2017 and Later Model Year Light-Duty Vehicle Greenhouse Gas Emissions and Corporate Average Fuel Economy Standards

Federal RegisterOct 15, 2012

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 85, 86, and 600

DEPARTMENT OF TRANSPORTATION

National Highway Traffic Safety Administration

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

[EPA-HQ-OAR-2010-0799; FRL-9706-5; NHTSA-2010-0131]

RIN 2060-AQ54; RIN 2127-AK79

2017 and Later Model Year Light-Duty Vehicle Greenhouse Gas Emissions and Corporate Average Fuel Economy Standards

AGENCIES:

Environmental Protection Agency (EPA) and National Highway Traffic Safety Administration (NHTSA), DOT.

ACTION:

Final rule.

SUMMARY:

EPA and NHTSA, on behalf of the Department of Transportation, are issuing final rules to further reduce greenhouse gas emissions and improve fuel economy for light-duty vehicles for model years 2017 and beyond. On May 21, 2010, President Obama issued a Presidential Memorandum requesting that NHTSA and EPA develop through notice and comment rulemaking a coordinated National Program to improve fuel economy and reduce greenhouse gas emissions of light-duty vehicles for model years 2017-2025, building on the success of the first phase of the National Program for these vehicles for model years 2012-2016. This final rule, consistent with the President's request, responds to the country's critical need to address global climate change and to reduce oil consumption. NHTSA is finalizing Corporate Average Fuel Economy standards for model years 2017-2021 and issuing augural standards for model years 2022-2025 under the Energy Policy and Conservation Act, as amended by the Energy Independence and Security Act. NHTSA will set final standards for model years 2022-2025 in a future rulemaking. EPA is finalizing greenhouse gas emissions standards for model years 2017-2025 under the Clean Air Act. These standards apply to passenger cars, light-duty trucks, and medium-duty passenger vehicles, and represent the continuation of a harmonized and consistent National Program. Under the National Program automobile manufacturers will be able to continue building a single light-duty national fleet that satisfies all requirements under both programs while ensuring that consumers still have a full range of vehicle choices that are available today. EPA is also finalizing minor changes to the regulations applicable to model years 2012-2016, with respect to air conditioner performance, nitrous oxides measurement, off-cycle technology credits, and police and emergency vehicles.

DATES:

This final rule is effective on December 14, 2012,

sixty days after date of publication in the

Federal Register

. The incorporation by reference of certain publications listed in this regulation is approved by the Director of the

Federal Register

as of December 14, 2012.

ADDRESSES:

EPA and NHTSA have established dockets for this action under Docket ID No. EPA-HQ-OAR-2010-0799 and NHTSA 2010-0131, respectively. All documents in the docket are listed in the

http://www.regulations.gov

index. Although listed in the index, some information is not publicly available,

e.g.,

confidential business information (CBI) or other information whose disclosure is restricted by statute. Certain other material, such as copyrighted material, will be publicly available in hard copy in EPA's docket, and electronically in NHTSA's online docket. Publicly available docket materials can be found either electronically in

www.regulations.gov

by searching for the dockets using the Docket ID numbers above, or in hard copy at the following locations: EPA: EPA Docket Center, EPA/DC, EPA West, Room 3334, 1301 Constitution Ave. NW., Washington, DC. The Public Reading Room is open from 8:30 a.m. to 4:30 p.m., Monday through Friday, excluding legal holidays. The telephone number for the Public Reading Room is (202) 566-1744. NHTSA: Docket Management Facility, M-30, U.S. Department of Transportation (DOT), West Building, Ground Floor, Rm. W12-140, 1200 New Jersey Avenue SE., Washington, DC 20590. The DOT Docket Management Facility is open between 9 a.m. and 5 p.m. Eastern Time, Monday through Friday, except Federal holidays.

FOR FURTHER INFORMATION CONTACT:

EPA: Christopher Lieske, Office of Transportation and Air Quality, Assessment and Standards Division, Environmental Protection Agency, 2000 Traverwood Drive, Ann Arbor MI 48105; telephone number: 734-214-4584; fax number: 734-214-4816; email address:

lieske.christopher@epa.gov

, or contact the Assessment and Standards Division; email address:

otaqpublicweb@epa.gov

. NHTSA: Rebecca Yoon, Office of the Chief Counsel, National Highway Traffic Safety Administration, 1200 New Jersey Avenue SE., Washington, DC 20590. Telephone: (202) 366-2992.

SUPPLEMENTARY INFORMATION:

A. Does this action apply to me?

This action affects companies that manufacture or sell new light-duty vehicles, light-duty trucks, and medium-duty passenger vehicles, as defined under EPA's CAA regulations,

and passenger automobiles (passenger cars) and non-passenger automobiles (light trucks) as defined under NHTSA's CAFE regulations.

Regulated categories and entities include:

“Light-duty vehicle,” “light-duty truck,” and “medium-duty passenger vehicle” are defined in 40 CFR 86.1803-01. Generally, the term “light-duty vehicle” means a passenger car, the term “light-duty truck” means a pick-up truck, sport-utility vehicle, or minivan of up to 8,500 lbs gross vehicle weight rating, and “medium-duty passenger vehicle” means a sport-utility vehicle or passenger van from 8,500 to 10,000 lbs gross vehicle weight rating. Medium-duty passenger vehicles do not include pick-up trucks.

“Passenger car” and “light truck” are defined in 49 CFR Part 523.

Category

NAICS Codes

Examples of potentially regulated entities

Industry

336111

Motor Vehicle Manufacturers.

336112

Industry

811111

Commercial Importers of Vehicles and Vehicle Components.

811112

811198

423110

Industry

335312

Alternative Fuel Vehicle Converters.

336312

336399

811198

North American Industry Classification System (NAICS).

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

FOR FURTHER INFORMATION CONTACT

Table of Contents

I. Overview of Joint EPA/NHTSA Final 2017-2025 National Program

A. Executive Summary

1. Purpose of the Regulatory Action

2. Summary of the Major Provisions of the Final Rule

3. Costs and Benefits of National Program

B. Introduction

1. Continuation of the National Program

2. Additional Background on the National Program and Stakeholder Engagement Prior to the NPRM

3. Public Participation and Stakeholder Engagement Since the NPRM Was Issued

4. California's Greenhouse Gas Program

C. Summary of the Final 2017-2025 National Program

1. Joint Analytical Approach

2. Level of the Standards

3. Form of the Standards

4. Program Flexibilities for Achieving Compliance

5. Mid-Term Evaluation

6. Coordinated Compliance

7. Additional Program Elements

D. Summary of Costs and Benefits for the National Program

1. Summary of Costs and Benefits for the NHTSA CAFE Standards

2. Summary of Costs and Benefits for the EPA's GHG Standards

3. Why are the EPA and NHTSA MY 2025 estimated per-vehicle costs different?

E. Background and Comparison of NHTSA and EPA Statutory Authority

1. NHTSA Statutory Authority

2. EPA Statutory Authority

3. Comparing the Agencies' Authority

II. Joint Technical Work Completed for This Final Rule

A. Introduction

B. Developing the Future Fleet for Assessing Costs, Benefits, and Effects

1. Why did the agencies establish baseline and reference vehicle fleets?

2. What comments did the agencies receive regarding fleet projections for the NPRM?

3. Why were two fleet projections created for the FRM?

4. How did the agencies develop the MY 2008 baseline vehicle fleet?

5. How did the agencies develop the projected MY 2017-2025 vehicle reference fleet for the 2008 model year based fleet?

6. How did the agencies develop the model year 2010 baseline vehicle fleet as part of the 2010 based fleet projection?

7. How did the agencies develop the projected my 2017-2025 vehicle reference fleet for the 2010 model year based fleet?

8. What are the differences in the sales volumes and characteristics of the MY 2008 based and the MY 2010 based fleets projections?

C. Development of Attribute-Based Curve Shapes

1. Why are standards attribute-based and defined by a mathematical function?

2. What attribute are the agencies adopting, and why?

3. How have the agencies changed the mathematical functions for the MYs 2017-2025 standards, and why?

4. What curves are the agencies promulgating for MYs 2017-2025?

5. Once the agencies determined the slope, how did the agencies determine the rest of the mathematical function?

6. Once the agencies determined the complete mathematical function shape, how did the agencies adjust the curves to develop the proposed standards and regulatory alternatives?

D. Joint Vehicle Technology Assumptions

1. What technologies did the agencies consider?

2. How did the agencies determine the costs of each of these technologies?

3. How did the agencies determine the effectiveness of each of these technologies?

4. How did the agencies consider real-world limits when defining the rate at which technologies can be deployed?

5. Maintenance and Repair Costs Associated With New Technologies

E. Joint Economic and Other Assumptions

F. CO

Credits and Fuel Consumption Improvement Values for Air Conditioning Efficiency, Off-cycle Reductions, and Full-size Pickup Trucks

1. Air Conditioning Efficiency Credits and Fuel Consumption Improvement Values

2. Off-Cycle CO

Credits

3. Advanced Technology Incentives for Full-Size Pickup Trucks

G. Safety Considerations in Establishing CAFE/GHG Standards

1. Why do the agencies consider safety?

2. How do the agencies consider safety?

3. What is the current state of the research on statistical analysis of historical crash data?

4. How do the agencies think technological solutions might affect the safety estimates indicated by the statistical analysis?

5. How have the agencies estimated safety effects for the final rule?

III. EPA MYs 2017-2025 Light-Duty Vehicle Greenhouse Gas Emissions Standards

A. Overview of EPA Rule

1. Introduction

2. Why is EPA establishing MYs 2017-2025 standards for light-duty vehicles?

3. What is EPA finalizing?

4. Basis for the GHG Standards Under Section 202(a)

5. Other Related EPA Motor Vehicle Regulations

B. Model Year 2017-2025 GHG Standards for Light-duty Vehicles, Light-duty Trucks, and Medium Duty Passenger Vehicles

1. What fleet-wide emissions levels correspond to the CO

standards?

2. What are the CO

attribute-based standards?

3. Mid-Term Evaluation

4. Averaging, Banking, and Trading Provisions for CO

Standards

5. Small Volume Manufacturer Standards

6. Additional Lead Time for Intermediate Volume Manufacturers

7. Small Business Exemption

8. Police and Emergency Vehicle Exemption From GHG Standards

9. Nitrous Oxide, Methane, and CO

-equivalent Approaches

10. Test Procedures

C. Additional Manufacturer Compliance Flexibilities

1. Air Conditioning Related Credits

2. Incentives for Electric Vehicles, Plug-in Hybrid Electric Vehicles, Fuel Cell Vehicles, and Dedicated and Dual Fuel Compressed Natural Gas Vehicles

3. Incentives for Using Advanced “Game-Changing” Technologies in Full-Size Pickup Trucks

4. Treatment of Plug-in Hybrid Electric Vehicles, Dual Fuel Compressed Natural Gas Vehicles, and Ethanol Flexible Fuel Vehicles for GHG Emissions Compliance

5. Off-cycle Technology Credits

D. Technical Assessment of the CO

Standards

1. How did EPA develop reference and control fleets for evaluating standards?

2. What are the effectiveness and costs of CO

-reducing technologies?

3. How were technologies combined into “Packages” and what is the cost and effectiveness of packages?

4. How does EPA project how a manufacturer would decide between options to improve CO

performance to meet a fleet average standard?

5. Projected Compliance Costs and Technology Penetrations

6. How does the technical assessment support the final CO

standards as compared to the alternatives has EPA considered?

7. Comments Received on the Analysis of Technical Feasibility and Appropriateness of the Standards

8. To what extent do any of today's vehicles meet or surpass the final MY 2017-2025 CO

footprint-based targets with current powertrain designs?

E. Certification, Compliance, and Enforcement

1. Compliance Program Overview

2. Compliance With Fleet-Average CO

Standards

3. Vehicle Certification

4. Useful Life Compliance

5. Credit Program Implementation

6. Enforcement

7. Other Certification Issues

8. Warranty, Defect Reporting, and Other Emission-related Components Provisions

9. Miscellaneous Technical Amendments and Corrections

10. Base Tire Definition

11. Treatment of Driver-Selectable Modes and Conditions

12. Publication of GHG Compliance Information

F. How will this rule reduce GHG emissions and their associated effects?

1. Impact on GHG Emissions

2. Climate Change Impacts From GHG Emissions

3. Changes in Global Climate Indicators Associated With This Rule's GHG Emissions Reductions

G. How will the rule impact Non-GHG emissions and their associated effects?

1. Inventory

2. Health Effects of Non-GHG Pollutants

3. Environmental Effects of Non-GHG Pollutants

4. Air Quality Impacts of Non-GHG Pollutants

5. Other Unquantified Health and Environmental Effects

H. What are the estimated cost, economic, and other impacts of the rule?

1. Conceptual Framework for Evaluating Consumer Impacts

2. Costs Associated With the Vehicle Standards

3. Cost per Ton of Emissions Reduced

4. Reduction in Fuel Consumption and its Impacts

5. Cost of Ownership, Payback Period and Lifetime Savings on New Vehicle Purchases

6. CO

Emission Reduction Benefits

7. Non-Greenhouse Gas Health and Environmental Impacts

8. Energy Security Impacts

9. Additional Impacts

10. Summary of Costs and Benefits

11. U.S. Vehicle Sales Impacts and Affordability of New Vehicles

12. Employment Impacts

I. Statutory and Executive Order Reviews

J. Statutory Provisions and Legal Authority

IV. NHTSA Final Rule for Passenger Car and Light Truck CAFE Standards for Model Years 2017 and Beyond

A. Executive Overview of NHTSA Final Rule

1. Introduction

2. Why does NHTSA set CAFE standards for passenger cars and light trucks?

3. Why is NHTSA presenting CAFE standards for MYs 2017-2025 now?

B. Background

1. Chronology of Events Since the MY 2012-2016 Final Rule was Issued

2. How has NHTSA developed the CAFE standards since the President's announcement, and what has changed between the proposal and the final rule?

C. Development and Feasibility of the Proposed Standards

1. How was the baseline vehicle fleet developed?

2. How were the technology inputs developed?

3. How did NHTSA develop its economic assumptions?

4. How does NHTSA use the assumptions in its modeling analysis?

D. Statutory Requirements

1. EPCA, as Amended by EISA

2. Administrative Procedure Act

3. National Environmental Policy Act

E. What are the CAFE standards?

1. Form of the Standards

2. Passenger Car Standards for MYs 2017-2025

3. Minimum Domestic Passenger Car Standards

4. Light Truck Standards

F. How do the final standards fulfill NHTSA's statutory obligations?

1. Overview

2. What are NHTSA's statutory obligations?

3. How did the agency balance the factors for the NPRM?

4. What comments did the agency receive regarding the proposed maximum feasible levels?

5. How has the agency balanced the factors for this final rule?

G. Impacts of the Final CAFE Standards

1. How will these standards improve fuel economy and reduce GHG emissions for MY 2017-2025 vehicles?

2. How will these standards improve fleet-wide fuel economy and reduce GHG emissions beyond MY 2025?

3. How will these standards impact non-GHG emissions and their associated effects?

4. What are the estimated costs and benefits of these standards?

5. How would these final standards impact vehicle sales and employment?

6. Social Benefits, Private Benefits, and Potential Unquantified Consumer Welfare Impacts of the Standards

7. What other impacts (quantitative and unquantifiable) will these standards have?

H. Vehicle Classification

I. Compliance and Enforcement

1. Overview

2. How does NHTSA determine compliance?

3. What compliance flexibilities are available under the CAFE program and how do manufacturers use them?

4. What new incentives are being added to the CAFE program for MYs 2017-2025?

5. Other CAFE Enforcement Issues

J. Record of Decision

1. The Agency's Decision

2. Alternatives NHTSA Considered in Reaching its Decision

3. NHTSA's Environmental Analysis, Including Consideration of the Environmentally Preferable Alternative

4. Factors Balanced by NHTSA in Making its Decision

5. How the Factors and Considerations Balanced by NHTSA Entered Into its Decision

6. The Agency's Preferences Among Alternatives Based on Relevant Factors, Including Economic and Technical Considerations and Agency Statutory Missions

7. Mitigation

K. Regulatory Notices and Analyses

1. Executive Order 12866, Executive Order 13563, and DOT Regulatory Policies and Procedures

2. National Environmental Policy Act

3. Clean Air Act (CAA) as Applied to NHTSA's Action

4. National Historic Preservation Act (NHPA)

5. Fish and Wildlife Conservation Act (FWCA)

6. Coastal Zone Management Act (CZMA)

7. Endangered Species Act (ESA)

8. Floodplain Management (Executive Order 11988 and DOT Order 5650.2)

9. Preservation of the Nation's Wetlands (Executive Order 11990 and DOT Order 5660.1a)

10. Migratory Bird Treaty Act (MBTA), Bald and Golden Eagle Protection Act (BGEPA), Executive Order 13186

11. Department of Transportation Act (Section 4(f))

12. Regulatory Flexibility Act

13. Executive Order 13132 (Federalism)

14. Executive Order 12988 (Civil Justice Reform)

15. Unfunded Mandates Reform Act

16. Regulation Identifier Number

17. Executive Order 13045

18. National Technology Transfer and Advancement Act

19. Executive Order 13211

20. Department of Energy Review

21. Privacy Act

I. Overview of Joint EPA/NHTSA Final 2017-2025 National Program

A. Executive Summary

1. Purpose of the Regulatory Action

a. The Need for the Action and How the Action Addresses the Need

NHTSA, on behalf of the Department of Transportation, and EPA are issuing final rules to further reduce greenhouse gas emissions and improve fuel economy for light-duty vehicles for model years 2017 and beyond. On May 21, 2010, President Obama issued a Presidential Memorandum requesting that EPA and NHTSA develop through notice and comment rulemaking a coordinated National Program to improve fuel economy and reduce greenhouse gas emissions of light-duty vehicles for model years 2017-2025, building on the success of the first phase of the National Program for these vehicles for model years 2012-2016. These final rules are consistent with the President's request and respond to the country's critical need to address global

climate change and to reduce oil consumption.

These standards apply to passenger cars, light-duty trucks, and medium-duty passenger vehicles (i.e. sport utility vehicles, cross-over utility vehicles, and light trucks), and represent the continuation of a harmonized and consistent National Program for these vehicles. Under the National Program automobile manufacturers will be able to continue building a single light-duty national fleet that satisfies all requirements under both programs.

The National Program is estimated to save approximately 4 billion barrels of oil and to reduce GHG emissions by the equivalent of approximately 2 billion metric tons over the lifetimes of those light duty vehicles produced in MYs 2017-2025. The agencies project that fuel savings will far outweigh higher vehicle costs, and that the net benefits to society of the MYs 2017-2025 National Program will be in the range of $326 billion to $451 billion (7 and 3 percent discount rates, respectively) over the lifetimes of those light duty vehicles sold in MYs 2017-2025.

The National Program is projected to provide significant savings for consumers due to reduced fuel use. Although the agencies estimate that technologies used to meet the standards will add, on average, about $1,800 to the cost of a new light duty vehicle in MY 2025, consumers who drive their MY 2025 vehicle for its entire lifetime will save, on average, $5,700 to $7,400 (7 and 3 percent discount rates, respectively) in fuel, for a net lifetime savings of $3,400 to $5,000. This estimate assumes gasoline prices of $3.87 per gallon in 2025 with small increases most years throughout the vehicle's lifetime.

b. Legal Authority

EPA and NHTSA are finalizing separate sets of standards for passenger cars and for light trucks, under their respective statutory authority. EPA is setting national CO

emissions standards for passenger cars and light-trucks under section 202 (a) of the Clean Air Act (CAA) ((42 U.S.C. 7521 (a)), and under its authority to measure passenger car and passenger car fleet fuel economy pursuant to the Energy Policy and Conservation Act (EPCA) 49 U.S.C. 32904 (c). NHTSA is setting national corporate average fuel economy (CAFE) standards under the Energy Policy and Conservation Act (EPCA), as amended by the Energy Independence and Security Act (EISA) of 2007 (49 U.S.C. 32902).

Section 202 (a) of the Clean Air Act requires EPA to establish standards for emissions of pollutants from new motor vehicles which emissions cause or contribute to air pollution which may reasonably be anticipated to endanger public health or welfare.

See Coalition for Responsible Regulation

EPA,

No. 09-1322 (D.C. Cir. June 26, 2012) slip op. p. 41 (“'[i]f EPA makes a finding of endangerment, the Clean Air Act requires the [a]gency to regulate emissions of the deleterious pollutant from new motor vehicles. `* * * Given the non-discretionary duty in Section 202 (a)(1) and the limited flexibility available under Section 202 (a)(2), which this court has held relates only to the motor-vehicle industry,* * * EPA had no statutory basis on which it could `ground [any] reasons for further inaction” (quoting

State of Massachusetts

EPA,

549 U.S. 497, 533, 535 (2007). In establishing such standards, EPA must consider issues of technical feasibility, cost, and available lead time. Standards under section 202 (a) thus take effect only “after providing such period as the Administrator finds necessary to permit the development and application of the requisite technology, giving appropriate consideration to the cost of compliance within such period” (CAA section 202 (a)(2) (42 U.S.C. 7512 (a)(2)).

EPCA, as amended by EISA, contains a number of provisions regarding how NHTSA must set CAFE standards. EPCA requires that NHTSA establish separate passenger car and light truck standards (49 U.S.C. 32902(b)(1)) at “the maximum feasible average fuel economy level that it decides the manufacturers can achieve in that model year (49 U.S.C. 32902(a)),” based on the agency's consideration of four statutory factors: Technological feasibility, economic practicability, the effect of other standards of the Government on fuel economy, and the need of the nation to conserve energy (49 U.S.C. 32902(f)). EPCA does not define these terms or specify what weight to give each concern in balancing them; thus, NHTSA defines them and determines the appropriate weighting that leads to the maximum feasible standards given the circumstances in each CAFE standard rulemaking. For MYs 2011-2020, EPCA further requires that separate standards for passenger cars and for light trucks be set at levels high enough to ensure that the CAFE of the industry-wide combined fleet of new passenger cars and light trucks reaches at least 35 mpg not later than MY 2020 (49 U.S.C. 32902(b)(2)(A))]. For model years 2021-2030, standards need simply be set at the maximum feasible level (49 U.S.C.32903(b)(2)(B).

Section I.E of the preamble contains a detailed discussion of both agencies' statutory authority.

2. Summary of the Major Provisions of the Final Rule

NHTSA and EPA are finalizing rules for light-duty vehicles that the agencies believe represent the appropriate levels of fuel economy and GHG emissions standards for model years 2017 and beyond pursuant to their respective statutory authorities.

a. Standards

EPA is establishing standards that are projected to require, on an average industry fleet wide basis, 163 grams/mile of carbon dioxide (CO

) in model year 2025, which is equivalent to 54.5 mpg if this level were achieved solely through improvements in fuel efficiency.

Consistent with its statutory authority, NHTSA has developed two phases of passenger car and light truck standards in this rulemaking action. The first phase, from MYs 2017-2021, includes final standards that are projected to require, on an average industry fleet wide basis, a range from 40.3-41.0 mpg in MY 2021. The second phase of the CAFE program, from MYs 2022-2025, includes standards that are not final, due to the statutory requirement that NHTSA set average fuel economy standards not more than 5 model years at a time. Rather, those standards are augural, meaning that they represent NHTSA's current best estimate, based on the information available to the agency today, of what levels of stringency might be maximum feasible in those model years. NHTSA projects that those standards could require, on an average industry fleet wide basis, a range from 48.7-49.7 mpg in model year 2025.

Real-world CO

is typically 25 percent higher and real-world fuel economy is typically 20 percent lower than the CO

and CAFE compliance values discussed here. 163g/mi would be equivalent to 54.5 mpg, if the entire fleet were to meet this CO

level through tailpipe CO

and fuel economy improvements. The agencies expect, however, that a portion of these improvements will be made through improvements in air conditioning leakage and through use of alternative refrigerants, which would not contribute to fuel economy.

Both the CO

and CAFE standards are footprint-based, as are the standards currently in effect for these vehicles through model year 2016. The standards will become more stringent on average in each model year from 2017 through 2025. Generally, the larger the vehicle footprint, the less numerically stringent the corresponding vehicle CO

emissions and MPG targets. As a result of the footprint-based standards, the burden of compliance is distributed

across all vehicle footprints and across all manufacturers. Manufacturers are not compelled to build vehicles of any particular size or type (nor do the rules create an incentive to do so), and each manufacturer will have its own fleet-wide standard that reflects the light duty vehicles it chooses to produce.

b. Mid-Term Evaluation

The agencies will conduct a comprehensive mid-term evaluation and agency decision-making process for the MYs 2022-2025 standards as described in the proposal. The mid-term evaluation reflects the rules' long time frame and, for NHTSA, the agency's statutory obligation to conduct a

de novo

rulemaking in order to establish final standards for MYs 2022-2025. In order to align the agencies' proceedings for MYs 2022-2025 and to maintain a joint national program, EPA and NHTSA will finalize their actions related to MYs 2022-2025 standards concurrently. If the EPA determination is that standards may change, the agencies will issue a joint NPRM and joint final rules. NHTSA and EPA fully expect to conduct this mid-term evaluation in coordination with the California Air Resources Board, given our interest in maintaining a National Program to address GHG emissions and fuel economy. Further discussion of the mid-term evaluation is found in Sections III.B.3 and IV.A.3.b.

c. Compliance Flexibilities

As proposed, the agencies are finalizing several provisions which provide compliance flexibility to manufacturers to meet the standards without compromising the program's overall environmental and energy security objectives. Further discussion of compliance flexibilities is in Section C.4, II.F, III.B, III.C, IV.I.

Credit Averaging, Banking and Trading

The agencies are continuing to allow manufacturers to generate credits for over-compliance with the CO

and CAFE standards.

A manufacturer will generate credits if its car and/or truck fleet achieves a fleet average CO

/CAFE level better than its car and/or truck standards. Conversely, a manufacturer will incur a debit/shortfall if its fleet average CO

/CAFE level does not meet the standard when all credits are taken into account. As in the prior CAFE and GHG programs, a manufacturer whose fleet generates credits in a given model year would have several options for using those credits, including credit carry-back, credit carry-forward, credit transfers, and credit trading.

This credit flexibility is required by EPCA/EISA,

see

49 U.S.C. 32903, and is well within EPA's discretion under section 202 (a) of the CAA.

Air Conditioning Improvement Credits

As proposed, EPA is establishing that the maximum total A/C credits available for cars will be 18.8 grams/mile CO

-equivalent and 24.4 grams/mile for trucks CO

-equivalent.

The approaches used to calculate these credits for direct and indirect A/C improvement (i.e., improvements to A/C leakage (including substitution of low GHG refrigerant) and A/C efficiency) are generally consistent with those of the MYs 2012-2016 program, although there are several revisions. Most notably, a new test for A/C efficiency, optional under the GHG program starting in MY 2014, will be used exclusively in MY 2017 and beyond. Under its EPCA authority, EPA proposed and is finalizing provisions to allow manufacturers to generate fuel consumption improvement values for purposes of CAFE compliance based on these same improvements in air conditioner efficiency.

This is further broken down by 5.0 and 7.2 g/mi respectively for car and truck A/C efficiency credits, and 13.8 and 17.2 g/mi respectively for car and truck alternative refrigerant credits.

Off-Cycle Credits

EPA proposed and is finalizing provisions allowing manufacturers to continue to generate and use off-cycle credits to demonstrate compliance with the GHG standards. These credits are for measureable GHG emissions and fuel economy improvements attributable to use of technologies whose benefits are not measured by the two-cycle test mandated by EPCA. Under its EPCA authority, EPA proposed and is finalizing provisions to allow manufacturers to generate fuel consumption improvement values for purposes of CAFE compliance based on the use of off-cycle technologies.

Incentives for Electric Vehicles, Plug-in Hybrid Electric Vehicles, Fuel Cell Vehicles and Compressed Natural Gas Vehicles

In order to provide temporary regulatory incentives to promote the penetration of certain “game changing” advanced vehicle technologies into the light duty vehicle fleet, EPA is finalizing, as proposed, an incentive multiplier for CO

emissions compliance purposes for all electric vehicles (EVs), plug-in hybrid electric vehicles (PHEVs), and fuel cell vehicles (FCVs) sold in MYs 2017 through 2021. The incentives are expected to promote increased application of these advanced technologies in the program's early model years, which could achieve economies of scale that will support the wider application of these technologies to help achieve the more stringent standards in MYs 2022-2025. In addition, in response to public comments persuasively explaining how infrastructure for compressed natural gas (CNG) vehicles could serve as a bridge to use of advanced technologies such as hydrogen fuel cells, EPA is finalizing an incentive multiplier for CNG vehicles sold in MYs 2017 through 2021.

NHTSA currently interprets EPCA and EISA as precluding it from offering incentives for the alternative fuel operation of EVs, PHEVs, FCVs, and NGVs, except as specified by statute, and thus did not propose and is not including incentive multipliers comparable to the EPA incentive multipliers described above.

Incentives for Use of Advanced Technologies Including Hybridization for full-Size Pick-up Trucks

The agencies recognize that the standards presented in this final rule for MYs 2017-2025 will be challenging for large vehicles, including full-size pickup trucks. To help address this challenge, the program will, as proposed, contain incentives for the use of hybrid electric and other advanced technologies in full-size pickup trucks.

3. Costs and Benefits of National Program

It is important to note that NHTSA's CAFE standards and EPA's GHG standards will both be in effect, and both will lead to increases in average fuel economy and reductions in GHGs. The two agencies' standards together comprise the National Program, and the following discussions of the respective costs and benefits of NHTSA's CAFE standards and EPA's GHG standards does not change the fact that both the CAFE and GHG standards, jointly, are the source of the benefits and costs of the National Program.

The costs and benefits projected by NHTSA to result from the CAFE standards are presented first, followed by those projected by EPA to result from the GHG emissions standards. For several reasons, the estimates for costs and benefits presented by NHTSA and EPA for their respective rules, while consistent, are not directly comparable, and thus should not be expected to be identical. See Section I.D of the preamble for further details and discussion.

NHTSA has analyzed in detail the projected costs and benefits for the 2017-2025 CAFE standards for light-

duty vehicles. NHTSA estimates that the fuel economy increases would lead to fuel savings totaling about 170 billion gallons throughout the lives of light duty vehicles sold in MYs 2017-2025. At a 3 percent discount rate, the present value of the economic benefits resulting from those fuel savings is between $481 billion and $488 billion; at a 7 percent private discount rate, the present value of the economic benefits resulting from those fuel savings is between $375 billion and $380 billion. The agency further estimates that these new CAFE standards will lead to corresponding reductions in CO

emissions totaling 1.8 billion metric tons during the lives of light duty vehicles sold in MYs 2017-2025. The present value of the economic benefits from avoiding those emissions is approximately $49 billion, based on a global social cost of carbon value of about $26 per metric ton (in 2017, and growing thereafter).

The Table below shows NHTSA's estimated overall lifetime discounted costs and benefits, and net benefits for the model years 2017-2025 CAFE standards.

NHTSA's Estimated MYs 2017-2021 and MYs 2017-2025 Costs, Benefits, and Net Benefits (Billions of 2010 dollars)) under the CAFE Standards

Baseline fleet

Totals

3% Discount rate

7% Discount rate

Annualized

3% Discount rate

7% Discount rate

Cumulative for MYs 2017-2021 Final Standards

Costs

2010

($61)-

($58)-

($2.4)-

($3.6)-

2008

($57)

($54)

($2.2)

($3.3)

Benefits

2010

$243-

$195-

$9.2-

$11.3-

2008

$240

$194

$9.0

$11.0

Net Benefits

2010

$183-

$137-

$6.8-

$7.7-

2008

$184

$141

$6.8

$7.8

umulative for MYs 2017—2025 (Includes MYs 2022-2025 Augural Standards

)

Costs

2010

($154)-

($147)-

($5.4)-

($7.6)-

2008

($156)

($148)

($5.4)

($7.5)

Benefits

2010

$629-

$502-

$21.0-

$24.2-

2008

$639

$510

$21.3

$24.4

Net Benefits

2010

$476-

$356-

$15.7-

$16.7-

2008

$483

$362

$15.9

$16.9

“The “Estimated Achieved” analysis includes accounting for compliance flexibilities and advanced technologies that manufacturers may voluntarily use for compliance, but that NHTSA is prohibited from considering when determining the maximum feasible level of new CAFE standards.

EPA has analyzed in detail the projected costs and benefits of the 2017-2025 GHG standards for light-duty vehicles. The Table below shows EPA's estimated lifetime discounted cost, fuel savings, and benefits for all such vehicles projected to be sold in model years 2017-2025. The benefits include impacts such as climate-related economic benefits from reducing emissions of CO

(but not other GHGs), reductions in energy security externalities caused by U.S. petroleum consumption and imports, the value of certain particulate matter-related health benefits (including premature mortality), the value of additional driving attributed to the VMT rebound effect, the value of reduced refueling time needed to fill up a more fuel efficient vehicle. The analysis also includes estimates of economic impacts stemming from additional vehicle use, such as the economic damages caused by accidents, congestion and noise (from increased VMT rebound driving).

EPA's Estimated 2017-2025 Model Year Lifetime Discounted Costs, Benefits, and Net Benefits Assuming the 3% Discount Rate SCC Value

(Billions of 2010 dollars)

Lifetime Present Value

—3% Discount Rate

Program Costs

$150

Fuel Savings

475

Benefits

126

Net Benefits

451

Annualized Value

—3% Discount Rate

Annualized costs

6.49

Annualized fuel savings

20.5

Annualized benefits

5.46

Net benefits

19.5

Lifetime Present Value

—7% Discount Rate

Program Costs

144

Fuel Savings

364

Benefits

106

Net Benefits

326

Annualized Value

—7% Discount Rate

Annualized costs

10.8

Annualized fuel savings

27.3

Annualized benefits

7.96

Net benefits

24.4

B. Introduction

Further notes and details concerning these SCC. Value are found in Section I.D.2. Table I-17.

EPA is announcing final greenhouse gas emissions standards for model years 2017-2025 and NHTSA is announcing final Corporate Average Fuel Economy standards for model years 2017-2021 and issuing augural

standards for

model years (MYs) 2022-2025. These rules establish strong and coordinated Federal greenhouse gas and fuel economy standards for passenger cars, light-duty trucks, and medium-duty passenger vehicles (hereafter light-duty vehicles or LDVs). Together, these vehicle categories, which include passenger cars, sport utility vehicles, crossover utility vehicles, minivans, and pickup trucks, among others, are presently responsible for approximately 60 percent of all U.S. transportation-related greenhouse gas (GHG) emissions and fuel consumption. These final rules extend the MYs 2012-2016 National Program by establishing more stringent Federal light-duty vehicle GHG emissions and corporate average fuel economy (CAFE) standards in MYs 2017 and beyond. This coordinated program will achieve important reductions in GHG emissions and fuel consumption from the light-duty vehicle part of the transportation sector, based on technologies that either are commercially available or that the agencies project will be commercially available in the rulemaking timeframe and that can be incorporated at a reasonable cost. Higher initial vehicle costs will be more than offset by significant fuel savings for consumers over the lives of the vehicles covered by this rulemaking. NHTSA's final rule also constitutes the agency's Record of Decision for purposes of its NEPA analysis.

For the NPRM/PRIA/Draft EIS, NHTSA described the proposed standards for MYs 2022-2025 as “conditional.” “Conditional” was understood and objected to by some readers as implying that the future proceeding would consist merely of a confirmation of the conclusions and analysis of the current rulemaking, which would be incorrect and inconsistent with the agency's obligations under both EPCA/EISA and the Administrative Procedure Act. The agency must conduct a de novo rulemaking for MYs 2022-2025. To avoid creating an incorrect impression, the agency is changing the descriptor for the MY 2022-2025 standards that are presented and discussed in these documents. The descriptor must convey that

the standards we are now presenting for MYs 2022-2025 reflect the agency's current best judgment of what we would have set at this time had we the authority to do so, but also avoid suggesting that the future process for establishing final standards for MYs 2022-2025 would be anything other than a new and separate rulemaking based on the freshly gathered and solicited information before the agency at that future time and on a fresh assessing and balancing of all statutorily relevant factors, in light of the considerations existing at the time of that rulemaking. The agency deliberated extensively, considering many alternative descriptors, and concluded that the best descriptor was “augural,” from the verb “to augur,” meaning to foretell future events based on current information (as in, “these standards may augur well for what the agency might establish in the future”). This is precisely what the MYs 2022-2025 standards presented in these documents are—our effort to help interested parties anticipate the future by providing our current best judgment as to what standards we would now set, based on the information before us today, recognizing that our future decision as to what standards we will actually set will be based on the information then before us.

This joint rulemaking builds on the success of the first phase of the National Program to regulate fuel economy and GHG emissions from U.S. light-duty vehicles, which established strong and coordinated standards for MYs 2012-2016. As with the MY 2012-2016 final rules, a key element in developing this rulemaking was the agencies' discussions with automobile manufacturers, the California Air Resources Board (CARB) and many other stakeholders. During the extended public comment period, the agencies received nearly 300,000 written comments (and nearly 400 oral comments through testimony at three public hearings held in Detroit, Philadelphia and San Francisco) on this rule and received strong support from most auto manufacturers, the United Auto Workers (UAW), nongovernmental organizations (NGOs), consumer groups, national security experts and veterans, State/local government and auto suppliers.

Continuing the National Program in coordination with California will help to ensure that all manufacturers can build a single fleet of vehicles that satisfy all requirements under both federal programs as well as under California's program,

which will in turn help to reduce costs and regulatory complexity while providing significant energy security, consumer savings, and environmental benefits.

Section I.B.4 provides a explanation of California's authority to set air pollution standards for vehicles.

The California Air Resources Board (CARB) adopted California MYs 2017-2025 GHG emissions standards on January 26, 2012. At its March 22, 2012 meeting the Board gave final approval to the California standards. The Board directed CARB's Executive Officer to “continue collaborating with EPA and NHTSA as their standards are finalized and in the mid-term review * * *” and the Board also reconfirmed its commitment to propose to revise its GHG emissions standards for MYs 2017 to 2025 “to accept compliance with the 2017 through 2025 MY National Program as compliance with California's greenhouse gas emission standards in the 2017 through 2025 model years if the Executive Officer determines that U.S. EPA has adopted a final rule that at a minimum preserve greenhouse reductions benefits set forth” in the NPRM issued by EPA on December 1, 2011. State of California Air Resources Board, Resolution 12-11, January 26, 2012, at 20.

Available at http://www.arb.ca.gov/regact/2012/cfo2012/res12-11.pdf

(last accessed July 9, 2012).

Combined with the standards already in effect for MYs 2012-2016, as well as the MY 2011 CAFE standards, the final standards will result in MY 2025 light-duty vehicles with nearly double the fuel economy, and approximately one-half of the GHG emissions compared to MY 2010 vehicles—representing the most significant federal actions ever taken to reduce GHG emissions and improve fuel economy in the U.S.

EPA is establishing standards that are projected to require, on an average industry fleet wide basis, 163 grams/mile of carbon dioxide (CO

) in model year 2025, which is equivalent to 54.5 mpg if this level were achieved solely through improvements in fuel efficiency.

Consistent with its statutory authority,

NHTSA has developed two phases of passenger car and light truck standards in this rulemaking action. The first phase, from MYs 2017-2021, includes final standards that are projected to require, on an average industry fleet wide basis, a range from 40.3-41.0 mpg in MY 2021.

The second phase of the CAFE program, from MYs 2022-2025, includes standards that are not final due to the statutory provision that NHTSA shall issue regulations prescribing average fuel economy standards for at least 1 but not more than 5 model years at a time.

The MYs 2022-2025 CAFE standards, then, are not final based on this rulemaking, but rather augural, meaning that they represent the agency's current judgment, based on the information available to the agency today, of what levels of stringency would be maximum feasible in those model years. NHTSA projects that those standards could require, on an average industry fleet wide basis, a range from 48.7-49.7 mpg in model year 2025. The agencies note that these estimated combined fleet average mpg levels are projections and, in fact the agencies are establishing separate standards for passenger cars and trucks, based on a vehicle's size or “footprint,” and the actual average achieved fuel economy and GHG emissions levels will be determined by the actual footprints and production volumes of the vehicle models that are produced. NHTSA will undertake a

de novo

rulemaking at a later date to set legally binding CAFE standards for MYs 2022-2025.

See

Section IV for more information. The agencies will conduct a comprehensive mid-term evaluation and agency decision-making process for the MYs 2022-2025 standards as described in the proposal. The mid-term evaluation reflects the rules' long time frame and, for NHTSA, the agency's statutory obligation to conduct

de novo

rulemaking in order to establish final standards for vehicles for those model years. In order to align the agencies' proceedings for MYs 2022-2025 and to maintain a joint national program, EPA and NHTSA will finalize their actions related to MYs 2022-2025 standards concurrently.

Real-world CO

is typically 25 percent higher and real-world fuel economy is typically 20 percent lower than the CO

and CAFE compliance values discussed here. 163g/mi would be equivalent to 54.5 mpg, if the entire fleet were to meet this CO

level through tailpipe CO

and fuel economy improvements. The agencies expect, however, that a portion of these improvements will be made through improvements in air conditioning leakage and use of alternative refrigerants, which would not contribute to fuel economy.

49 U.S.C. 32902.

The range of values here and through this rulemaking document reflect the results of co-analyses conducted by NHTSA using two different light-duty vehicle market forecasts through model year 2025. To evaluate the effects of the standards, the agencies must project what vehicles and technologies will exist in future model years and then evaluate what technologies can feasibly be applied to those vehicles to raise their fuel economy and reduce their greenhouse gas emissions. To project the future fleet, the agencies must develop a baseline vehicle fleet. For this final rule, the agencies have analyzed the impacts of the standards using two different forecasts of the light-duty vehicle fleet through MY 2025. The baseline fleets are discussed in detail in Section II.B of this preamble, and in Chapter 2 of the Technical Support Document. EPA's sensitivity analysis of the alternative fleet is included in Chapter 10 of its RIA.

49 U.S.C. 32902(b)(3)(B).

The agencies project that manufacturers will comply with the final rules by using a range of technologies, including improvements in air conditioning efficiency, which reduce both GHG emissions and fuel consumption. Compliance with EPA's GHG standards is also likely to be achieved through improvements in air conditioning system leakage and through the use of alternative air conditioning refrigerants with a lower global warming potential (GWP), which reduce GHGs (i.e., hydrofluorocarbons) but which do not generally improve fuel economy. The agencies believe there is a wide range of technologies already available to reduce GHG emissions and improve fuel economy from both passenger cars and trucks. The final rules facilitate long-term planning by manufacturers and suppliers for the continued development and deployment across their fleets of fuel saving and GHG emissions-reducing technologies. The agencies believe that advances in gasoline engines and transmissions will continue for the foreseeable future, and that there will be continual improvement in other technologies, including vehicle weight reduction, lower tire rolling resistance, improvements in vehicle aerodynamics, diesel engines, and more efficient vehicle accessories. The agencies also expect to see increased electrification of the fleet through the expanded production of stop/start, hybrid, plug-in hybrid and electric vehicles. Finally, the agencies expect that vehicle air conditioners will continue to improve by becoming more efficient and by increasing the use of alternative refrigerants and lower leakage air conditioning systems. Many of these technologies are already available today, some on a limited number of vehicles while others are more widespread in the fleet, and manufacturers will be able to meet the standards through significant efficiency improvements in these technologies, as well as through a significant penetration of these and other technologies across the fleet. Auto manufacturers may also introduce new technologies that we have not considered for this rulemaking analysis, which could result in possible alternative, more cost-effective paths to compliance.

From a societal standpoint, this second phase of the National Program is estimated to save approximately 4 billion barrels of oil and to reduce GHG emissions by the equivalent of approximately 2 billion metric tons over the lifetimes of those light duty vehicles produced in MYs 2017-2025. These savings and reductions come on top of those that are being achieved through the MYs 2012-2016 standards.

The agencies project that fuel savings will far outweigh higher vehicle costs, and that the net benefits to society of the MYs 2017-2025 National Program will be in the range of $326 billion to $451 billion (7 and 3 percent discount rates, respectively) over the lifetimes of those light duty vehicles sold in MY 2017-2025.

The cost and benefit estimates provided in this final rule are only for the MYs 2017-2025 rulemaking. EPA and DOT's rulemaking establishing standards for MYs 2012-2016 are already part of the baseline for this analysis.

These final standards are projected to provide significant savings for consumers due to reduced fuel use. Although the agencies estimate that technologies used to meet the standards will add, on average, about $1,800 to the cost of a new light duty vehicle in MY 2025, consumers who drive their MY 2025 vehicle for its entire lifetime will save, on average, $5,700 to $7,400 (7 and 3 percent discount rates, respectively) in fuel, for a net lifetime savings of $3,400 to $5,000. This estimate assumes gasoline prices of $3.87 per gallon in 2025 with small increases most years throughout the vehicle's lifetime.

For those consumers who purchase their new MY 2025 vehicle with cash, the discounted fuel savings will offset the higher vehicle cost in roughly 3.3 years, and fuel savings will continue for as long as the consumer owns the vehicle. Those consumers that buy a new vehicle with a typical 5-year loan will immediately benefit from an average monthly cash flow savings of about $12 during the loan period, or about $140 per year, on average. So this type of consumer would benefit immediately from the time of purchase: the increased monthly fuel savings would more than offset the higher monthly payment. Section I.D provides a detailed discussion of the projected costs and benefits of the MYs 2017-2025 for CAFE and GHG emissions standards for light-duty vehicles.

See Chapter 4.2.2 of the Joint TSD for full discussion of fuel price projections over the vehicle's lifetime.

In addition to saving consumers money at the pump, the agencies have designed their final standards to preserve consumer choice—that is, the standards should not affect consumers' opportunity to purchase the size of vehicle with the performance, utility and safety features that meets their needs. The standards are based on a vehicle's size (technically they are based on vehicle footprint, which is the area defined by the points where the tires contact the ground), and larger vehicles have numerically less stringent fuel economy/GHG emissions targets and smaller vehicles have numerically more stringent fuel economy/GHG emissions targets. Footprint based standards promote fuel economy and GHG emissions improvements in vehicles of all sizes, and are not expected to create incentives for manufacturers to change the size of their vehicles in order to comply with the standards. Moreover, since the standards are fleet average standards for each manufacturer, no specific vehicle

must

meet a target.

Thus, nothing in these rules prevents consumers in the 2017 to 2025 timeframe from choosing from the same mix of vehicles that are currently in the marketplace.

A specific vehicle would only have to meet a fuel economy or GHG target value on the target curve standards being finalized today in the rare event that a manufacturer produces a single vehicle model.

1. Continuation of the National Program

EPA is adopting final greenhouse gas emissions standards for model years 2017-2025 and NHTSA is adopting final Corporate Average Fuel Economy standards for model years 2017-2021 and presenting augural standards for model years 2022-2025. These rules will implement strong and coordinated Federal greenhouse gas and fuel economy standards for passenger cars, light-duty trucks, and medium-duty passenger vehicles. Together, these vehicle categories, which include passenger cars, sport utility vehicles, crossover utility vehicles, minivans, and pickup trucks, are presently responsible for approximately 60 percent of all U.S. transportation-related greenhouse gas emissions and fuel consumption. The final rules continue the National Program by setting more stringent standards for MY 2017 and beyond light duty vehicles. This coordinated program will achieve important reductions of

greenhouse gas (GHG) emissions and fuel consumption from the light-duty vehicle part of the transportation sector, based on technologies that either are commercially available or that the agencies project will be commercially available in the rulemaking timeframe and that can be incorporated at a reasonable cost.

In working together to finalize these standards, NHTSA and EPA are building on the success of the first phase of the National Program to regulate fuel economy and GHG emissions from U.S. light-duty vehicles, which established the strong and coordinated light duty vehicle standards for model years (MY) 2012-2016. As with the MY 2012-2016 final rules, a key element in developing the final rules was the agencies' collaboration with the California Air Resources Board (CARB) and discussions with automobile manufacturers and many other stakeholders. Continuing the National Program will help to ensure that all manufacturers can build a single fleet of U.S. light duty vehicles that satisfy all requirements under both federal programs as well as under California's program, helping to reduce costs and regulatory complexity while providing significant energy security, consumer savings and environmental benefits.

The agencies have been developing the basis for these final standards almost since the conclusion of the rulemaking establishing the first phase of the National Program. Consistent with Executive Order 13563, this rule was developed with early consultation with stakeholders, employs flexible regulatory approaches to reduce burdens, maintains freedom of choice for the public, and helps to harmonize federal and state regulations. After much research and deliberation by the agencies, along with CARB and other stakeholders, on July 29, 2011 President Obama announced plans for extending the National Program to MY 2017-2025 light duty vehicles and NHTSA and EPA issued a Supplemental Notice of Intent (NOI) outlining the agencies' plans for proposing the MY 2017-2025 standards and program.

This July NOI built upon the extensive analysis conducted by the agencies during 2010 and 2011, including an initial technical assessment report and NOI issued in September 2010, and a supplemental NOI issued in December 2010. The State of California and thirteen auto manufacturers representing over 90 percent of U.S. vehicle sales provided letters of support for the program concurrent with the Supplemental NOI.

The United Auto Workers (UAW) also supported the announcement,

as did many consumer and environmental groups. As envisioned in the Presidential announcement, Supplemental NOI, and the December 2011 Notice of Proposed Rulemaking (NPRM), these final rules establish standards for MYs 2017- and beyond light duty vehicles. These standards take into consideration significant public input that was received in response to the NPRM from the regulated industry, consumer groups, labor unions, states, environmental organizations, national security experts and veterans, industry suppliers and dealers, as well as other organizations and by thousands of U.S. citizens. The agencies anticipate that these final standards will spur the development of a new generation of clean and more fuel efficient cars and trucks through innovative technologies and manufacturing that will, in turn, spur economic growth and create high-quality domestic jobs, enhance our energy security, and improve our environment.

76 FR 48758 (August 9, 2011).

Letters of support are available at

http://www.epa.gov/otaq/climate/regulations.htm

and at

http://www.nhtsa.gov/fuel-economy

(last accessed June 12, 2012).

The UAW's support was expressed in a statement on July 29, 2011, which can be found at

http://www.uaw.org/articles/uaw-supports-administration-proposal-light-duty-vehicle-cafe-and-greenhouse-gas-emissions-r

(last accessed June 12, 2012).

As described below, NHTSA and EPA are finalizing a continuation of the National Program for light-duty vehicles that the agencies believe represents the appropriate levels of fuel economy and GHG emissions standards for model years 2017 and beyond, given the technologies that the agencies project will be available for use on these vehicles and the agencies' understanding of the cost and manufacturers' ability to apply these technologies during that time frame, and consideration of other relevant factors. Under this joint rulemaking, EPA is establishing GHG emissions standards under the Clean Air Act (CAA), and NHTSA is establishing CAFE standards under EPCA, as amended by the Energy Independence and Security Act of 2007 (EISA). This joint final rulemaking reflects a carefully coordinated and harmonized approach to implementing these two statutes, in accordance with all substantive and procedural requirements imposed by law.

For NHTSA, this includes the requirements of the National Environmental Policy Act (NEPA).

These final rules allow for long-term planning by manufacturers and suppliers for the continued development and deployment across their fleets of fuel saving and emissions-reducing technologies. NHTSA's and EPA's technology assessment indicates there is a wide range of technologies available for manufacturers to consider utilizing to reduce GHG emissions and improve fuel economy. The agencies believe that advances in gasoline engines and transmissions will continue during these model years and that these technologies are likely to play a key role in compliance strategies for the MYs 2017-2025 standards, which is a view that is supported in the literature, among the vehicle manufacturers, suppliers, and by public comments.

The agencies also believe that there will be continued improvement in diesel engines, vehicle aerodynamics, and tires as well as the use of lighter weight materials and optimized designs that will reduce vehicle mass. The agencies also expect to see increased electrification of the fleet through the expanded production of stop/start, hybrid, plug-in hybrid and electric vehicles.

Finally, the agencies expect that vehicle air conditioners will continue to become more efficient, thereby improving fuel efficiency. The agencies also expect that air conditioning leakage will be reduced and that manufacturers will use reduced global warming refrigerants. Both of these improvements will reduce GHG emissions.

There are a number of competing gasoline engine technologies, with one in particular that the agencies project will increase beyond MY 2016. This is the downsized gasoline direct injection engine equipped with a turbocharger and cooled exhaust gas recirculation, which has better fuel efficiency than a larger engine and similar steady-state power performance. Paired with these engines, the agencies project that advanced transmissions (such as automatic and dual clutch transmissions with eight forward speeds) and higher efficiency gearboxes will contribute to providing fuel efficiency improvements. Transmissions with eight or more speeds can be found in the fleet today in very limited production, and while they are expected to penetrate further by MY 2016, we anticipate that by MY 2025 these will be common in new light duty vehicles.

For example, while today less than three percent of annual vehicle sales are strong hybrids, plug-in hybrids and all electric vehicles, by MY 2025 we estimate in our analyses for this final rule that these technologies could represent 3-7%, while “mild” hybrids may be as high as 17- 27% of new sales and vehicles with stop/start systems only may be as high as 6-15% of new sales. Thus by MY 2025, 26-49% of the fleet may have some level of electrification.

Although a number of these technologies are available today, the agencies' assessments support that there will be continuing improvements in the efficiency of some of the technologies and that the cost of many of the technologies will be lower in the future.

We anticipate that the standards will require most manufacturers to considerably increase the application of these technologies across their light duty vehicle fleets in order to comply with the standards. Manufacturers may also develop and introduce other technologies that we have not considered for this rulemaking analysis, which could play important roles in compliance with the standards and potentially offer more cost effective alternatives. Due to the relatively long lead time for the later model years in this rule, it is quite possible that innovations may arise that the agencies (and the automobile manufacturers) are not considering today, which may even become commonplace by MY 2025.

As discussed further below, and as with the standards for MYs 2012-2016, the agencies believe that the final standards help to preserve consumer choice, that is, the standards should not affect consumers' opportunity to purchase the size and type of vehicle that meets their needs, and should not otherwise affect vehicles' performance attributes. NHTSA and EPA are finalizing standards based on vehicle footprint, which is the area defined by the points where the tires contact the ground, where smaller vehicles have relatively more stringent targets, and larger vehicles have less stringent targets. Footprint based standards promote fuel economy and GHG emissions improvements in vehicles of all sizes, and are not expected to create incentives for manufacturers to change the size of their vehicles in order to comply with the standards. Consequently, these rules should not have a significant effect on the relative availability of different size vehicles in the fleet. The agencies' analyses used a constraint of preserving all other aspects of vehicles' functionality and performance, and the technology cost and effectiveness estimates developed in the analyses reflect this constraint.

In addition, as with the standards for MYs 2012-2016, the agencies believe that the standards should not have a negative effect on vehicle safety, as it relates to vehicle size and mass as described in Section II.C and II.G below, respectively. Because the standards are fleet average standards for each manufacturer, no specific vehicle

must

meet a target.

Thus, nothing in these rules prevents consumers in the 2017 to 2025 timeframe from choosing from the same mix of vehicles that are currently in the marketplace.

One commenter asserted that the standards “value purported consumer choice and the continued production of every vehicle in its current form over the need to conserve energy: as soon as increased fuel efficiency begins to affect any attribute of any existing vehicle, stringency increases cease.” CBD Comments p. 4. This assertion is incorrect. As explained in the text above, the agencies' cost estimates include costs of preserving existing attributes, such as vehicle performance. These costs are reflected in the agencies' analyses of reasonableness of the costs of the rule, but do not by themselves dictate any particular level of standard stringency much less cause stringency to “cease” as the commenter would have it.

Given the long time frame at issue in setting standards for MYs 2022-2025 light-duty vehicles, and given NHTSA's statutory obligation to conduct a

de novo

rulemaking in order to establish final standards for vehicles for the 2022-2025 model years, the agencies will conduct a comprehensive mid-term evaluation and agency decision-making process for the MYs 2022-2025 standards, as described in the proposal. As stated in the proposal, both NHTSA and EPA will develop and compile up-to-date information for the mid-term evaluation, through a collaborative, robust and transparent process, including public notice and comment. The mid-term evaluation will assess the appropriateness of the MYs 2022-2025 standards, based on information available at the time of the mid-term evaluation and an updated assessment of all the factors considered in setting the standards and the impacts of those factors on the manufacturers' ability to comply. NHTSA and EPA fully expect to conduct this mid-term evaluation in coordination with the California Air Resources Board, given our interest in maintaining a National Program to address GHG emissions and fuel economy. NHTSA's rulemaking, which will incorporate findings from the mid-term evaluation, will be a totally fresh consideration of all relevant information and fresh balancing of statutory and other relevant factors in order to determine the maximum feasible CAFE standards for MYs 2022-2025. In order to align the agencies proceedings for MYs 2022-2025 and to maintain a joint national program, if the EPA determination is that its standards will not change, NHTSA will issue its final rule concurrently with the EPA determination. If the EPA determination is that standards may change, the agencies will issue a joint NPRM and joint final rule. Further discussion of the mid-term evaluation is found later in this section, as well as in Sections III.B.3 and IV.A.3.b.

The 2017-2025 National Program is estimated to reduce GHGs by approximately 2 billion metric tons and to save 4 billion barrels of oil over the lifetime of MYs 2017-2025 vehicles relative to the MY 2016 standard curves already in place.

The average cost for a MY 2025 vehicle to meet the standards is estimated to be about $1800 compared to a vehicle that meets the level of the MY 2016 standards in MY 2025. Fuel savings for consumers are expected to more than offset the higher vehicle costs. The typical driver will save a total of $5,700 to $7,400 (7 percent and 3 percent discount rate, respectively) in fuel costs over the lifetime of a MY 2025 vehicle and, even after accounting for the higher vehicle cost, consumers will save a net $3,400 to $5,000 (7 percent and 3 percent discount rate, respectively) over the vehicle's lifetime. This estimate assumes a gasoline price of $3.87 per gallon in 2025 with small increases most years over the vehicle's lifetime.

Further, the payback period for a consumer purchasing a 2025 light-duty vehicle with cash would be, on average, 3.4 years at a 7 percent discount rate or 3.2 years at a 3 percent discount rate, while consumers who buy with a 5-year loan would save more each month on fuel than the increased amount they will spend on the higher monthly loan payment, beginning in the first month of ownership.

The cost and benefit estimates provided here are only for the MY 2017-2025 rulemaking. The CAFE and GHG emissions standards for MYs 2012-2016 and CAFE standards for MY 2011 are already part of the baseline for this analysis.

See Chapter 4.2.2 of the Joint TSD for full discussion of fuel price projections of the vehicle lifetimes.

Continuing the National Program has both energy security and climate change benefits. Climate change is a significant long-term threat to the global environment. EPA has found that elevated atmospheric concentrations of six greenhouse gases—carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride—taken in combination endanger both the public health and the public welfare of current and future generations. EPA further found that the combined emissions of these greenhouse gases from new motor vehicles and new motor vehicle engines contribute to the greenhouse gas air pollution that endangers public health and welfare. 74 FR 66496 (Dec. 15, 2009). As summarized in EPA's Endangerment and Cause or Contribute Findings under Section 202(a) of the Clean Air Act, anthropogenic emissions of GHGs are very likely (90 to 99 percent probability) the cause of most of the observed global warming over the last

50 years.

Mobile sources emitted 30 percent of all U.S. GHGs in 2010 (transportation sources, which do not include certain off-highway sources, account for 27 percent) and have been the source of the largest absolute increases in U.S. GHGs since 1990.

Mobile sources addressed in the endangerment and contribution findings under CAA section 202(a)—light-duty vehicles, heavy-duty trucks, buses, and motorcycles—accounted for 23 percent of all U.S. GHG emissions in 2010.

Light-duty vehicles emit CO

, methane, nitrous oxide, and hydrofluorocarbons and were responsible for nearly 60 percent of all mobile source GHGs and over 70 percent of Section 202(a) mobile source GHGs in 2010.

For light-duty vehicles in 2010, CO

emissions represented about 94 percent of all greenhouse emissions (including HFCs), and similarly, the CO

emissions measured over the EPA tests used for fuel economy compliance represent about 90 percent of total light-duty vehicle GHG emissions.

32,33

74 FR 66,496, 66,518, December 18, 2009; “Technical Support Document for Endangerment and Cause or Contribute Findings for Greenhouse Gases Under Section 202(a) of the Clean Air Act” Docket: EPA-HQ-OAR-2009-0472-11292,

http://epa.gov/climatechange/endangerment/index.html

(last accessed August 9. 2012)

Memorandum: Mobile Source Contribution to U.S. GHGs in 2010 (Docket EPA-HQ-OAR-2010-0799). See generally, U.S. Environmental Protection Agency. 2012. Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990-2010. EPA 430-R-12-001. Available at

http://epa.gov/climatechange/emissions/downloads12/US-GHG-Inventory-2012-Main-Text.pdf

(last accessed June 12, 2012).

Section 202(a) sources include passenger cars, light-duty trucks, motorcycles, buses, and medium- and heavy-duty trucks. EPA's GHG Inventory groups these modes into on-road totals. However, the on-road totals in the Inventory include refrigerated transport for medium- and heavy-duty trucks, which is not considered a source for Section 202(a). In order to determine the Section 202(a) total, we took the on-road GHG total of 1556.8 Tg and subtracted the 11.6 Tg of refrigerated transport to yield a value of 1545.2 Tg.

http://epa.gov/climatechange/emissions/downloads12/US-GHG-Inventory-2012-Main-Text.pdf

(last accessed June 12, 2012)

Memorandum: Mobile Source Contribution to U.S. GHGs in 2010 (Docket EPA-HQ-OAR-2010-0799). See generally, U.S. Environmental Protection Agency. 2009. Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990-2007. EPA 430-R-09-004. Available at

http://epa.gov/climatechange/emissions/downloads09/GHG2007entire_report-508.pdf

http://epa.gov/climatechange/emissions/downloads12/US-GHG-Inventory-2012-Main-Text.pdf

Improving our energy and national security by reducing our dependence on foreign oil has been a national objective since the first oil price shocks in the 1970s. Although our dependence on foreign petroleum has declined since peaking in 2005, net petroleum imports accounted for approximately 45 percent of U.S. petroleum consumption in 2011.

World crude oil production is highly concentrated, exacerbating the risks of supply disruptions and price shocks as the recent unrest in North Africa and the Persian Gulf highlights. Recent tight global oil markets led to prices over $100 per barrel, with gasoline reaching over $4 per gallon in many parts of the U.S., causing financial hardship for many families and businesses. The export of U.S. assets for oil imports continues to be an important component of the historically unprecedented U.S. trade deficits. Transportation accounted for about 72 percent of U.S. petroleum consumption in 2010.

Light-duty vehicles account for about 60 percent of transportation oil use, which means that they alone account for about 40 percent of all U.S. oil consumption.

Energy Information Administration, “How dependent are we on foreign oil?”

Available at http://www.eia.gov/energy_in_brief/foreign_oil_dependence.cfm

(last accessed June12, 2012).

Energy Information Administration, Annual Energy Outlook 2011, “Oil/Liquids.”

Available at http://www.eia.gov/forecasts/aeo/MT_liquidfuels.cfm

(last accessed June 12, 2012).

Energy Information Administration, Annual Energy Outlook 2012 Early Release Overview.

Available at http://www.eia.gov/forecasts/aeo/er/early_fuel.cfm

(last accessed Jun. 14, 2012).

2. Additional Background on the National Program and Stakeholder Engagement Prior to the NPRM

Following the successful adoption of a National Program for model years (MY) 2012-2016 light duty vehicles, President Obama issued a Memorandum on May 21, 2010 requesting that the NHTSA, on behalf of the Department of Transportation, and the U.S. EPA develop “

* * * a coordinated national program under the CAA [Clean Air Act] and the EISA [Energy Independence and Security Act of 2007] to improve fuel efficiency and to reduce greenhouse gas emissions of passenger cars and light-duty trucks for model years 2017-2025.

”

Among other things, the agencies were tasked with researching and then developing standards for MYs 2017 through 2025 that would be appropriate and consistent with EPA's and NHTSA's respective statutory authorities. Several major automobile manufacturers and CARB sent letters to EPA and NHTSA in support of a MYs 2017 to 2025 rulemaking initiative as outlined in the President's announcement.

The Presidential Memorandum is found at:

http://www.whitehouse.gov/the-press-office/presidential-memorandum-regarding-fuel-efficiency-standards

. For the reader's reference, the President also requested the Administrators of EPA and NHTSA to issue joint rules under the CAA and EISA to establish fuel efficiency and greenhouse gas emissions standards for commercial medium-and heavy-duty on-highway vehicles and work trucks beginning with the 2014 model year. The agencies recently promulgated final GHG and fuel efficiency standards for heavy duty vehicles and engines for MYs 2014-2018. 76 FR 57106 (September 15, 2011).

These letters of support in response to the May 21, 2010 Presidential Memorandum are available at

http://www.epa.gov/otaq/climate/letters.htm

(last accessed August 9, 2012).

The President's memorandum requested that the agencies, “work with the State of California to develop by September 1, 2010, a technical assessment to inform the rulemaking process * * *”. Together, NHTSA, EPA, and CARB issued the joint Technical Assessment Report (TAR) consistent with Section 2(a) of the Presidential Memorandum.

In developing this assessment, the agencies and CARB held numerous meetings with a wide variety of stakeholders including the automobile original equipment manufacturers (OEMs), automotive suppliers, non-governmental organizations, states and local governments, infrastructure providers, and labor unions. Concurrent with issuing the TAR, NHTSA and EPA also issued a joint Notice of Intent to Issue a Proposed Rulemaking (NOI)

which highlighted the results of the TAR analyses, provided an overview of key program design elements, and announced plans for initiating the joint rulemaking to improve the fuel efficiency and reduce the GHG emissions of passenger cars and light-duty trucks built in MYs 2017-2025.

This Interim Joint Technical Assessment Report (TAR) is available at

http://www.epa.gov/otaq/climate/regulations/ldv-ghg-tar.pdf

(last accessed August 9, 2012) and

http://www.nhtsa.gov/staticfiles/rulemaking/pdf/cafe/2017+CAFE-GHG_Interim_TAR2.pdf

. Section 2(a) of the Presidential Memorandum requested that EPA and NHTSA “Work with the State of California to develop by September 1, 2010, a technical assessment to inform the rulemaking process, reflecting input from an array of stakeholders on relevant factors, including viable technologies, costs, benefits, lead time to develop and deploy new and emerging technologies, incentives and other flexibilities to encourage development and deployment of new and emerging technologies, impacts on jobs and the automotive manufacturing base in the United States, and infrastructure for advanced vehicle technologies.”

75 FR 62739, October 13, 2010.

The TAR evaluated a range of potential stringency scenarios through model year 2025, representing a 3, 4, 5, and 6 percent per year estimated decrease in GHG levels from a model

year 2016 fleet-wide average of 250 gram/mile (g/mi), which was intended to represent a reasonably broad range of stringency increases for potential future GHG emissions standards, and was also consistent with the increases suggested by CARB in its letter of commitment in response to the President's memorandum.

41,42

For each of these scenarios, the TAR also evaluated four illustrative “technological pathways” by which these levels could be attained, each pathway offering a different mix of advanced technologies and assuming various degrees of penetration of advanced gasoline technologies, mass reduction, hybrid electric vehicles (HEVs), plug-in hybrids (PHEVs), and electric vehicles (EVs). These pathways were meant to represent ways that the industry as a whole could increase fuel economy and reduce greenhouse gas emissions, and did not represent ways that individual manufacturers would be required to or necessarily would employ in responding to future standards.

75 FR 62744-45.

Statement of the California Air Resources Board Regarding Future Passenger Vehicle Greenhouse Gas Emissions Standards, California Air Resources Board, May 21, 2010. Available at:

http://www.epa.gov/otaq/climate/letters.htm

(last accessed August 9, 2012).

Manufacturers and others commented extensively on a variety of topics in the TAR, including the stringency of the standards, program design elements, the effect of potential standards on vehicle safety, and the TAR's discussion of technology costs, effectiveness, and feasibility. In response, the agencies and CARB spent the next several months continuing to gather information from the industry and others in response to the agencies' initial analytical efforts. EPA and NHTSA issued a follow-on Supplemental NOI in November 2010,

highlighting many of the key comments the agencies received in response to the September NOI and TAR, and summarized some of the key themes from the comments and the additional stakeholder meetings.

75 FR 76337, December 8, 2010.

The agencies' stakeholder engagement between December 2010 and July 29, 2011 focused on ensuring that the agencies possessed the most complete and comprehensive set of information to inform the proposed rulemaking. Information that the agencies presented to stakeholders is posted in the NPRM docket and referenced in multiple places in the NPRM. Throughout this period, the stakeholders repeated many of the broad concerns and suggestions described in the TAR, NOI, and November 2010 SNOI. For example, stakeholders uniformly expressed interest in maintaining a harmonized and coordinated national program that would be supported by CARB and allow auto makers to build one fleet and preserve consumer choice. The stakeholders also raised concerns about potential stringency levels, consumer acceptance of some advanced technologies and the potential structure of compliance flexibilities available under EPCA (as amended by EISA) and the CAA. In addition, most of the stakeholders wanted to discuss issues concerning technology availability, cost and effectiveness and economic practicability. The auto manufacturers, in particular, sought to provide the agencies with a better understanding of their respective strategies (and associated costs) for improving fuel economy while satisfying consumer demand in the coming years. Additionally, some stakeholders expressed concern about potential safety impacts associated with the standards, consumer costs and consumer acceptance, and potential disparate treatment of cars and trucks. Some stakeholders also stressed the importance of investing in infrastructure to support more widespread deployment of alternative vehicles and fuels. Many stakeholders also asked the agencies to acknowledge prevailing economic uncertainties in developing proposed standards. In addition, many stakeholders discussed the number of years to be covered by the program and what they considered to be important features of a mid-term review of any standards set or proposed for MY 2022-2025. In all of these meetings, NHTSA and EPA sought additional data and information from the stakeholders that would allow them to refine their initial analyses and determine proposed standards that are consistent with the agencies' respective statutory and regulatory requirements. The general issues raised by those stakeholders are addressed in the sections of this final rule discussing the topics to which the issues pertain (

e.g.,

the form of the standards, technology cost and effectiveness, safety impacts, impact on U.S. vehicle sales and other economic considerations, costs and benefits).

The first stage of the meetings occurred between December 2010 and June 20, 2011. These meetings covered topics that were generally similar to the meetings that were held prior to the publication of the November 2010 Supplemental NOI and that were summarized in that document. Manufacturers provided the agencies more detailed information related to their product plans for vehicle models and fuel efficiency improving technologies and associated cost estimates, as well as more detailed feedback regarding the potential program design elements to be included in the program. The second stage of meetings occurred between June 21, 2011 and July 14, 2011, during which EPA, NHTSA, CARB and several components of the Executive Office of the President kicked-off an intensive series of meetings, primarily with manufacturers, to share tentative regulatory concepts including concept stringency curves and program flexibilities based on the analyses completed by the agencies as of June 21, 2011

and requested manufacturer feedback; specifically

detailed and reliable information on how they might comply with the concepts, potential changes to the concept stringency levels and program flexibilities available under EPA's and NHTSA's respective authority that might facilitate compliance, and if they projected they could not comply, information supporting that belief. In these second stage meetings, the agencies received considerable input from the manufacturers related to the questions asked by the agencies and also related to consumer acceptance and adoption of some advanced technologies and program costs based on their independent assessment or information previously submitted to the agencies. The third stage of meetings occurred between July 15, 2011 and July 28, 2011 during which the agencies continued to refine concept stringencies and compliance flexibilities based on further consideration of the information available to them as well as meeting with manufacturers who expressed ongoing interest in engaging with the agencies.

The agencies consider a range of standards that may satisfy applicable legal criteria, taking into account the complete record before them. The initial concepts shared with stakeholders were within the range the agencies were considering, based on the information then available to the agencies.

``Agency Materials Provided to Manufacturers” Memo to docket NHTSA-2010-0131.

“Agency Materials Provided to Manufacturers” Memo to docket NHTSA-2010-0131.

Throughout all three stages, EPA and NHTSA continued to engage other stakeholders to ensure that the agencies were obtaining the most comprehensive and reliable information possible to guide the agencies in developing proposed standards for MY 2017-2025. Environmental organizations consistently stated that stringent standards are technically achievable and critical to important national interests. Labor interests stressed the need to

carefully consider economic impacts and the opportunity to create and support new jobs, and consumer advocates emphasized the economic and practical benefits to consumers of improved fuel economy and the need to preserve consumer choice.

On July 29, 2011, President Obama with the support of thirteen major automakers, announced plans to pursue the next phase in the Administration's national vehicle program, increasing fuel economy and reducing GHG emissions for passenger cars and light trucks built in MYs 2017-2025.

The President was joined by Ford, GM, Chrysler, BMW, Honda, Hyundai, Jaguar/Land Rover, Kia, Mazda, Mitsubishi, Nissan, Toyota and Volvo, which together account for over 90 percent of all vehicles sold in the United States. The California Air Resources Board (CARB), the United Auto Workers (UAW) and a number of environmental and consumer groups, also announced their support.

The President's remarks are available at

http://www.whitehouse.gov/the-press-office/2011/07/29/remarks-president-fuel-efficiency-standards

(last accessed August 9, 2012); see also

http://www.nhtsa.gov/fuel-economy

for more information from the agency about the announcement.

On the same day as the President's announcement, EPA and NHTSA released a second SNOI (published in the

Federal Register

on August 9, 2011) describing the joint proposal that the agencies expected to issue to establish the National Program for model years 2017-2025. The agencies received letters of support for the concepts laid out in the SNOI from BMW, Chrysler, Ford, General Motors, Global Automakers, Honda, Hyundai, Jaguar/Land Rover, Kia, Mazda, Mitsubishi, Nissan, Toyota, Volvo and CARB. The input of stakeholders, which is encouraged by Executive Order 13563, was invaluable to the agencies in developing the NPRM. A more detailed summary of the process leading to the proposed rulemaking is found at 76 FR 74862-865.

3. Public Participation and Stakeholder Engagement Since the NPRM Was Issued

The agencies signed their respective proposed rules on November 16, 2011 (76 FR 74854 (December 1, 2011)), and subsequently received a large number of comments representing many perspectives. Between January 17 and 24, 2012 the EPA and NHTSA held three public hearings in Detroit, Philadelphia and San Francisco. Nearly 400 people testified and many more attended the hearings. In response to requests, the written comment period was extended by two weeks for a total of 74 days from

Federal Register

publication, closing on February 13, 2012. The agencies received extensive written comments from more than 140 organizations, including auto manufacturers and suppliers, State and local governments and their associations, consumer groups, labor unions, fuels and energy providers, auto dealers, academics, national security experts and veterans, environmental and other non-governmental organizations (NGOs), and nearly 300,000 comments from private individuals. In addition to comments received on the proposal, the agencies met with many different stakeholder groups between issuance of the NPRM and this final rule. Generally, the agencies met with nearly all automakers individually to discuss flexibilities such as the A/C, off-cycle, and pickup truck incentives, as well as different ways to meet the standards; with suppliers to discuss the same flexibilities; with environmental groups to discuss flexibilities and that the agencies maintain strong standards for the final rule; and with the natural gas interests to discuss incentives for natural gas in the final rule. Memoranda summarizing these meetings can be found in the EPA and NHTSA dockets for this rulemaking. EPA-HQ-OAR-2010-0799 and NHTSA-2010-0131.

NHTSA is required to provide information on these meetings per DOT Order 2100.2,

available at http://www.reg-group.com/library/DOT2100-2.PDF

(last accessed Jun. 12, 2012). The agencies have placed memos summarizing these meetings in their respective dockets.

An overwhelming majority of commenters supported the proposed 2017-2025 CAFE and GHG standards with most organizations and nearly all of the private individuals expressing broad support for the program and for the continuation of the National Program to model years (MY) 2017-2025 light-duty vehicles, and the Program's projected achievement of an emissions level of 163 gram/mile fleet average CO

, which would be equivalent to 54.5 miles per gallon if the automakers were to meet this CO

level solely through fuel economy improvements.

Real-world CO

is typically 25 percent higher and real-world fuel economy is typically 20 percent lower than the CO

and CAFE compliance values discussed here. 163 g/mi would be equivalent to 54.5 mpg, if the entire fleet were to meet this CO

level through tailpipe CO

and fuel economy improvements, and assumes gasoline fueled vehicles (significant diesel fuel penetration would have a different mpg equivalent). The agencies expect, however, that a portion of these improvements will be made through improvements in air conditioning leakage and alternative refrigerants, which would not contribute to fuel economy.

In general, more than a dozen automobile manufacturers supported the proposed standards as well as the credit opportunities and other provisions that provide compliance flexibility, while also recommending some changes to the credit and flexibility provisions—in fact, a significant majority of comments from industry focused on the credit and flexibility provisions. Nearly all automakers stressed the importance of the mid-term evaluation to assess the progress of technology development and cost, and the accuracy of the agencies' assumptions due to the long time-frame of the rule. Many industry commenters expressly predicated their support of the 2017-2025 National Program on the existence of this evaluation. Environmental and public interest non-governmental organizations (NGOs), as well as States that commented were also very supportive of extending the National Program to MYs 2017-2025 passenger vehicles and light trucks. Many of these organizations expressed concern that the mid-term evaluation might be used as an opportunity to weaken standards or to delay the environmental benefits of the National Program.

The agencies also received comments that either opposed the issuance of the standards, or that argued that they should be modified in various ways. The Center for Biological Diversity (CBD) commented that the proposed standards were not sufficiently stringent, recommending that the agencies increase the standards to 60-70 mpg in 2025. CBD, as well as several other organizations,

also argued that minimum standards (“backstops”) were necessary for all fleets in order to ensure anticipated fuel economy gains. Several environmental groups expressed concern that flexibilities, such as off-cycle credits, could result in significantly lower gains through double-counting and allowing manufacturers to avoid making fuel economy improvements.

The Natural Resources Defense Council, the Union of Concerned Scientists, the Sierra Club, and the Consumer's Union.

Some car-focused manufacturers objected to the truck curves, which they considered lenient while some small truck manufacturers objected to the large truck targets, which they considered lenient; and some intermediate and small volume manufacturers with limited product lines requested additional lead time, as well as less stringent standards for their vehicles. Manufacturers in general argued that backstops were not

necessary for fuel economy gains and would be outside NHTSA's authority. Manufacturers also commented extensively on the programs' flexibilities, such as off-cycle credits, generally requesting more permissive applications and requirements.

The National Automobile Dealers Association (NADA) opposed the MYs 2017-2025 proposed standards, arguing that the agencies should delay rulemaking since they believe there was no need to set standards so far in advance, that the costs of the proposed program are higher than agencies have projected, and that some (mostly low income) consumers will not be able to acquire financing for new cars meeting these more stringent standards.

Many environmental and consumer groups commented that the benefits of the rule were understated and the costs overstated, arguing that several potential benefits had not been included and the technology effectiveness estimates were overly conservative. Some environmental groups also expressed concern that the benefits of the rule could be eroded if the agencies' assumptions about the market do not come to pass or if manufacturers build larger vehicles. Other groups, such as NADA, Competitive Enterprise Institute, and the Institute for Energy Research, argued that the benefits of the rule were overstated and the costs understated, asserting that manufacturers would have already made improvements if the agencies' calculations were correct.

Many commenters discussed potential environmental and health aspects of the rule. Producers of specific materials, such as aluminum, steel, or plastic, commented that standards should ultimately reflect a life cycle analysis that accounts for the greenhouse gas emissions attributable to the materials from which vehicles are manufactured. Some environmental groups requested that standards for electrified vehicles reflect emissions attributable to upstream electricity generation. Many commenters expressed support for the rule and its health benefits, while other commenters were concerned about possible negative health impacts due to assumptions about future fuel properties.

Many commenters also addressed issues relating to safety, with most generally supporting the agencies' efforts to continue to improve their understanding of the relationship between mass reduction and safety. Consistent with their comments in prior rulemakings, several environmental and consumer organizations commented that data exist that mass reduction does not have adverse safety impacts, and stated that the use of better designs and materials can improve both fuel economy and safety. Dynamic Research Institute (DRI) submitted a study, and other commenters pointed to DRI's work and additional studies for the agencies' consideration, as discussed in more detail in Section II.G below. Materials producers (aluminum, steel, composite, etc.) commented that their respective materials can be used to improve safety. The Alliance commented that while some recent mass reduction vehicle design concept studies have created designs that perform well in simulation modeling of safety standard and voluntary safety guideline tests, the design concepts yield aggressively stiffer crash pulses may be detrimental to rear seat occupants, vulnerable occupants and potential crash partners. The Alliance also commented that there are simulation model uncertainties with respect to advanced materials, and the real-world crash behavior of these concepts may not match that predicted in those studies. The Alliance and Volvo commented that it is important to monitor safety trends, and the Alliance urged that the agencies revisit this topic during the mid-term evaluation.

Additional comments touched on the use of “miles per gallon” to describe the standards, the agencies' baseline market forecast, consumer welfare and trends in consumer preferences for fuel economy, and a wide range of other topics.

Throughout this notice, the agencies discuss key issues arising from the public comments and the agencies' responses to those comments. The agencies also respond to comments in the Joint TSD and in their respective RIAs. In addition, EPA has addressed all of the public comments specific to the GHG program in a Response to Comments document.

EPA Response to Comments document. (EPA-420-F-12-017) Available in the docket and at:

http://www.epa.gov/otaq/climate/regs-light-duty.htm

(last accessed August 8, 2012).

4. California's Greenhouse Gas Program

In 2004, the California Air Resources Board (CARB) approved standards for new light-duty vehicles, regulating the emission of CO

and other GHGs.

On June 30, 2009, EPA granted California's request for a waiver of preemption under the CAA with respect to these standards.

Thirteen states and the District of Columbia, comprising approximately 40 percent of the light-duty vehicle market, adopted California's standards.

The granting of the waiver permits California and the other states to proceed with implementing the California emission standards for MYs 2009 and later. After EPA and NHTSA issued their MYs 2012-2016 standards, CARB revised its program such that compliance with the EPA greenhouse gas standards will be deemed to be compliance with California's GHG standards.

This facilitates the National Program by allowing manufacturers to meet all of the standards with a single national fleet.

Through operation of section 209(b) of the Clean Air Act, California is able to seek and receive a waiver of section 209(a)'s preemptions to enforce such standards. Section 209(b)(1) requires a waiver to be granted for any State that had adopted standards (other than crankcase emission standards) for the control of emissions from new motor vehicles or new motor vehicles' engines prior to March 30, 1966. California is the only state to have adopted standards prior to 1966 and is therefore the only state qualified to seek and receive a waiver. EPA evaluates California's request under the three waiver criteria set forth in section 209(b)(1)(A)-(C) and must grant a waiver under section 209(e)(2) if these criteria are met.

74 FR 32744 (July 8, 2009). See also

Chamber of Commerce

EPA,

642 F.3d 192 (D.C. Cir. 2011) (dismissing petitions for review challenging EPA's grant of the waiver).

The Clean Air Act allows other states to adopt California's motor vehicle emissions standards under section 177 if such standards are identical to the California standards for which a waiver has been granted. States are not required to seek EPA approval under the terms of section 177.

See

“California Exhaust Emission Standards and Test Procedures for 2001 and Subsequent Model Passenger Cars, Light-Duty Trucks, and Medium-Duty Vehicles as approved by OAL,” March 29, 2010 at 7.

Available at

http://www.arb.ca.gov/regact/2010/ghgpv10/oaltp.pdf

(last accessed June 12, 2012).

As requested by the President and in the interest of maximizing regulatory harmonization, NHTSA and EPA worked closely with CARB throughout the development of the proposed rules. CARB staff released its proposal for MYs 2017-2025 GHG emissions standards consistent with the standards proposed by EPA on December 9, 2011 and the California Air Resources Board adopted these standards at its January 26, 2012 Board meeting, with final approval at its March 22, 2012 Board meeting.

In adopting their GHG standards the California Air Resources Board directed the Executive Officer to “continue collaborating with EPA and NHTSA as their standards are finalized and in the mid-term review to minimize potential lost benefits from federal treatment of upstream emissions of electricity and hydrogen fueled vehicles,” and also, “to participate in U.S. EPA's review of the 2022 through 2025 model year

passenger vehicle greenhouse gas standards being proposed under the 2017 through 2025 MY National Program.”

CARB also reconfirmed its commitment, previously made in July 2011 in conjunction with release of the Supplemental NOI,

to propose to revise its GHG emissions standards for MYs 2017-2025 such that compliance with EPA GHG emissions standards shall be deemed compliance with the California GHG emissions standards. The Board directed CARB's Executive Officer that, “it is appropriate to accept compliance with the 2017 through 2025 model year National Program as compliance with California's greenhouse gas emission standards in the 2017 through 2025 model years, once United States Environmental Protection Agency (U.S. EPA) issues their final rule on or after its current July 2012 planned release, provided that the greenhouse gas reductions set forth in U.S. EPA's December 1, 2011 Notice of Proposed Rulemaking for 2017 through 2025 model year passenger vehicles are maintained, except that California shall maintain its own reporting requirements.”

See California Low-Emission Vehicles (LEV) & GHG 2012 regulations adopted by State of California Air Resources Board, March 22, 2012, Resolution 12-21 incorporating by reference Resolution 12-11 (see especially Resolution 12-11 at 20) which was adopted January 26, 2012. Available at

http://www.arb.ca.gov/regact/2012/leviiighg2012/leviiighg2012.htm

(last accessed July 9, 2012).

Id.

See State of California July 28, 2011 letter available at:

http://www.epa.gov/otaq/climate/letters.htm

(last accessed August 9, 2012).

Id., CARB Resolution 12-21 (March 22, 2012) (last accessed June 6, 2012).

C. Summary of the Final 2017-2025 National Program

1. Joint Analytical Approach

These final rules continue the collaborative analytical effort between NHTSA and EPA, which began with the MYs 2012-2016 rulemaking for light-duty vehicles. NHTSA and EPA have worked together on nearly every aspect of the technical analysis supporting these joint rules. The results of this collaboration are reflected in key elements of the respective NHTSA and EPA rules, as well as in the analytical work contained in the Joint Technical Support Document (Joint TSD). The agencies have continued to develop and refine the supporting analyses since issuing the proposed rule last December. The Joint TSD, in particular, describes important details of the analytical work that are common to both agencies' rules, and also explains any key differences in approach. The joint analyses addressed in the TSD include the build-up of the baseline and reference fleets, the derivation of the shape of the footprint-based attribute curves that define the agencies' respective standards, a detailed description of the estimated costs and effectiveness of the technologies that are available to vehicle manufacturers, the economic inputs used to calculate the costs and benefits of the final rules, a description of air conditioner and other off-cycle technologies, and the agencies' assessment of the impacts of hybrid technology incentive provisions for full-size pick-up trucks. This comprehensive joint analytical approach has provided a sound and consistent technical basis for both agencies in developing their final standards, which are summarized in the sections below.

2. Level of the Standards

EPA and NHTSA are finalizing separate sets of standards for passenger cars and for light trucks, each under its respective statutory authority. EPA is setting national CO

emissions standards for passenger cars and light-trucks under section 202(a) of the Clean Air Act (CAA), while NHTSA is setting national corporate average fuel economy (CAFE) standards under the Energy Policy and Conservation Act (EPCA), as amended by the Energy Independence and Security Act (EISA) of 2007 (49 U.S.C. 32902). Both the CO

and CAFE standards for passenger cars and standards for light trucks are footprint-based, similar to the standards currently in effect for these vehicles through model year 2016, and will become more stringent on average in each model year from 2017 through 2025. The basis for measuring performance relative to standards continues to be based predominantly on the EPA city and highway test cycles (2-cycle test). However, EPA is finalizing optional air conditioning and off-cycle credits for the GHG program and adjustments to calculated fuel economy for the CAFE program that are based on test procedures other than the 2-cycle tests.

As proposed, EPA is finalizing standards that are projected to require, on an average industry fleet wide basis, 163 grams/mile of CO

in model year 2025. This is projected to be achieved through improvements in fuel efficiency and improvements in non-CO

GHG emissions from reduced air conditioning (A/C) system leakage and use of lower global warming potential (GWP) refrigerants. The level of 163 grams/mile CO

is equivalent on a mpg basis to 54.5 mpg, if this level was achieved solely through improvements in fuel efficiency.

Real-world CO

is typically 25 percent higher and real-world fuel economy is typically 20 percent lower than the CO

and CAFE values discussed here. The reference to CO

here refers to CO

equivalent reductions, as this included some degree of reductions in greenhouse gases other than CO

, as one part of the A/C-related reductions. In addition, greater penetration of diesel fuel (as opposed to gasoline) will change the fuel economy equivalent.

Consistent with the proposal, for passenger cars, the CO

compliance values associated with the footprint curves will be reduced on average by 5 percent per year from the model year 2016 projected passenger car industry-wide compliance level through model year 2025. In recognition of manufacturers' unique challenges in improving the fuel economy and GHG emissions of full-size pickup trucks as the fleet transitions from the MY 2016 standards to MY 2017 and later, while preserving the utility (

e.g.,

towing and payload capabilities) of those vehicles, EPA is finalizing standards reflecting an annual rate of improvement for light-duty trucks which is lower than that for passenger cars in the early years of the program. For light-duty trucks, the average annual rate of CO

emissions reduction in model years 2017 through 2021 is 3.5 percent per year. As proposed, EPA is also changing the slopes of the CO

-footprint curves for light-duty trucks from those in the 2012-2016 rule, in a manner that effectively means that the annual rate of improvement for smaller light-duty trucks in model years 2017 through 2021 will be higher than 3.5 percent, and the annual rate of improvement for larger light-duty trucks over the same time period will be lower than 3.5 percent. For model years 2022 through 2025, EPA is finalizing an average annual rate of CO

emissions reduction for light-duty trucks of 5 percent per year.

Consistent with its statutory authority,

For passenger cars, the annual increase in

the stringency of the target curves between model years 2017 to 2021 is expected to average 3.8 to 3.9 percent. In recognition of manufacturers' unique challenges in improving the fuel economy and GHG emissions of full-size pickup trucks as the fleet transitions from the MY 2016 standards to MY 2017 and later, while preserving the utility (

e.g.,

towing and payload capabilities) of those vehicles, NHTSA is also finalizing a lower annual rate of improvement for light trucks in the first phase of the program. For light trucks, the annual increase in the stringency of the target curves in model years 2017 through 2021 is 2.5 to 2.7 percent per year on average. NHTSA is changing the slopes of the fuel economy footprint curves for light trucks from those in the MYs 2012-2016 final rule, which effectively make the annual rate of improvement for smaller light trucks in MYs 2017-2021 higher than 2.5 or 2.7 percent per year, and the annual rate of improvement for larger light trucks over that time period lower than 2.5 or 2.7 percent per year.

49 U.S.C. 32902.

The range of values here and through this rulemaking document reflect the results of co-analyses conducted by NHTSA using two different light-duty vehicle market forecasts through model year 2025. To evaluate the effects of the standards, the agencies must project what vehicles and technologies will exist in future model years and then evaluate what technologies can feasibly be applied to those vehicles to raise their fuel economy and reduce their greenhouse gas emissions. To project the future fleet, the agencies must develop a baseline vehicle fleet. For this final rule, the agencies have analyzed the impacts of the standards using two different forecasts of the light‐duty vehicle fleet through MY 2025. The baseline fleets are discussed in detail in Section II.B of this preamble, and in Chapter 1 of the Technical Support Document. EPA's sensitivity analysis of the alternative fleet is included in Chapter 10 of its RIA.

The MYs 2022-2025 standards, then, are not final as part of this rulemaking, but rather augural, meaning that they represent the agency's current judgment, based on the information available to the agency today, of what levels of stringency would be maximum feasible in those model years. NHTSA projects that those standards would require, on an average industry fleet wide basis, a range from 48.7 to 49.7 mpg in model year 2025. NHTSA will undertake a

de novo

rulemaking at a later date to set legally binding standards for MYs 2022-2025.

See

Section IV for more information. For passenger cars, the annual increase in the stringency of the target curves between model years 2022 and 2025 is expected to average 4.7

percent, and for light trucks, the annual increase during those model years is expected to average 4.8 to 4.9 percent.

49 U.S.C. 32902(b)(3)(B).

The rate of increase is rounded at 4.7 percent per year using 2010 and 2008 baseline.

NHTSA notes that for the first time in this rulemaking, EPA is finalizing, under its EPCA authority, rules allowing the impact of air conditioning system efficiency improvements to be included in the calculation of fuel economy for CAFE compliance. Given that these real-world improvements will be available to manufacturers for compliance, NHTSA has accounted for this by determining the amount that industry is expected to improve air conditioning system efficiency in each model year from 2017-2025, and setting the CAFE standards to reflect these improvements, in a manner consistent with EPA's GHG standards. See Sections III.B.10 and IV.I.4.b of this final rule preamble for more information.

NHTSA also notes that the rates of increase in stringency for CAFE standards are lower than EPA's rates of increase in stringency for GHG standards. As in the MYs 2012-2016 rulemaking, this is for purposes of harmonization and in reflection of several statutory constraints in EPCA/EISA. As a primary example, NHTSA's standards, unlike EPA's, do not reflect the inclusion of air conditioning system refrigerant and leakage improvements, but EPA's standards allows consideration of such A/C refrigerant improvements which reduce GHGs but do not affect fuel economy. As another example, the Clean Air Act allows various compliance flexibilities (among them certain credit generating mechanisms) not present in EPCA.

As with the MYs 2012-2016 standards, NHTSA and EPA's final MYs 2017-2025 passenger car and light truck standards are expressed as mathematical functions depending on the vehicle footprint attribute.

Footprint is one measure of vehicle size, and is determined by multiplying the vehicle's wheelbase by the vehicle's average track width. The standards that must be met by each manufacturer's fleet will be determined by computing the production-weighted average of the targets applicable to each of the manufacturer's fleet of passenger cars and light trucks.

Under these footprint-based standards, the average levels required of individual manufacturers will depend, as noted above, on the mix and volume of vehicles the manufacturer produces in any given model year. The values in the tables below reflect the agencies' projection of the range of the corresponding average fleet levels that will result from these attribute-based curves given the agencies' current assumptions about the mix of vehicles that will be sold in the model years covered by these standards. EPA and NHTSA have each finalized the attribute-based curves, as proposed, for the model years covered by these final rules, as discussed in detail in Section II.B of this preamble and Chapter 2 of the Joint TSD. The agencies have updated their projections of the impacts of the final rule standards since the proposal, as discussed in Sections III and IV of this preamble and in the agencies' respective RIAs.

NHTSA is required to set attribute-based CAFE standards for passenger cars and light trucks. 49 U.S.C. 32902(b)(3).

For CAFE calculations, a harmonic average is used.

As shown in Table I-1 NHTSA's fleet-wide estimated required CAFE levels for passenger cars would increase from between 40.1 and 39.6 mpg in MY 2017 to between 55.3 and 56.2 mpg in MY 2025. Fleet-wide required CAFE levels for light trucks, in turn, are estimated to increase from between 29.1 and 29.4 mpg in MY 2017 and between 39.3 and 40.3 mpg in MY 2025. For the reader's reference, Table I-1 also provides the estimated average fleet-wide required levels for the combined car and truck fleets, culminating in an estimated overall fleet average required CAFE level of a range from 48.7 to 49.7 mpg in MY 2025. Considering these combined car and truck increases, the standards together represent approximately a 4.0 percent annual rate of increase,

on average, relative to the MY 2016 required CAFE levels.

This estimated average percentage increase includes the effect of changes in standard stringency and changes in the forecast fleet sales mix.

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The estimated average required mpg levels for passenger cars and trucks under the standards shown in Table I-1 above include the use of A/C efficiency improvements, as discussed above, but do not reflect a number of flexibilities and credits that manufacturers may use for compliance that NHTSA cannot consider in establishing standards based on EPCA/EISA constraints. These flexibilities cause the actual achieved fuel economy to be lower than the required levels in the table above. The flexibilities and credits that NHTSA cannot consider include the ability of manufacturers to pay civil penalties rather than achieving required CAFE levels, the ability to use Flexible Fuel Vehicle (FFV) credits, the ability to count electric vehicles for compliance, the operation of plug-in hybrid electric vehicles on electricity for compliance prior to MY 2020, and the ability to transfer and carry-forward credits. When accounting for these flexibilities and credits, NHTSA estimates that the CAFE standards will lead to the following average achieved fuel economy levels, based on the agencies' projections of what each manufacturer's fleet will comprise in each year of the program:

The CAFE program includes incentives for full size pick-up trucks that have mild HEV or strong HEV systems, and for full size pick-up trucks that have fuel economy performance that is better than the target curve by more than final levels. To receive these incentives, manufacturers must produce vehicles with these technologies or performance levels at volumes that meet or exceed final penetration levels (percentage of full size pick-up truck volume). This incentive is described in detail in Section IV.I.3.a.. The NHTSA estimates in Table I-2 do not account for the reduction in estimated average achieved fleet-wide CAFE fuel economy that will occur if manufacturers use this incentive. NHTSA has conducted a sensitivity study that estimates the effects for manufacturers' potential use of this flexibility in Chapter X of the RIA.

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NHTSA is also required by EISA to set a minimum fuel economy standard for domestically manufactured passenger cars in addition to the attribute-based passenger car standard. The minimum standard “shall be the greater of (A) 27.5 miles per gallon; or (B) 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 * * *,” and applies to each manufacturer's fleet of domestically manufactured passenger cars (

i.e.,

like the other CAFE standards, it represents a fleet average requirement, not a requirement for each individual vehicle within the fleet).

Based on NHTSA's current market forecast, the agency is finalizing minimum standards for domestic passenger cars for MYs 2017-2021 and providing augural standards for MYs 2022-2025 as presented below in Table I-3.

Table I-3—Minimum Standard for Domestically Manufactured Passenger Cars (mpg)

2017

2018

2019

2020

2021

2022

2023

2024

2025

36.7

38.0

39.4

40.9

42.7

44.7

46.8

49.0

51.3

EPA is finalizing GHG emissions standards, and Table I-4 provides estimates of the projected overall fleet-wide CO

emission compliance target levels. The values reflected in Table I-4 are those that correspond to the manufacturers' projected CO

compliance target levels from the passenger car and truck footprint curves, but do not account for EPA's projection of how manufacturers will implement two of the incentive programs being finalized in today's rulemaking (advanced technology vehicle multipliers, and hybrid and performance-based incentives for full-size pickup trucks). Table I-4 also does not account for the intermediate volume manufacturer lead-time provisions that EPA is adopting. EPA's projection of fleet-wide emissions levels that do reflect these provisions is shown in Table I-5 below.

Table I-4—Projected Fleet-Wide CO

Compliance Targets Under the Footprint-Based CO

Standards (g/mi) (Primary Analysis)

2016 base

2017

2018

2019

2020

2021

2022

2023

2024

2025

Passenger Cars

225

212

202

191

182

172

164

157

150

143

Light Trucks

298

295

285

277

269

249

237

225

214

203

Combined Cars and Trucks

250

243

232

222

213

199

190

180

171

163

Projected results using MY 2008 based fleet projection analysis. These values differ slightly from those shown in the proposal because of revisions to the MY 2008 based fleet.

As shown in Table I-4, projected fleet-wide CO

emission compliance targets for cars increase in stringency from 212 to 143 g/mi between MY 2017 and MY 2025. Similarly, projected fleet-wide CO

equivalent emission compliance targets for trucks increase in stringency from 295 to 203 g/mi. As shown, the overall fleet average CO

level targets are projected to increase in stringency from 243 g/mi in MY 2017 to 163 g/mi in MY 2025, which is equivalent to 54.5 mpg if all reductions are made with fuel economy improvements.

As noted at proposal, the projected fleet compliance levels for 2016 are different for trucks and the fleet than were projected in the 2012-2016 rule. See 76 FR 74868 n. 44. Our assessment for this final rule is based on a predicted 2016 car value of 224, a 2016 truck value of 297 and a projected combined car and truck value of 252 g/mi. That is because the standards are footprint based and the fleet projections, hence the footprint distributions, change slightly with each update of our projections, as described below. In addition, the actual fleet compliance levels for any model year will not be known until the end of that model year based on actual vehicle sales.

EPA anticipates that manufacturers will take advantage of program flexibilities, credits and incentives, such as car/truck credit transfers, air conditioning credits, off-cycle credits, advanced technology vehicle multipliers, intermediate volume manufacturer lead-time provisions, and hybrid and performance-based incentives for full size pick-up trucks. Three of these flexibility provisions—advanced technology vehicle multipliers, intermediate volume manufacturer lead-time provisions, and the full size pick-up hybrid/performance incentives—are expected to have an impact on the fleet-wide emissions levels that manufacturers will actually achieve.

Therefore, Table I-5 shows EPA's projection of the achieved emission levels of the fleet for MY 2017 through 2025. The differences between the emissions levels shown in Tables I-4 and I-5 reflect the impact on stringency due EPA's projection of manufacturers' use of the advanced technology vehicle multipliers, and the full size pick-up hybrid/performance incentives, but does not reflect car-truck trading, air conditioning credits, or off-cycle credits, because, while the latter credit provisions help reduce manufacturers' costs of the program, EPA believes that they will result in real-world emission reductions that will not affect the achieved level of emission reductions. These estimates are more fully discussed in III.B.

There are extremely small (and unquantified) impacts on the achieved values from other flexibilities such as small volume manufacturer specific standards and emergency vehicle exemptions.

Table I-5—Projected Fleet-Wide Achieved CO

-Equivalent Emission Levels Under the Footprint-Based CO

Standards (g/mi)

(Primary Analysis)

2016 base

2017

2018

2019

2020

2021

2022

2023

2024

2025

Passenger Cars

225

213

203

193

183

173

164

157

150

143

Light Trucks

298

295

287

278

270

250

238

226

214

204

Combined Cars and Trucks

250

243

234

223

214

200

190

181

172

163

Projected results using 2008 based fleet projection analysis. These values differ slightly from those shown in the proposal because of revisions to the MY 2008 based fleet and updates to the analysis.

A more detailed description of how the agency arrived at the year by year progression of both the projected compliance targets and the achieved CO

emission levels can be found in Sections III of this preamble.

Electric vehicles are assumed at 0 gram/mile in this analysis.

The projected fleet achieved levels for 2016 are different for the fleet than were projected in the 2012-2016 rule. Our assessment is based on a predicted 2016 car value of 224, and a 2016 truck value of 297 and a projected combined car and truck value of 252 g/mi. That is because the standards are footprint based and the fleet projections, hence the footprint distributions, change slightly with each update of our projections, as described below. In addition, the actual fleet achieved levels for any model year will not be known until the end of that model year based on actual vehicle sales.

As previously stated, there was broad support for the proposed standards by auto manufacturers including BMW, Chrysler, Ford, GM, Honda, Hyundai, Kia, Jaguar/Land Rover, Mazda, Mitsubishi, Nissan, Tesla, Toyota, Volvo, as well as the Global Automakers. Of the larger manufacturers, Volkswagen and Mercedes commented that the proposed passenger car standards were relatively too stringent while light truck standards were relatively too lenient and suggested several alternatives to the proposed standards. Toyota also commented that lower truck stringency puts more burdens on small cars. Honda was concerned that small light trucks face disproportionate stringency compared to larger footprint trucks under the proposed standards. The agencies' consideration of these and other comments and of the updated technical analyses did not lead to changes to the stringency of the standards nor in the shapes of the curves discussed above. These issues are discussed in more detail in Sections II, III and IV.

NHTSA and EPA reviewed the technology assessment employed in the proposal in developing this final rule, and concluded that there is a wide range of technologies available in the MY 2017-2025 timeframe for manufacturers to consider in upgrading light-duty vehicles to reduce GHG emissions and improve fuel economy. Commenters generally agreed with this assessment and conclusion.

The final technology assessment relied on our joint analyses for the proposed rule, as well as some new information and analyses, including information we received during the public comment period, as discussed in Section II.D below. The analyses performed for this final rule included an updated assessment of the cost, effectiveness and availability of several technologies.

For more detail on comments regarding the agencies' technology assessment, see Section II.D.

As noted further in Section II.D, for this final rule, the agencies considered over 40 current and evolving vehicle and engine technologies that manufacturers could use to improve the fuel economy and reduce CO

emissions of their vehicles during the MYs 2017-2025 timeframe. Many of the technologies we considered are available today, some on a limited number of vehicles and others more widespread throughout the fleet, and the agencies believe they could be incorporated into vehicles as manufacturers make their product development decisions. These “near-term” technologies are identical or very similar to those anticipated in the agencies' analyses of compliance strategies for the MYs 2012-2016 final rule, but we believe they can achieve wider penetration throughout the

vehicle fleet during the MYs 2017-2025 timeframe. For this rulemaking, given its timeframe, we also considered other technologies that are not currently in production, but that are beyond the initial research phase, and are under development and expected to be in production in the next 5-10 years. Examples of these technologies are downsized and turbocharged engines operating at combustion pressures even higher than today's turbocharged engines, and emerging hybrid architecture combined with an 8-speed dual clutch transmission, a combination that is not available today. These are technologies that the agencies believe that manufacturers can, for the most part, apply both to cars and trucks, and that we expect will achieve significant improvements in fuel economy and reductions in CO

emissions at reasonable cost in the MYs 2017-2025 timeframe. Chapter 3 of the joint TSD provides the full assessment of these technologies. Due to the relatively long lead time before MY 2017, the agencies expect that manufacturers will be able to employ combinations of these and potentially other technologies and that manufacturers and the supply industry will be able to produce them in sufficient volumes to comply with the final standards.

A number of commenters suggested that the proposed standards were either too stringent or not stringent enough (either in some model years or in all model years, depending on the commenter), and nearly all auto manufacturers and their associations stressed the importance of the mid-term evaluation of the MYs 2022-2025 standards in their comments due to the long timeframe of the rule and uncertainty in assumptions given this timeframe. Our consideration of these comments as well as our revised analyses, leads us to conclude that the general rate of increase in the stringency of the standards as proposed remains appropriate. The comprehensive mid-term evaluation process being finalized and our evaluation of the stringency of the standards is discussed further in Sections III and IV.

Both agencies also considered other alternative standards as part of their respective Regulatory Impact Analyses that span a reasonable range of alternative stringencies both more and less stringent than the final standards. EPA's and NHTSA's analyses of these regulatory alternatives (and explanation of why we are finalizing the standards) are contained in Sections III and IV of this preamble, respectively, as well as in the agencies' respective Regulatory Impact Analyses (RIAs).

3. Form of the Standards

NHTSA and EPA are finalizing attribute-based standards for passenger cars and light trucks, as required by EISA and as allowed by the CAA, and will continue to use vehicle footprint as the attribute.

Footprint is defined as a vehicle's wheelbase multiplied by its average track width—in other words, the area enclosed by the points at which the wheels meet the ground. NHTSA and EPA adopted an attribute-based approach based on vehicle footprint for MYs 2012-2016 light-duty vehicle standards.

The agencies continue to believe that footprint is the most appropriate attribute on which to base the proposed standards, as discussed in Section II.C and in Chapter 2 of the Joint TSD. The majority of commenters supported the continued use of footprint as the vehicle attribute; those comments and the agencies' response are discussed in Section II.C below.

NHTSA and EPA use the same vehicle category definitions for determining which vehicles are subject to the car curve standards versus the truck curve standards as were used for MYs 2012-2016 standards. As in the MYs 2012-2016 rulemaking, a vehicle classified as a car under the NHTSA CAFE program will also be classified as a car under the EPA GHG program, and likewise for trucks. This approach of using common definitions allows the CO

standards and the CAFE standards to continue to be harmonized across all vehicles for the National Program.

NHTSA also used the footprint attribute in its Reformed CAFE program for light trucks for model years 2008-2011 and passenger car CAFE standards for MY 2011.

Under the footprint-based standards, the curve defines a GHG or fuel economy performance target for each separate car or truck footprint. Using the curves, each manufacturer thus will have a GHG and CAFE average standard that is unique to each of its fleets, depending on the footprints and production volumes of the vehicle models produced by that manufacturer. A manufacturer will have separate footprint-based standards for cars and for trucks. The curves are mostly sloped, so that generally, larger vehicles (

i.e.,

vehicles with larger footprints) will be subject to higher CO

grams/mile targets and lower CAFE mpg targets than smaller vehicles. This is because, generally speaking, smaller vehicles are more capable of achieving lower levels of CO

and higher levels of fuel economy than larger vehicles. Although a manufacturer's fleet average standards could be estimated throughout the model year based on the projected production volume of its vehicle fleet (and are estimated as part of the EPA certification process), the standards to which the manufacturer must comply will be determined by its final model year production figures. A manufacturer's calculation of its fleet average standards as well as its fleets' average performance at the end of the model year will thus be based on the production-weighted average target and performance of each model in its fleet.

As in the MYs 2012-2016 rule, a manufacturer may have some 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 for each model).

The final footprint-based standards are identical to those proposed. The passenger car curves are also similar in shape to the car curves for MYs 2012-2016. However, as proposed, the final light truck curves for MYs 2017-2025 reflect more significant changes compared to the light truck curves for MYs 2012-2016; specifically, the agencies have increased the slope and extended the large-footprint cutpoint for the light truck curves over time to larger footprints. We continue to believe that these changes from the MYs 2012-2016 curves represent an appropriate balance of both technical and policy issues, as discussed in Section II.C below and Chapter 2 of the Joint TSD.

NHTSA is adopting the attribute curves below for model years 2017 through 2021 and presenting the augural attribute curves below for model years 2022-2025. As just explained, these targets, expressed as mpg values, will be production-weighted to determine each manufacturer's fleet average standard for cars and trucks. Although the general model of the target curve equation is the same for each vehicle category and each year, the parameters of the curve equation differ for cars and trucks. Each parameter also changes on a model year basis, resulting in the yearly increases in stringency. Figure I-1 below illustrates the passenger car CAFE curves for model years 2017 through 2025 while Figure I-2 below illustrates the light truck CAFE curves for model years 2017 through 2025.

EPA is finalizing the attribute curves shown in Figure I-3 and Figure I-4 below, for model years 2017 through 2025. As with the CAFE curves, the general form of the equation is the same for each vehicle category and each year, but the parameters of the equation differ for cars and trucks. Again, each parameter also changes on a model year basis, resulting in the yearly increases in stringency. Figure I-3 below illustrates the CO

car standard curves for model years 2017 through 2025 while Figure I-

4 shows the CO

truck standard curves for model years 2017-2025.

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EPA and NHTSA received a number of comments about the shape of the car and truck curves. Some commenters, including Honda, Toyota and Volkswagen, stated that the light truck curve was too lenient for large trucks, while Nissan and Honda stated the light truck curve was too stringent for small trucks; Porsche and Volkswagen stated the car curve was too stringent generally, and Toyota stated it was too stringent for small cars. A number of NGOs (Center for Biological Diversity, International Council on Clean Transportation, Natural Resources Defense Council, Sierra Club, Union of Concerned Scientists) also commented on the truck curves as well as the relationship between the car and truck curves. We address all these comments further in Section II.C as well as in Sections III and IV.

Generally speaking, a smaller footprint vehicle will tend to have higher fuel economy and lower CO

emissions relative to a larger footprint vehicle when both have a comparable level of fuel efficiency improvement technology. Since the finalized standards apply to a manufacturer's overall passenger car fleet and overall light truck fleet, not to an individual vehicle, if one of a manufacturer's fleets is dominated by small footprint vehicles, then that fleet will have a higher fuel economy requirement and a lower CO

requirement than a manufacturer whose fleet is dominated by large footprint vehicles. Compared to the non-attribute based CAFE standards in place prior to MY 2011, the final standards more evenly distribute the compliance burdens of the standards among different manufacturers, based on their respective product offerings. With this footprint-based standard approach, EPA and NHTSA continue to believe that the rules will not create significant incentives to produce vehicles of particular sizes, and thus there should be no significant effect on the relative availability of different vehicle sizes in the fleet due to these standards, which will help to maintain consumer choice during the MY 2017 to MY 2025 rulemaking timeframe. Consumers should still be able to purchase the size of vehicle that meets their needs. Table I-6 helps to illustrate the varying CO

emissions and fuel economy targets under the final standards that different vehicle sizes will have, although we emphasize again that these targets are not actual standards—the standards are manufacturer-specific, rather than vehicle-specific.

Table I-6—Model Year 2025 CO

and Fuel Economy Targets for Various MY 2012 Vehicle Types

Vehicle type

Example models

Example model footprint

(sq. ft.)

Emissions target

(g/mi)

Fuel economy target (mpg)

Example Passenger Cars

Compact car

Honda Fit

131

61.1

Midsize car

Ford Fusion

147

54.9

Full size car

Chrysler 300

170

48.0

Example Light-duty Trucks

Small SUV

4WD Ford Escape

170

47.5

Midsize crossover

Nissan Murano

188

43.4

Minivan

Toyota Sienna

209

39.2

Large pickup truck

Chevy Silverado (extended cab, 6.5 foot bed)

252

33.0

a,b

Real-world CO

is typically 25 percent higher and real-world fuel economy is typically 20 percent lower than the CO

and fuel economy target values presented here.

4. Program Flexibilities for Achieving Compliance

a. CO

/CAFE Credits Generated Based on Fleet Average Over-Compliance

As proposed, the agencies are finalizing several provisions which provide compliance flexibility to manufacturers to meet the standards. Many of the provisions are also found in the MYs 2012-2016 rules. For example, the agencies are continuing to allow manufacturers to generate credits for over-compliance with the CO

and CAFE standards.

As noted above, under the footprint-based standards, a manufacturer's ultimate compliance obligations are determined at the end of each model year, when production of vehicles for that model year is complete. Since the fleet average standards that apply to a manufacturer's car and truck fleets are based on the applicable footprint-based curves, a production volume-weighted fleet average requirement will be calculated for each averaging set (cars and trucks) based on the mix and volumes of the models manufactured for sale by the manufacturer. If a manufacturer's car and/or truck fleet achieves a fleet average CO

/CAFE level better than its car and/or truck standards, then the manufacturer generates credits. Conversely, if the fleet average CO

/CAFE level does not meet the standard, the fleet would incur debits (also referred to as a shortfall). As in the MY 2011 CAFE program under EPCA/EISA, and also in MYs 2012-2016 for the light-duty vehicle GHG and CAFE program, a manufacturer whose fleet generates credits in a given model year would have several options for using those credits, including credit carry-back, credit carry-forward, credit transfers, and credit trading.

This credit flexibility is required by EPCA/EISA,

see

49 U.S.C. 32903, and is well within EPA's discretion under section 202(a) of the CAA.

Credit “carry-back” means that manufacturers are able to use credits to offset a deficit that had accrued in a prior model year, while credit “carry-forward” means that manufacturers can bank credits and use them toward compliance in future model years. EPCA, as amended by EISA, requires NHTSA to allow manufacturers to carry back credits for up to three model years, and to carry forward credits for up to five model years. EPA's MYs 2012-2016 light duty vehicle GHG program includes the same limitations and, as proposed, EPA is continuing this limitation in the MY 2017-2025 program. In its comments, Volkswagen requested that credits under the GHG rules be allowed to be carried back for five model years rather than three as proposed. A five year carry back could create a perverse incentive for shortfalls to accumulate past the point where they can be rectified by later model year performance. EPA is therefore adopting the three year carry back period in its rule. NHTSA is required to allow a three year carry-back period by statute.

However, to facilitate the transition to the increasingly more stringent standards, EPA proposed, and is finalizing under its CAA authority a one-time CO

carry-forward beyond 5 years, such that any credits generated from MYs 2010 through 2016 will be able to be used to comply with light duty vehicle GHG standards at any time through MY 2021. This provision does not apply to early credits generated in MY 2009. EPA received comments from the Alliance of Automobile Manufacturers and several individual manufacturers supporting the proposed additional credit carry-forward flexibility and also comments from the Center for Biological Diversity opposing the additional credit carry-forward provisions which are addressed in section III.B.4. NHTSA's program will continue the 5-year carry-forward and 3-year carry-back, as required by statute.

Credit “transfer” means the ability of manufacturers to move credits from their passenger car fleet to their light truck fleet, or vice versa. As part of the EISA amendments to EPCA, NHTSA was required to establish by regulation a CAFE credit transferring program, now codified at 49 CFR Part 536, to allow a manufacturer to transfer credits between its car and truck fleets to achieve compliance with the standards. For example, credits earned by over-compliance with a manufacturer's car fleet average standard could be used to offset debits incurred due to that manufacturer's not meeting the truck fleet average standard in a given year. However, EISA imposed a cap on the amount by which a manufacturer could raise its CAFE standards through transferred credits: 1 mpg for MYs 2011-2013; 1.5 mpg for MYs 2014-2017; and 2 mpg for MYs 2018 and beyond.

These statutory limits will continue to apply to the determination of compliance with the CAFE standards. EISA also prohibits the use of transferred credits to meet the minimum domestic passenger car fleet CAFE standard.

49 U.S.C. 32903(g)(3).

49 U.S.C. 32903(g)(4).

Under section 202 (a) of the CAA there is no statutory limitation on car-truck credit transfers, and EPA's GHG program allows unlimited credit transfers across a manufacturer's car-light truck fleet to meet the GHG

standard. This is based on the expectation that this flexibility will facilitate setting appropriate GHG standards that manufacturers can comply with in the lead time provided, and will allow the required GHG emissions reductions to be achieved in the most cost effective way. Therefore, EPA did not constrain the magnitude of allowable car-truck credit transfers in the MY 2012-2016 rule,

as doing so would reduce the flexibility to achieve the standards in the lead time provided, and would increase costs with no corresponding environmental benefit. EPA did not propose and is not finalizing any constraints on credit transfers for MY 2017 and later, consistent with the MY 2012-2016 program. As discussed in Section III.B.4, EPA received one comment from Center for Biological Diversity that it should be consistent with EISA and establish limitations on credit transfers. EPA disagrees with the commenter and continues to believe that limiting transfers and trading would unnecessarily constrain program flexibility as discussed in section III.B.4 below.

EPA's GHG program will continue to adjust car and truck credits by vehicle miles traveled (VMT), as in the MY2012-2016 program.

Credit “trading” means the ability of manufacturers to sell credits to, or purchase credits from, one another. EISA allowed NHTSA to establish by regulation a CAFE credit trading program, also now codified at 49 CFR Part 536, to allow credits to be traded between vehicle manufacturers. EPA also allows credit trading in the light-duty vehicle GHG program. These sorts of exchanges between averaging sets are typically allowed under EPA's current mobile source emission credit programs. EISA also prohibits manufacturers from using traded credits to meet the minimum domestic passenger car CAFE standard.

49 U.S.C. 32903(f)(2).

b. Air Conditioning Improvement Credits/Fuel Economy Value Increases

Air conditioning (A/C) systems contribute to GHG emissions in two ways. The primary refrigerant used in automotive air conditioning systems today—a hydrofluorocarbon (HFC) refrigerant and potent GHG called HFC-134a—can leak directly from the A/C system (direct A/C emissions). In addition, operation of the A/C system places an additional load on the engine that increases fuel consumption and thus results in additional CO

tailpipe emissions (indirect A/C emissions). In the MY 2012-2016 program, EPA allows manufacturers to generate credits by reducing either or both types of GHG emissions related to A/C systems. For those model years, EPA anticipated that manufacturers would pursue these relatively inexpensive reductions in GHGs due to improvements in A/C systems and accounted for generation and use of both of these credits in setting the levels of the CO

standards.

For this rule, as with the MYs 2012-2016 program, EPA is finalizing its proposal to allow manufacturers to generate CO

-equivalent

credits to use in complying with the CO

standards by reducing direct and/or indirect A/C emissions. These reductions can be achieved by improving A/C system efficiency (and thus reducing tailpipe CO

and improving fuel consumption), by reducing refrigerant leakage, and by using refrigerants with lower global warming potentials (GWPs) than HFC-134a. As proposed, EPA is establishing that the maximum total A/C credits available for cars will be 18.8 grams/mile CO

-equivalent and for trucks will be 24.4 grams/mile CO

-equivalent.

The approaches to be used to calculate these direct and indirect A/C credits are generally consistent with those of the MYs 2012-2016 program, although there are several revisions, including as proposed the introduction of a new A/C efficiency test procedure that will be applicable starting in MY 2014 for compliance with EPA's GHG standards.

equivalence (CO

e) expresses the global warming potential of a greenhouse gas (for A/C, hydrofluorocarbons) by normalizing that potency to CO

's. Thus, the maximum A/C credit for direct emissions is the equivalent of 18.8 grams/mile of CO

for cars.

This is further broken down by 5.0 and 7.2 g/mi respectively for car and truck AC efficiency credits, and 13.8 and 17.2 g/mi respectively for car and truck alternative refrigerant credits.

In addition to the grams-per-mile CO

-equivalent credits, for the first time the agencies are establishing provisions in the CAFE program that would account for improvements in air conditioner efficiency. Improving A/C efficiency leads to real-world fuel economy benefits, because as explained above, A/C operation represents an additional load on the engine. Thus, more efficient A/C operation imposes less of a load and allows the vehicle to go farther on a gallon of gas. Under EPCA, EPA has authority to adopt procedures to measure fuel economy and to calculate CAFE compliance values.

Under this authority, EPA is establishing that manufacturers can generate fuel consumption improvement values for purposes of CAFE compliance based on air conditioning system efficiency improvements for cars and trucks. An increase in a vehicle's CAFE grams-per-mile value would be allowed up to a maximum based on 0.000563 gallon/mile for cars and on 0.000810 gallon/mile for trucks. This is equivalent to the A/C efficiency CO

credit allowed by EPA under the GHG program. For the CAFE program, EPA would use the same methods to calculate the values for air conditioning efficiency improvements for cars and trucks as are used in EPA's GHG program. Additionally, given that these real-world improvements will be available to manufacturers for compliance, NHTSA has accounted for this by determining the amount that industry is expected to improve air conditioning system efficiency in each model year from 2017-2025, and setting the CAFE standards to reflect these improvements, in a manner consistent with EPA's GHG standards. EPA is not allowing generation of fuel consumption improvement values for CAFE purposes, nor is NHTSA increasing stringency of the CAFE standard, for the use of A/C systems that reduce leakage or employ alternative, lower GWP refrigerant. This is because those changes do not generally affect fuel economy. Most industry commenters supported this proposal, while one NGO noted that the inclusion of air conditioning improvements for purposes of CAFE car compliance was a change from prior interpretations.

See

49 U.S.C. 32904(c).

c. Off-cycle Credits/Fuel Economy Value Increases

For MYs 2012-2016, EPA provided an option for manufacturers to generate credits for utilizing new and innovative technologies that achieve CO

reductions that are not reflected on current test procedures. EPA noted in the MYs 2012-2016 rulemaking that examples of such “off-cycle” technologies might include solar panels on hybrids and active aerodynamics, among other technologies. See generally 75 FR 25438-39. EPA's current program allows off-cycle credits to be generated through MY 2016.

EPA proposed and is finalizing provisions allowing manufacturers to continue to generate and use off-cycle credits for MY 2017 and later to demonstrate compliance with the light-duty vehicle GHG standards. In addition, as with A/C efficiency, improving efficiency through the use of off-cycle technologies leads to real-world fuel economy benefits and allows the vehicle to go farther on a gallon of gas. Thus, under its EPCA authority EPA proposed and is finalizing provisions to allow manufacturers to generate fuel consumption improvement

values for purposes of CAFE compliance based on the use of off-cycle technologies. Increases in fuel economy under the CAFE program based on off-cycle technology will be equivalent to the off-cycle credit allowed by EPA under the GHG program, and these amounts will be determined using the same procedures and test methods as are used in EPA's GHG program. For the reasons discussed in Sections III.D and IV.I of this final rule preamble, the ability to generate off-cycle credits and increases in fuel economy for use in compliance will not affect or change the stringency of the GHG or CAFE standards established by each agency.

The agencies have developed estimates for the cost and effectiveness of various off-cycle technologies, including active aerodynamics and stop-start. For the final rule analysis, NHTSA assumed that these two technologies are available to manufacturers for compliance with the standards, similar to all of the other fuel economy improving technologies that the analysis assumes are available. The costs and benefits of these technologies are included in the analysis, similar to all other available technologies and therefore, NHTSA has included the assessment of off-cycle credits in the assessment of maximum feasible standards. EPA has included the 2-cycle benefit of stop-start and active aerodynamics in the standards setting analysis because these technologies have 2-cycle, in addition to off-cycle, effectiveness. As with all the technologies considered in TSD Chapter 3 which are modeled as part of potential compliance paths, EPA considers the 2-cycle effectiveness when setting the standard. The only exception where off-cycle effectiveness is reflected in the standard is for improvements to air conditioning leakage and efficiency.

Many automakers indicated that they had a strong interest in pursuing off-cycle technologies, and encouraged the agencies to refine and simplify the evaluation process to provide more certainty as to the types of technologies the agencies would approve for credit generation. Other commenters, such as suppliers and some NGOs, also provided technical input on various aspects of the off-cycle credit program. Some environmental groups expressed concerns about the uncertainties in calculating off-cycle credits and that the ability for manufacturer's to earn credits from off-cycle technologies should not be a disincentive for implementing other (2-cycle) technologies. For MY 2017 and later, EPA is finalizing several proposed provisions to expand and streamline the MYs 2012-2016 off-cycle credit provisions, including an approach by which the agencies will provide default values, which will eliminate the need for case-by-case-testing, for a subset of off-cycle technologies whose benefits are reliably and conservatively quantified. EPA is finalizing a list of technologies and default credit values for these technologies, as well as capping the maximum amount of these credits which can be utilized unless a manufacturer demonstrates through testing that greater amounts are justified. The agencies believe that our assessment of off-cycle technologies and associated credit values on this list is conservative, and emphasize that automakers may apply for additional off-cycle credits beyond the minimum credit value and cap if they present sufficient supporting data. Manufacturers may also apply to receive credit for off-cycle technologies besides those listed, again, if they have sufficient data. EPA received several comments regarding the list of technologies and associated credit values and has modified the list somewhat in response to these comments, as discussed in Section II.F.2. EPA was also persuaded by the public comments that the default credit values should not be contingent upon a minimum penetration of the technology into a manufacturer's fleet, and so is not adopting this aspect of the proposal. Manufacturers often apply new technologies on a limited basis to gain experience, gauge consumer acceptance, allow refinement of the manufacturing and production processes for quality and cost, a

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