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

Federal RegisterAug 10, 2021

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 86 and 600

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

RIN 2060-AV13

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

AGENCY:

Environmental Protection Agency (EPA).

ACTION:

Proposed rule.

SUMMARY:

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

DATES:

Comments:

Written comments must be received on or before September 27, 2021.

Public Hearing:

EPA plans to hold a virtual public hearing on August 25, 2021. An additional session may be held on August 26th if necessary to accommodate the number of testifiers that sign-up to testify. Please refer to the separate

Federal Register

notice issued by EPA for public hearing details. The hearing notice is available at

https://www.epa.gov/regulations-emissions-vehicles-and-engines/proposed-rule-revise-existing-national-ghg-emissions.

ADDRESSES:

You may send comments, identified by Docket ID No. EPA-HQ-OAR-2021-0208, by any of the following methods:

•

Federal eRulemaking Portal: https://www.regulations.gov/

(our preferred method). Follow the online instructions for submitting comments.

•

Email: a-and-r-Docket@epa.gov.

Include Docket ID No. EPA-HQ-OAR-2021-0208 in the subject line of the message.

•

Mail:

U.S. Environmental Protection Agency, EPA Docket Center, OAR, Docket EPA-HQ-OAR-2021-0208, Mail Code 28221T, 1200 Pennsylvania Avenue NW, Washington, DC 20460.

•

Hand Delivery or Courier (by scheduled appointment only):

EPA Docket Center, WJC West Building, Room 3334, 1301 Constitution Avenue NW, Washington, DC 20004. The Docket Center's hours of operations are 8:30 a.m.-4:30 p.m., Monday-Friday (except Federal Holidays).

Instructions:

All submissions received must include the Docket ID No. EPA-HQ-OAR-2021-0208 for this rulemaking. Comments received may be posted without change to

https://www.regulations.gov/,

including any personal information provided. For detailed instructions on sending comments and additional information on the rulemaking process, see the “Public Participation” heading of the

SUPPLEMENTARY INFORMATION

section of this document. Out of an abundance of caution for members of the public and our staff, the EPA Docket Center and Reading Room are closed to the public, with limited exceptions, to reduce the risk of transmitting COVID-19. Our Docket Center staff will continue to provide remote customer service via email, phone, and webform. We encourage the public to submit comments via

https://www.regulations.gov/

or email, as there may be a delay in processing mail. Hand deliveries and couriers may be received by scheduled appointment only. For further information on EPA Docket Center services and the current status, please visit us online at

https://www.epa.gov/dockets.

EPA plans to hold a virtual public hearing for this rulemaking. Please refer to the separate

Federal Register

notice issued by EPA for public hearing details. The hearing notice is available at

https://www.epa.gov/regulations-emissions-vehicles-and-engines/proposed-rule-revise-existing-national-ghg-emissions.

FOR FURTHER INFORMATION CONTACT:

Tad Wysor, Office of Transportation and Air Quality, Assessment and Standards Division (ASD), Environmental Protection Agency, 2000 Traverwood Drive, Ann Arbor, MI 48105; telephone number: (734) 214-4332; email address:

wysor.tad@epa.gov.

SUPPLEMENTARY INFORMATION:

A. Public Participation

Written Comments

EPA will keep the comment period open until September 27, 2021. All information will be available for inspection at the EPA Air Docket No. EPA-HQ-OAR-2021-0208. Submit your comments, identified by Docket ID No. EPA-HQ-OAR-2021-0208, at

https://www.regulations.gov

(our preferred method), or the other methods identified in the

ADDRESSES

section. Once submitted, comments cannot be edited or removed from the docket. EPA may publish any comment received to its public docket. Do not submit to EPA's docket at

https://www.regulations.gov

any information you consider to be Confidential Business Information (CBI) or other information whose disclosure is restricted by statute. Multimedia submissions (audio, video, etc.) must be accompanied by a written comment. The written comment is considered the official comment and should include discussion of all points you wish to make. EPA will generally not consider comments or comment contents located outside of the primary submission (

i.e.,

on the web, cloud, or other file sharing system). For additional submission methods, the full EPA public comment policy, information about CBI or multimedia submissions, and general guidance on making effective comments, please visit

https://www.epa.gov/dockets/commenting-epa-dockets.

EPA is temporarily suspending its Docket Center and Reading Room for public visitors, with limited exceptions, to reduce the risk of transmitting COVID-19. Our Docket Center staff will continue to provide remote customer

service via email, phone, and webform. We encourage the public to submit comments via

https://www.regulations.gov/

as there may be a delay in processing mail. Hand deliveries or couriers will be received by scheduled appointment only. For further information and updates on EPA Docket Center services, please visit us online at

https://www.epa.gov/dockets.

EPA continues to carefully and continuously monitor information from the Centers for Disease Control and Prevention (CDC), local area health departments, and our Federal partners so that we can respond rapidly as conditions change regarding COVID-19.

Virtual Public Hearing

EPA plans to hold a virtual public hearing on August 25, 2021. An additional session will be held on August 26th if necessary, to accommodate the number of testifiers that sign-up to testify. Please refer to the separate

Federal Register

notice issued by EPA for public hearing details. The hearing notice is available at

https://www.epa.gov/regulations-emissions-vehicles-and-engines/proposed-rule-revise-existing-national-ghg-emissions.

Please also refer to this website for any updates regarding the hearings. EPA does not intend to publish additional documents in the

Federal Register

announcing updates.

B. Does this action apply to me?

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

Category

NAICS

codes

Examples of potentially regulated entities

Industry

336111

336112

Motor Vehicle Manufacturers.

Industry

811111

811112

Commercial Importers of Vehicles and Vehicle Components.

811198

423110

Industry

335312

811198

Alternative Fuel Vehicle Converters.

North American Industry Classification System (NAICS).

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

FOR FURTHER INFORMATION CONTACT

Table of Contents

I. Executive Summary

A. Purpose of This Proposed Rule and Legal Authority

1. Proposal for Near-Term Standards Through Model Year 2026

2. Why does EPA believe the proposed standards are appropriate under the CAA?

3. Future Longer-Term Action to Further Reduce Light-Duty Vehicle Emissions in 2027 and Beyond

B. Summary of Proposed Light-Duty Vehicle GHG Program

1. Proposed Revised GHG Emissions Standards

2. Proposed Compliance Incentives and Flexibilities

C. Analytical Support for the Proposed Revised Standards

1. Summary of Analyses for This Proposed Rule

2. History of Similar Analyses

D. Summary of Costs and Benefits of the Proposed Program

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

F. Affordability and Equity

G. What alternatives is EPA considering?

1. Description of the Alternatives

2. Summary of Costs and Benefits of the Alternatives

3. Summary of the Proposal's Costs and Benefits Compared to the Alternatives

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

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

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

standards?

2. What are the proposed CO

attribute-based standards?

3. EPA's Statutory Authority Under the CAA

4. Averaging, Banking, and Trading Provisions for CO

Standards

5. Certification, Compliance, and Enforcement

6. On-Board Diagnostics Program Updates

7. Stakeholder Engagement

8. How do EPA's proposed standards relate to NHTSA's CAFE proposal and to California's GHG program?

B. Additional Manufacturer Compliance Flexibilities

1. Multiplier Incentives for Advanced Technology Vehicles

2. Advanced Technology Incentives for Full-Size Pickups

3. Off-Cycle Technology Credits

4. Air Conditioning System Credits

5. Natural Gas Vehicles Technical Correction

C. What alternatives is EPA considering?

III. Technical Assessment of the Proposed CO

Standards

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

B. Projected Compliance Costs and Technology Penetrations

1. GHG Targets and Compliance Levels

2. Projected Compliance Costs per Vehicle

3. Technology Penetration Rates

C. Are the proposed standards feasible?

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

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

A. Impact on GHG Emissions

B. Climate Change Impacts From GHG Emissions

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

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

A. Impact on Non-GHG Emissions

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

C. Air Quality Impacts of Non-GHG Pollutants

VI. Basis for the Proposed GHG Standards Under CAA Section 202(a)

A. Consideration of Technological Feasibility and Lead Time

1. Technological Readiness of the Auto Industry in Meeting Revised GHG Standards

2. Opportunities Provided Through Credits and Incentives Provisions

B. Consideration of Vehicle Costs of Compliance

C. Consideration of Impacts on Consumers

D. Consideration of Emissions of GHGs and Other Air Pollutants

E. Consideration of Energy, Safety and Other Factors

F. Balancing of Factors Under CAA 202(a)

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

A. Conceptual Framework for Evaluating Consumer Impacts

B. Vehicle Sales Impacts

C. Changes in Fuel Consumption

D. Greenhouse Gas Emission Reduction Benefits

E. Non-Greenhouse Gas Health Impacts

F. Energy Security Impacts

G. Impacts of Additional Driving

H. Safety Considerations in Establishing GHG Standards

I. Summary of Costs and Benefits

J. Impacts on Consumers of Vehicle Costs and Fuel Savings

K. Employment Impacts

L. Environmental Justice

1. GHG Impacts

2. Non-GHG Impacts

M. Affordability and Equity Impacts

VIII. Statutory and Executive Order Reviews

A. Executive Order 12866: “Regulatory Planning and Review and Executive Order 13563: Improving Regulation and Regulatory Review”

B. Paperwork Reduction Act

C. Regulatory Flexibility Act

D. Unfunded Mandates Reform Act

E. Executive Order 13132: “Federalism”

F. Executive Order 13175: “Consultation and Coordination With Indian Tribal Governments”

G. Executive Order 13045: “Protection of Children From Environmental Health Risks and Safety Risks”

H. Executive Order 13211: “Energy Effects”

I. National Technology Transfer and Advancement Act

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

IX. Statutory Provisions and Legal Authority

I. Executive Summary

A. Purpose of This Proposed Rule and Legal Authority

1. Proposal for Near-Term Standards Through Model Year 2026

The Environmental Protection Agency (EPA) is proposing to revise existing national greenhouse gas (GHG) emissions standards for passenger cars and light trucks under section 202(a) of the Clean Air Act (CAA), 42 U.S.C. 7521(a). Section 202(a) requires EPA to establish standards for emissions of air pollutants from new motor vehicles which, in the Administrator's judgment, cause or contribute to air pollution which may reasonably be anticipated to endanger public health or welfare.

This proposal also responds to Executive Order (E.O.) 13990, “Protecting Public Health and the Environment and Restoring Science To Tackle the Climate Crisis” (Jan. 20, 2021), which directs EPA to consider taking the action proposed in this notice:

86 FR 7037, January 25, 2021.

“[T]he head of the relevant agency, as appropriate and consistent with applicable law, shall consider publishing for notice and comment a proposed rule suspending, revising, or rescinding the agency action[s set forth below] within the time frame specified.”

“Establishing Ambitious, Job-Creating Fuel Economy Standards: . . . `The Safer Affordable Fuel-Efficient (SAFE) Vehicles Rule for Model Years 2021-2026 Passenger Cars and Light Trucks,' 85 FR 24174 (April 30, 2020), by July 2021. . . . In considering whether to propose suspending, revising, or rescinding the latter rule, the agency should consider the views of representatives from labor unions, States, and industry.”

The proposed program would revise the light-duty vehicle GHG standards previously revised by the SAFE rule and would build upon earlier EPA actions and supporting analyses that established or maintained stringent light-duty vehicle GHG emissions standards. For example, in 2012, EPA issued a final rule establishing light-duty vehicle GHG standards for model years (MYs) 2017-2025,

which were supported in analyses accounting for compliance costs, lead time and other relevant factors.

That rule and its analyses also accounted for the development and availability of advanced GHG emission-reducing technologies for gasoline-fueled vehicles, which demonstrated that the standards were appropriate under section 202(a) of the CAA.

This proposed rule provides additional analysis that takes into consideration updated data and recent developments. Auto manufacturers are currently implementing an increasing array of advanced gasoline vehicle GHG emission-reducing technologies at a rapid pace throughout their vehicle fleets. Vehicle electrification technologies are also advancing rapidly, as battery costs have continued to decline, and automakers have announced an increasing diversity and volume of zero-emission vehicle models. Meanwhile, in 2019, several auto manufacturers voluntarily entered into agreements with the State of California to comply with GHG emission reduction targets through MY 2026 across their national vehicle fleets (the “California Framework Agreements”) that are more stringent than the EPA standards as revised by the SAFE rule. These developments further support EPA's decision to reconsider and propose revising the existing EPA standards to be more stringent, particularly in light of factors indicating that more stringent near-term standards are feasible at reasonable cost and would achieve significantly greater GHG emissions reductions and public health and welfare benefits than the existing program. In developing this proposal, EPA has conducted outreach with a wide range of interested stakeholders, including labor unions, States, and industry as provided in E.O. 13990, and we will continue to engage with these and other stakeholders as part of our regulatory development process.

EPA's model year emission standards also apply in subsequent model years, unless revised,

e.g.,

MY 2025 standards issued in the 2012 rule also applied to MY 2026 and beyond.

77 FR 62624, October 15, 2012.

Id.

This proposal is limited to MYs 2023-2026, given lead time considerations under the CAA, which is consistent with E.O. 13990's direction to review the SAFE rule standards. We have designed the proposed program based on our assessment that the proposed standards are reasonable and appropriate and will achieve a significant level of GHG reductions for MYs 2023-2026 vehicles, with the expectation that a future, longer-term program for MYs 2027 and later will build upon these near-term standards.

EPA has set previous light-duty vehicle GHG emission standards in joint rulemakings where NHTSA also established CAFE standards. EPA has concluded that it is not necessary at this time for this EPA proposal to be done in a joint action with NHTSA. EPA has coordinated with NHTSA, both on a bilateral level as well as through the interagency review of the EPA proposal led by the Office of Management and Budget.

2. Why does EPA believe the proposed standards are appropriate under the CAA?

EPA is proposing to revise GHG emissions standards for passenger cars and light trucks under its authority in section 202(a) of the CAA. Section 202(a) requires EPA to establish standards for emissions of pollutants from new motor vehicles which, in the Administrator's judgment, cause or contribute to air pollution which may reasonably be anticipated to endanger public health or welfare. Standards under section 202(a) take effect “after such period as the Administrator finds necessary to permit the development and application of the requisite technology, giving appropriate consideration to the cost of compliance within such period.” Thus, in establishing or revising section 202(a) standards designed to reduce air pollution that endangers public health and welfare, EPA also must consider issues of technological feasibility, compliance cost, and lead time. EPA also may consider other factors and in previous light-duty vehicle GHG standards rulemakings has considered the impacts of potential GHG standards

on the auto industry, fuel savings by consumers, oil conservation, energy security and other energy impacts, as well as other relevant considerations such as safety.

As we describe in greater detail below, EPA has carefully considered the technological feasibility and cost of the proposed standards and the available lead time for manufacturers to comply with them, including existing and proposed flexibilities designed to facilitate compliance during the MYs 2023-2026 timeframe. Based on our analysis, we believe that the proposed standards, combined with proposed flexibilities that address lead time considerations resulting from relaxations in standards revised in the SAFE rule, are appropriate and justified under section 202(a) of the CAA. Our updated analysis for this proposal, as well as our earlier analyses of similar standards, supports the conclusion that the proposed standards are technologically feasible for the model years covered (MYs 2023-2026) and that the costs of compliance for manufacturers would be reasonable. The proposed standards would result in greater reductions in GHG emissions, as well as reductions in emissions of some criteria pollutants and air toxics, resulting in significant benefits for public health and welfare. We also show that the proposal would result in reduced vehicle operating costs for consumers and that the benefits of the proposed program would significantly exceed the costs.

EPA has significantly updated its analysis for this rule. As discussed further below, we have updated a number of key inputs, such as, for example, certain technology costs and penetrations, to ensure they are up to date. Notably, the results of this updated analysis are generally in agreement with prior analyses, including those conducted for the SAFE rule. In particular, the costs that have been estimated for manufacturers to meet standards of a similar stringency to the proposed standards have been roughly consistent since EPA first estimated them in 2012. That is, although manufacturers have less lead time before these standards would be implemented than with previous rulemakings, the significant progress that has been made in implementing advanced gasoline technologies in the fleet (as well as advances in electric and hybrid vehicle technology) since 2012 means the proposed standards can be achieved at roughly the same cost as previous estimates, and additional lead time is unnecessary.

When considering similar cost estimates in the SAFE rule, EPA identified some factors, primarily costs to manufacturers and upfront costs to consumers, as favoring reductions in stringency of the then-existing standards, and other factors, such as reduced emissions that endanger public health and welfare and reduced operating costs for consumers, as favoring increased stringency (or a lower degree of reduced stringency). In balancing these factors in the SAFE rule, EPA placed greater weight on the former factors, and thereby decided to make EPA's GHG standards significantly less stringent. But the purpose of adopting standards under CAA section 202 is to address air pollution that may reasonably be anticipated to endanger public health and welfare. Indeed, reducing air pollution has traditionally been the focus of such standards. EPA has reconsidered how costs, lead time and other factors were weighed in the SAFE rule and is reaching a different conclusion as to the appropriate stringency of GHG standards. In light of the statutory purpose of section 202, the Administrator is placing greater weight on the emission reductions and resulting public health and welfare benefits, as well as the savings in vehicle operating costs for consumers, and proposing significantly more stringent standards for MYs 2023-2026 compared to the standards established by the SAFE rule. As discussed in Section III.A, the proposed standards take into consideration both the updated analysis for this rule and past EPA analyses conducted for similar GHG standards. We are revising decisions made in the SAFE final rule in accordance with Supreme Court decisions affirming that agencies are free to reconsider and revise their prior decisions where they provide a reasonable explanation for their revised decisions.

In this rulemaking, the agency is changing its 2020 position and restoring its previous approach by proposing to find, in light of the statutory purposes of the Clean Air Act and in particular of section 202(a), that it is more appropriate to place greater weight on the magnitude and benefits of reducing emissions that endanger public health and welfare, while continuing to consider compliance costs, lead time and other relevant factors.

See, e.g.,

Encino Motorcars, LLC

Navarro,

136 S. Ct. 2117, 2125 (2016);

FCC

Fox Television Stations, Inc.,

556 U.S. 502, 515 (2009).

3. Future Longer-Term Action To Further Reduce Light-Duty Vehicle Emissions in 2027 and Beyond

Addressing the climate crisis will require substantial reductions in GHG emissions from the transportation sector. The transportation sector is the largest U.S. source of GHG emissions, representing 29 percent of total GHG emissions.

Within the transportation sector, light-duty vehicles are the largest contributor, at 58 percent, and thus comprise 17 percent of total U.S. GHG emissions.

GHG emissions have significant impacts on public health and welfare as evidenced by the well-documented scientific record and as set forth in EPA's Endangerment and Cause or Contribute Findings under Section 202(a) of the CAA.

Additionally, major scientific assessments continue to be released that further advance our understanding of the climate system and the impacts that GHGs have on public health and welfare both for current and future generations, as discussed in Section IV.B, making it clear that continued emission reductions in the light-duty vehicle sector are needed beyond the model years covered by the standards proposed today.

Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990-2019

(EPA-430-R-21-005, published April 2021).

Ibid.

74 FR 66496, December 15, 2009; 81 FR 54422, August 15, 2016.

This proposed action therefore serves as a critical building block for a comprehensive, multipollutant longer-term regulatory program implementing EPA's statutory authority under the CAA. We are at a pivotal moment in the history of the light-duty transportation sector—a shift to zero-emission vehicle technologies is already underway, and it presents a strong potential for dramatic reductions in GHG and criteria pollutant emissions over the longer term. Major automakers as well as many global jurisdictions and U.S. states have announced plans to shift the light-duty fleet toward zero-emissions technology, as detailed below. EPA anticipates that the design of a future, longer-term program beyond 2026 will incorporate accelerating advances in zero-emission technologies.

A proliferation of recent announcements from automakers signals a rapidly growing shift in investment away from internal-combustion technologies and toward high levels of electrification. These automaker announcements are supported by continued advances in automotive electrification technologies, and further driven by the need to

compete in a global market as other countries implement aggressive zero-emission transportation policies. For example, in January 2021, General Motors announced plans to become carbon neutral by 2040, including an effort to shift its light-duty vehicles entirely to zero-emissions by 2035.

In March 2021, Volvo announced plans to make only electric cars by 2030,

and Volkswagen announced that it expects half of its U.S. sales will be all-electric by 2030.

In April 2021, Honda announced a full electrification plan to take effect by 2040, with 40 percent of North American sales expected to be fully electric or fuel cell vehicles by 2030, 80 percent by 2035 and 100 percent by 2040.

In May 2021, Ford announced that they expect 40 percent of their global sales will be all-electric by 2030.

In June 2021, Fiat announced a move to all electric vehicles by 2030, and in July 2021 its parent corporation Stellantis announced an intensified focus on electrification across all of its brands.

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Also in July 2021, Mercedes-Benz announced that all of its new architectures would be electric-only from 2025, with plans to become ready to go all-electric by 2030 where possible.

General Motors, “General Motors, the Largest U.S. Automaker, Plans to be Carbon Neutral by 2040,” Press Release, January 28, 2021.

Volvo Car Group, “Volvo Cars to be fully electric by 2030,” Press Release, March 2, 2021.

Volkswagen Newsroom, “Strategy update at Volkswagen: The transformation to electromobility was only the beginning,” March 5, 2021. Accessed June 15, 2021 at

https://www.volkswagen-newsroom.com/en/stories/strategy-update-at-volkswagen-the-transformation-to-electromobility-was-only-the-beginning-6875.

Honda News Room, “Summary of Honda Global CEO Inaugural Press Conference,” April 23, 2021. Accessed June 15, 2021 at

https://global.honda/newsroom/news/2021/c210423eng.html.

Ford Motor Company, “Superior Value From EVs, Commercial Business, Connected Services is Strategic Focus of Today's `Delivering Ford+' Capital Markets Day,” Press Release, May 26, 2021.

Stellantis, “World Environment Day 2021—Comparing Visions: Olivier Francois and Stefano Boeri, in Conversation to Rewrite the Future of Cities,” Press Release, June 4, 2021.

Stellantis, “Stellantis Intensifies Electrification While Targeting Sustainable Double-Digit Adjusted Operating Income Margins in the Mid-Term,” Press Release, July 8, 2021.

Mercedes-Benz, “Mercedes-Benz prepares to go all-electric,” Press Release, July 22, 2021.

These announcements and others like them continue a pattern over the past several years of many manufacturers taking steps to aggressively pursue zero-emission technologies, introduce a wide range of zero-emission vehicle models, and reduce their reliance on the internal-combustion engine in various markets around the globe.

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These goals and investments have been coupled with a rapidly increasing availability of plug-in vehicle models in the U.S.

For example, the number of all-electric vehicle (EV) and plug-in hybrid electric vehicle (PHEV) models available for sale in the U.S. more than doubled from about 24 in MY 2015 to about 60 in MY 2021, with offerings in a growing range of vehicle segments.

Recent model announcements indicate that this number will increase to more than 80 models by MY 2023, with many more expected to reach production before the end of the decade.

Many of the zero-emission vehicles already on the market today cost less to drive than conventional vehicles,

22 23

offer improved performance and handling,

and can be charged at a growing network of public chargers

as well as at home.

Environmental Defense Fund and M.J. Bradley & Associates, “Electric Vehicle Market Status—Update, Manufacturer Commitments to Future Electric Mobility in the U.S. and Worldwide,” April 2021.

International Council on Clean Transportation, “The end of the road? An overview of combustion-engine car phase-out announcements across Europe,” May 10, 2020.

Muratori et al., “The rise of electric vehicles—2020 status and future expectations,” Progress in Energy v3n2 (2021), March 25, 2021. Accessed July 15, 2021 at

https://iopscience.iop.org/article/10.1088/2516-1083/abe0ad.

Fueleconomy.gov,

2015 Fuel Economy Guide and 2021 Fuel Economy Guide.

Environmental Defense Fund and M.J. Bradley & Associates, “Electric Vehicle Market Status—Update, Manufacturer Commitments to Future Electric Mobility in the U.S. and Worldwide,” April 2021.

Department of Energy Vehicle Technologies Office, Transportation Analysis Fact of the Week #1186, “The National Average Cost of Fuel for an Electric Vehicle is about 60% Less than for a Gasoline Vehicle,” May 17, 2021.

Department of Energy Vehicle Technologies Office, Transportation Analysis Fact of the Week #1190, “Battery-Electric Vehicles Have Lower Scheduled Maintenance Costs than Other Light-Duty Vehicles,” June 14, 2021.

Consumer Reports, “Electric Cars 101: The Answers to All Your EV Questions,” November 5, 2020. Accessed June 8, 2021 at

https://www.consumerreports.org/hybrids-evs/electric-cars-101-the-answers-to-all-your-ev-questions/.

Department of Energy Alternative Fuels Data Center, Electric Vehicle Charging Station Locations. Accessed on May 19, 2021 at

https://afdc.energy.gov/fuels/electricity_locations.html#/find/nearest?fuel=ELEC.

At the same time, an increasing number of global jurisdictions and U.S. states plan to take actions to shift the light-duty fleet toward zero-emissions technology. In 2020, California announced an intention to require increasing volumes of zero-emission vehicles to meet the goal that, by 2035, all new light-duty vehicles sold in the state be zero-emission vehicles.

Massachusetts

and New York

are also poised to adopt similar targets and requirements to take effect by 2035. Several other states may adopt similar provisions by 2050 as members of the International Zero-Emission Vehicle Alliance.

Globally, at least 12 countries, as well as numerous local jurisdictions, have announced similar goals to shift all new passenger car sales to zero-emission vehicles in the coming years, including Norway (2025); the Netherlands, Denmark, Iceland, Ireland, Sweden, and Slovenia (2030); Canada and the United Kingdom (2035); France and Spain (2040); and Costa Rica (2050).

30 31

Together, these countries represent approximately 13 percent of the global market for passenger cars,

in addition to that represented by the aforementioned U.S. states and other global jurisdictions.

State of California Office of the Governor, “Governor Newsom Announces California Will Phase Out Gasoline-Powered Cars & Drastically Reduce Demand for Fossil Fuel in California's Fight Against Climate Change,” Press Release, September 23, 2020.

Commonwealth of Massachusetts, “Request for Comment on Clean Energy and Climate Plan for 2030,” December 30, 2020.

New York State Senate, Senate Bill S2758, 2021-2022 Legislative Session. January 25, 2021.

ZEV Alliance, “International ZEV Alliance Announcement,” Dec. 3, 2015. Accessed on July 16, 2021 at

http://www.zevalliance.org/international-zev-alliance-announcement/.

International Council on Clean Transportation, “Update on the global transition to electric vehicles through 2019,” July 2020.

Reuters, “Canada to ban sale of new fuel-powered cars and light trucks from 2035,” June 29, 2021. Accessed July 1, 2021 from

https://www.reuters.com/world/americas/canada-ban-sale-new-fuel-powered-cars-light-trucks-2035-2021-06-29/.

International Council on Clean Transportation, “Growing momentum: Global overview of government targets for phasing out new internal combustion engine vehicles,” posted 11 November 2020, accessed April 28, 2021 at

https://theicct.org/blog/staff/global-ice-phaseout-nov2020.

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

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

Department of Energy Electricity Advisory Committee, “Enhancing Grid Resilience with Integrated Storage from Electric Vehicles: Recommendations for the U.S. Department of Energy,” June 25, 2018.

B. Summary of Proposed Light-Duty Vehicle GHG Program

EPA is proposing revised GHG standards that would begin in MY 2023 and increase in stringency year over year through MY 2026. EPA proposes to increase the stringency of the standards from the average roughly 1.5 percent year-over-year stringency increase of the relaxed SAFE standards to a nearly 10 percent proposed stringency increase in MY 2023, followed by a nearly 5 percent proposed stringency increase in each MY from 2024 through 2026. EPA believes the 10 percent proposed increase in stringency in MY 2023 is appropriate given the technological investments industry has continued to make beyond what would be required to meet the SAFE rule revised standards, such as improvements being made in response to the California Framework Agreements, as well as the compliance flexibilities built into the program. Also, as discussed in Section I.G below, EPA requests comment on standards for MY 2026 that would result in fleet average target levels that are in the range of 5-10 g/mile lower (i.e., more stringent) than the levels proposed. This request for comments is in keeping with the additional lead time available for this out-year compared to MYs 2023-2025, and because EPA may determine that it is appropriate, particularly in light of the accelerating transition to electrified vehicles, to require additional reductions in this time frame. The proposed standards would achieve significant GHG and other emission reductions and related public health and welfare benefits, while providing consumers with lower operating costs resulting from significant fuel savings. Our analysis described in this notice demonstrates that the proposed standards are appropriate under section 202(a) of the CAA, considering costs, technological feasibility, available lead time, and other factors. The proposed trajectory of increasing stringency from MYs 2023 to 2026 takes into account the credit-based emissions averaging, banking and trading flexibilities of the current program as well as additional flexibility provisions that we are proposing to ease the transition to more stringent standards. EPA also took into account manufacturers' ability to generate credits against the existing standards relaxed in the SAFE rule for MYs 2021 and 2022, which we are not proposing to revise.

In our design and analyses of the proposed program and our overall updated assessment of feasibility, EPA also took into account the decade-long light-duty vehicle GHG emission reduction program in which the auto industry has introduced a wide lineup of ever more fuel-efficient, GHG-reducing technologies. The technological achievements already developed and applied to vehicles within the current new vehicle fleet will enable the industry to achieve the proposed standards even without the development of new technologies beyond those already widely available. Furthermore, in light of the design cycle timing for vehicles, EPA has basis to expect that the vehicles that automakers will be selling during the first years of the proposed MY 2023-26 program were already designed before the less stringent SAFE standards were recently adopted. Further support that the technologies needed to meet the proposed standards do not need to be developed, but are already widely available and in use on vehicles, can be found in the fact that five vehicle manufacturers, representing about a third of U.S. auto sales, agreed in 2019 with the State of California that their nationwide fleets would meet GHG emission reduction targets more stringent than the applicable EPA standards beginning in model year 2021. The fact that five automakers voluntarily entered into the California Framework Agreements also supports the feasibility of meeting standards at least as stringent as the emission reduction targets under the California Framework, which we describe in detail later in this preamble. We describe additional details of the proposal below and in later sections of the preamble as well as in the Draft Regulatory Impact Analysis (DRIA). We also describe and analyze both less stringent and more stringent alternatives, consistent with OMB Circular A-4.

Although most automakers have launched ambitious plans to develop and produce increasing numbers of zero- and near-zero-emission vehicles, EPA recognizes that during the near-term timeframe of the proposed standards through MY 2026, the new vehicle fleet likely will continue to consist primarily of gasoline-fueled vehicles. In this preamble and in the DRIA, we provide our analyses supporting our assessment that the proposed standards for MYs 2023 through 2026 would be achievable primarily through the application of advanced gasoline vehicle technologies. We project that during the four-year ramping up of the stringency of the CO

standards, the proposed standards could be met with gradually increasing sales of plug-in electric vehicles in the U.S., up to about 8 percent market share (including both electric vehicles (EVs) and plug-in hybrid electric vehicles (PHEVs)) by MY 2026. Given that EVs and PHEVs represented about 2 percent of the new vehicle market in MY 2019,

this would represent a significant increase in penetration of these vehicles but one that we believe is reasonable given automaker announcements on increasing EV and PHEV production. We note later in this preamble in the discussion of the alternative levels of stringency that EPA is considering, that there may be the potential for higher levels of EV penetration by MY 2026, which could enable EPA to consider a more stringent standard for MY 2026. As described elsewhere in this preamble, we believe that, in conjunction with the proposed standards, the limited but focused incentives and flexibilities that we are proposing would support automakers' acceleration of their introduction and sales of advanced technologies, including zero and near-zero-emission technologies.

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

1. Proposed Revised GHG Emissions Standards

i. Proposed Revised CO

Targets

As with EPA's previous light-duty GHG programs, EPA is proposing footprint-based standards curves for both passenger cars and trucks. Each manufacturer would have a unique standard for the passenger cars category and another for the truck category

for each MY based on the sales-weighted footprint-based CO

targets

of the vehicles produced in that MY. Figure 1 shows EPA's proposed standards, expressed as average fleetwide GHG emissions targets (cars and trucks combined), projected through MY 2026. For comparison, the figure also shows the corresponding targets for the SAFE final rulemaking (FRM) and the 2012 FRM. The projected fleet targets for this proposed rule increase in stringency in

MY 2023 by about 10 percent (from the existing SAFE rule standards in MY 2022), followed by stringency increases thereafter of nearly 5 percent year over year from MY 2024 through MY 2026. Also, as discussed in Section I.G, EPA requests comment on standards for MY 2026 that would result in fleet average target levels that are in the range of 5-10 g/mile lower (

i.e.

, more stringent) than the levels proposed. As with all EPA vehicle emissions standards, the proposed MY 2026 standards would then remain in place for all subsequent MYs, unless and until they are revised in a subsequent rulemaking. Table 1 presents the estimates of EPA's proposed standards presented in Figure 1, again in terms of the projected overall industry fleetwide CO

-equivalent emission compliance target levels. The industry fleet-wide estimates in Table 1 are projections based on modeling that EPA conducted for the proposed rule, taking into consideration projected fleet mix and footprints for each manufacturer's fleet in each model year. Table 2 presents projected industry fleet average year-over-year percent reductions comparing the existing standards under the SAFE rule and the proposed revised standards. See Section II.A below for a full discussion of the proposed standards and presentations of the footprint standards curves.

Passenger cars include cars and smaller cross-overs and SUVs, while the truck category includes larger cross-overs and SUVs, minivans, and pickup trucks.

Because compliance is based on the full range of vehicles in a manufacturer's car and truck fleets, with lower-emitting vehicles compensating for higher-emitting vehicles, the emission levels of specific vehicles within the fleet are referred to as targets, rather than standards.

BILLING CODE 6560-50-P

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Table 1—Projected Industry Fleet-Wide CO

Compliance Targets for MYs 2023-2026

[grams/mi]

2022 *

2023

2024

2025

2026 **

Cars

180

165

157

149

142

Trucks

260

232

221

210

199

Combined Cars and Trucks

220

199

189

180

171

* SAFE rule targets included for reference.

** EPA is also requesting comment on MY 2026 standards that would result in fleet average levels that are 5-10 g/mile more stringent than the levels shown.

The combined car/truck CO2 targets are a function of assumed car/truck shares. For this illustration, we assume an approximately 50/50% split in MYs 2023-2026. See DRIA Chapter 2 for detail.

Table 2—Projected Industry Fleet Average Target Year-Over-Year Percent Reductions

SAFE rule

Cars

Trucks

Combined

Proposal

Cars

Trucks

Combined

2023

1.7

1.5

1.6

8.3

10.8

9.8

2024

1.1

1.2

4.8

4.7

2025

2.3

2.0

2.2

5.1

5.0

4.9

2026 *

1.8

1.6

1.7

4.7

5.2

5.0

* The percentages shown do not include EPA's request for comments on MY 2026 standards that are 5-10 g/mile more stringent than proposed.

2. Proposed Compliance Incentives and Flexibilities

The existing GHG program established in the 2010 and 2012 rules included several key flexibilities, such as credit programs and technology incentives that are discussed further in this proposal where EPA is requesting comment or proposing modifications.

These include:

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

• Credit Averaging, Banking, and Trading (ABT) including credit carry-forward, credit carry-back, transferring credits between a manufacturer's car and truck fleets, and credit trading between manufacturers (MY 2012 and later)

• Off-cycle credits for GHG emissions reductions not captured on the test procedures used for fleet average compliance with the footprint-based standards (MY 2012 and later)

• Air conditioning credits for system efficiency improvements and reduced refrigerant leakage or use of low global warming potential refrigerants (MY 2012 and later)

• Multiplier incentives for advanced technology vehicles including electric vehicles, fuel cell vehicles, plug-in hybrids (ending after MY 2021)

• Multiplier incentives for natural gas fueled vehicles (MY 2021-2026)

• Full-size pick-up incentives for hybridization or performance improvements equivalent to hybridization (ending after MY 2021)

EPA is proposing a targeted set of extended or additional compliance flexibilities and incentives that we believe are appropriate given the stringency and lead time of the proposed standards. We are proposing four types of flexibilities/incentives, in addition to flexibilities/incentives that already will be available for these MYs under EPA's existing regulations: (1) A limited extension of carry-forward credits generated in MYs 2016 through 2020; (2) an extension of the advanced technology vehicle multiplier credits for MYs 2022 through 2025 with a cumulative credit cap; (3) restoration of the 2012 rule's full-size pickup truck incentives for strong hybrids or similar performance-based credit for MYs 2022 through 2025 (provisions which were removed in the SAFE rule); and (4) an increase of the off-cycle credits menu cap from 10 g/mile to 15 g/mile. EPA is also proposing to remove the multiplier incentives for natural gas fueled vehicles for MYs 2023-2026. We summarize these proposals below and provide details in Sections II.B and II.C below.

The GHG program includes existing provisions initially established in the 2010 rule, which set the MY 2012-2016 GHG standards, for how credits may be used within the program. These averaging, banking, and trading (ABT) provisions include credit carry-forward, credit carry-back (also called deficit carry-forward), credit transfers (within a manufacturer), and credit trading (across manufacturers). These ABT provisions define how credits may be used and are integral to the program. The current program limits credit carry-forward to 5 years. EPA is proposing a limited extension of credit carry-forward for credits generated in MYs 2016 through 2020. The proposal would change the credit carry-forward time limitation for MY 2016 credits from five to seven years and the carry-forward limit for MYs 2017-2020 from 5 to 6 years, as shown in Table 3 below.

Table 3—EPA Proposed Extension of Credit Carry-Forward Provisions

MY credits are banked

MYs credits are valid under EPA's proposed extension

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2016

2017

2018

2019

2020

2021

x = Current program. + = Proposed additional years.

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

loss of emissions reduction benefits to increase the potential for far greater emissions reduction and technology diffusion benefits in the longer term.

EPA believed that the temporary regulatory incentives would help bring low emission technologies to market more quickly than in the absence of incentives.

With these same goals in mind for this program, EPA is proposing multiplier incentives from MY 2022 though MY 2025 with a cap on multiplier credits and to reinstate the full-size pickup incentives removed from the program by the SAFE rule. These proposed incentives are intended as a temporary measure supporting the transition to zero-emission vehicles and to provide additional flexibility in meeting the MY 2023-2026 proposed standards, as further discussed in Section II.B.1.

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

77 FR 62812, October 15, 2012.

EPA is also proposing to remove the extended multiplier incentives added by the SAFE rule from the GHG program after MY 2022. EPA is proposing to end multipliers for NGVs in this manner because NGVs are not a near-zero emissions technology and EPA believes multipliers are no longer necessary or appropriate for these vehicles. Any NGV multiplier credits generated in MY 2022 would be included under the proposed multiplier cap.

The current program also includes credits for real-world emissions reductions not reflected on the test cycles used for measuring CO

emissions for compliance with the fleet average standards. There are credits for using technologies that reduce GHG emissions that aren't captured on EPA tests (“off-cycle” technologies) and improvements to air conditioning systems that increase efficiency and reduce refrigerant leakage. These credit opportunities do not sunset under the existing regulations, remaining a part of the program through MY 2026 and beyond unless the program is changed by regulatory action. EPA is proposing to modify an aspect of the off-cycle credits program to provide additional opportunities for manufacturers to generate credits by increasing the pre-defined menu credit cap from 10 to 15 g/mile. EPA is also proposing to modify some of the regulatory definitions that are used to determine whether a technology is eligible for the menu credits. EPA is not proposing changes to the air conditioning credits elements of the program.

C. Analytical Support for the Proposed Revised Standards

1. Summary of Analyses for This Proposed Rule

All of EPA's analyses of the national light-duty vehicle GHG program over the past decade have been built on the same overall framework and produce the same types of results. Section III.A below explains this common EPA framework in more detail. In summary, it includes the following primary elements:

i. Analyzing Issues of Feasibility, Costs, and Lead Time

As with our earlier analyses, EPA used a model to simulate the decision process of auto manufacturers in choosing among the emission reduction technologies available to incorporate in vehicles across their fleets. The models take into account both the projected costs of established and newer technologies and the relative ability of each of these technologies to reduce GHG emissions. This process identifies potential pathways for manufacturers to comply with a given set of GHG standards. EPA then estimates projected average and total costs for manufacturers to produce these vehicles to meet the standards under evaluation during the model years covered by the analysis.

In addition to projecting the technological capabilities of the industry and estimating compliance costs for each of the four affected model years (MYs 2023-2026), EPA has considered the role of the averaging, banking, and trading system that has been available and extensively used by the industry since the beginning of the light-duty vehicle GHG program in model year 2012. Our analysis of the current and anticipated near-future usage of the GHG credit mechanisms (III.B.2 below) reinforces the trends we identified in our other analyses showing widespread technological advancement in the industry at reasonable per-vehicle costs. Together, these analyses support EPA's conclusion under section 202(a) of the CAA that technologically feasible pathways are available at reasonable costs for automakers to comply with the proposed standards during each of the four model years. We discuss these analyses and their results further in Section III below.

ii. Analyzing the Projected Impacts of the Proposed Program

We also estimate the GHG and non-GHG emission impacts (tailpipe and upstream) of the proposed standards. EPA then builds on the estimated changes in emissions and fuel consumption to calculate expected net economic impacts from these changes. Key economic inputs include: The social costs of GHGs; measures of health impacts from changes in criteria pollutant emissions; a value for the vehicle miles traveled “rebound effect;” estimates of energy security impacts of changes in fuel consumption; and costs associated with crashes, noise, and congestion from additional rebound driving.

Our overall analytical approach generates key results for the following metrics: Incremental costs per vehicle (industry-wide averages and by manufacturer); total vehicle technology costs for the auto industry; GHG emissions reductions and criteria pollutant emissions reductions; penetration of key GHG-reducing technologies across the fleet; consumer fuel savings; oil reductions; and net societal costs and benefits. We discuss these analyses in Sections III, IV, V, and VII below as well as in the DRIA.

2. History of Similar Analyses

At several points during the past decade, EPA has performed detailed analyses to evaluate the technological feasibility, as well as to project program costs and benefits, of the national light-duty vehicle GHG emissions control program. Although the purposes of these analyses varied, and EPA used somewhat different modeling approaches and tools, in each case these analyses included assessments of the program in the later years of the standards,

i.e.

, MYs 2022 through 2025 or 2026. As we describe in more detail in Chapter 1 of the DRIA, EPA performed similar analyses in support of the 2011 proposal and 2012 final rule establishing the original MY 2017-2025 light-duty vehicle GHG standards; in 2016-January 2017 in support of the Midterm Evaluation process and Determination concerning the MY 2022-2025 standards; and in 2018 during the development of the SAFE proposed rule.

It is notable that, although each analysis is based on projections from the then-available fleet data forward to model years 2025 or 2026, the results of each of these earlier analyses, as well as the updated analysis we have performed for our proposed standards, have all produced very similar results in several key metrics. For example, the estimated projected cost to manufacturers to implement similar standards in 2025-2026 has remained fairly consistent since 2012. Thus, while we believe the updated analysis presented in the DRIA provides strong support for the

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

D. Summary of Costs and Benefits of the Proposed Program

EPA estimates that this proposal would result in significant present-value net benefits of $86 billion to $140 billion (annualized net benefits of $4.2 billion to $7.3 billion)—that is, the total benefits far exceed the total costs of the program. Table 4 below summarizes EPA's estimates of total discounted costs, fuel savings, and benefits. The results presented here project the monetized environmental and economic impacts associated with the proposed standards during each calendar year through 2050. The proposal also would have significant benefits for consumers, as the fuel savings for American drivers would total $120 to $250 billion through 2050. With these fuel savings, consumers would benefit from reduced operating costs over the vehicle lifetime.

The benefits include climate-related economic benefits from reducing emissions of GHGs that contribute to climate change, reductions in energy security externalities caused by U.S. petroleum consumption and imports, the value of certain particulate matter-related health benefits (including premature mortality), the value of additional driving attributed to the rebound effect, and the value of reduced refueling time needed to fill a more fuel-efficient vehicle. The analysis also includes estimates of economic impacts stemming from additional vehicle use, such as the economic damages caused by crashes, congestion, and noise (from increased rebound driving). See the DRIA for more information regarding these estimates.

Table 4—Monetized Discounted Costs, Benefits, and Net Benefits of the Proposed Program for Calendar Years Through 2050

[Billions of 2018 dollars]

a b c d e

Present value

Discount rate

Annualized value

Discount rate

Costs

$240

$150

$12

Fuel Savings

250

120

9.9

Benefits

130

110

6.9

6.3

Net Benefits

140

7.3

4.2

Notes:

Values rounded to two significant figures; totals may not sum due to rounding. Present and annualized values are based on the stream of annual calendar year costs and benefits included in the analysis (2021-2050) and discounted back to year 2021.

Climate benefits are based on reductions in CO

, CH

and N

O emissions and are calculated using four different estimates of the social cost of each greenhouse gas (SC-GHG model average at 2.5%, 3%, and 5% discount rates; 95th percentile at 3% discount rate), which each increase over time. In this table, we show the benefits associated with the average SC-GHGs at a 3% discount rate but the Agency does not have a single central SC-GHG point estimate. We emphasize the importance and value of considering the benefits calculated using all four SC-GHG estimates and present them later in this preamble. As discussed in Chapter 3.3 of the DRIA, a consideration of climate benefits calculated using discount rates below 3 percent, including 2 percent and lower, is also warranted when discounting intergenerational impacts.

The same discount rate used to discount the value of damages from future GHG emissions (SC-GHGs at 5, 3, and 2.5 percent) is used to calculate the present and annualized values of climate benefits for internal consistency, while all other costs and benefits are discounted at either 3% or 7%.

Net benefits reflect the fuel savings plus benefits minus costs.

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

2.5

exposure.

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

Table 5—GHG Analysis of Lifetime Costs & Benefits To Meet the Proposed MYs 2023-2026 GHG Standards, 3% Discount Rate

[For vehicles produced in MY 2023-2026]

a b c d

[Billions of 2018$]

Costs

Fuel savings

Benefits

Net benefits

Present values

2023

$4.8

$3.6

$1.9

$0.68

2024

5.9

3.6

4.7

2025

6.7

8.6

4.4

6.2

2026

8.1

7.2

Sum

Annualized values

2023

0.21

0.16

0.08

0.029

2024

0.26

0.3

0.16

0.2

2025

0.29

0.37

0.19

0.27

2026

0.35

0.58

0.31

0.54

Sum

1.1

1.4

0.74

Notes:

The lifetime costs and benefits of each MY vehicle are discounted back to 2021.

Climate benefits are based on reductions in CO

, CH

and N

O emissions and are calculated using four different estimates of the social cost of each greenhouse gas (SC-GHG model average at 2.5%, 3%, and 5% discount rates; 95th percentile at 3% discount rate), which each increase over time. In this table, we show the benefits associated with the average SC-GHGs at a 3% discount rate, but the Agency does not have a single central SC-GHG point estimate. We emphasize the importance and value of considering the benefits calculated using all four SC-GHG estimates and present them later in this preamble. As discussed in Chapter 3.3 of the DRIA, a consideration of climate benefits calculated using discount rates below 3 percent, including 2 percent and lower, is also warranted when discounting intergenerational impacts.

The same discount rate used to discount the value of damages from future GHG emissions is used to calculate the present and annualized value of SC-GHGs for internal consistency, while all other costs and benefits are discounted at 3% in this table.

2.5

exposure.

Table 6—GHG Analysis of Lifetime Costs & Benefits To Meet the Proposed MYs 2023-2026 GHG Standards, 7% Discount Rate

[For vehicles produced in MY 2023-2026]

a b c d

[Billions of 2018$]

Costs

Fuel savings

Benefits

Net benefits

Present values

2023

$4.4

$2.6

$1.7

−$0.14

2024

5.5

4.7

3.3

2.4

2025

6.1

5.5

3.9

3.4

2026

7.3

8.2

6.2

7.2

Sum

Annualized values

2023

0.33

0.19

0.085

−0.053

2024

0.41

0.35

0.16

0.1

2025

0.45

0.41

0.19

0.15

2026

0.55

0.62

0.31

0.38

Sum

1.7

1.6

0.75

0.58

Notes:

The lifetime costs and benefits of each MY vehicle are discounted back to 2021.

Climate benefits are based on reductions in CO

, CH

and N

O emissions and are calculated using four different estimates of the social cost of each greenhouse gas (SC-GHG model average at 2.5%, 3%, and 5% discount rates; 95th percentile at 3% discount rate), which each increase over time. In this table, we show the benefits associated with the average SC-GHGs at a 3% discount rate, but the Agency does not have a single central SC-GHG point estimate. We emphasize the importance and value of considering the benefits calculated using all four SC-GHG estimates and present them later in this preamble. As discussed in Chapter 3.3 of the DRIA, a consideration of climate benefits calculated using discount rates below 3 percent, including 2 percent and lower, is also warranted when discounting intergenerational impacts.

2.5

exposure.

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

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

involvement of all people regardless of race, color, national origin, or income with respect to the development, implementation, and enforcement of environmental laws, regulations, and policies. Executive Order 14008 also calls on federal agencies to make achieving environmental justice part of their missions “by developing programs, policies, and activities to address the disproportionately high and adverse human health, environmental, climate-related and other cumulative impacts on disadvantaged communities, as well as the accompanying economic challenges of such impacts.” It declares a policy “to secure environmental justice and spur economic opportunity for disadvantaged communities that have been historically marginalized and overburdened by pollution and under-investment in housing, transportation, water and wastewater infrastructure and health care.” Under Executive Order 13563 (76 FR 3821), federal agencies may consider equity, human dignity, fairness, and distributional considerations, where appropriate and permitted by law.

EPA's 2016 “Technical Guidance for Assessing Environmental Justice in Regulatory Analysis” provides recommendations on conducting the highest quality analysis feasible, recognizing that data limitations, time and resource constraints, and analytic challenges will vary by media and regulatory context.

“Technical Guidance for Assessing Environmental Justice in Regulatory Analysis.” Epa.gov, Environmental Protection Agency,

https://www.epa.gov/sites/production/files/2016-06/documents/ejtg_5_6_16_v5.1.pdf.

(June 2016).

EPA's mobile source regulatory program has historically reduced significant amounts of both GHG and non-GHG pollutants to the benefit of all U.S. residents, including populations that live near roads and in communities with EJ concerns. EJ concerns may arise in the context of this rulemaking in two key areas.

First, minority populations and low-income populations may be especially vulnerable to the impacts of climate change. As discussed in Section IV.C, this proposed rulemaking would mitigate the impacts of climate change by achieving significant GHG emission reductions, which would benefit populations that may be especially vulnerable to various forms of damages associated with climate change.

Second, in addition to significant climate-change benefits, the proposed standards would also impact non-GHG emissions. As discussed in Section VII.L.2, numerous studies have found that environmental hazards such as air pollution are more prevalent in areas where minority populations and low-income populations represent a higher fraction of the population compared with the general population. There is substantial evidence, for example, that people who live or attend school near major roadways are more likely to be of a racial minority, Hispanic ethnicity, and/or low socioeconomic status (see Section VII.L.2).

We expect this proposed rule would result in both small reductions and small increases of non-GHG emissions. These effects could potentially impact communities with EJ concerns, though not necessarily immediately and not equally in all locations. For this proposal, the air quality information needed to perform a quantified analysis of the distribution of such impacts was not available. We therefore recommend caution when interpreting these broad, qualitative observations.

We note that EPA intends to develop a future rule to control emissions of GHGs as well as criteria and air toxic pollutants from light-duty vehicles for MYs beyond 2026. We are considering how to project air quality impacts from the changes in non-GHG emissions for that future rulemaking (see Section V.C).

F. Affordability and Equity

In addition to considering environmental justice impacts, we have examined the effects of the proposed standards on affordability of vehicles and transportation services for low-income households in Section VII.L of this Preamble and Chapter 8.4 of the DRIA. As with the effects of the proposed standards on vehicle sales discussed in Section VII.B, the effects of the proposed standards on affordability and equity depend in part on two countervailing effects: The increase in the up-front costs of new vehicles subject to more stringent standards, and the decrease in operating costs from reduced fuel consumption over time. The increase in up-front new vehicle costs has the potential to increase the prices of used vehicles, to make credit more difficult to obtain, and to make the least expensive new vehicles less desirable compared to used vehicles. The reduction in operating costs over time has the potential to mitigate or reverse all these effects. Lower operating costs on their own increase mobility (see DRIA Chapter 3.1 for a discussion of rebound driving).

While social equity involves issues beyond income and affordability, including race, ethnicity, gender, gender identification, and residential location, the potential effects of the proposed standards on lower-income households are of great importance for social equity and reflect these contrasting forces. The overall effects on vehicle ownership, including for lower-income households, depend heavily on the role of fuel consumption in vehicle sales decisions, as discussed in Section VII.M. At the same time, lower-income households own fewer vehicles per household, are more likely to buy used vehicles than new, and spend more on fuel than on vehicles on an annual basis than higher-income households. In addition, for lower-income households, fuel expenditures are a larger portion of household income, so the fuel savings that would result from this proposal may be more impactful to these consumers. Thus, the benefits of this proposal may be stronger for lower-income households even if they buy used vehicles: As vehicles meeting the proposed standards enter the used vehicle market, they will retain the fuel economy/GHG-reduction benefits, and associated fuel savings, while facing a smaller portion of the upfront vehicle costs. The reduction in operating costs may also increase access to transportation services, such as ride-hailing and ride-sharing, where the lower per-mile costs may play a larger role than up-front costs in pricing. As a result, lower-income consumers may be affected more from the reduction in operating costs than the increase in up-front costs.

New electric vehicles currently have higher up-front costs and lower operating costs than gasoline vehicles and require access to charging infrastructure that may not be readily available to many. EPA has heard from some environmental justice groups and Tribes that limited access to electric vehicles and charging infrastructure can be a barrier for purchasing EVs. This proposal projects that the vast majority of vehicles produced in the time frame of the proposed standards will be gasoline-fueled vehicles (with EVs and PHEVs gradually increasing to about 8 percent total market share by MY 2026 compared to about 4 percent in the No Action scenario, see DRIA Chapter 4.1.3, Table 4-30). However, EPA will monitor and study affordability issues related to electric vehicles as their prevalence in the vehicle fleet increases.

G. What alternatives is EPA considering?

1. Description of the Alternatives

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

Framework for the 2.7 percent effective stringency level (as described in Section II.B.1) as the basis for the MY 2023 stringency level and the 2012 rule's MY 2025 standards as the basis for the MY 2026 stringency level, with linear year-over-year reductions between the two points for MYs 2024 and 2025. EPA views the California Framework as a reasonable basis for the least stringent alternative that EPA would consider finalizing, since it represents a level of stringency that five manufacturers have already committed to achieving. EPA did not include incentive multipliers for Alternative 1, as doing so would only further reduce the effective stringency of this Alternative, and EPA views Alternative 1 as the lower end of stringency that it believes is appropriate through 2026.

For the more stringent alternative, Alternative 2, EPA used the 2012 rule standards as the basis for MY 2023-2025 targets, with the standards continuing to increase in stringency in a linear fashion for MY 2026. Alternative 2 adopts the 2012 rule stringency levels in MY 2023 and follows the 2012 rule standard target levels through MY 2025. EPA extended the same linear average year-over-year trajectory for MYs 2023-2025 to MY 2026 for the final standards under Alternative 2. As noted in Section II.A.1, EPA believes that it is important to continue to make progress in MY 2026 beyond the MY 2025 standard levels in the 2012 rule. As with the proposal, Alternative 2 meets this objective. EPA did not include in Alternative 2 the proposed incentive multipliers with the proposed cumulative credit cap in MYs 2022-2025, which would have the effect of making Alternative 2 less stringent. As discussed in Section II.B.1, EPA is requesting comment on whether or not to include the proposed multipliers, and our request for comments extends to whether to include multipliers both for the proposal and for Alternative 2.

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

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

Table 7—Applicability of Revised Flexibility Provisions to the Proposal and Alternatives

Provision

Proposal

Alternative 1

Alternative 2

Extension of credit carry-forward for MY 2016-2020 credits

Yes

Yes.

Advanced technology incentive multipliers for MYs 2022-2025 with cap

Yes

No.

Increase of off-cycle menu cap from 10 to 15 g/mile

Yes

Yes.

Reinstatement of full-size pickup incentives for strong hybrids or equivalent technologies for MYs 2022-2025

Yes

Yes.

EPA's technical analysis, presented in Section III, consists of model runs using a model capable of reflecting some but not all of these provisions. The modeling includes consideration of advanced technology incentive multipliers for the proposal but not for the alternatives. The model runs also include the 15 grams per mile off-cycle menu cap as appropriate given the standards or targets to which a fleet being modeled is complying. Not included in the model runs are the full-size pickup truck technology incentive credit or the extension of the emissions credit carry-forward.

The fleet average targets for the two alternatives compared to the proposed standards are provided in Table 8 below. EPA also requests comment on the level of stringency for MY 2026 for the alternatives and the proposed standards. Specifically, EPA requests comment on standards for MY 2026 that would result in fleet average target levels that are in the range of 5-10 g/mile lower (

i.e.

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

Table 8—Projected Fleet Average Target Levels for Proposed Standards and Alternatives

[CO

grams/mile]

Model year

Proposal

projected

targets

Alternative 1 projected

targets

Alternative 2 projected

targets

2021

* 223

* 224

2022

* 220

2023

199

203

195

2024

189

194

186

2025

180

185

177

2026 **

171

177

169

* SAFE rule standards included here for reference.

** EPA is also requesting comment on MY 2026 standards that would result in fleet average levels that are 5-10 g/mile more stringent than the levels shown.

EP10AU21.001

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

2. Summary of Costs and Benefits of the Alternatives

EPA estimates that Alternative 1 would result in significant present-value net benefits of $76 billion to $130 billion (annualized net benefits of $4.1 billion to $6.6 billion)—that is, the total benefits far exceed the total costs of the program. Table 9 below summarizes EPA's estimates of total discounted costs, fuel savings, and benefits for Alternative 1. The results presented here project the monetized

environmental and economic impacts associated with the proposed standards during each calendar year through 2050. Alternative 1 also would have significant benefits for consumers, as the fuel savings for American drivers would total $98 billion to $200 billion through 2050. With these fuel savings, consumers would benefit from reduced operating costs over the vehicle lifetime.

Table 9—Monetized Discounted Costs, Benefits, and Net Benefits of Alternative 1 for Calendar Years Through 2050

[Billions of 2018 dollars]

a b c d e

Present value

Discount rate

Annualized value

Discount rate

Costs

$190

$110

$9.5

$9.2

Fuel savings

200

7.9

Benefits

120

5.4

Net benefits

130

6.6

4.1

Notes:

Climate benefits are based on reductions in CO

, CH

and N

Net benefits reflect the fuel savings plus benefits minus costs.

2.5

exposure.

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

Table 10—GHG Analysis of Lifetime Costs & Benefits To Meet the Alternative 1 MYs 2023-2026 GHG Standards, 3% Discount Rate

[For vehicles produced in MY 2023-2026]

a b c d

[Billions of 2018$]

Costs

Fuel savings

Benefits

Net benefits

Present values

2023

$3.9

$3.4

$1.5

2024

4.9

6.5

3.7

5.3

2025

5.6

7.7

4.5

6.5

2026

6.4

9.7

Sum

Annualized values

2023

0.17

0.15

0.085

0.067

2024

0.21

0.28

0.16

0.23

2025

0.24

0.33

0.19

0.28

2026

0.28

0.44

0.26

0.42

Sum

0.9

1.2

0.7

Notes:

The lifetime costs and benefits of each MY vehicle are discounted back to 2021.

Climate benefits are based on reductions in CO

and N

O emissions and are calculated using four different estimates of the social cost of each greenhouse gas (SC-GHG model average at 2.5%, 3%, and 5% discount rates; 95th percentile at 3% discount rate), which each increase over time. In this table, we show the benefits associated with the average SC-GHGs at a 3% discount rate, but the Agency does not have a single central SC-GHG point estimate. We emphasize the importance and value of considering the benefits calculated using all four SC-GHG estimates and present them later in this preamble. As discussed in Chapter 3.3 of the DRIA, a consideration of climate benefits calculated using discount rates below 3 percent, including 2 percent and lower, is also warranted when discounting intergenerational impacts.

2.5

exposure.

Table 11—GHG Analysis of Lifetime Costs & Benefits To Meet the Alternative 1 MYs 2023-2026 GHG Standards, 7% Discount Rate

[For Vehicles Produced in MY 2023-2026]

a b c d

[Billions of 2018$]

Costs

Fuel savings

Benefits

Net benefits

Present values

2023

$3.7

$2.4

$1.7

$0.4

2024

4.7

4.3

3.2

2.8

2025

5.1

4.9

3.8

3.6

2026

5.6

6.2

5.6

Sum

Annualized values

2023

0.28

0.18

0.091

−0.0084

2024

0.35

0.32

0.17

0.14

2025

0.38

0.37

0.2

0.19

2026

0.42

0.47

0.26

0.31

Sum

1.4

1.3

0.72

0.63

Notes:

The lifetime costs and benefits of each MY vehicle are discounted back to 2021.

Climate benefits are based on reductions in CO

, CH

and N

O emissions and are calculated using four different estimates of the social cost of each greenhouse gas (SC-GHG model average at 2.5%, 3%, and 5% discount rates; 95th percentile at 3% discount rate), which each increase over time. In this table, we show the benefits associated with the average SC-GHGs at a 3% discount rate, but the Agency does not have a single central SC-GHG point estimate. We emphasize the importance and value of considering the benefits calculated using all four SC-GHG estimates and present them later in this preamble. As discussed in Chapter 3.3 of the DRIA, a consideration of climate benefits calculated using discount rates below 3 percent, including 2 percent and lower, is also warranted when discounting intergenerational impacts.

2.5

exposure.

EPA estimates that Alternative 2 would result in significant present value net benefits of $110 billion to $180 billion (annualized net benefits of $5.7 billion to $9.1 billion)—that is, the total benefits far exceed the total costs of the program. Table 12 below summarizes EPA's estimates of total discounted costs, fuel savings, and benefits for Alternative 2. The results presented here project the monetized environmental and economic impacts associated with the proposed standards during each calendar year through 2050. Alternative 2 also would have significant benefits for consumers, as the fuel savings for American drivers would total $150 billion to $290 billion through 2050. With these fuel savings, consumers would benefit from reduced operating costs over the vehicle lifetime.

The benefits include climate-related economic benefits from reducing emissions of GHGs that contribute to climate change, reductions in energy security externalities caused by U.S. petroleum consumption and imports, the value of certain particulate matter-related health benefits (including premature mortality), the value of additional driving attributed to the rebound effect, and the value of reduced time needed to refuel a more fuel efficient vehicle. The analysis also includes estimates of economic impacts stemming from additional vehicle use, such as the economic damages caused by crashes, congestion, and noise (from increased rebound driving). See the DRIA for more information regarding these estimates.

Table 12—Monetized Discounted Costs, Benefits, and Net Benefits of Alternative 2 for Calendar Years Through 2050

[Billions of 2018 dollars]

a b c d e

Present value

Discount rate

Annualized value

Discount rate

Costs

$290

$180

$15

$14

Fuel Savings

290

150

Benefits

170

140

8.8

Net Benefits

180

110

9.1

5.7

Notes:

Climate benefits are based on reductions in CO

, CH

and N

Net benefits reflect the fuel savings plus benefits minus costs.

2.5

exposure.

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

Table 13—GHG Analysis of Lifetime Costs & Benefits To Meet the Alternative 2 MY 2023-2026 GHG Standards, 3% Discount Rate

[For vehicles produced in MY 2023-2026]

a b c d

[Billions of 2018$]

Costs

Fuel savings

Benefits

Net benefits

Present values

2023

$6.8

$7.7

$4.6

$5.5

2024

7.7

9.8

5.7

7.8

2025

8.4

6.5

9.1

2026

9.2

7.8

Sum

Annualized values

2023

$0.3

$0.33

$0.2

$0.24

2024

0.33

0.42

0.25

0.34

2025

0.37

0.48

0.28

0.39

2026

0.4

0.57

0.34

0.51

Sum

1.4

1.8

1.1

1.5

Notes:

The lifetime costs and benefits of each MY vehicle are discounted back to 2021.

Climate benefits are based on reductions in CO

, CH

and N

O emissions and are calculated using four different estimates of the social cost of each greenhouse gas (SC-GHG model average at 2.5%, 3%, and 5% discount rates; 95th percentile at 3% discount rate), which each increase over time. In this table, we show the benefits associated with the average SC-GHGs at a 3% discount rate, but the Agency does not have a single central SC-GHG point estimate. We emphasize the importance and value of considering the benefits calculated using all four SC-GHG estimates and present them later in this preamble. As discussed in Chapter 3.3 of the DRIA, a consideration of climate benefits calculated using discount rates below 3 percent, including 2 percent and lower, is also warranted when discounting intergenerational impacts.

2.5

exposure.

Table 14—GHG Analysis of Lifetime Costs & Benefits To Meet the Alternative 2 MY 2023-2026 GHG Standards, 7% Discount Rate

[For vehicles produced in MY 2023-2026]

a b c d

[Billions of 2018$]

Costs

Fuel savings

Benefits

Net benefits

Present values

2023

$6.3

$5.4

$3.1

2024

6.5

4.4

2025

7.4

7.1

5.5

5.2

2026

7.9

8.2

6.6

6.9

Sum

Annualized Values

2023

0.48

0.4

0.21

0.14

2024

0.53

0.49

0.26

0.22

2025

0.56

0.54

0.29

0.27

2026

0.59

0.61

0.34

0.37

Sum

2.2

1.1

Notes:

The lifetime costs and benefits of each MY vehicle are discounted back to 2021.

Climate benefits are based on reductions in CO

, CH

and N

O emissions and are calculated using four different estimates of the social cost of each greenhouse gas (SC-GHG model average at 2.5%, 3%, and 5% discount rates; 95th percentile at 3% discount rate), which each increase over time. In this table, we show the benefits associated with the average SC-GHGs at a 3% discount rate, but the Agency does not have a single central SC-GHG point estimate. We emphasize the importance and value of considering the benefits calculated using all four SC-GHG estimates and present them later in this preamble. As discussed in Chapter 3.3 of the DRIA, a consideration of climate benefits calculated using discount rates below 3 percent, including 2 percent and lower, is also warranted when discounting intergenerational impacts.

2.5

exposure.

3. Summary of the Proposal's Costs and Benefits Compared to the Alternatives

Here we present the proposal's costs and benefits (as summarized previously in Section I.D) alongside the costs and benefits of the alternatives (as summarized previously in Section I.G.2).

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

Table 15—Present Value Monetized Discounted Costs, Benefits, and Net Benefits of the Proposed Program and Alternatives for Calendar Years Through 2050

[Billions of 2018 dollars]

a b c d e

3% Discount rate

Proposal

Alternative 1

Alternative 2

7% Discount rate

Proposal

Alternative 1

Alternative 2

Costs

$240

$190

$290

$150

$110

$180

Fuel Savings

250

200

290

120

150

Benefits

130

120

170

110

140

Net Benefits

140

130

180

110

Notes:

Climate benefits are based on reductions in CO

, CH

and N

Net benefits reflect the fuel savings plus benefits minus costs.

2.5

exposure.

Table 16—Annualized Monetized Discounted Costs, Benefits, and Net Benefits of the Proposed Program and Alternatives for Calendar Years Through 2050

[Billions of 2018 dollars]

a b c d e

3% Discount rate

Proposal

Alternative 1

Alternative 2

7% Discount rate

Proposal

Alternative 1

Alternative 2

Costs

$12

$9.5

$15

$12

$9.2

$14

Fuel Savings

9.9

7.9

Benefits

6.9

8.8

6.3

5.4

Net Benefits

7.3

6.6

9.1

4.2

4.1

5.7

Notes:

Climate benefits are based on reductions in CO

, CH

and N

Net benefits reflect the fuel savings plus benefits minus costs.

2.5

exposure.

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

Table 17—Present Value GHG Analysis of Lifetime Costs & Benefits for MY 2023-2026 GHG Standards Under the Proposal and Alternatives

[For vehicles produced in MY 2023-2026]

a b c d

[Billions of 2018$]

3% Discount rate

Costs

Fuel

savings

Benefits

Net

benefits

7% Discount rate

Costs

Fuel

savings

Benefits

Net

benefits

Proposal

2023

$4.8

$3.6

$1.9

$0.68

$4.4

$2.6

$1.7

−$0.14

2024

5.9

3.6

4.7

5.5

4.7

3.3

2.4

2025

6.7

8.6

4.4

6.2

6.1

5.5

3.9

3.4

2026

8.1

7.2

7.3

8.2

6.2

7.2

Sum

Alternative 1

2023

$3.9

$3.4

$1.5

$3.7

$2.4

$1.7

$0.4

2024

4.9

6.5

3.7

5.3

4.7

4.3

3.2

2.8

2025

5.6

7.7

4.5

6.5

5.1

4.9

3.8

3.6

2026

6.4

9.7

5.6

6.2

5.6

Sum

Alternative 2

2023

$6.8

$7.7

$4.6

$5.5

$6.3

$5.4

$3.1

2024

7.7

9.8

5.7

7.8

6.5

4.4

2025

8.4

6.5

9.1

7.4

7.1

5.5

5.2

2026

9.2

7.8

7.9

8.2

6.6

6.9

Sum

Notes:

The lifetime costs and benefits of each MY vehicle are discounted back to 2021.

Climate benefits are based on reductions in CO

, CH

and N

O emissions and are calculated using four different estimates of the social cost of each greenhouse gas (SC-GHG model average at 2.5%, 3%, and 5% discount rates; 95th percentile at 3% discount rate), which each increase over time. In this table, we show the benefits associated with the average SC-GHGs at a 3% discount rate, but the Agency does not have a single central SC-GHG point estimate. We emphasize the importance and value of considering the benefits calculated using all four SC-GHG estimates and present them later in this preamble. As discussed in Chapter 3.3 of the DRIA, a consideration of climate benefits calculated using discount rates below 3 percent, including 2 percent and lower, is also warranted when discounting intergenerational impacts.

2.5

exposure.

Table 18—Annualized GHG Analysis of Lifetime Costs & Benefits for MY 2023-2026 GHG Standards Under the Proposal and Alternatives

[For vehicles produced in MY 2023-2026]

a b c d

[Billions of 2018$]

3% Discount rate

Costs

Fuel

savings

Benefits

Net

benefits

7% Discount rate

Costs

Fuel

savings

Benefits

Net

benefits

Proposal

2023

$0.21

$0.16

$0.08

$0.029

$0.33

$0.19

$0.085

−$0.053

2024

0.26

0.3

0.16

0.2

0.41

0.35

0.16

0.1

2025

0.29

0.37

0.19

0.27

0.45

0.41

0.19

0.15

2026

0.35

0.58

0.31

0.54

0.55

0.62

0.31

0.38

Sum

1.1

1.4

0.74

1.7

1.6

0.75

0.58

Alternative 1

2023

$0.17

$0.15

$0.085

$0.067

$0.28

$0.18

$0.091

−$0.0084

2024

0.21

0.28

0.16

0.23

0.35

0.32

0.17

0.14

2025

0.24

0.33

0.19

0.28

0.38

0.37

0.2

0.19

2026

0.28

0.44

0.26

0.42

0.47

0.26

0.31

Sum

0.9

1.2

0.7

1.4

1.3

0.72

0.63

Alternative 2

2023

$0.3

$0.33

$0.2

$0.24

$0.48

$0.4

$0.21

$0.14

2024

0.33

0.42

0.25

0.34

0.53

0.49

0.26

0.22

2025

0.37

0.48

0.28

0.39

0.56

0.54

0.29

0.27

2026

0.4

0.57

0.34

0.51

0.59

0.61

0.34

0.37

Sum

1.4

1.8

1.1

1.5

2.2

1.1

Notes:

The lifetime costs and benefits of each MY vehicle are discounted back to 2021.

Climate benefits are based on reductions in CO

, CH

and N

O emissions and are calculated using four different estimates of the social cost of each greenhouse gas (SC-GHG model average at 2.5%, 3%, and 5% discount rates; 95th percentile at 3% discount rate), which each increase over time. For the presentational purposes of this table, we show the benefits associated with the average SC-GHGs at a 3% discount rate, but the Agency does not have a single central SC-GHG point estimate. We emphasize the importance and value of considering the benefits calculated using all four SC-GHG estimates and present them later in this preamble. As discussed in Chapter 3.3 of the RIA, a consideration of climate benefits calculated using discount rates below 3 percent, including 2 percent and lower, are also warranted when discounting intergenerational impacts.

2.5

exposure.

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

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

As noted, the transportation sector is the largest U.S. source of GHG emissions, making up 29 percent of all emissions.

Within the transportation sector, light-duty vehicles are the largest contributor, 58 percent, to transportation GHG emissions in the U.S.

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

Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990-2019

(EPA-430-R-21-005, published April 2021).

Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990-2019

(EPA-430-R-21-005, published April 2021).

EPA is proposing revised, more stringent standards to control the emissions of greenhouse gases (GHGs) from MY 2023 and later light-duty vehicles.

Carbon dioxide (CO

) is the primary greenhouse gas resulting from the combustion of vehicular fuels. The standards regulate CO

on a gram per mile (g/mile) basis, which EPA defines by separate footprint curves for a manufacturer's car and truck fleets.

Based on complying with these proposed standards, the industry-wide average emissions target for new light-duty vehicles is projected to be 171 g/mile of CO

in MY 2026.

Also, as discussed in Section II.C below, EPA is requesting comment on standards for MY 2026 that are in the range of 5-10 g/mile lower (

i.e.,

more stringent) than the levels proposed, resulting in fleet average target levels that are in the range of 166-161 g/mile. EPA is not proposing to change existing averaging, banking, and trading program elements, except for a proposed limited extension of credit carry-forward for one or two years for credits generated in MYs 2016-2020, as discussed in Section II.B.4. The proposed standards would apply to passenger cars, light-duty trucks, and medium-duty passenger vehicles (MDPVs).

As an overall group, they are referred to in this preamble as light-duty vehicles or simply as vehicles. In this preamble, passenger cars may be referred to simply as “cars,” and light-duty trucks and MDPVs as “light trucks” or “trucks.”

See Sections III and VI for a discussion of lead time.

Footprint curves are graphical representations of the algebraic formulae defining the emission standards in the regulatory text.

The reference to CO

here refers to CO

equivalent reductions, as this level includes some reductions in emissions of greenhouse gases other than CO

, from refrigerant leakage, as one part of the A/C related reductions.

As with the previous GHG emissions standards, EPA will continue to use the same vehicle category definitions as in the CAFE program. MDPVs are grouped with light trucks for fleet average compliance determinations.

As discussed in section II.B, EPA is proposing several revised provisions that would allow manufacturers to generate credits or that provide additional incentives for use of advanced emission reduction technologies. These include “off-cycle” credits for technologies that reduce CO

emissions during off-cycle operation that are not reasonably accounted for by the 2-cycle tests used for compliance purposes. EPA is proposing to increase the existing credit cap for menu-based credits from 10 g/mile to 15 g/mile and is proposing a number of program revisions and clarifications to address issues that have been identified as EPA has implemented the program. In addition, EPA is proposing to extend multiplier incentives for EVs, PHEVs, and FCVs, with a cumulative cap on credits. Multiplier incentives allow these low-emitting vehicles to count as more than one vehicle in a manufacturer's compliance calculation. EPA is proposing to eliminate multiplier incentives for natural gas vehicles adopted in the SAFE rule after MY 2022. EPA is also proposing to reinstate full size pick-up truck incentives through MY 2025 for vehicles that meet efficiency performance criteria or include strong hybrid technology at a minimum level of production volumes. The SAFE rule removed the full-size pickup incentives for MYs 2022-2025.

The current program includes several program elements that will remain in place, without change. EPA is not proposing to change the fundamental structure of the standards, which are based on the footprint attribute with separate footprint curves for cars and trucks. EPA is not proposing to change the existing CH

and N

O emissions standards. EPA is not proposing changes to the program structure in terms of vehicle certification, compliance, and enforcement. These aspects of the program continue to function as intended and EPA does not currently believe changes are needed. EPA is continuing to use tailpipe-only values to determine vehicle GHG emissions, without accounting for upstream emissions (EVs and PHEVs will continue to use 0 g/mile through MY 2026). EPA is also not proposing changes to current program opportunities to earn credits toward the fleet-wide average CO

standards for improvements to air conditioning systems. The current A/C credits program provides credits for improvements to address both hydrofluorocarbon (HFC) refrigerant direct losses (

i.e.,

system “leakage”) and indirect CO

emissions related to the increased load on the engine (also referred to as “A/C efficiency” related emissions).

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

standards?

EPA is proposing revised more stringent standards for MYs 2023-2026 that are projected to result in an industry-wide average target for the light-duty fleet of 171 g/mile of CO

in MY 2026. The proposed standards are designed to reach the same level of stringency as the California Framework emission reduction targets in MY 2023, and then ramp down in a linear fashion with year over year average stringency increases of 4.7-5.0 percent. For MY 2026, the proposal goes beyond the 2012 rule level of stringency for MY 2025, by about 3 percent more stringent, making the proposed MY 2026 standard the most stringent vehicle GHG standard that EPA has proposed to date. EPA believes that is possible and worthwhile to make additional progress in MY 2026 by surpassing the level of stringency of the original MY 2025 standards established nine years ago in the 2012 rule. EPA is proposing an ambitious and reasonable approach that would take the initial steps towards making needed

reductions in GHG emissions. EPA does not propose any change to the approach of having separate standards for cars and light trucks under existing program definitions.

The industry fleet average and car/truck year-over-year percent reductions for the proposed standards compared to the existing SAFE rule standards are provided in Table 19 below. For passenger cars, the proposed footprint curves call for reducing CO

by 8.3 percent in MY 2023 followed by year over year reductions of 4.7 to 5.1 percent from the MY 2023 passenger car standard through MY 2026. For light-duty trucks, the proposed footprint curves standards would require reducing CO

by 10.8 percent in MY 2023 followed by year over year reductions of 4.7 to 5.2 percent on average from the MY 2023 light-duty truck standard through MY 2026.

Table 19—Projected Industry Fleet Average Target Year-Over-Year Percent Reductions

SAFE rule

Cars

(%)

Trucks

(%)

Combined

(%)

Proposal

Cars

(%)

Trucks

(%)

Combined

(%)

2023

1.7

1.5

1.6

8.3

10.8

9.8

2024

1.1

1.2

4.8

4.7

2025

2.3

2.0

2.2

5.1

5.0

4.9

2026

1.8

1.6

1.7

* 4.7

* 5.2

* 5.0

* The percentages shown do not include EPA's request for comments on MY 2026 standards that are 5-10 g/mile more stringent than proposed.

For light-trucks, EPA is proposing to change the upper right cutpoints of the CO

-footprint curves (

i.e.

, the footprint sizes in sq. ft. at which the CO

standards level off as flat CO

target values for larger vehicle footprints. See Figure 5 below). The SAFE rule altered these cutpoints and EPA is now proposing to restore them to the original upper right cutpoints initially established in the 2012 rule, for MYs 2023-2026, essentially requiring increasingly more stringent CO

targets at the higher footprint range up to the revised cutpoint levels. The shapes of the curves and the cutpoints are discussed in Section II.A.2.

The 171 g/mile estimated industry-wide target for MY 2026 noted above is based on EPA's current fleet mix projections for MY 2026 (approximately 50 percent cars and 50 percent trucks, with only slight variations from MY 2023-2026). As discussed below, the final fleet average standards for each manufacturer ultimately will depend on each manufacturer's actual rather than projected production in each MY from MY 2023 to MY 2026 under the sales-weighted footprint-based standard curves for the car and truck regulatory classes. In the 2012 rule, EPA estimated that the fleet average target would be 163 g/mile in MY 2025 based on the projected fleet mix for MY 2025 (67 percent car and 33 percent trucks) based on information available at the time of the 2012 rulemaking. Primarily due to the historical and ongoing shift in fleet mix that included more crossover and small and mid-size SUVs and fewer passenger cars, EPA's projection in the Midterm Evaluation (MTE) January 2017 Final Determination for the original MY 2025 fleet average target level increased to 173 g/mile.

EPA has again updated its fleet mix projections and now projects that the original 2012 rule MY 2025 footprint curves standards would result in an industry-wide fleet average target level of 177 g/mile. The projected fleet average targets under the 2012 rule, using the updated fleet mix projections and the projected fleet average targets for the proposal are provided in Table 20 below. Figure 3 below, based on the values in Table 20, shows the proposed standards target levels along with estimated targets for the 2012 rule, SAFE rule, and California Framework for comparison.

“Final Determination on the Appropriateness of the Model Year 2022-2025 Light-Duty Vehicle Greenhouse Gas Emissions Standards under the Midterm Evaluation,” EPA-420-R-17-001, January 2017.

For comparison purposes, the California Framework estimates are based on a scenario in which all manufacturers meet the California Framework in MYs 2021-2026 (not only the manufacturers that agreed to the California Framework).

Table 20—Fleet Average Target Projections for the Proposed Standards Compared to Updated Fleet Average Target Projections for the 2012 Rule, SAFE Rule and California Framework

[CO

grams/mile]

Proposal projected

targets

2012 Rule

projected

targets

(updated)

SAFE rule projected

targets

(updated)

California framework projected

targets

2021

* 223

214

223

214

2022

* 220

205

220

206

2023

199

195

216

199

2024

189

186

214

191

2025

180

177

209

184

2026

* 171

177

205

177

* Projected targets under the SAFE rule standards.

** EPA is also requesting comment on MY 2026 standards that would result in fleet average levels that are 5-10 g/mile more stringent than the level shown.

EP10AU21.002

EPA's standards are based in part on EPA's projection of average industry wide CO

-equivalent emission reductions from A/C improvements, where the footprint curves are made numerically more stringent by an amount equivalent to this projection of A/C refrigerant leakage credits.

Including this projection of A/C credits for purposes of setting GHG standards levels is consistent with the 2012 rule and the SAFE rule.

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

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

In general, the schedule of the proposed standards allows an incremental phase-in to the MY 2026 level and reflects consideration of the appropriate lead time for manufacturers to take actions necessary to meet the

proposed standards.

The technical feasibility of the standards is discussed in Section III below and in the DRIA. Note that MY 2026 is the final MY in which the proposed standards become more stringent. The MY 2026 CO

standards would remain in place for later MYs, unless and until revised by EPA in a future rulemaking for those MYs.

As discussed in Section III, EPA has used the Corporate Average Fuel Economy (CAFE) Compliance and Effects Modeling System (CCEMS) to support the technical assessment. Among the ways EPA has considered lead time in the proposal is by using the constraints built into the CCEMS model which are designed to represent lead-time constraints, including the use of redesign and refresh cycles. See CCEMS Model Documentation on web page

https://www.nhtsa.gov/corporate-average-fuel-economy/compliance-and-effects-modeling-system

and contained in the docket for this rule.

EPA has estimated the overall fleet-wide CO

emission levels that correspond with the attribute-based footprint standards, based on projections of the composition of each manufacturer's fleet in each year of the program. As noted above, EPA estimates that, on a combined fleet-wide national basis, the 2026 MY standards would result in a level of 171 g/mile CO

. The derivation of the 171 g/mile estimate is described in Section III.A. EPA aggregated the estimates for individual manufacturers based on projected production volumes into the fleet-wide averages for cars, trucks, and the entire fleet, shown in Table 21.

As discussed above, the combined fleet estimates are based on projected fleet mix of cars and trucks that varies over the MY 2023-2026 timeframe. This fleet mix distribution can also be found in Section III.A.

Due to rounding during calculations, the estimated fleet-wide CO

target levels may vary by plus or minus 1 gram.

Table 21—Estimated Fleet-Wide CO

Target Levels Corresponding to the Proposed Standards

Model year

Cars CO

(g/mile)

Trucks CO

(g/mile)

Fleet CO

(g/mile)

2023

165

232

199

2024

157

221

189

2025

149

210

180

2026 and later *

142

199

171

** EPA is also requesting comment on MY 2026 standards that would result in fleet average levels that are 5-10 g/mile more stringent than the levels shown.

As shown in Table 21, fleet-wide CO

emission target levels for cars under the proposed standards are projected to decrease from 165 to 142 g/mile between MY 2023 and MY 2026. Similarly, fleet-wide CO

target levels for trucks are projected to decrease from 232 to 199 g/mile. These numbers do not reflect the effects of flexibilities and credits in the program.

The estimated fleetwide achieved values can be found in Section V.

Nor do they reflect flexibilities under the ABT program.

As noted above, EPA is proposing standards that set increasingly stringent levels of CO

control from MY 2023 though MY 2026. Applying the CO

footprint curves applicable in each MY to the vehicles (and their footprint distributions) expected to be sold in each MY produces progressively more stringent estimates of fleet-wide CO

emission standards. EPA believes manufacturers can achieve the proposed standards' important CO

emissions reductions through the application of available control technology at reasonable cost, as well as the use of program flexibilities.

The existing program includes several provisions that we are not proposing to change and so would continue during the implementation timeframe of this proposed rule. Consistent with the requirement of CAA section 202(a)(1) that standards be applicable to vehicles “for their useful life,” the proposed MY 2023-2026 vehicle standards will apply for the useful life of the vehicle.

Also, EPA is not proposing any changes to the test procedures over which emissions are measured and weighted to determine compliance with the GHG standards. These procedures are the Federal Test Procedure (FTP or “city” test) and the Highway Fuel Economy Test (HFET or “highway” test). While EPA may consider requiring the use of test procedures other than the 2-cycle test procedures in a future rulemaking, EPA is not considering any test procedure changes in this rulemaking.

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

EPA has analyzed the feasibility of achieving the proposed CO

standards through the application of currently available technologies, based on projections of the technology and technology penetration rates to reduce emissions of CO

, during the normal redesign process for cars and trucks, taking into account the effectiveness and cost of the technology. The results of the analysis are discussed in detail in Section III below and in the DRIA. EPA also presents the overall estimated costs and benefits of the proposed car and truck CO

standards in Section VII.I.

2. What are the proposed CO

attribute-based standards?

As with the existing GHG standards, EPA is proposing separate car and truck standards—that is, vehicles defined as cars would have one set of footprint-based curves, and vehicles defined as trucks would have a different set.

In general, for a given footprint, the CO

g/mile target

for trucks is higher than the target for a car with the same footprint. The curves are described mathematically in EPA's regulations by a family of piecewise linear functions (with respect to vehicle footprint) that gradually and continually ramp down from the MY 2022 curves established in the SAFE rule. EPA's proposed minimum and maximum footprint targets and the corresponding cutpoints are provided below in Table 22 for MYs 2023-2026 along with the slope and intercept defining the linear function for footprints falling between the minimum and maximum footprint values. For footprints falling between the minimum and maximum, the targets are calculated as follows: Slope × Footprint + Intercept = Target. Figure 4 and Figure 5 provide the existing MY 2021-2022 and proposed MY 2023-2026 footprint curves graphically for both car and light trucks, respectively.

See 49 CFR part 523. Generally, passenger cars include cars and smaller cross-overs and SUVs, while the truck category includes larger cross-overs and SUVs, minivans, and pickup trucks.

Because compliance is based on a sales-weighting of the full range of vehicles in a manufacturer's car and truck fleets, the foot-print based CO

emission levels of specific vehicles within the fleet are referred to as targets, rather than standards.

Table 22—Proposed Footprint-Based CO

Standard Curve Coefficients

Car

2023

2024

2025

2026

Truck

2023

2024

2025

2026

MIN CO

(g/mi)

145.6

138.6

131.9

125.6

181.1

172.1

163.5

155.4

MAX CO

(g/mi)

199.1

189.5

180.3

171.6

312.1

296.5

281.8

267.8

Slope (g/mi/ft

)

3.56

3.39

3.23

3.07

3.97

3.77

3.58

3.41

Intercept (g/mi)

−0.4

−0.3

18.4

17.4

16.6

15.8

MIN footprint (ft

)

MAX footprint (ft

)

BILLING CODE 6560-01-P

EP10AU21.003

EP10AU21.004

BILLING CODE 6560-01-C

The shapes of the proposed MY 2023-2026 car curves are similar to the MY 2022 curve. By contrast, the proposed MY 2023-2026 truck curves return to the cutpoint of 74.0 sq ft originally established in the 2012 rule, but changed in the SAFE rule.

The gap between the 2022 curves and the 2023 curves is indicative of the design of the proposed standards as described earlier, where the gap between the MY 2022 and MY 2023 curves is roughly double the gap between the curves for MYs 2024-2026.

77 FR 62781.

3. EPA's Statutory Authority Under the CAA

i. Standards-Setting Authority Under CAA Section 202(a)

Title II of the Clean Air Act (CAA) provides for comprehensive regulation of mobile sources, authorizing EPA to regulate emissions of air pollutants from all mobile source categories. Pursuant to these sweeping grants of authority, when setting GHG standards for light-duty vehicles, EPA considers such issues as technology effectiveness, technology cost (per vehicle, per manufacturer, and per consumer), the lead time necessary to implement the technology, and—based on these considerations—the feasibility and practicability of potential standards; as weel as the impacts of potential standards on emissions reductions of both GHGs and non-GHGs; the impacts of standards on oil conservation and energy security; the impacts of standards on fuel savings by consumers; the impacts of standards on the auto industry; other energy impacts; and other relevant factors such as impacts on safety.

Pursuant to Title II of the Clean Air Act, EPA has taken a comprehensive, integrated approach to mobile source emission control that has produced benefits well in excess of the costs of regulation. In developing the Title II program, the Agency's historic, initial focus was on personal vehicles since that category represented the largest source of mobile source emissions.

Title II emission standards have stimulated the development of a broad set of advanced automotive technologies, such as on-board computers and fuel injection systems, which have been the building blocks of automotive designs and have yielded not only lower pollutant emissions, but improved vehicle performance, reliability, and durability. In response to EPA's adoption of Title II emission standards for GHGs from light-duty vehicles in 2010 and later, manufacturers have continued to significantly ramp up their development and application of a wide range of new and improved technologies, including more fuel-efficient engine designs, transmissions, aerodynamics, and tires, air conditioning systems that contribute to lower GHG emissions, and various levels of electrified vehicle technologies.

This proposed rule implements a specific provision from Title II, section 202(a). Section 202(a)(1) of the CAA, 42 U.S.C. 7521(a)(1), states that “the Administrator shall by regulation prescribe (and from time to time revise) . . . standards applicable to the emission of any air pollutant from any class or classes of new motor vehicles . . . which in his judgment cause, or contribute to, air pollution which may reasonably be anticipated to endanger public health or welfare.” Once EPA makes the appropriate endangerment and cause or contribute findings,

then section 202(a) authorizes EPA to issue standards applicable to emissions of those pollutants. Indeed, EPA's obligation to do so is mandatory.

See Coalition for Responsible Regulation

EPA,

684 F.3d 102, 126-27 (D.C. Cir. 2012);

Massachusetts

EPA,

549 U.S. 497, 533 (2007). Moreover, EPA's mandatory legal duty to promulgate these emission standards derives from “a statutory obligation wholly independent of DOT's mandate to promote energy efficiency.”

Massachusetts,

549 U.S. at 532. Consequently, EPA has no discretion to decline to issue greenhouse gas standards under section 202(a), or to defer issuing such standards due to NHTSA's regulatory authority to establish fuel economy standards. Rather, “[j]ust as EPA lacks authority to refuse to regulate on the grounds of NHTSA's regulatory authority, EPA cannot defer regulation on that basis.”

Coalition for Responsible Regulation,

684 F.3d at 127.

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

Any standards under CAA section 202(a)(1) “shall be applicable to such vehicles . . . for their useful life.” Emission standards set by EPA under CAA section 202(a)(1) are technology-based, as the levels chosen must be premised on a finding of technological feasibility. Thus, standards promulgated under CAA section 202(a) are to take effect only “after such period as the Administrator finds necessary to permit the development and application of the requisite technology, giving appropriate consideration to the cost of compliance within such period.” CAA section 202(a)(2); see also

NRDC

EPA,

655 F. 2d 318, 322 (D.C. Cir. 1981). EPA must consider costs to those entities which are directly subject to the standards.

Motor & Equipment Mfrs. Ass'n Inc.

EPA,

627 F. 2d 1095, 1118 (D.C. Cir. 1979). Thus, “the [s]ection 202(a)(2) reference to compliance costs encompasses only the cost to the motor-vehicle industry to come into compliance with the new emission standards, and does not mandate consideration of costs to other entities not directly subject to the proposed standards.”

See Coalition for Responsible Regulation,

684 F.3d at 128.

EPA is afforded considerable discretion under section 202(a) when assessing issues of technical feasibility and availability of lead time to implement new technology. Such determinations are “subject to the restraints of reasonableness,” which “does not open the door to `crystal ball' inquiry.”

NRDC,

655 F. 2d at 328, quoting

International Harvester Co.

Ruckelshaus,

478 F. 2d 615, 629 (D.C. Cir. 1973). However, “EPA is not obliged to provide detailed solutions to every engineering problem posed in the perfection of [a particular device]. In the absence of theoretical objections to the technology, the agency need only identify the major steps necessary for development of the device, and give plausible reasons for its belief that the industry will be able to solve those problems in the time remaining. The EPA is not required to rebut all speculation that unspecified factors may hinder `real world' emission control.”

NRDC,

655 F. 2d at 333-34. In developing such technology-based standards, EPA has the discretion to consider different standards for appropriate groupings of vehicles (“class or classes of new motor vehicles”), or a single standard for a larger grouping of motor vehicles.

NRDC,

655 F.2d at 338. Finally, with respect to regulation of vehicular greenhouse gas emissions, EPA is not “required to treat NHTSA's . . . regulations as establishing the baseline for the [section 202(a) standards].”

Coalition for Responsible Regulation,

684 F.3d at 127 (noting that the section 202(a) standards provide “benefits above and beyond those resulting from NHTSA's fuel-economy standards.”)

Although standards under CAA section 202(a)(1) are technology-based, they are not based exclusively on technological capability. EPA has the discretion to consider and weigh various factors along with technological feasibility, such as the cost of compliance (section 202(a)(2)), lead time necessary for compliance (section 202(a)(2)), safety (see

NRDC,

655 F. 2d at 336 n. 31)

and other impacts on consumers, and energy impacts associated with use of the technology. See

George E. Warren Corp.

EPA,

159 F.3d 616, 623-624 (D.C. Cir. 1998) (ordinarily permissible for EPA to consider factors not specifically enumerated in the Act).

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

In addition, EPA has clear authority to set standards under CAA section 202(a) that are technology-forcing when EPA considers that to be appropriate, but EPA is not required to do so (as distinguished from standards under provisions such as section 202(a)(3) and section 213(a)(3)). Section 202(a) of the CAA does not specify the degree of weight to apply to each factor, and EPA accordingly has discretion in choosing an appropriate balance among factors. See

Sierra Club

EPA,

325 F.3d 374, 378 (D.C. Cir. 2003) (even where a provision is technology-forcing, the provision “does not resolve how the Administrator should weigh all [the statutory] factors in the process of finding the `greatest emission reduction achievable' ”);

NPRA

EPA,

287 F.3d 1130, 1135 (D.C. Cir. 2002) (EPA decisions, under CAA provision authorizing technology-forcing standards, based on complex scientific or technical analysis are accorded particularly great deference); see also

Husqvarna AB

EPA,

254 F. 3d 195, 200 (D.C. Cir. 2001) (great discretion to balance statutory factors in considering level of technology-based standard, and statutory requirement “to [give appropriate] consideration to the cost of applying . . . technology” does not mandate a specific method of cost analysis);

Hercules Inc.

EPA,

598 F. 2d 91, 106 (D.C. Cir. 1978) (“In reviewing a numerical standard we must ask whether the agency's numbers are within a zone of reasonableness, not whether its numbers are precisely right”); Permian Basin Area Rate Cases, 390 U.S. 747, 797 (1968) (same);

Federal Power Commission

Conway Corp.,

426 U.S. 271, 278 (1976) (same);

Exxon Mobil Gas Marketing Co.

FERC,

297 F. 3d 1071, 1084 (D.C. Cir. 2002) (same).

ii. Testing Authority

Under section 203 of the CAA, sales of vehicles are prohibited unless the vehicle is covered by a certificate of conformity. EPA issues certificates of conformity pursuant to section 206 of the CAA, based on (necessarily) pre-sale testing conducted either by EPA or by the manufacturer. The Federal Test Procedure (FTP or “city” test) and the Highway Fuel Economy Test (HFET or “highway” test) are used for this purpose. Compliance with standards is required not only at certification but throughout a vehicle's useful life, so that testing requirements may continue post-certification. Useful life standards may apply an adjustment factor to account for vehicle emission control deterioration or variability in use (section 206(a)).

EPA establishes the test procedures under which compliance with the CAA GHG standards is measured. EPA's testing authority under the CAA is broad and flexible. EPA has also developed tests with additional cycles (the so-called 5-cycle tests) which are used for purposes of fuel economy labeling and are also used in the EPA program for extending off-cycle credits under the light-duty vehicle GHG program.

iii. Compliance and Enforcement Authority

EPA oversees testing, collects and processes test data, and performs calculations to determine compliance with CAA standards. CAA standards apply not only at certification but also throughout the vehicle's useful life. The CAA provides for penalties should manufacturers fail to comply with their fleet average standards, and there is no option for manufacturers to pay fines in lieu of compliance with the standards. Under the CAA, penalties for violation of a fleet average standard are typically determined on a vehicle-specific basis by determining the number of a manufacturer's highest emitting vehicles that cause the fleet average standard violation. Penalties for reporting requirements under Title II of the CAA apply per day of violation, and other violations apply on a per vehicle, or a per part or component basis. See CAA sections 203(a) and 205(a) and 40 CFR 19.4.

Section 207 of the CAA grants EPA broad authority to require manufacturers to remedy vehicles if EPA determines there are a substantial number of noncomplying vehicles. In addition, section 205 of the CAA authorizes EPA to assess penalties of up to $48,762 per vehicle for violations of various prohibited acts specified in the CAA. In determining the appropriate penalty, EPA must consider a variety of factors such as the gravity of the violation, the economic impact of the violation, the violator's history of compliance, and “such other matters as justice may require.” The CAA does not authorize vehicle manufacturers to pay fines in lieu of meeting emission standards.

4. Averaging, Banking, and Trading Provisions for CO

Standards

i. Background

Averaging, banking, and trading (ABT) is an important compliance flexibility and ABT has been built into various highway engine and vehicle programs (and nonroad engines and equipment programs) to support emissions standards that through the introduction of new technologies, result in reductions in air pollution. The light-duty ABT program for GHG standards includes existing provisions initially established in the 2010 rule for how credits may be generated and used within the program.

These provisions include credit carry-forward, credit carry-back (also called deficit carry-forward), credit transfers (within a manufacturer), and credit trading (across manufacturers).

40 CFR 86.1865-12.

Credit carry-forward refers to banking (saving) credits for future use, after satisfying any needs to offset prior MY debits within a vehicle category (car fleet or truck fleet). Credit carry-back refers to using credits to offset any deficit in meeting the fleet average standards that had accrued in a prior MY. A manufacturer may have a deficit at the end of a MY (after averaging across its fleet using credit transfers between cars and trucks)—that is, a manufacturer's fleet average level may fail to meet the required fleet average standard for the MY. The CAA does not expressly limit the duration of such credit provisions, and in the MY 2012-2016 and 2017-2025 programs, EPA chose to adopt 5-year credit carry-forward (generally, with an exception noted below) and 3-year credit carry-back provisions as a reasonable approach that maintained consistency between the EPA GHG and NHTSA's CAFE provisions.

While some stakeholders had suggested that light-duty GHG credits should have an unlimited credit life, EPA did not adopt that suggestion for the light-duty GHG program because it would pose enforcement challenges and could lead to some manufacturers accumulating large banks of credits that could interfere with the program's goal to develop and transition to progressively more advanced emissions control technologies in the future.

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

Although the credit carry-forward and carry-back provisions generally remained in place for MY 2017 and later standards, EPA finalized provisions allowing all unused (banked) credits generated in MY 2010-2016 (but not MY 2009 early credits) to be carried forward through MY 2021. See § 86.1865-12(k)(6)(ii); 77 FR 62788 October 15, 2012. This is the normal 5-year carry-forward for MY 2016 and later credits but provides additional carry-forward years for credits generated in MYs 2010-2015. Extending the life of MY 2010-2015 credits provided greater flexibility for manufacturers in using the credits. This provision was intended to facilitate the transition to increasingly stringent standards through MY 2021 by helping manufacturers resolve lead time issues they might face in the early MYs of the program. This extension of credit carry-forward also provided additional incentive for manufacturers to generate credits earlier, for example in MYs 2014 and 2015, thereby encouraging the earlier use of additional CO

reducing technologies.

Transferring credits in the EPA program refers to exchanging credits between the two averaging sets—passenger cars and light trucks—within a manufacturer. For example, credits accrued by overcompliance with a manufacturer's car fleet average standard can be used to offset debits accrued due to that manufacturer not meeting the truck fleet average standard in a given year. (Put another way, a manufacturer's car and truck fleets are, in essence, a single averaging set in the EPA program). Finally, accumulated credits may be traded to another manufacturer. Credit trading has occurred on a regular basis in EPA's vehicle program.

Manufacturers acquiring credits may offset credit shortfalls and bank credits for use toward future compliance within the carry-forward constraints of the program.

EPA provides general information on credit trades annually as part of its annual Automotive Trends and GHG Compliance Report. The latest report is available at:

https://www.epa.gov/automotive-trends

and the docket for this rulemaking.

The ABT provisions are an integral part of the vehicle GHG program and the agency expects that manufacturers will continue to utilize these provisions into the future. EPA's annual Automotive Trends Report provides details on the use of these provisions in the GHG program.

ABT allows EPA to consider standards more stringent than we would otherwise consider by giving manufacturers an important tool to resolve lead time and feasibility issues. EPA believes the targeted extension of credit carry-forward that we are proposing, discussed below, is appropriate considering the stringency and implementation timeframe of the proposed standards.

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

ii. Extended Credit Carry-Forward Proposal

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

credits into the 2023-2026 MYs, to ease the manufacturers' transition to these more stringent standards.

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

Table 23—Proposed Extension of Credit Carry-Forward for MY 2016-2020 Credits

credits

are

banked

MYs credits are valid under EPA's proposed extension

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2016

2017

2018

2019

2020

2021

x = Current program. + = Proposed additional years.

Extending the life for MY 2016-2020 credits provides greater flexibility for manufacturers in using the credits they have generated through overcompliance with the stringent standards in those MYs. These credits would help manufacturers to ease the transition to the more stringent proposed standards. Providing the extended credit carry-forward will help some manufacturers to lower overall costs and address any potential lead time issues they may face during these MYs, especially in the first year of the proposed standards (MY 2023).

EPA is proposing to extend credit life only for credits generated against standards established in the 2012 rule for MYs 2016-2020. EPA views these credits as a reflection of manufacturers' having achieved reductions beyond and earlier than those required by the standards. EPA is not proposing to extend credit life for credits generated in MYs 2021-2022 against the SAFE standards, as we view these credits as windfall credits, accumulated by manufacturers mostly because of the large reduction in the stringency of standards under the SAFE rule, as compared to the 2012 rule standards previously in effect, rather than for technology-based actions taken by a manufacturer to reduce fleet emissions.

As noted above, there is precedent for extending credit carry-forward temporarily beyond five years to help manufacturers transition to more stringent standards. In the 2012 rule, EPA extended carry-forward for MY 2010-2015 credits to MY 2021 for similar reasons, to provide more flexibility for a limited time during a transition to more stringent standards.

ABT is an important compliance flexibility and has been built into various highway engine and vehicle programs to support emissions standards programs that through the introduction of new technologies result in reductions in air pollution. While the normal five-year credit life in the light-duty GHG program is generally sufficient to address the need for manufacturer flexibility while considering the practical challenges of properly tracking credits over an extended period of time for compliance and enforcement purposes, there are occasions—such as when the industry is transitioning to significantly more stringent standards—where more flexibility is appropriate. As noted above, ABT allows EPA to consider standards more stringent than we would otherwise consider by giving manufacturers an important tool to resolve lead time and feasibility issues, and EPA believes the targeted extension of credit life that we are proposing is appropriate given the stringency and implementation timeframe of the proposed standards.

77 FR 62788.

5. Certification, Compliance, and Enforcement

EPA established comprehensive vehicle certification, compliance, and enforcement provisions for the GHG standards as part of the rulemaking establishing the initial GHG standards for MY 2012-2016 vehicles.

Manufacturers have been using these provisions since MY 2012 and EPA is not proposing or seeking comment on changes in the areas of certification, compliance, or enforcement.

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

6. On-Board Diagnostics Program Updates

EPA regulations state that onboard diagnostics (OBD) systems must generally detect malfunctions in the emission control system, store trouble codes corresponding to detected malfunctions, and alert operator

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