to the EPA's waiver to CARB for the Advanced 
Clean Car Program.\1703\ As a result, California programs and those of 
other states appear likely to remain in place at least long enough to 
influence fleet composition decisions by vehicle manufacturers over the 
relevant timeframes for this rule's analysis. Should future changes in 
the legal status of those programs occur, NHTSA would, of course, 
adjust its analysis as needed to reflect the likely empirical effects 
of such developments. Separately, RFA and the Clean Fuels Development 
Coalition also argued that the renewable fuel standards (RFS) program 
preempts the ZEV program.1704 1705 NHTSA does not administer 
this program but notes that the ZEV program has never been found to be 
preempted by the RFS and thus, the program, as a factual matter, is not 
preempted. Therefore, much like their EPCA preemption arguments, the 
commenters' RFS preemption arguments also do not change the empirical 
effect that the ZEV program has on manufacturers' decisions and 
projections about the compositions of their fleets.
---------------------------------------------------------------------------

    \1702\ See, e.g., NHTSA, Final Rule: CAFE Preemption, 86 FR 
74,236, 74,241 (Dec. 29, 2021).
    \1703\ Ohio v. EPA, No. 22-1081 (D.C. Cir. Sept. 15, 2023).
    \1704\ RFA et al, NHTSA-2023-0022-57625 at 12.
    \1705\ CFDC et al, NHTSA-2023-0022-62242 at 6.
---------------------------------------------------------------------------

G. Executive Order 12988 (Civil Justice Reform)

    Pursuant to E.O. 12988, ``Civil Justice Reform'' (61 FR 4729, Feb. 
7, 1996), NHTSA has considered whether this final rule would have any 
retroactive effect. This final rule does not have any retroactive 
effect.

[[Page 52944]]

H. Executive Order 13175 (Consultation and Coordination With Indian 
Tribal Governments)

    This final rule does not have tribal implications, as specified in 
E.O. 13175, ``Consultation and Coordination with Indian Tribal 
Governments'' (65 FR 67249, Nov. 9, 2000). This final rule would be 
implemented at the Federal level and would impose compliance costs only 
on vehicle manufacturers. Thus, E.O. 13175, which requires consultation 
with Tribal officials when agencies are developing policies that have 
``substantial direct effects'' on Tribes and Tribal interests, does not 
apply to this final rule.

I. Unfunded Mandates Reform Act

    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) 
requires Federal agencies to prepare a written assessment of the costs, 
benefits, and other effects of a proposed or final rule that includes a 
Federal mandate likely to result in the expenditure by State, local, or 
Tribal governments, in the aggregate, or by the private sector, of more 
than $100 million in any one year (adjusted for inflation with base 
year of 1995). Adjusting this amount by the implicit gross domestic 
product price deflator for 2021 results in $165 million (110.213/66.939 
= 1.65).\1706\ Before promulgating a rule for which a written statement 
is needed, section 205 of UMRA generally requires NHTSA to identify and 
consider a reasonable number of regulatory alternatives and adopt the 
least costly, most cost-effective, or least burdensome alternative that 
achieves the objective of the rule. The provisions of section 205 do 
not apply when they are inconsistent with applicable law. Moreover, 
section 205 allows NHTSA to adopt an alternative other than the least 
costly, most cost-effective, or least burdensome alternative if NHTSA 
publishes with the rule an explanation of why that alternative was not 
adopted.
---------------------------------------------------------------------------

    \1706\ U.S. Bureau of Economic Analysis (BEA). 2024. National 
Income and Product Accounts, Table 1.1.9: Implicit Price Deflators 
for Gross Domestic Product (use Interactive Data Tables to select 
years). Available at: https://apps.bea.gov/iTable/?reqid=19&step=2&isuri=1&categories=survey. (Accessed: Feb, 28, 
2024).
---------------------------------------------------------------------------

    This final rule will not result in the expenditure by State, local, 
or Tribal governments, in the aggregate, of more than $165 million 
annually, but it will result in the expenditure of that magnitude by 
vehicle manufacturers and/or their suppliers. In developing this final 
rule, we considered a range of alternative fuel economy and fuel 
efficiency standards. As explained in detail in Section V of the 
preamble above, NHTSA concludes that our selected alternatives are the 
maximum feasible alternatives that achieve the objectives of this 
rulemaking, as required by EPCA/EISA.

J. Regulation Identifier Number

    The DOT assigns a regulation identifier number (RIN) to each 
regulatory action listed in the Unified Agenda of Federal Regulations. 
The Regulatory Information Service Center publishes the Unified Agenda 
in April and October of each year. The RIN contained in the heading at 
the beginning of this document may be used to find this action in the 
Unified Agenda.

K. National Technology Transfer and Advancement Act

    Section 12(d) of the National Technology Transfer and Advancement 
Act (NTTAA) requires NHTSA evaluate and use existing voluntary 
consensus standards in its regulatory activities unless doing so would 
be inconsistent with applicable law (e.g., the statutory provisions 
regarding NHTSA's vehicle safety authority) or otherwise 
impractical.\1707\
---------------------------------------------------------------------------

    \1707\ 15 U.S.C. 272.
---------------------------------------------------------------------------

    Voluntary consensus standards are technical standards developed or 
adopted by voluntary consensus standards bodies. Technical standards 
are defined by the NTTAA as ``performance-based or design-specific 
technical specification and related management systems practices.'' 
They pertain to ``products and processes, such as size, strength, or 
technical performance of a product, process or material.''
    Examples of organizations generally regarded as voluntary consensus 
standards bodies include the American Society for Testing and 
Materials, International, the SAE, and the American National Standards 
Institute (ANSI). If NHTSA does not use available and potentially 
applicable voluntary consensus standards, it is required by the Act to 
provide Congress, through OMB, an explanation of reasons for not using 
such standards. There are currently no consensus standards that NHTSA 
administers relevant to these CAFE and HDPUV standards.

L. Department of Energy Review

    In accordance with 49 U.S.C. 32902(j)(2), NHTSA submitted this 
final rule to the DOE for review. That agency did not make any comments 
that NHTSA did not address.\1708\
---------------------------------------------------------------------------

    \1708\ DOE's letter of review of the final rule.
---------------------------------------------------------------------------

M. Paperwork Reduction Act

    Under the procedures established by the Paperwork Reduction Act of 
1995 (PRA) (44 U.S.C. 3501, et seq.), Federal agencies must obtain 
approval from the OMB for each collection of information they conduct, 
sponsor, or require through regulations. A person is not required to 
respond to a collection of information by a Federal Agency unless the 
collection displays a valid OMB control number. This final rule 
implements changes that relate to information collections that are 
subject to the PRA, but the changes are not expected to substantially 
or materially modify the information collections nor increase the 
burden associated with the information collections. Additional details 
about NHTSA's information collection for its Corporate Average Fuel 
Economy (CAFE) program (OMB control number 2127-0019, Current 
Expiration: 02/28/2026) and how NHTSA estimated burden for this 
collection are available in the supporting statements for the currently 
approved collection.\1709\
---------------------------------------------------------------------------

    \1709\ Office of Information and Regulatory Affairs. 2022. 
Supporting Statements: Part A, Corporate Average Fuel Economy 
Reporting. OMB 2127-0019. Available at: https://www.reginfo.gov/public/do/PRAViewDocument?ref_nbr=202210-2127-003. (Accessed: Feb, 
28, 2024).
---------------------------------------------------------------------------

N. Congressional Review Act

    The Congressional Review Act, 5 U.S.C. 801 et seq., as added by the 
Small Business Regulatory Enforcement Fairness Act of 1996, generally 
provides that before a rule may take effect, the agency promulgating 
the rule must submit a rule report, which includes a copy of the rule, 
to each House of the Congress and to the Comptroller General of the 
United States. NHTSA will submit a report containing this rule and 
other required information to the U.S. Senate, the U.S. House of 
Representatives, and the Comptroller General of the United States prior 
to publication of the rule in the Federal Register. Because this rule 
meets the criteria in 5 U.S.C. 804(2), it will be effective sixty days 
after the date of publication in the Federal Register.

List of Subjects in 49 CFR Parts 523, 531, 533, 535, 536 and 537

    Fuel economy, Reporting and recordkeeping requirements.

    For the reasons discussed in the preamble, NHTSA is amending 49 CFR 
parts 523, 531, 533, 535, 536, and 537 as follows:

PART 523--VEHICLE CLASSIFICATION

0
1. The citation for part 523 continues to read as follows:


[[Page 52945]]


    Authority: 49 U.S.C. 32901; delegation of authority at 49 CFR 
1.95.


0
2. Amend Sec.  523.2 by revising the definitions of ``Base tire (for 
passenger automobiles, light trucks, and medium-duty passenger 
vehicles)'', ``Basic vehicle frontal area'', ``Emergency vehicle'', 
``Full-size pickup truck'', ``Light truck'', and ``Medium duty 
passenger vehicle'' to read as follows:


Sec.  523.2  Definitions.

* * * * *
    Base tire (for passenger automobiles, light trucks, and medium-duty 
passenger vehicles) means the tire size specified as standard equipment 
by the manufacturer on each unique combination of a vehicle's footprint 
and model type. Standard equipment is defined in 40 CFR 86.1803.
    Basic vehicle frontal area is used as defined in 40 CFR 86.1803-01 
for passenger automobiles, light trucks, medium-duty passenger vehicles 
and Class 2b through 3 pickup trucks and vans. For heavy-duty tracts 
and vocational vehicles, it has the meaning given in 40 CFR 1037.801.
* * * * *
    Emergency vehicle means one of the following:
    (1) For passenger cars, light trucks and medium-duty passenger 
vehicles, emergency vehicle has the meaning given in 49 U.S.C. 
32902(e).
    (2) For heavy-duty vehicles, emergency vehicle has the meaning 
given in 40 CFR 1037.801.
* * * * *
    Full-size pickup truck means a light truck, including a medium-duty 
passenger vehicle, that meets the specifications in 40 CFR 86.1803-01 
for a full-size pickup truck.
* * * * *
    Light truck means a non-passenger automobile meeting the criteria 
in Sec.  523.5. The term light truck includes medium-duty passenger 
vehicles that meet the criteria in Sec.  523.5 for non-passenger 
automobiles.
* * * * *
    Medium-duty passenger vehicle means any complete or incomplete 
motor vehicle rated at more than 8,500 pounds GVWR and less than 10,000 
pounds GVWR that is designed primarily to transport passengers, but 
does not include a vehicle that--
    (1) Is an ``incomplete truck,'' meaning any truck which does not 
have the primary load carrying device or container attached; or
    (2) Has a seating capacity of more than 12 persons; or
    (3) Is designed for more than 9 persons in seating rearward of the 
driver's seat; or
    (4) Is equipped with an open cargo area (for example, a pick-up 
truck box or bed) of 72.0 inches in interior length or more. A covered 
box not readily accessible from the passenger compartment will be 
considered an open cargo area for purposes of this definition. (See 
paragraph (1) of the definition of medium-duty passenger vehicle at 40 
CFR 86.1803-01).
* * * * *

0
3. Revise Sec.  523.3 to read as follows:


Sec.  523.3  Automobile.

    An automobile is any 4-wheeled vehicle that is propelled by fuel, 
or by alternative fuel, manufactured primarily for use on public 
streets, roads, and highways and rated at less than 10,000 pounds gross 
vehicle weight, except:
    (a) A vehicle operated only on a rail line;
    (b) A vehicle manufactured in different stages by 2 or more 
manufacturers, if no intermediate or final-stage manufacturer of that 
vehicle manufactures more than 10,000 multi-stage vehicles per year; or
    (c) A work truck.

0
4. Revise Sec.  523.4 to read as follows:


Sec.  523.4  Passenger automobile.

    A passenger automobile is any automobile (other than an automobile 
capable of off-highway operation) manufactured primarily for use in the 
transportation of not more than 10 individuals. A medium-duty passenger 
vehicle that does not meet the criteria for non-passenger motor 
vehicles in Sec.  523.6 is a passenger automobile.

0
5. Revise the introductory text of Sec.  523.5 to read as follows:


Sec.  523.5  Non-passenger automobile.

    A non-passenger automobile means an automobile that is not a 
passenger automobile or a work truck and includes vehicles described in 
paragraphs (a) and (b) of this section. A medium-duty passenger motor 
vehicle that meets the criteria in either paragraph (a) or (b) of this 
section is a non-passenger automobile.
* * * * *

0
6. Revise Sec.  523.6(a) to read as follows:


Sec.  523.6  Heavy-duty vehicle.

    (a) A heavy-duty vehicle is any commercial medium- or heavy-duty 
on-highway vehicle or a work truck, as defined in 49 U.S.C. 32901(a)(7) 
and (19). For the purpose of this section, heavy-duty vehicles are 
divided into four regulatory categories as follows:
    (1) Heavy-duty pickup trucks and vans;
    (2) Heavy-duty vocational vehicles;
    (3) Truck tractors with a GVWR above 26,000 pounds; and
    (4) Heavy-duty trailers.
* * * * *

0
7. Revise Sec.  523.8(b) to read as follows:


Sec.  523.8  Heavy-duty vocational vehicle.

* * * * *
    (b) Medium-duty passenger vehicles; and
* * * * *

PART 531--PASSENGER AUTOMOBILE AVERAGE FUEL ECONOMY STANDARDS

0
8. The authority citation for part 531 continues to read as follows:

    Authority:  49 U.S.C. 32902; delegation of authority at 49 CFR 
1.95.


0
9. Revise Sec.  531.1 to read as follows:


Sec.  531.1  Scope.

    This part establishes average fuel economy standards pursuant to 49 
U.S.C. 32902 for passenger automobiles.

0
10. Revise Sec.  531.4 to read as follows:


Sec.  531.4  Definitions.

    (a) Statutory terms. (1) The terms average fuel economy, 
manufacture, manufacturer, and model year are used as defined in 49 
U.S.C. 32901.
    (2) The terms automobile and passenger automobile are used as 
defined in 49 U.S.C. 32901 and in accordance with the determination in 
part 523 of this chapter.
    (b) Other terms. As used in this part, unless otherwise required by 
the context--
    (1) The term domestically manufactured passenger automobile means 
the vehicle is deemed to be manufactured domestically under 49 U.S.C. 
32904(b)(3) and 40 CFR 600.511-08.
    (2) [Reserved]

0
11. Amend Sec.  531.5 by revising paragraphs (a) through (d) to read as 
follows:


Sec.  531.5  Fuel economy standards.

    (a) Except as provided in paragraph (e) of this section, each 
manufacturer of passenger automobiles shall comply with the fleet 
average fuel economy standards in table 1 to this paragraph (a), 
expressed in miles per gallon, in the model year specified as 
applicable:

[[Page 52946]]



                        Table 1 to Paragraph (a)
------------------------------------------------------------------------
                                                    Average fuel economy
                    Model year                       standard (miles per
                                                           gallon)
------------------------------------------------------------------------
1978..............................................                  18.0
1979..............................................                  19.0
1980..............................................                  20.0
1981..............................................                  22.0
1982..............................................                  24.0
1983..............................................                  26.0
1984..............................................                  27.0
1985..............................................                  27.5
1986..............................................                  26.0
1987..............................................                  26.0
1988..............................................                  26.0
1989..............................................                  26.5
1990-2010.........................................                  27.5
------------------------------------------------------------------------

    (b) Except as provided in paragraph (e) of this section, for model 
year 2011, a manufacturer's passenger automobile fleet shall comply 
with the fleet average fuel economy level calculated for that model 
year according to figure 1 and the appropriate values in table 2 to 
this paragraph (b).
    Figure 1 to Paragraph (b)
    [GRAPHIC] [TIFF OMITTED] TR24JN24.281
    
Where:

N is the total number (sum) of passenger automobiles produced by a 
manufacturer;
Ni is the number (sum) of the ith passenger automobile 
model produced by the manufacturer; and
Ti is the fuel economy target of the ith model passenger 
automobile, which is determined according to the following formula, 
rounded to the nearest hundredth:
[GRAPHIC] [TIFF OMITTED] TR24JN24.282

Where:

Parameters a, b, c, and d are defined in table 2 to this paragraph 
(b);
e = 2.718; and
x = footprint (in square feet, rounded to the nearest tenth) of the 
vehicle model.

             Table 2 to paragraph (b)-- Parameters for the Passenger Automobile Fuel Economy Targets
----------------------------------------------------------------------------------------------------------------
                                           Model year
------------------------------------------------------------------------------------------------    Parameters
                  a  (mpg)                        b  (mpg)     c  (gal/mi/ft2)    d  (gal/mi)
----------------------------------------------------------------------------------------------------------------
2011........................................           31.20            24.00            51.41             1.91
----------------------------------------------------------------------------------------------------------------

    (c) Except as provided in paragraph (e) of this section, for model 
years 2012-2031, a manufacturer's passenger automobile fleet shall 
comply with the fleet average fuel economy level calculated for that 
model year according to this figure 2 and the appropriate values in 
this table 3 to this paragraph (c).

[[Page 52947]]

Figure 2 to Paragraph (c)
[GRAPHIC] [TIFF OMITTED] TR24JN24.283

Where:

CAFErequired is the fleet average fuel economy standard 
for a given fleet (domestic passenger automobiles or import 
passenger automobiles);

    Subscript i is a designation of multiple groups of automobiles, 
where each group's designation, i.e., i = 1, 2, 3, etc., represents 
automobiles that share a unique model type and footprint within the 
applicable fleet, either domestic passenger automobiles or import 
passenger automobiles;
    Productioni is the number of passenger automobiles 
produced for sale in the United States within each ith designation, 
i.e., which share the same model type and footprint;
    TARGETi is the fuel economy target in miles per gallon 
(mpg) applicable to the footprint of passenger automobiles within each 
ith designation, i.e., which share the same model type and footprint, 
calculated according to figure 3 to this paragraph (c) and rounded to 
the nearest hundredth of a mpg, i.e., 35.455 = 35.46 mpg, and the 
summations in the numerator and denominator are both performed over all 
models in the fleet in question.
Figure 3 to Paragraph (c)
[GRAPHIC] [TIFF OMITTED] TR24JN24.284

Where:

TARGET is the fuel economy target (in mpg) applicable to vehicles of 
a given footprint (FOOTPRINT, in square feet);
Parameters a, b, c, and d are defined in table 3 to this paragraph 
(c); and
The MIN and MAX functions take the minimum and maximum, 
respectively, of the included values.

      Table 3 to Paragraph (c)--Parameters for the Passenger Automobile Fuel Economy Targets, MYs 2012-2031
----------------------------------------------------------------------------------------------------------------
                                                                            Parameters
                                                 ---------------------------------------------------------------
                   Model year                                                       c  (gal/mi/
                                                     a  (mpg)        b  (mpg)          ft2)         d  (gal/mi)
----------------------------------------------------------------------------------------------------------------
2012............................................           35.95           27.95       0.0005308        0.006057
2013............................................           36.80           28.46       0.0005308        0.005410
2014............................................           37.75           29.03       0.0005308        0.004725
2015............................................           39.24           29.90       0.0005308        0.003719
2016............................................           41.09           30.96       0.0005308        0.002573
2017............................................           43.61           32.65       0.0005131        0.001896
2018............................................           45.21           33.84       0.0004954        0.001811
2019............................................           46.87           35.07       0.0004783        0.001729
2020............................................           48.74           36.47       0.0004603        0.001643
2021............................................           49.48           37.02        0.000453         0.00162
2022............................................           50.24           37.59        0.000447         0.00159
2023............................................           51.00           38.16        0.000440         0.00157
2024............................................           55.44           41.48        0.000405         0.00144
2025............................................           60.26           45.08        0.000372         0.00133
2026............................................           66.95           50.09        0.000335         0.00120
2027............................................           68.32           51.12      0.00032841      0.00117220
2028............................................           69.71           52.16      0.00032184      0.00114876
2029............................................           71.14           53.22      0.00031541      0.00112579
2030............................................           72.59           54.31      0.00030910      0.00110327
2031............................................           74.07           55.42      0.00030292      0.00108120
----------------------------------------------------------------------------------------------------------------


[[Page 52948]]

    (d) In addition to the requirements of paragraphs (b) and (c) of 
this section, each manufacturer, other than manufacturers subject to 
standards in paragraph (e) of this section, shall also meet the minimum 
fleet standard for domestically manufactured passenger automobiles 
expressed in table 4 to this paragraph (d):

      Table 4 to Paragraph (d)--Minimum Fuel Economy Standards for
     Domestically Manufactured Passenger Automobiles, MYs 2011-2031
------------------------------------------------------------------------
                                                               Minimum
                         Model year                            standard
------------------------------------------------------------------------
2011.......................................................         27.8
2012.......................................................         30.7
2013.......................................................         31.4
2014.......................................................         32.1
2015.......................................................         33.3
2016.......................................................         34.7
2017.......................................................         36.7
2018.......................................................         38.0
2019.......................................................         39.4
2020.......................................................         40.9
2021.......................................................         39.9
2022.......................................................         40.6
2023.......................................................         41.1
2024.......................................................         44.3
2025.......................................................         48.1
2026.......................................................         53.5
2027.......................................................         55.2
2028.......................................................         56.3
2029.......................................................         57.5
2030.......................................................         58.6
2031.......................................................         59.8
------------------------------------------------------------------------

* * * * *

0
9. Amend Sec.  531.6 by revising paragraph (b) to read as follows:


Sec.  531.6  Measurement and calculation procedures.

* * * * *
    (b) For model years 2017 through 2031, a manufacturer is eligible 
to increase the fuel economy performance of passenger cars in 
accordance with procedures established by the Environmental Protection 
Agency (EPA) set forth in 40 CFR part 600, subpart F, including 
adjustments to fuel economy for fuel consumption improvements related 
to air conditioning (AC) efficiency and off-cycle technologies. 
Starting in model year 2027, fuel economy increases for fuel 
consumption improvement values under 40 CFR 86.1868-12 and 40 CFR 
86.1869-12 only apply for vehicles propelled by internal combustion 
engines. Manufacturers must provide reporting on these technologies as 
specified in Sec.  537.7 of this chapter by the required deadlines.
    (1) Efficient AC technologies. A manufacturer may increase its 
fleet average fuel economy performance through the use of technologies 
that improve the efficiency of AC systems pursuant to the requirements 
in 40 CFR 86.1868-12. Fuel consumption improvement values resulting 
from the use of those AC systems must be determined in accordance with 
40 CFR 600.510-12(c)(3)(i).
    (2) Off-cycle technologies on EPA's predefined list. A manufacturer 
may increase its fleet average fuel economy performance through the use 
of off-cycle technologies pursuant to the requirements in 40 CFR 
86.1869-12 for predefined off-cycle technologies in accordance with 40 
CFR 86.1869-12(b). The fuel consumption improvement is determined in 
accordance with 40 CFR 600.510-12(c)(3)(ii).
    (3) Off-cycle technologies using 5-cycle testing. Through model 
year 2026, a manufacturer may increase its fleet average fuel economy 
performance through the use of off-cycle technologies tested using the 
EPA's 5-cycle methodology in accordance with 40 CFR 86.1869-12(c). The 
fuel consumption improvement is determined in accordance with 40 CFR 
600.510-12(c)(3)(ii).
    (4) Off-cycle technologies using the alternative EPA-approved 
methodology. Through model year 2026, a manufacturer may seek to 
increase its fuel economy performance through use of an off-cycle 
technology requiring an application request made to the EPA in 
accordance with 40 CFR 86.1869-12(d).
    (i) Eligibility under the Corporate Average Fuel Economy (CAFE) 
program requires compliance with paragraphs (b)(4)(i)(A) through (C) of 
this section. Paragraphs (b)(4)(i)(A), (B) and (D) of this section 
apply starting in model year 2024. Paragraph (b)(4)(i)(E) of this 
section applies starting in model year 2025.
    (A) A manufacturer seeking to increase its fuel economy performance 
using the alternative methodology for an off-cycle technology, should 
submit a detailed analytical plan to EPA prior to the applicable model 
year. The detailed analytical plan may include information, such as 
planned test procedure and model types for demonstration. The plan will 
be approved or denied in accordance with 40 CFR 86.1869.12(d).
    (B) A manufacturer seeking to increase its CAFE program fuel 
economy performance using the alternative methodology for an off-cycle 
technology must submit an official credit application to EPA and obtain 
approval in accordance with 40 CFR 86.1869.12(e) prior to September of 
the given model year.
    (C) A manufacturer's plans, applications and requests approved by 
the EPA must be made in consultation with NHTSA. To expedite NHTSA's 
consultation with the EPA, a manufacturer must concurrently submit its 
application to NHTSA if the manufacturer is seeking off-cycle fuel 
economy improvement values under the CAFE program for those 
technologies. For off-cycle technologies that are covered under 40 CFR 
86.1869-12(d), NHTSA will consult with the EPA regarding NHTSA's 
evaluation of the specific off-cycle technology to ensure its impact on 
fuel economy and the suitability of using the off-cycle technology to 
adjust the fuel economy performance.
    (D) A manufacturer may request an extension from NHTSA for more 
time to obtain an EPA approval. Manufacturers should submit their 
requests 30 days before the deadlines in paragraphs (b)(4)(i)(A) 
through (C) of this section. Requests should be submitted to NHTSA's 
Director of the Office of Vehicle Safety Compliance at [email protected].
    (E) For MYs 2025 and 2026, a manufacturer must respond within 60-
days to any requests from EPA or NHTSA for additional information or 
clarifications to submissions provided pursuant to paragraphs 
(b)(4)(i)(A) and (B) of this section. Failure to respond within 60 days 
may result in denial of the manufacturer's request to increase its fuel 
economy performance through use of an off-cycle technology requests 
made to the EPA in accordance with 40 CFR 86.1869-12(d).
    (ii) Review and approval process. NHTSA will provide its views on 
the suitability of the technology for that purpose to the EPA. NHTSA's 
evaluation and review will consider:
    (A) Whether the technology has a direct impact upon improving fuel 
economy performance;
    (B) Whether the technology is related to crash-avoidance 
technologies, safety critical systems or systems affecting safety-
critical functions, or technologies designed for the purpose of 
reducing the frequency of vehicle crashes;
    (C) Information from any assessments conducted by the EPA related 
to the application, the technology and/or related technologies; and
    (D) Any other relevant factors.
    (iii) Safety. (A) Technologies found to be defective or non-
compliant, subject to recall pursuant to part 573 of this chapter, 
Defect and Noncompliance Responsibility and Reports, due to a risk to 
motor vehicle safety, will have the values of approved off-cycle 
credits removed from the manufacturer's credit

[[Page 52949]]

balance or adjusted to the population of vehicles the manufacturer 
remedies as required by 49 U.S.C. chapter 301. NHTSA will consult with 
the manufacturer to determine the amount of the adjustment.
    (B) Approval granted for innovative and off-cycle technology 
credits under NHTSA's fuel efficiency program does not affect or 
relieve the obligation to comply with the Vehicle Safety Act (49 U.S.C. 
chapter 301), including the ``make inoperative'' prohibition (49 U.S.C. 
30122), and all applicable Federal motor vehicle safety standards 
(FMVSSs) issued thereunder (part 571 of this chapter). In order to 
generate off-cycle or innovative technology credits manufacturers must 
state--
    (1) That each vehicle equipped with the technology for which they 
are seeking credits will comply with all applicable FMVSS(s); and
    (2) Whether or not the technology has a fail-safe provision. If no 
fail-safe provision exists, the manufacturer must explain why not and 
whether a failure of the innovative technology would affect the safety 
of the vehicle.

PART 533--LIGHT TRUCK FUEL ECONOMY STANDARDS

0
10. The authority citation for part 533 continues to read as follows:

    Authority: 49 U.S.C. 32902; delegation of authority at 49 CFR 
1.95.


0
11. Revise Sec.  533.1 to read as follows:


Sec.  533.1  Scope.

    This part establishes average fuel economy standards pursuant to 49 
U.S.C. 32902 for light trucks.

0
12. Revise Sec.  533.4 to read as follows:


Sec.  533.4  Definitions.

    (a) Statutory terms. (1) The terms average fuel economy, average 
fuel economy standard, fuel economy, import, manufacture, manufacturer, 
and model year are used as defined in 49 U.S.C. 32901.
    (2) The term automobile is used as defined in 49 U.S.C. 32901 and 
in accordance with the determinations in part 523 of this chapter.
    (b) Other terms. As used in this part, unless otherwise required by 
the context--
    (1) Light truck is used in accordance with the determinations in 
part 523 of this chapter.
    (2) Captive import means with respect to a light truck, one which 
is not domestically manufactured, as defined in section 502(b)(2)(E) of 
the Motor Vehicle Information and Cost Savings Act, but which is 
imported in the 1980 model year or thereafter by a manufacturer whose 
principal place of business is in the United States.
    (3) 4-wheel drive, general utility vehicle means a 4-wheel drive, 
general purpose automobile capable of off-highway operation that has a 
wheelbase of not more than 280 centimeters, and that has a body shape 
similar to 1977 Jeep CJ-5 or CJ-7, or the 1977 Toyota Land Cruiser.
    (4) Basic engine means a unique combination of manufacturer, engine 
displacement, number of cylinders, fuel system (as distinguished by 
number of carburetor barrels or use of fuel injection), and catalyst 
usage.
    (5) Limited product line light truck means a light truck 
manufactured by a manufacturer whose light truck fleet is powered 
exclusively by basic engines which are not also used in passenger 
automobiles.

0
13. Amend Sec.  533.5 by revising table 7 to paragraph (a) and 
paragraph (j) to read as follows:


Sec.  533.5  Requirements.

    (a) * * *

                             Table 7 to Paragraph (a)-Parameters for the Light Truck Fuel Economy Targets for MYs, 2017-2031
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                    Parameters
                                                         -----------------------------------------------------------------------------------------------
                       Model year                                                                                                               h (gal/
                                                           a (mpg)   b (mpg)  c (gal/mi/ft2)   d (gal/mi)   e (mpg)   f (mpg)  g (gal/mi/ft2)     mi)
--------------------------------------------------------------------------------------------------------------------------------------------------------
2017....................................................     36.26     25.09       0.0005484     0.005097     35.10     25.09       0.0004546   0.009851
2018....................................................     37.36     25.20       0.0005358     0.004797     35.31     25.20       0.0004546   0.009682
2019....................................................     38.16     25.25       0.0005265     0.004623     35.41     25.25       0.0004546   0.009603
2020....................................................     39.11     25.25       0.0005140     0.004494     35.41     25.25       0.0004546   0.009603
2021....................................................     39.71     25.63        0.000506      0.00443        NA        NA              NA         NA
2022....................................................     40.31     26.02        0.000499      0.00436        NA        NA              NA         NA
2023....................................................     40.93     26.42        0.000491      0.00429        NA        NA              NA         NA
2024....................................................     44.48     26.74        0.000452      0.00395        NA        NA              NA         NA
2025....................................................     48.35     29.07        0.000416      0.00364        NA        NA              NA         NA
2026....................................................     53.73     32.30        0.000374      0.00327        NA        NA              NA         NA
2027....................................................     53.73     32.30      0.00037418   0.00327158        NA        NA              NA         NA
2028....................................................     53.73     32.30      0.00037418   0.00327158        NA        NA              NA         NA
2029....................................................     54.82     32.96      0.00036670   0.00320615        NA        NA              NA         NA
2030....................................................     55.94     33.63      0.00035936   0.00314202        NA        NA              NA         NA
2031....................................................     57.08     34.32      0.00035218   0.00307918        NA        NA              NA         NA
--------------------------------------------------------------------------------------------------------------------------------------------------------

* * * * *
    (j) For model years 2017-2031, a manufacturer's light truck fleet 
shall comply with the fleet average fuel economy standard calculated 
for that model year according to figures 2 and 4 to paragraph (a) of 
this section and the appropriate values in table 7 to paragraph (a) of 
this section.

0
14. Amend Sec.  533.6 by:
0
a. Revising paragraph (c) to read as follows:


Sec.  533.6  Measurement and calculation procedures.

* * * * *
    (c) For model years 2017 through 2031, a manufacturer is eligible 
to increase the fuel economy performance of light trucks in accordance 
with procedures established by the Environmental Protection Agency 
(EPA) set forth in 40 CFR part 600, subpart F, including adjustments to 
fuel economy for fuel consumption improvements related to air 
conditioning (AC) efficiency, off-cycle technologies, and hybridization 
and other performance-based technologies for full-size pickup trucks 
that meet the requirements specified in 40 CFR 86.1803. Starting in 
model year 2027, fuel economy increases for fuel consumption 
improvement values under 40 CFR 86.1868-12 and 40 CFR 86.1869-12 only 
apply for vehicles propelled by internal combustion engines.

[[Page 52950]]

Manufacturers must provide reporting on these technologies as specified 
in Sec.  537.7 of this chapter by the required deadlines.
    (1) Efficient AC technologies. A manufacturer may seek to increase 
its fleet average fuel economy performance through the use of 
technologies that improve the efficiency of AC systems pursuant to the 
requirements in 40 CFR 86.1868-12. Fuel consumption improvement values 
resulting from the use of those AC systems must be determined in 
accordance with 40 CFR 600.510-12(c)(3)(i).
    (2) Incentives for advanced full-size light-duty pickup trucks. For 
model year 2023 and 2024, the eligibility of a manufacturer to increase 
its fuel economy using hybridized and other performance-based 
technologies for full-size pickup trucks must follow 40 CFR 86.1870-12 
and the fuel consumption improvement of these full-size pickup truck 
technologies must be determined in accordance with 40 CFR 600.510-
12(c)(3)(iii). Manufacturers may also combine incentives for full size 
pickups and dedicated alternative fueled vehicles when calculating fuel 
economy performance values in 40 CFR 600.510-12.
    (3) Off-cycle technologies on EPA's predefined list. A manufacturer 
may seek to increase its fleet average fuel economy performance through 
the use of off-cycle technologies pursuant to the requirements in 40 
CFR 86.1869-12 for predefined off-cycle technologies in accordance with 
40 CFR 86.1869-12(b). The fuel consumption improvement is determined in 
accordance with 40 CFR 600.510-12(c)(3)(ii).
    (4) Off-cycle technologies using 5-cycle testing. Through model 
year 2026, a manufacturer may only increase its fleet average fuel 
economy performance through the use of off-cycle technologies tested 
using the EPA's 5-cycle methodology in accordance with 40 CFR 86.1869-
12(c). The fuel consumption improvement is determined in accordance 
with 40 CFR 600.510-12(c)(3)(ii).
    (5) Off-cycle technologies using the alternative EPA-approved 
methodology. Through model year 2026, a manufacturer may seek to 
increase its fuel economy performance through the use of an off-cycle 
technology requiring an application request made to the EPA in 
accordance with 40 CFR 86.1869-12(d).
    (i) Eligibility under the Corporate Average Fuel Economy (CAFE) 
program requires compliance with paragraphs (c)(5)(i)(A) through (C) of 
this section. Paragraphs (c)(5)(i)(A), (B) and (D) of this section 
apply starting in model year 2024. Paragraph (b)(5)(i)(E) of this 
section applies starting in model year 2025.
    (A) A manufacturer seeking to increase its fuel economy performance 
using the alternative methodology for an off-cycle technology, should 
submit a detailed analytical plan to EPA prior to the applicable model 
year. The detailed analytical plan may include information such as, 
planned test procedure and model types for demonstration. The plan will 
be approved or denied in accordance with 40 CFR 86.1869-12(d).
    (B) A manufacturer seeking to increase its fuel economy performance 
using the alternative methodology for an off-cycle technology must 
submit an official credit application to EPA and obtain approval in 
accordance with 40 CFR 86.1869-12(e) prior to September of the given 
model year.
    (C) A manufacturer's plans, applications and requests approved by 
the EPA must be made in consultation with NHTSA. To expedite NHTSA's 
consultation with the EPA, a manufacturer must concurrently submit its 
application to NHTSA if the manufacturer is seeking off-cycle fuel 
economy improvement values under the CAFE program for those 
technologies. For off-cycle technologies that are covered under 40 CFR 
86.1869-12(d), NHTSA will consult with the EPA regarding NHTSA's 
evaluation of the specific off-cycle technology to ensure its impact on 
fuel economy and the suitability of using the off-cycle technology to 
adjust the fuel economy performance.
    (D) A manufacturer may request an extension from NHTSA for more 
time to obtain an EPA approval. Manufacturers should submit their 
requests 30 days before the deadlines above. Requests should be 
submitted to NHTSA's Director of the Office of Vehicle Safety 
Compliance at [email protected].
    (E) For MYs 2025 and 2026, a manufacturer must respond within 60-
days to any requests from EPA or NHTSA for additional information or 
clarifications to submissions provided pursuant to paragraphs 
(b)(4)(i)(A) and (B) of this section. Failure to respond within 60 days 
may result in denial of the manufacturer's request to increase its fuel 
economy performance through use of an off-cycle technology requests 
made to the EPA in accordance with 40 CFR 86.1869-12(d).
    (ii) Review and approval process. NHTSA will provide its views on 
the suitability of the technology for that purpose to the EPA. NHTSA's 
evaluation and review will consider:
    (A) Whether the technology has a direct impact upon improving fuel 
economy performance;
    (B) Whether the technology is related to crash-avoidance 
technologies, safety critical systems or systems affecting safety-
critical functions, or technologies designed for the purpose of 
reducing the frequency of vehicle crashes;
    (C) Information from any assessments conducted by the EPA related 
to the application, the technology and/or related technologies; and
    (D) Any other relevant factors.
    (E) NHTSA will collaborate to host annual meetings with EPA at 
least once by July 30th before the model year begins to provide general 
guidance to the industry on past off-cycle approvals.
    (iii) Safety. (A) Technologies found to be defective or non-
compliant, subject to recall pursuant to part 573 of this chapter, 
Defect and Noncompliance Responsibility and Reports, due to a risk to 
motor vehicle safety, will have the values of approved off-cycle 
credits removed from the manufacturer's credit balance or adjusted to 
the population of vehicles the manufacturer remedies as required by 49 
U.S.C. chapter 301. NHTSA will consult with the manufacturer to 
determine the amount of the adjustment.
    (B) Approval granted for innovative and off-cycle technology 
credits under NHTSA's fuel efficiency program does not affect or 
relieve the obligation to comply with the Vehicle Safety Act (49 U.S.C. 
chapter 301), including the ``make inoperative'' prohibition (49 U.S.C. 
30122), and all applicable Federal motor vehicle safety standards 
issued thereunder (FMVSSs) (part 571 of this chapter). In order to 
generate off-cycle or innovative technology credits manufacturers must 
state--
    (1) That each vehicle equipped with the technology for which they 
are seeking credits will comply with all applicable FMVSS(s); and
    (2) Whether or not the technology has a fail-safe provision. If no 
fail-safe provision exists, the manufacturer must explain why not and 
whether a failure of the innovative technology would affect the safety 
of the vehicle.

PART 535 MEDIUM- AND HEAVY-DUTY VEHICLE FUEL EFFICIENCY PROGRAM

0
15. The authority citation for part 535 continues to read as follows:

    Authority: 49 U.S.C. 32902 and 30101; delegation of authority at 
49 CFR 1.95.


0
16. Amend Sec.  535.4 by revising the introductory text, removing the 
definition for ``Alterers'', and adding the

[[Page 52951]]

definition for ``Alterer'', in alphabetical order, to read as follows:


Sec.  535.4  Definitions.

    The terms manufacture, manufacturer, commercial medium-duty on 
highway vehicle, commercial heavy-duty on highway vehicle, fuel, and 
work truck are used as defined in 49 U.S.C. 32901. See 49 CFR 523.2 for 
general definitions related to NHTSA's fuel efficiency programs.
* * * * *
    Alterer means a manufacturer that modifies an altered vehicle as 
defined in 49 CFR 567.3
* * * * *

0
17. Amend Sec.  535.5 by revising paragraphs (a)(1), (2) and (9) to 
read as follows:


Sec.  535.5  Standards.

    (a) * * *
    (1) Mandatory standards. For model years 2016 and later, each 
manufacturer must comply with the fleet average standard derived from 
the unique subconfiguration target standards (or groups of 
subconfigurations approved by EPA in accordance with 40 CFR 86.1819) of 
the model types that make up the manufacturer's fleet in a given model 
year. Each subconfiguration has a unique attribute-based target 
standard, defined by each group of vehicles having the same payload, 
towing capacity and whether the vehicles are equipped with a 2-wheel or 
4-wheel drive configuration. Phase 1 target standards apply for model 
years 2016 through 2020. Phase 2 target standards apply for model years 
2021 through 2029. NHTSA's Phase 3 HDPUV target standards apply for 
model year 2030 and later.
    (2) Subconfiguration target standards. (i) Two alternatives exist 
for determining the subconfiguration target standards for Phase 1. For 
each alternative, separate standards exist for compression-ignition and 
spark-ignition vehicles:
    (A) The first alternative allows manufacturers to determine a fixed 
fuel consumption standard that is constant over the model years; and
    (B) The second alternative allows manufacturers to determine 
standards that are phased-in gradually each year.
    (ii) Calculate the subconfiguration target standards as specified 
in this paragraph (a)(2)(ii), using the appropriate coefficients from 
table 1 to paragraph (a)(2)(ii), choosing between the alternatives in 
paragraph (a)(2)(i) of this section. For electric or fuel cell heavy-
duty vehicles, use compression-ignition vehicle coefficients ``c'' and 
``d'' and for hybrid (including plug-in hybrid), dedicated and dual-
fueled vehicles, use coefficients ``c'' and ``d'' appropriate for the 
engine type used. Round each standard to the nearest 0.001 gallons per 
100 miles and specify all weights in pounds rounded to the nearest 
pound. Calculate the subconfiguration target standards using equation: 
1 to this paragraph (a)(2)(ii).
Equation 1 to Paragraph (a)(2)(ii)
Subconfiguration Target Standard (gallons per 100 miles) = [c x (WF)] + 
d

Where:

WF = Work Factor = [0.75 x (Payload Capacity + Xwd)] + [0.25 x 
Towing Capacity]
Xwd = 4wd Adjustment = 500 lbs. if the vehicle group is equipped 
with 4wd and all-wheel drive, otherwise equals 0 lbs. for 2wd.
Payload Capacity = GVWR (lbs.) - Curb Weight (lbs.) (for each 
vehicle group) Towing Capacity = GCWR (lbs.) - GVWR (lbs.) (for each 
vehicle group)

       Table 1 to Paragraph (a)(2)(ii)--Coefficients for Mandatory
                    Subconfiguration Target Standards
------------------------------------------------------------------------
              Model year(s)                      c               d
------------------------------------------------------------------------
              Phase 1 Alternative 1--Fixed Target Standards
             Compression Ignition (CI) Vehicle Coefficients
------------------------------------------------------------------------
2016 to 2018............................       0.0004322           3.330
2019 to 2020............................       0.0004086           3.143
------------------------------------------------------------------------
                         SI Vehicle Coefficients
------------------------------------------------------------------------
2016 to 2017............................       0.0005131           3.961
2018 to 2020............................       0.0004086           3.143
------------------------------------------------------------------------
            Phase 1 Alternative 2--Phased-in Target Standards
------------------------------------------------------------------------
                         CI Vehicle Coefficients
------------------------------------------------------------------------
2016....................................       0.0004519           3.477
2017....................................       0.0004371           3.369
2018 to 2020............................       0.0004086           3.143
------------------------------------------------------------------------
                         SI Vehicle Coefficients
------------------------------------------------------------------------
2016....................................       0.0005277           4.073
2017....................................       0.0005176           3.983
2018 to 2020............................       0.0004951           3.815
------------------------------------------------------------------------
                     Phase 2--Fixed Target Standards
------------------------------------------------------------------------
                         CI Vehicle Coefficients
------------------------------------------------------------------------
2021....................................       0.0003988           3.065
2022....................................       0.0003880           2.986
2023....................................       0.0003792           2.917
2024....................................       0.0003694           2.839
2025....................................       0.0003605           2.770
2026....................................       0.0003507           2.701
2027 to 2029............................       0.0003418           2.633

[[Page 52952]]

 
2030....................................      0.00030762           2.370
2031....................................      0.00027686           2.133
2032....................................      0.00024917           1.919
2033....................................      0.00022924           1.766
2034....................................      0.00021090           1.625
2035....................................      0.00019403           1.495
------------------------------------------------------------------------
                         SI Vehicle Coefficients
------------------------------------------------------------------------
2021....................................       0.0004827           3.725
2022....................................       0.0004703           3.623
2023....................................       0.0004591           3.533
2024....................................       0.0004478           3.443
2025....................................       0.0004366           3.364
2026....................................       0.0004253           3.274
2027 to 2029............................       0.0004152           3.196
2030....................................      0.00037368           2.876
2031....................................      0.00033631           2.589
2032....................................      0.00030268           2.330
2033....................................      0.00027847           2.143
2034....................................      0.00025619           1.972
2035....................................      0.00023569           1.814
------------------------------------------------------------------------

* * * * *
    (9) Advanced, innovative, and off-cycle technologies. For vehicles 
subject to Phase 1 standards, manufacturers may generate separate 
credit allowances for advanced and innovative technologies as specified 
in Sec.  535.7(f)(1) and (2). For vehicles subject to Phase 2 
standards, manufacturers may generate separate credits allowance for 
off-cycle technologies in accordance with Sec.  535.7(f)(2) through 
model year 2029. Separate credit allowances for advanced technology 
vehicles cannot be generated; instead, manufacturers may use the credit 
specified in Sec.  535.7(f)(1)(ii) through model year 2027.
* * * * *

0
18. Amend Sec.  535.6 by revising paragraph (a)(1) to read as follows:


Sec.  535.6  easurement and calculation procedures.

* * * * *
    (a) * * *
    (1) For the Phase 1 program, if the manufacturer's fleet includes 
conventional vehicles (gasoline, diesel and alternative fueled 
vehicles) and advanced technology vehicles (hybrids with powertrain 
designs that include energy storage systems, vehicles with waste heat 
recovery, electric vehicles and fuel cell vehicles), it may divide its 
fleet into two separate fleets each with its own separate fleet average 
fuel consumption performance rate. For Phase 2 and later, manufacturers 
may calculate their fleet average fuel consumption rates for a 
conventional fleet and separate advanced technology vehicle fleets. 
Advanced technology vehicle fleets should be separated into plug-in 
hybrid electric vehicles, electric vehicles and fuel cell vehicles.
* * * * *

0
19. Amend Sec.  535.7 by revising paragraphs (a)(1)(iii) and (iv), 
(a)(2)(iii), (a)(4)(i) and (ii), (b)(2), (f)(2) introductory text, 
(f)(2)(ii), and (f)(2)(vi)(B) to read as follows:


Sec.  535.7  Averaging, banking, and trading (ABT) credit program.

    (a) * * *
    (1) * * *
    (iii) Advanced technology credits. Credits generated by vehicle or 
engine families or subconfigurations containing vehicles with advanced 
technologies (i.e., hybrids with regenerative braking, vehicles 
equipped with Rankine-cycle engines, electric and fuel cell vehicles) 
as described in paragraph (f)(1) of this section.
    (iv) Innovative and off-cycle technology credits. Credits can be 
generated by vehicle or engine families or subconfigurations having 
fuel consumption reductions resulting from technologies not reflected 
in the GEM simulation tool or in the Federal Test Procedure (FTP) 
chassis dynamometer and that were not in common use with heavy-duty 
vehicles or engines before model year 2010 that are not reflected in 
the specified test procedure. Manufacturers should prove that these 
technologies were not in common use in heavy-duty vehicles or engines 
before model year 2010 by demonstrating factors such as the penetration 
rates of the technology in the market. NHTSA will not approve any 
request if it determines that these technologies do not qualify. The 
approach for determining innovative and off-cycle technology credits 
under this fuel consumption program is described in paragraph (f)(2) of 
this section and by the Environmental Protection Agency (EPA) under 40 
CFR 86.1819-14(d)(13), 1036.610, and 1037.610. Starting in model year 
2030, manufacturers certifying vehicles under Sec.  535.5(a) may not 
earn off-cycle technology credits under 40 CFR 86.1819-14(d)(13).
    (2) * * *
    (iii) Positive credits, other than advanced technology credits in 
Phase 1, generated and calculated within an averaging set may only be 
used to offset negative credits within the same averaging set.
* * * * *
    (4) * * *
    (i) Manufacturers may only trade banked credits to other 
manufacturers to use for compliance with fuel consumption standards. 
Traded FCCs, other than advanced technology credits earned in Phase 1, 
may be used only within the averaging set in which they were generated. 
Manufacturers may only trade credits to other entities for the purpose 
of expiring credits.
    (ii) Advanced technology credits earned in Phase 1 can be traded 
across different averaging sets.
* * * * *
    (b) * * *

[[Page 52953]]

    (2) Adjust the fuel consumption performance of subconfigurations 
with advanced technology for determining the fleet average actual fuel 
consumption value as specified in paragraph (f)(1) of this section and 
40 CFR 86.1819-14(d)(6)(iii). Advanced technology vehicles can be 
separated in a different fleet for the purpose of applying credit 
incentives as described in paragraph (f)(1) of this section.
* * * * *
    (f) * * *
    (2) Innovative and off-cycle technology credits. This provision 
allows fuel saving innovative and off-cycle engine and vehicle 
technologies to generate fuel consumption credits (FCCs) comparable to 
CO\2\ emission credits consistent with the provisions of 40 CFR 
86.1819-14(d)(13) (for heavy-duty pickup trucks and vans), 40 CFR 
1036.610 (for engines), and 40 CFR 1037.610 (for vocational vehicles 
and tractors). Heavy-duty pickup trucks and vans may only generate FCCs 
through model year 2029.
* * * * *
    (ii) For model years 2021 and later, or for model years 2021 
through 2029, for heavy-duty pickup trucks and vans manufacturers may 
generate off-cycle technology credits for introducing technologies that 
are not reflected in the EPA specified test procedures. Upon 
identification and joint approval with EPA, NHTSA will allow equivalent 
FCCs into its program to those allowed by EPA for manufacturers seeking 
to obtain innovative technology credits in a given model year. Such 
credits must remain within the same regulatory subcategory in which the 
credits were generated. NHTSA will adopt FCCs depending upon whether--
    (A) The technology meets paragraphs (f)(2)(i)(A) and (B) of this 
section.
    (B) For heavy-duty pickup trucks and vans, manufacturers using the 
5-cycle test to quantify the benefit of a technology are not required 
to obtain approval from the agencies to generate results.
* * * * *
    (vi) * * *
    (B) For model years 2021 and later, or for model years 2021 through 
2029 for heavy-duty pickup trucks and vans, manufacturers may not rely 
on an approval for model years before 2021. Manufacturers must 
separately request the agencies' approval before applying an 
improvement factor or credit under this section for 2021 and later 
engines and vehicle, even if the agencies approve the improvement 
factor or credit for similar engine and vehicle models before model 
year 2021.
* * * * *

PART 536--TRANSFER AND TRADING OF FUEL ECONOMY CREDITS

0
20. The authority citation for part 536 continues to read as follows:

    Authority: 49 U.S.C. 32903; delegation of authority at 49 CFR 
1.95.


0
21. Revise Table 1 to Sec.  536.4(c) to read as follows:


Sec.  536.4  Credits.

* * * * *

                           Table 1 to Sec.   536.4(c)--Lifetime Vehicle Miles Traveled
----------------------------------------------------------------------------------------------------------------
                                                       Lifetime vehicle miles traveled  (VMT)
            Model year             -----------------------------------------------------------------------------
                                        2012         2013         2014         2015         2016      2017-2031
----------------------------------------------------------------------------------------------------------------
Passenger Cars....................      177,238      177,366      178,652      180,497      182,134      195,264
Light Trucks......................      208,471      208,537      209,974      212,040      213,954      225,865
----------------------------------------------------------------------------------------------------------------

PART 537--AUTOMOTIVE FUEL ECONOMY REPORTS

0
22. The authority citation for part 537 continues to read as follows:

    Authority: 49 U.S.C. 32907; delegation of authority at 49 CFR 
1.95.


0
23. Revise Sec.  537.2 to read as follows:


Sec.  537.2  Purpose.

    The purpose of this part is to obtain information to aid the 
National Highway Traffic Safety Administration in evaluating automobile 
manufacturers' plans for complying with average fuel economy standards 
and in preparing an annual review of the average fuel economy 
standards.

0
24. Revise Sec.  537.3 to read as follows:


Sec.  537.3  Applicability.

    This part applies to automobile manufacturers, except for 
manufacturers subject to an alternate fuel economy standard under 49 
U.S.C. 32902(d).

0
25. Revise Sec.  537.4 to read as follows:


Sec.  537.4  Definitions.

    (a) Statutory terms. (1) The terms average fuel economy standard, 
fuel, manufacture, and model year are used as defined in 49 U.S.C. 
32901.
    (2) The term manufacturer is used as defined in 49 U.S.C. 32901 and 
in accordance with part 529 of this chapter.
    (3) The terms average fuel economy, fuel economy, and model type 
are used as defined in subpart A of 40 CFR part 600.
    (4) The terms automobile, automobile capable of off-highway 
operation, and passenger automobile are used as defined in 49 U.S.C. 
32901 and in accordance with the determinations in part 523 of this 
chapter.
    (b) Other terms. (1) The term loaded vehicle weight is used as 
defined in subpart A of 40 CFR part 86.
    (2) The terms axle ratio, base level, body style, car line, 
combined fuel economy, engine code, equivalent test weight, gross 
vehicle weight, inertia weight, transmission class, and vehicle 
configuration are used as defined in subpart A of 40 CFR part 600.
    (3) The term light truck is used as defined in part 523 of this 
chapter and in accordance with determinations in that part.
    (4) The terms approach angle, axle clearance, brakeover angle, 
cargo carrying volume, departure angle, passenger carrying volume, 
running clearance, and temporary living quarters are used as defined in 
part 523 of this chapter.
    (5) The term incomplete automobile manufacturer is used as defined 
in part 529 of this chapter.
    (6) As used in this part, unless otherwise required by the context:
    (i) Administrator means the Administrator of the National Highway 
Traffic Safety Administration or the Administrator's delegate.
    (ii) Current model year means:
    (A) In the case of a pre-model year report, the full model year 
immediately following the period during which that report is required 
by Sec.  537.5(b) to be submitted.
    (B) In the case of a mid-model year report, the model year during 
which

[[Page 52954]]

that report is required by Sec.  537.5(b) to be submitted.
    (iii) Average means a production-weighted harmonic average.
    (iv) Total drive ratio means the ratio of an automobile's engine 
rotational speed (in revolutions per minute) to the automobile's 
forward speed (in miles per hour).

0
26. Amend Sec.  537.7 by revising paragraphs (c)(7)(i) through (iii) to 
read as follows:


Sec.  537.7  Pre-model year and mid-model year reports.

* * * * *
    (c) * * *
    (7) * * *
    (i) Provide a list of each air conditioning (AC) efficiency 
improvement technology utilized in your fleet(s) of vehicles for each 
model year for which the manufacturer qualifies for fuel consumption 
improvement values under 49 CFR 531.6 or 533.6. For each technology 
identify vehicles by make and model types that have the technology, 
which compliance category those vehicles belong to and the number of 
vehicles for each model equipped with the technology. For each 
compliance category (domestic passenger car, import passenger car, and 
light truck), report the AC fuel consumption improvement value in 
gallons/mile in accordance with the equation specified in 40 CFI00.510-
12(c)(3)(i).
    (ii) Manufacturers must provide a list of off-cycle efficiency 
improvement technologies utilized in its fleet(s) of vehicles for each 
model year that is pending or approved by the Environmental Protection 
Agency (EPA) for which the manufacturer qualifies for fuel consumption 
improvement values under 49 CFR 531.6 or 533.6. For each technology, 
manufacturers must identify vehicles by make and model types that have 
the technology, which compliance category those vehicles belong to, the 
number of vehicles for each model equipped with the technology, and the 
associated off-cycle credits (grams/mile) available for each 
technology. For each compliance category (domestic passenger car, 
import passenger car, and light truck), manufacturers must calculate 
the fleet off-cycle fuel consumption improvement value in gallons/mile 
in accordance with the equation specified in 40 CFR 600.510-
12(c)(3)(ii).
    (iii) For model years up to 2024, manufacturers must provide a list 
of full-size pickup trucks in its fleet that meet the mild and strong 
hybrid vehicle definitions. For each mild and strong hybrid type, 
manufacturers must identify vehicles by make and model types that have 
the technology, the number of vehicles produced for each model equipped 
with the technology, the total number of full-size pickup trucks 
produced with and without the technology, the calculated percentage of 
hybrid vehicles relative to the total number of vehicles produced, and 
the associated full-size pickup truck credits (grams/mile) available 
for each technology. For the light truck compliance category, 
manufacturers must calculate the fleet pickup truck fuel consumption 
improvement value in gallons/mile in accordance with the equation 
specified in 40 CFR 600.510-12(c)(3)(iii).

    Issued in Washington, DC, under authority delegated in 49 CFR 
1.95 and 501.5.
Sophie Shulman,
Deputy Administrator.
[FR Doc. 2024-12864 Filed 6-13-24; 8:45 am]
BILLING CODE 4910-59-P