Corporate Average Fuel Economy Standards for Model Years 2024-2026 Passenger Cars and Light Trucks

Federal RegisterSep 3, 2021

Ask Donna

What actually matters in this document.

Text

DEPARTMENT OF TRANSPORTATION

National Highway Traffic Safety Administration

49 CFR Parts 531, 533, 536, and 537

[NHTSA-2021-0053]

RIN 2127-AM34

Corporate Average Fuel Economy Standards for Model Years 2024-2026 Passenger Cars and Light Trucks

AGENCY:

National Highway Traffic Safety Administration (NHTSA), Department of Transportation (DOT).

ACTION:

Notice of proposed rulemaking.

SUMMARY:

NHTSA, on behalf of the Department of Transportation, is proposing revised fuel economy standards for passenger cars and light trucks for model years 2024-2026. On January 20, 2021, President Biden signed an Executive order (E.O.) entitled, “Protecting Public Health and the Environment and Restoring Science To Tackle the Climate Crisis.” In it, the President directed that “The Safer Affordable Fuel-Efficient (SAFE) Vehicles Rule for Model Years 2021-2026 Passenger Cars and Light Trucks” (hereafter, “the 2020 final rule”) be immediately reviewed for consistency with our Nation's abiding commitment to empower our workers and communities; promote and protect our public health and the environment; and conserve our national treasures and monuments, places that secure our national memory. President Biden further directed that the 2020 final rule be reviewed at once and that (in this case) the Secretary of Transportation consider “suspending, revising, or rescinding” it, via a new proposal, by July 2021. Because of the President's direction in the E.O., NHTSA reexamined the 2020 final rule under its authority to set corporate average fuel economy (CAFE) standards. In doing so, NHTSA tentatively concluded that the fuel economy standards set in 2020 should be revised so that they increase at a rate of 8 percent year over year for each model year from 2024 through 2026, for both passenger cars and light trucks. This responds to the agency's statutory mandate to improve energy conservation. This proposal also makes certain minor changes to fuel economy reporting requirements.

DATES:

Comments:

Comments are requested on or before October 26, 2021. In compliance with the Paperwork Reduction Act, NHTSA is also seeking comment on a revision to an existing information collection. For additional information, see the Paperwork Reduction Act Section under Section IX, below. All comments relating to the information collection requirements should be submitted to NHTSA and to the Office of Management and Budget (OMB) at the address listed in the

ADDRESSES

section on or before October 26, 2021. See the

SUPPLEMENTARY INFORMATION

section on “Public Participation,” below, for more information about written comments.

Public Hearings:

NHTSA will hold one virtual public hearing during the public comment period. The agency will announce the specific date and web address for the hearing in a supplemental

Federal Register

notification. The agency will accept oral and written comments on the rulemaking documents and will also accept comments on the Supplemental Environmental Impact Statement (SEIS) at this hearing. The hearing will start at 9 a.m. Eastern standard time and continue until everyone has had a chance to speak. See the

SUPPLEMENTARY INFORMATION

section on “Public Participation,” below, for more information about the public hearing.

ADDRESSES:

You may send comments, identified by Docket No. NHTSA-2021-0053, by any of the following methods:

•

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

Follow the instructions for submitting comments.

•

Fax:

(202) 493-2251.

•

Mail:

Docket Management Facility, M-30, U.S. Department of Transportation, West Building, Ground Floor, Rm. W12-140, 1200 New Jersey Avenue SE, Washington, DC 20590.

•

Hand Delivery:

Docket Management Facility, M-30, U.S. Department of Transportation, West Building, Ground Floor, Rm. W12-140, 1200 New Jersey Avenue SE, Washington, DC 20590, between 9 a.m. and 4 p.m. Eastern Time, Monday through Friday, except Federal holidays.

Comments on the proposed information collection requirements should be submitted to: Office of Management and Budget at

www.reginfo.gov/public/do/PRAMain.

To find this particular information collection, select “Currently under Review—Open for Public Comment” or use the search function. NHTSA requests that comments sent to the OMB also be sent to the NHTSA rulemaking docket identified in the heading of this document.

Instructions:

All submissions received must include the agency name and docket number or Regulatory Information Number (RIN) for this rulemaking. All comments received will be posted without change to

http://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.

Docket:

For access to the dockets or to read background documents or comments received, please visit

http://www.regulations.gov,

and/or Docket Management Facility, M-30, U.S. Department of Transportation, West Building, Ground Floor, Rm. W12-140, 1200 New Jersey Avenue SE, Washington, DC 20590. The Docket Management Facility is open between 9 a.m. and 4 p.m. Eastern Time, Monday through Friday, except Federal holidays.

FOR FURTHER INFORMATION CONTACT:

Rebecca Schade, NHTSA Office of Chief Counsel, National Highway Traffic Safety Administration, 1200 New Jersey Avenue SE, Washington, DC 20590; email:

rebecca.schade@dot.gov.

SUPPLEMENTARY INFORMATION:

Does this action apply to me?

This action affects companies that manufacture or sell new passenger automobiles (passenger cars) and non-passenger automobiles (light trucks) as defined under NHTSA's CAFE regulations.

Regulated categories and entities include:

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

see also

D. How is this proposal consistent with EPA's proposal and with California's programs?

The NHTSA and EPA proposals remain coordinated despite being issued as separate regulatory actions. Because NHTSA and EPA are regulating the exact same vehicles and manufacturer will use the same technologies to meet both sets of standards, NHTSA and EPA coordinated during the development of each agency's independent proposal to revise the standards set forth in the 2020 final rule. The NHTSA-proposed CAFE and EPA-proposed CO

standards for MY 2026 represent roughly equivalent levels of stringency and may serve as a coordinated starting point for subsequent standards. While the proposed CAFE and CO

standards for MYs 2024-2025 are different, this is largely due to the difference in the “start year” for the revised regulations—EPA is proposing to revise standards for MY 2023, while EPCA's lead time requirements, which do not apply to EPA, prevent NHTSA from proposing revised standards until MY 2024. In order to set standards for MY 2023, EPA intends to issue its final rule by December 31, 2021, whereas NHTSA has until April 2022 to finalize standards for MY 2024. The difference in timing makes separate rulemaking actions reasonable and prudent. The specific differences in what the two agencies' standards require become smaller each year, until alignment is achieved. The agencies still have coordinated closely to minimize inconsistency between the programs and will continue to do so through the final rule stage.

While NHTSA's and EPA's programs differ in certain other respects, like programmatic flexibilities, those differences are not new in this proposal. Some parts of the programs are harmonized, and others differ, often as a result of statute. Since NHTSA and EPA began regulating together under President Obama, differences in programmatic flexibilities have meant that manufacturers have had (and will have) to plan their compliance strategies considering both the CAFE standards and the GHG standards and assure that they are in compliance with both, while still building a single fleet of vehicles to accomplish that goal. NHTSA is proposing CAFE standards that increase at 8 percent per year over MYs 2024-2026 because that is what NHTSA has tentatively concluded is maximum feasible in those model years, under the EPCA factors, and is confident that industry would still be able to build a single fleet of vehicles to meet both the NHTSA and EPA standards. Auto manufacturers are extremely sophisticated companies, well-able to manage complex compliance strategies that account for multiple regulatory programs concurrently. If different agencies' standards are more binding for some companies in certain years, this does not mean that manufacturers must build

multiple

fleets of vehicles, simply that they will have to be more strategic about

how

they build their fleet.

NHTSA has also considered and accounted for California's ZEV mandate (and its adoption by a number of other states) in developing the baseline for this proposal, and has also accounted for the Framework Agreements between California, BMW, Ford, Honda, VWA, and Volvo. NHTSA believes that it is reasonable to include ZEV in the baseline for this proposal regardless of whether California receives a waiver of preemption under the Clean Air Act (CAA) because, according to California, industry overcompliance with the ZEV mandate has been extensive, which indicates that whether or not a waiver exists, many companies intend to produce ZEVs in volumes comparable to what a ZEV mandate would require. Because no decision has yet been made on a CAA waiver for California, and because modeling a sub-national fleet is not currently an analytical option for NHTSA, NHTSA has not expressly accounted for California GHG standards in the analysis for this proposal, although we seek comment on whether and how to account for them in the final rule. Chapter 6 of the accompanying PRIA shows the estimated effects of all of these programs simultaneously.

III. Technical Foundation for NPRM Analysis

A. Why does NHTSA conduct this analysis?

NHTSA is proposing to establish revised CAFE standards for passenger cars and light trucks produced for model years (MYs) 2024-2026. NHTSA's review of the existing standards is consistent with Executive Order 13990, Protecting Public Health and the Environment and Restoring Science to Tackle the Climate Crisis, signed on January 20, 2021, directing the review of the 2020 final rule that established CAFE standards for MYs 2021-2026 and the consideration of whether to suspend, revise, or rescind that action by July 2021.

NHTSA establishes CAFE standards under the Energy Policy and Conservation Act, as amended, and this proposal is undertaken pursuant to that authority. This proposal would require CAFE stringency for both passenger cars and light trucks to increase at a rate of 8 percent per year annually from MY 2024 through MY 2026. NHTSA estimates that over the useful lives of vehicles produced prior to MY 2030, the proposal would save about 50 billion gallons of gasoline and increase electricity consumption by about 275 TWh. Accounting for emissions from both vehicles and upstream energy sector processes (

e.g.,

petroleum refining and electricity generation), NHTSA estimates that the proposal would reduce greenhouse gas emissions by about 465 million metric tons of carbon dioxide (CO

), about 500 thousand tons metric tons of methane (CH

), and about 12 thousand tons of nitrous oxide (N

O).

86 FR 7037 (Jan. 25, 2021).

When NHTSA promulgates new regulations, it generally presents an analysis that estimates the impacts of such regulations, and the impacts of other regulatory alternatives. These analyses derive from statutes such as the Administrative Procedure Act (APA) and National Environmental Policy Act (NEPA), from Executive orders (such as Executive Order 12866 and 13653), and from other administrative guidance (

e.g.,

Office of Management Budget Circular A-4). For CAFE, the Energy Policy and Conservation Act (EPCA), as amended by the Energy Independence and Security Act (EISA), contains a variety of provisions that require NHTSA to consider certain compliance elements in certain ways and avoid considering other things, in determining maximum feasible CAFE standards. Collectively, capturing all of these requirements and guidance elements analytically means that, at least for CAFE, NHTSA presents an analysis that spans a meaningful range of regulatory alternatives, that quantifies a range of technological, economic, and environmental impacts, and that does so in a manner that accounts for EPCA's express requirements for the CAFE program

(

e.g.,

passenger cars and light trucks are regulated separately, and the standard for each fleet must be set at the maximum feasible level in each model year).

NHTSA's decision regarding the proposed standards is thus supported by extensive analysis of potential impacts of the regulatory alternatives under consideration. Along with this preamble, a Technical Support Document (TSD), a Preliminary Regulatory Impact Analysis (PRIA), and a Supplemental Environmental Impact Statement (SEIS), together provide an extensive and detailed enumeration of related methods, estimates, assumptions, and results. NHTSA's analysis has been constructed specifically to reflect various aspects of governing law applicable to CAFE standards and has been expanded and improved in response to comments received to the prior rulemaking and based on additional work conducted over the last year. Further improvements may be made based on comments received to this proposal, the 2021 NAS Report,

and other additional work generally previewed in these rulemaking documents. The analysis for this proposal aided NHTSA in implementing its statutory obligations, including the weighing of various considerations, by reasonably informing decision-makers about the estimated effects of choosing different regulatory alternatives.

National Academies of Sciences, Engineering, and Medicine (NASEM), 2021.

Assessment of Technologies for Improving Fuel Economy of Light-Duty Vehicles—2025-2035,

Washington, DC: The National Academies Press (hereafter, “2021 NAS Report”).

Available at https://www.nationalacademies.org/our-work/assessment-of-technologies-for-improving-fuel-economy-of-light-duty-vehicles-phase-3

and for hard-copy review at DOT headquarters.

NHTSA's analysis makes use of a range of data (

i.e.,

observations of things that have occurred), estimates (

i.e.,

things that may occur in the future), and models (

i.e.,

methods for making estimates). Two examples of

data

include (1) records of actual odometer readings used to estimate annual mileage accumulation at different vehicle ages and (2) CAFE compliance data used as the foundation for the “analysis fleet” containing, among other things, production volumes and fuel economy levels of specific configurations of specific vehicle models produced for sale in the U.S. Two examples of

estimates

include (1) forecasts of future GDP growth used, with other estimates, to forecast future vehicle sales volumes and (2) the “retail price equivalent” (RPE) factor used to estimate the ultimate cost to consumers of a given fuel-saving technology, given accompanying estimates of the technology's “direct cost,” as adjusted to account for estimated “cost learning effects” (

i.e.,

the tendency that it will cost a manufacturer less to apply a technology as the manufacturer gains more experience doing so).

NHTSA uses the CAFE Compliance and Effects Modeling System (usually shortened to the “CAFE Model”) to estimate manufacturers' potential responses to new CAFE and CO

standards and to estimate various impacts of those responses. DOT's Volpe National Transportation Systems Center (often simply referred to as the “Volpe Center”) develops, maintains, and applies the model for NHTSA. NHTSA has used the CAFE Model to perform analyses supporting every CAFE rulemaking since 2001. The 2016 rulemaking regarding heavy-duty pickup and van fuel consumption and CO

emissions also used the CAFE Model for analysis (81 FR 73478, October 25, 2016).

The basic design of the CAFE Model is as follows: the system first estimates how vehicle manufacturers might respond to a given regulatory scenario, and from that potential compliance solution, the system estimates what impact that response will have on fuel consumption, emissions, and economic externalities. In a highly-summarized form, Figure III-1 shows the basic categories of CAFE Model procedures and the sequential flow between different stages of the modeling. The diagram does not present specific model inputs or outputs, as well as many specific procedures and model interactions. The model documentation accompanying this preamble presents these details, and Chapter 1 of the TSD contains a more detailed version of this flow diagram for readers who are interested.

BILLING CODE 4910-59-P

EP03SE21.029

BILLING CODE 4910-59-C

More specifically, the model may be characterized as an integrated system of models. For example, one model estimates manufacturers' responses, another estimates resultant changes in total vehicle sales, and still another estimates resultant changes in fleet turnover (

i.e.,

scrappage). Additionally, and importantly, the model does not determine the form or stringency of the standards. Instead, the model applies inputs specifying the form and stringency of standards to be analyzed and produces outputs showing the impacts of manufacturers working to meet those standards, which become the basis for comparing between different potential stringencies. A regulatory scenario, meanwhile, involves specification of the form, or shape, of the standards (

e.g.,

flat standards, or linear or logistic attribute-based standards), scope of passenger car and truck regulatory classes, and stringency of the CAFE standards for each model year to be analyzed. For example, a regulatory scenario may define CAFE standards that increase in stringency by 8 percent per year for 3 consecutive years.

Manufacturer compliance simulation and the ensuing effects estimation, collectively referred to as compliance modeling, encompass numerous subsidiary elements. Compliance simulation begins with a detailed user-provided

initial forecast of the vehicle models offered for sale during the simulation period. The compliance simulation then attempts to bring each manufacturer into compliance with the standards

defined by the regulatory scenario contained within an input file developed by the user.

Because the CAFE Model is publicly available, anyone can develop their own initial forecast (or other inputs) for the model to use. The DOT-developed market data file that contains the forecast used for this proposal is available on NHTSA's website.

With appropriate inputs, the model can also be used to estimate impacts of manufacturers' potential responses to new CO

standards and to California's ZEV program.

Estimating impacts involves calculating resultant changes in new vehicle costs, estimating a variety of costs (

e.g.,

for fuel) and effects (

e.g.,

emissions from fuel combustion) occurring as vehicles are driven over their lifetimes before eventually being

scrapped, and estimating the monetary value of these effects. Estimating impacts also involves consideration of consumer responses—

e.g.,

the impact of vehicle fuel economy, operating costs, and vehicle price on consumer demand for passenger cars and light trucks. Both basic analytical elements involve the application of many analytical inputs. Many of these inputs are developed

outside

of the model and not

the model. For example, the model

applies

fuel prices; it does not

estimate

fuel prices.

NHTSA also uses EPA's MOVES model to estimate “tailpipe” (a.k.a. “vehicle” or “downstream”) emission factors for criteria pollutants,

and uses four Department of Energy (DOE) and DOE-sponsored models to develop inputs to the CAFE Model, including three developed and maintained by DOE's Argonne National Laboratory. The agency uses the DOE Energy Information Administration's (EIA's) National Energy Modeling System (NEMS) to estimate fuel prices,

and uses Argonne's Greenhouse gases, Regulated Emissions, and Energy use in Transportation (GREET) model to estimate emissions rates from fuel production and distribution processes.

DOT also sponsored DOE/Argonne to use Argonne's Autonomie full-vehicle modeling and simulation system to estimate the fuel economy impacts for roughly a million combinations of technologies and vehicle types.

25 26

The TSD and PRIA describe details of the agency's use of these models. In addition, as discussed in the SEIS accompanying this NPRM, DOT relied on a range of climate models to estimate impacts on climate, air quality, and public health. The SEIS discusses and describes the use of these models.

See https://www.epa.gov/moves.

This proposal uses version MOVES3, available at

https://www.epa.gov/moves/latest-version-motor-vehicle-emission-simulator-moves.

See https://www.eia.gov/outlooks/aeo/info_nems_archive.php.

This proposal uses fuel prices estimated using the Annual Energy Outlook (AEO) 2021 version of NEMS (

see https://www.eia.gov/outlooks/aeo/pdf/02%20AEO2021%20Petroleum.pdf

Information regarding GREET is available at

https://greet.es.anl.gov/index.php.

This NPRM uses the 2020 version of GREET.

As part of the Argonne simulation effort, individual technology combinations simulated in Autonomie were paired with Argonne's BatPaC model to estimate the battery cost associated with each technology combination based on characteristics of the simulated vehicle and its level of electrification. Information regarding Argonne's BatPaC model is available at

https://www.anl.gov/cse/batpac-model-software.

In addition, the impact of engine technologies on fuel consumption, torque, and other metrics was characterized using GT-POWER simulation modeling in combination with other engine modeling that was conducted by IAV Automotive Engineering, Inc. (IAV). The engine characterization “maps” resulting from this analysis were used as inputs for the Autonomie full-vehicle simulation modeling. Information regarding GT-POWER is available at

https://www.gtisoft.com/gt-suite-applications/propulsion-systems/gt-power-engine-simulation-software.

To prepare for analysis supporting this proposal, DOT has refined and expanded the CAFE Model through ongoing development. Examples of such changes, some informed by past external comments, made since early 2020 include:

• Inclusion of 400- and 500-mile BEVs;

• Inclusion of high compression ratio (HCR) engines with cylinder deactivation;

• Accounting for manufacturers' responses to both CAFE and CO

standards jointly (rather than only separately)

• Accounting for the ZEV mandates applicable in California and the “Section 177” states;

• Accounting for some vehicle manufacturers' (BMW, Ford, Honda, VW, and Volvo) voluntary agreement with the State of California to continued annual national-level reductions of vehicle greenhouse gas emissions through MY 2026, with greater rates of electrification than would have been required under the 2020 Federal final rule;

For more information on the Framework Agreements for Clean Cars, including the specific agreements signed by individual manufacturers,

see https://ww2.arb.ca.gov/news/framework-agreements-clean-cars.

○ Inclusion of CAFE civil penalties in the “effective cost” metric used when simulating manufacturers' potential application of fuel-saving technologies;

○ Refined procedures to estimate health effects and corresponding monetized damages attributable to criteria pollutant emissions;

○ New procedures to estimate the impacts and corresponding monetized damages of highway vehicle crashes that do not result in fatalities;

○ Procedures to ensure that modeled technology application and production volumes are the same across all regulatory alternatives in the earliest model years; and

○ Procedures to more precisely focus application of EPCA's “standard setting constraints” (

i.e.,

regarding the consideration of compliance credits and additional dedicated alternative fueled vehicles) to only those model years for which NHTSA is proposing or finalizing new standards.

These changes reflect DOT's long-standing commitment to ongoing refinement of its approach to estimating the potential impacts of new CAFE standards.

NHTSA underscores that this analysis exercises the CAFE Model in a manner that explicitly accounts for the fact that in producing a single fleet of vehicles for sale in the United States, manufacturers face the

combination

of CAFE standards, EPA CO

standards, and ZEV mandates, and for five manufacturers, the voluntary agreement with California to more stringent CO

reduction requirements (also applicable to these manufacturers' total production for the U.S. market) through model year 2026. These regulations and contracts have important structural and other differences that affect the strategy a manufacturer could use to comply with each of the above.

As explained, the analysis is designed to reflect a number of statutory and regulatory requirements applicable to CAFE and tailpipe CO

standard-setting. EPCA contains a number of requirements governing the scope and nature of CAFE standard setting. Among these, some have been in place since EPCA was first signed into law in 1975, and some were added in 2007, when Congress passed EISA and amended EPCA. EPCA/EISA requirements regarding the technical characteristics of CAFE standards and the analysis thereof include, but are not limited to, the following, and the analysis reflects these requirements as summarized:

Corporate Average Standards:

The provision at 49 U.S.C. 32902 requires standards that apply to the average fuel economy levels achieved by each corporation's fleets of vehicles produced for sale in the U.S.

The CAFE Model calculates the CAFE and CO

levels of each manufacturer's fleets based on estimated production volumes and characteristics, including fuel economy levels, of distinct vehicle models that could be produced for sale in the U.S.

This differs from safety standards and traditional emissions standards, which apply separately to each vehicle. For example, every vehicle produced for sale in the U.S. must, on its own, meet all applicable Federal motor vehicle safety standards (FMVSS), but no vehicle produced for sale must, on its own, meet Federal fuel economy standards. Rather, each manufacturer is required to produce a mix of vehicles that, taken together, achieve an average fuel economy level no less than the applicable minimum level.

Separate Standards for Passenger Cars and Light Trucks:

The provision at 49 U.S.C. 32902 requires the Secretary of Transportation to set CAFE standards separately for passenger cars and light trucks. The CAFE Model accounts separately for passenger cars and light trucks when it analyzes CAFE or CO

standards, including differentiated standards and compliance.

Attribute-Based Standards:

The provision at 49 U.S.C. 32902 requires the Secretary of Transportation to define CAFE standards as mathematical functions expressed in terms of one or more vehicle attributes related to fuel economy. This means that for a given manufacturer's fleet of vehicles produced for sale in the U.S. in a given regulatory class and model year, the applicable minimum CAFE requirement (

i.e.,

the numerical value of the requirement) is computed based on the applicable mathematical function, and the mix and attributes of vehicles in the manufacturer's fleet. The CAFE Model accounts for such functions and vehicle attributes explicitly.

Separately Defined Standards for Each Model Year:

The provision at 49 U.S.C. 32902 requires the Secretary to set CAFE standards (separately for passenger cars and light trucks

) at the maximum feasible levels in each model year. The CAFE Model represents each model year explicitly, and accounts for the production relationships between model years.

49 U.S.C. chapter 329 uses the term “non-passenger automobiles,” while NHTSA uses the term “light trucks” in its CAFE regulations. The terms' meanings are identical.

For example, a new engine first applied to given vehicle model/configuration in model year 2020 will most likely be “carried forward” to model year 2021 of that same vehicle model/configuration, in order to reflect the fact that manufacturers do not apply brand-new engines to a given vehicle model every single year. The CAFE Model is designed to account for these real-world factors.

Separate Compliance for Domestic and Imported Passenger Car Fleets:

The provision at 49 U.S.C. 32904 requires the EPA Administrator to determine CAFE compliance separately for each manufacturers' fleets of domestic passenger cars and imported passenger cars, which manufacturers must consider as they decide how to improve the fuel economy of their passenger car fleets. The CAFE Model accounts explicitly for this requirement when simulating manufacturers' potential responses to CAFE standards, and combines any given manufacturer's domestic and imported cars into a single fleet when simulating that manufacturer's potential response to CO

standards (because EPA does not have separate standards for domestic and imported passenger cars).

Minimum CAFE Standards for Domestic Passenger Car Fleets:

The provision at 49 U.S.C. 32902 requires that domestic passenger car fleets meet a minimum standard, which is calculated as 92 percent of the industry-wide average level required under the applicable attribute-based CAFE standard, as projected by the Secretary at the time the standard is promulgated. The CAFE Model accounts explicitly for this requirement for CAFE standards and sets this requirement aside for CO

standards.

Civil Penalties for Noncompliance:

The provision at 49 U.S.C. 32912 (and implementing regulations) prescribes a rate (in dollars per tenth of a mpg) at which the Secretary is to levy civil penalties if a manufacturer fails to comply with a CAFE standard for a given fleet in a given model year, after considering available credits. Some manufacturers have historically demonstrated a willingness to pay civil penalties rather than achieving full numerical compliance across all fleets. The CAFE Model calculates civil penalties for CAFE shortfalls and provides means to estimate that a manufacturer might stop adding fuel-saving technologies once continuing to do so would be effectively more “expensive” (after accounting for fuel prices and buyers' willingness to pay for fuel economy) than paying civil penalties. The CAFE Model does not allow civil penalty payment as an option for CO

standards.

Dual-Fueled and Dedicated Alternative Fuel Vehicles:

For purposes of calculating CAFE levels used to determine compliance, 49 U.S.C. 32905 and 32906 specify methods for calculating the fuel economy levels of vehicles operating on alternative fuels to gasoline or diesel through MY 2020. After MY 2020, methods for calculating alternative fuel vehicle (AFV) fuel economy are governed by regulation. The CAFE Model is able to account for these requirements explicitly for each vehicle model. However, 49 U.S.C. 32902 prohibits consideration of the fuel economy of dedicated alternative fuel vehicle (AFV) models when NHTSA determines what levels of CAFE standards are maximum feasible. The CAFE Model therefore has an option to be run in a manner that excludes the additional application of dedicated AFV technologies in model years for which maximum feasible standards are under consideration. As allowed under NEPA for analysis appearing in EISs informing decisions regarding CAFE standards, the CAFE Model can also be run without this analytical constraint. The CAFE Model does account for dual- and alternative fuel vehicles when simulating manufacturers' potential responses to CO

standards. For natural gas vehicles, both dedicated and dual-fueled, EPA has a multiplier of 2.0 for model years 2022-2026.

While EPA is proposing changes to this and other flexibility provisions in its separate NPRM, for purposes of this NPRM, the CAFE Model only reflects the current EPA regulatory flexibilities.

ZEV Mandates:

The CAFE Model can simulate manufacturers' compliance with ZEV mandates applicable in California and “Section 177”

states. The approach involves identifying specific vehicle model/configurations that could be replaced with PHEVs or BEVs, and immediately making these changes in each model year, before beginning to consider the potential that other technologies could be applied toward compliance with CAFE or CO

standards.

The term “Section 177” states refers to states which have elected to adopt California's standards in lieu of Federal requirements, as allowed under Section 177 of the CAA.

Creation and Use of Compliance Credits:

The provision at 49 U.S.C. 32903 provides that manufacturers may earn CAFE “credits” by achieving a CAFE level beyond that required of a given fleet in a given model year, and specifies how these credits may be used to offset the amount by which a different fleet falls short of its corresponding requirement. These provisions allow credits to be “carried forward” and “carried back” between model years, transferred between regulated classes (domestic passenger cars, imported passenger cars, and light trucks), and traded between manufacturers. However, credit use is also subject to specific statutory limits. For example, CAFE compliance credits can be carried forward a maximum of five model years and carried back a maximum of three model years. Also, EPCA/EISA caps the amount of credit that can be transferred between passenger car and light truck fleets and prohibits manufacturers from applying traded or transferred credits to offset a failure to achieve the applicable minimum standard for domestic passenger cars. The CAFE Model explicitly simulates manufacturers' potential use of credits carried forward from prior model years or transferred from other fleets.

The provision at 49

U.S.C. 32902 prohibits consideration of manufacturers' potential application of CAFE compliance credits when setting maximum feasible CAFE standards. The CAFE Model can be operated in a manner that excludes the application of CAFE credits for a given model year under consideration for standard setting. For modeling CO

standards, the CAFE Model does not limit transfers. Insofar as the CAFE Model can be exercised in a manner that simulates trading of CO

compliance credits, such simulations treat trading as unlimited.

The CAFE Model does not explicitly simulate the potential that manufacturers would carry CAFE or CO

credits back (

i.e.,

borrow) from future model years, or acquire and use CAFE compliance credits from other manufacturers. At the same time, because EPA has currently elected not to limit credit trading, the CAFE Model can be exercised in a manner that simulates unlimited (a.k.a. “perfect”) CO

compliance credit trading throughout the industry (or, potentially, within discrete trading “blocs”). NHTSA believes there is significant uncertainty in how manufacturers may choose to employ these particular flexibilities in the future: For example, while it is reasonably foreseeable that a manufacturer who over-complies in one year may “coast” through several subsequent years relying on those credits rather than continuing to make technology improvements, it is harder to assume with confidence that manufacturers will rely on

future technology investments to offset prior-year shortfalls, or whether/how manufacturers will trade credits with market competitors rather than making their own technology investments. Historically, carry-back and trading have been much less utilized than carry-forward, for a variety of reasons including higher risk and preference not to `pay competitors to make fuel economy improvements we should be making' (to paraphrase one manufacturer), although NHTSA recognizes that carry-back and trading are used more frequently when standards increase in stringency more rapidly. Given the uncertainty just discussed, and given also the fact that the agency has yet to resolve some of the analytical challenges associated with simulating use of these flexibilities, the agency considers borrowing and trading to involve sufficient risk that it is prudent to support this proposal with analysis that sets aside the potential that manufacturers could come to depend widely on borrowing and trading. While compliance costs in real life may be somewhat different from what is modeled today as a result of this analytical decision, that is broadly true no matter what, and the agency does not believe that the difference would be so great that it would change the policy outcome. Furthermore, a manufacturer employing a trading strategy would presumably do so because it represents a lower-cost compliance option. Thus, the estimates derived from this modeling approach are likely to be conservative in this respect, with real-world compliance costs possibly being lower.

To avoid making judgments about possible future trading activity, the model simulates trading by combining all manufacturers into a single entity, so that the most cost-effective choices are made for the fleet as a whole.

Statutory Basis for Stringency:

The provision at 49 U.S.C. 32902 requires the Secretary to set CAFE standards at the maximum feasible levels, considering technological feasibility, economic practicability, the need of the United States to conserve energy, and the impact of other motor vehicle standards of the Government. EPCA/EISA authorizes the Secretary to interpret these factors, and as the Department's interpretation has evolved, NHTSA has continued to expand and refine its qualitative and quantitative analysis to account for these statutory factors. For example, one of the ways that economic practicability considerations are incorporated into the analysis is through the technology effectiveness determinations: The Autonomie simulations reflect the agency's judgment that it would not be economically practicable for a manufacturer to “split” an engine shared among many vehicle model/configurations into myriad versions each optimized to a single vehicle model/configuration.

National Environmental Policy Act:

In addition, NEPA requires the Secretary to issue an EIS that documents the estimated impacts of regulatory alternatives under consideration. The SEIS accompanying this NPRM documents changes in emission inventories as estimated using the CAFE Model, but also documents corresponding estimates—based on the application of other models documented in the SEIS, of impacts on the global climate, on tropospheric air quality, and on human health.

Other Aspects of Compliance:

Beyond these statutory requirements applicable to DOT and/or EPA are a number of specific technical characteristics of CAFE and/or CO

regulations that are also relevant to the construction of this analysis. For example, EPA has defined procedures for calculating average CO

levels, and has revised procedures for calculating CAFE levels, to reflect manufacturers' application of “off-cycle” technologies that increase fuel economy (and reduce CO

emissions). Although too little information is available to account for these provisions explicitly in the same way that the agency has accounted for other technologies, the CAFE Model does include and makes use of inputs reflecting the agency's expectations regarding the extent to which manufacturers may earn such credits, along with estimates of corresponding costs. Similarly, the CAFE Model includes and makes use of inputs regarding credits EPA has elected to allow manufacturers to earn toward CO

levels (not CAFE) based on the use of air conditioner refrigerants with lower global warming potential (GWP), or on the application of technologies to reduce refrigerant leakage. In addition, the CAFE Model accounts for EPA “multipliers” for certain alternative fueled vehicles, based on current regulatory provisions or on alternative approaches. Although these are examples of regulatory provisions that arise from the exercise of discretion rather than specific statutory mandate, they can materially impact outcomes.

Besides the updates to the model described above, any analysis of regulatory actions that will be implemented several years in the future, and whose benefits and costs accrue over decades, requires a large number of assumptions. Over such time horizons, many, if not most, of the relevant assumptions in such an analysis are inevitably uncertain. Each successive CAFE analysis seeks to update assumptions to reflect better the current state of the world and the best current estimates of future conditions.

A number of assumptions have been updated since the 2020 final rule for this proposal. While NHTSA would have made these updates as a matter of course, we note that that the COVID-19 pandemic has been profoundly disruptive, including in ways directly material to major analytical inputs such as fuel prices, gross domestic product (GDP), vehicle production and sales, and highway travel. As discussed below, NHTSA has updated its “analysis fleet” from a model year 2017 reference to a model year 2020 reference, updated estimates of manufacturers' compliance credit “holdings,” updated fuel price projections to reflect the U.S. Energy Information Administration's (EIA's) 2021 Annual Energy Outlook (AEO), updated projections of GDP and related macroeconomic measures, and updated projections of future highway travel. In addition, through Executive Order 13990, President Biden has required the formation of an Interagency Working Group (IWG) on the Social Cost of Greenhouse Gases and charged this body with updating estimates of the social costs of carbon, nitrous oxide, and methane. As discussed in the TSD, NHTSA has applied the IWG's interim guidance, which contains cost estimates (per ton of emissions) considerably greater than those applied in the analysis supporting the 2020 SAFE rule. These and other updated analytical inputs are discussed in detail in the TSD. NHTSA seeks comment on the above discussion.

B. What is NHTSA analyzing?

As in the CAFE and CO

rulemakings in 2010, 2012, and 2020, NHTSA is proposing to set attribute-based CAFE standards defined by a mathematical function of vehicle footprint, which has observable correlation with fuel economy. EPCA, as amended by EISA, expressly requires that CAFE standards for passenger cars and light trucks be based on one or more vehicle attributes related to fuel economy and be expressed in the form of a mathematical function.

Thus, the proposed standards (and regulatory alternatives) take the form of fuel economy targets expressed as functions of vehicle footprint (the product of vehicle wheelbase and average track width) that are separate for passenger cars and light trucks. Chapter 1.2.3 of the TSD discusses in detail NHTSA's continued

reliance on footprint as the relevant attribute in this proposal.

49 U.S.C. 32902(a)(3)(A).

Under the footprint-based standards, the function defines a fuel economy performance target for each unique footprint combination within a car or truck model type. Using the functions, each manufacturer thus will have a CAFE average standard for each year that is almost certainly unique to each of its fleets,

based upon the footprints and production volumes of the vehicle models produced by that manufacturer. A manufacturer will have separate footprint-based standards for cars and for trucks, consistent with 49 U.S.C. 32902(b)'s direction that NHTSA must set separate standards for cars and for trucks. The functions are mostly sloped, so that generally, larger vehicles (

i.e.,

vehicles with larger footprints) will be subject to lower mpg targets than smaller vehicles. This is because, generally speaking, smaller vehicles are more capable of achieving higher levels of fuel economy, mostly because they tend not to have to work as hard (and therefore require as much energy) to perform their driving task. Although a manufacturer's fleet average standards could be estimated throughout the model year based on the projected production volume of its vehicle fleet (and are estimated as part of EPA's certification process), the standards with which the manufacturer must comply are determined by its final model year production figures. A manufacturer's calculation of its fleet average standards, as well as its fleets' average performance at the end of the model year, will thus be based on the production-weighted average target and performance of each model in its fleet.

EPCA/EISA requires NHTSA and EPA to separate passenger cars into domestic and import passenger car fleets for CAFE compliance purposes (49 U.S.C. 32904(b)), whereas EPA combines all passenger cars into one fleet.

As discussed in prior rulemakings, a manufacturer may have some vehicle models that exceed their target and some that are below their target. Compliance with a fleet average standard is determined by comparing the fleet average standard (based on the production-weighted average of the target levels for each model) with fleet average performance (based on the production-weighted average of the performance of each model).

For passenger cars, consistent with prior rulemakings, NHTSA is proposing to define fuel economy targets as shown in Equation III-1.

EP03SE21.030

Where:

TARGET

is the fuel economy target (in mpg) applicable to a specific vehicle model type with a unique footprint combination,

is a minimum fuel economy target (in mpg),

is a maximum fuel economy target (in mpg),

is the slope (in gallons per mile per square foot, or gpm, per square foot) of a line relating fuel consumption (the inverse of fuel economy) to footprint, and

is an intercept (in gpm) of the same line.

Here,

MIN

and

MAX

are functions that take the minimum and maximum values, respectively, of the set of included values. For example,

MIN

[40, 35] = 35 and

MAX

(40, 25) = 40, such that

MIN

[

MAX

(40, 25), 35] = 35.

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

BILLING CODE 4910-59-P

EP03SE21.031

For light trucks, also consistent with prior rulemakings, NHTSA is proposing to define fuel economy targets as shown in Equation III-2.

EP03SE21.032

Where:

TARGET

is the fuel economy target (in mpg) applicable to a specific vehicle model type with a unique footprint combination,

a, b, c,

and

are as for passenger cars, but taking values specific to light trucks,

is a second minimum fuel economy target (in mpg),

is a second maximum fuel economy target (in mpg),

is the slope (in gpm per square foot) of a second line relating fuel consumption (the inverse of fuel economy) to footprint, and

is an intercept (in gpm) of the same second line.

For the preferred alternative, this equation is represented graphically as the curves in Figure III-3.

EP03SE21.033

BILLING CODE 4910-59-C

Although the general model of the target function equation is the same for each vehicle category (passenger cars and light trucks) and each model year, the parameters of the function equation differ for cars and trucks. The actual parameters for both the preferred alternative and the other regulatory alternatives are presented in Section IV.B of this preamble.

As has been the case since NHTSA began establishing attribute-based standards, no vehicle need meet the specific applicable fuel economy target, because compliance with CAFE standards is determined based on corporate average fuel economy. In this respect, CAFE standards are unlike, for example, Federal Motor Vehicle Safety Standards (FMVSS) and certain vehicle criteria pollutant emissions standards where each car must meet the requirements. CAFE standards apply to the average fuel economy levels achieved by manufacturers' entire fleets of vehicles produced for sale in the U.S. Safety standards apply on a vehicle-by-vehicle basis, such that every single vehicle produced for sale in the U.S. must, on its own, comply with minimum FMVSS. When first mandating CAFE standards in the 1970s, Congress specified a more flexible averaging-based approach that allows some vehicles to “under comply” (

i.e.,

fall short of the overall flat standard, or fall short of their target under attribute-based standards) as long as a manufacturer's overall fleet is in compliance.

The required CAFE level applicable to a given fleet in a given model year is determined by calculating the production-weighted harmonic average of fuel economy targets applicable to specific vehicle model configurations in the fleet, as shown in Equation III-3.

EP03SE21.034

Where:

CAFE

required

is the CAFE level the fleet is required to achieve,

refers to specific vehicle model/configurations in the fleet,

PRODUCTION

is the number of model configuration

produced for sale in the U.S., and

TARGET

FE,I

is the fuel economy target (as defined above) for model configuration

Chapter 1 of the TSD describes the use of attribute-based standards, generally, and explains the specific decision, in past rules and for the current rule, to continue to use vehicle footprint as the attribute over which to vary stringency. That chapter also discusses the policy in selecting the specific mathematical function; the methodologies used to develop the current attribute-based standards; and methodologies previously used to reconsider the mathematical function for CAFE standards. NHTSA refers readers to the TSD for a full discussion of these topics.

While Chapter 1 of the TSD explains why the proposed standards for MYs 2024-2026 continue to be footprint-based, the question has arisen periodically of whether NHTSA should instead consider multi-attribute standards, such as those that also depend on weight, torque, power, towing capability, and/or off-road capability. To date, every time NHTSA has considered options for which attribute(s) to select, the agency has concluded that a properly-designed footprint-based approach provides the best means of achieving the basic policy goals (

i.e.,

by increasing the likelihood of improved fuel economy across the entire fleet of vehicles; by reducing disparities between manufacturers' compliance burdens; and by reducing incentives for manufacturers to respond to standards in ways that could compromise overall highway safety) involved in applying an attribute-based standard. At the same time, footprint-based standards need also to be structured in a way that furthers the energy and environmental policy goals of EPCA without creating inappropriate incentives to increase vehicle size in ways that could increase fuel consumption or compromise safety. That said, as NHTSA moves forward with the CAFE program, and continues to refine our understanding of the light-duty vehicle market and trends in vehicle and highway safety, NHTSA will also continue to revisit whether other approaches (or other ways of applying the same basic approaches) could foreseeably provide better means of achieving policy goals.

For example, in the 2021 NAS Report, the committee recommended that if Congress does not act to remove the prohibition at 49 U.S.C. 32902(h) on considering the fuel economy of dedicated alternative fuel vehicles (like BEVs) in determining maximum feasible CAFE standards, then NHTSA should account for the fuel economy benefits of ZEVs by “setting the standard as a function of a second attribute in addition to footprint—for example, the expected market share of ZEVs in the total U.S. fleet of new light-duty vehicles—such that the standards increase as the share of ZEVs in the total U.S. fleet increases.”

DOE seconded this suggestion in its comments during interagency review of this proposal. Chapter 1 of the TSD contains an examination of this suggestion, and NHTSA seeks comment on whether and how NHTSA might consider adding electrification as an attribute on which to base CAFE standards.

National Academies of Sciences, Engineering, and Medicine, 2021.

Assessment of Technologies for Improving Fuel Economy of Light-Duty Vehicles—2025-2035,

Washington, DC: The National Academies Press (hereafter, “2021 NAS Report”), at Summary Recommendation 5.

Available at https://www.nationalacademies.org/our-work/assessment-of-technologies-for-improving-fuel-economy-of-light-duty-vehicles-phase-3

and for hard-copy review at DOT headquarters.

Changes in the market that have occurred since NHTSA last examined the appropriateness of the footprint curves have been, for the most part, consistent with the trends that the agency identified in 2018. For the most part, the fleet has continued to grow somewhat in vehicle size, as vehicle manufacturers have continued over the past several years to reduce their offerings of smaller footprint vehicles and increase their sales of larger footprint vehicles and continue to sell many small to mid-size crossovers and SUVs, some of which are classified as passenger cars and some of which are light trucks. Although this trend has had the effect of reducing the achieved fuel economy of the fleet (and thus increasing its carbon dioxide emissions) as compared to if vehicles had instead remained the same size or gotten smaller, NHTSA does not believe that there have been sufficiently major changes in the relationship between footprint and fuel economy over the last three years to warrant a detailed re-examination of that relationship as part of this proposal. Moreover, changes to the footprint curves can significantly affect manufacturers' ability to comply. Given the available lead time between now and the beginning of MY 2024, NHTSA believes it is unlikely any potential benefit of changing the shape of the footprint curves (when we are already proposing to change standard stringency) would outweigh the costs of doing so.

NHTSA seeks comment on the choice of footprint as the attribute on which the proposed standards are based, and particularly seeks comment on the 2021 NAS report recommendation described above. If commenters wish to provide comments on possible changes to the attribute(s) on which fuel economy standards should be based, including approaches for considering vehicle electrification in ways that would further a zero emissions fleet as discussed in Chapter 1 of the TSD, NHTSA would appreciate commenters including a discussion of the timeframe in which those changes should be made—for example, whether and how much lead time would be preferable for making such changes, particularly recognizing the available lead time for MY 2024. NHTSA also seeks comment on whether, to the extent that vehicle upsizing trends and fuel economy curves are causally related instead of correlated, it is the curve shape versus the choice of footprint that creates this relationship (or, alternatively, whether the relationship if any derives from vehicle classification). Again, if commenters wish to provide comments on possible changes to the curve shapes, NHTSA would appreciate commenters including a discussion of the timeframe in which those changes should be made.

NHTSA seeks comment on the discussion above and in the TSD.

C. What inputs does the compliance analysis require?

The CAFE Model applies various technologies to different vehicle models in each manufacturer's product line to simulate how each manufacturer might make progress toward compliance with the specified standard. Subject to a variety of user-controlled constraints, the model applies technologies based on their relative cost-effectiveness, as determined by several input assumptions regarding the cost and effectiveness of each technology, the cost of compliance (determined by the change in CAFE or CO

credits, CAFE-related civil penalties, or value of CO

credits, depending on the compliance program being evaluated), and the value of avoided fuel expenses. For a given manufacturer, the compliance simulation algorithm applies technologies either until the manufacturer runs out of cost-effective technologies,

until the manufacturer exhausts all available technologies, or, if the manufacturer is assumed to be willing to pay civil penalties or acquire credits from another manufacturer, until paying civil penalties or purchasing credits becomes more cost-effective than increasing vehicle fuel economy. At this stage, the system assigns an incurred technology cost and updated fuel economy to each vehicle model, as well as any civil penalties incurred/credits purchased by each manufacturer. This compliance simulation process is repeated for each model year included in the study period (through model year 2050 in this analysis).

Generally, the model considers a technology cost-effective if it pays for itself in fuel savings within 30 months. Depending on the settings applied, the model can continue to apply technologies that are

not

cost-effective rather than choosing other compliance options; if it does so, it will apply those additional technologies in order of cost-effectiveness (

i.e.,

most cost-effective first).

At the conclusion of the compliance simulation for a given regulatory scenario the system transitions between compliance simulation and effects calculations. This is the point where the system produces a full representation of the registered light-duty vehicle population in the United States. The CAFE Model then uses this fleet to generate estimates of the following (for each model year and calendar year included in the analysis): Lifetime travel, fuel consumption, carbon dioxide and criteria pollutant emissions, the magnitude of various economic externalities related to vehicular travel (

e.g.,

congestion and noise), and energy consumption (

e.g.,

the economic costs of short-term increases in petroleum prices, or social damages associated with GHG emissions). The system then uses these estimates to measure the benefits and costs associated with each regulatory alternative (relative to the no-action alternative).

To perform this analysis, the CAFE Model uses millions of data points contained in several input files that have been populated by engineers, economists, and safety and environmental program analysts at both NHTSA and the DOT's Volpe National Transportations Systems Center (Volpe). In addition, some of the input data comes from modeling and simulation analysis performed by experts at Argonne National Laboratory using their Autonomie full vehicle simulation model and BatPaC battery cost model. Other inputs are derived from other models, such as the U.S. Energy Information Administration's (EIA's) National Energy Modeling System (NEMS), Argonne's “GREET” fuel-cycle emissions analysis model, and U.S. EPA's “MOVES” vehicle emissions analysis model. As NHTSA and Volpe are both organizations within DOT, we use DOT throughout these sections to refer to the collaborative work performed for this analysis.

This section and Section III.D describe the inputs that the compliance simulation requires, including an in-depth discussion of the technologies used in the analysis, how they are defined in the CAFE Model, how they are characterized on vehicles that already exist in the market, how they can be applied to realistically simulate manufacturer's decisions, their effectiveness, and their cost. The inputs and analyses for the effects calculations, including economic, safety, and environmental effects, are discussed later in Sections III.C through III.H. NHTSA seeks comment on the following discussion.

1. Overview of Inputs to the Analysis

As discussed above, the current analysis involves estimating four major swaths of effects. First, the analysis estimates how the application of various combinations of technologies could impact vehicles' costs and fuel economy levels (and CO

emission rates). Second, the analysis estimates how vehicle manufacturers might respond to standards by adding fuel-saving technologies to new vehicles. Third, the analysis estimates how changes in new vehicles might impact vehicle sales and operation. Finally, the analysis estimates how the combination of these changes might impact national-scale energy consumption, emissions, highway safety, and public health.

There are several CAFE Model input files important to the discussion these first two steps, and these input files are discussed in detail later in this section and in Section III.D. The Market Data file contains the detailed description of the vehicle models and model configurations each manufacturer produces for sale in the U.S. The file also contains a range of other inputs that, though not specific to individual vehicle models, may be specific to individual manufacturers. The Technologies file identifies about six dozen technologies to be included in the analysis, indicates when and how widely each technology can be applied to specific types of vehicles, provides most of the inputs involved in estimating what costs will be incurred, and provides some of the inputs involved in estimating impacts on vehicle fuel consumption and weight.

The CAFE Model also makes use of databases of estimates of fuel consumption impacts and, as applicable, battery costs for different combinations of fuel saving technologies.

These databases are termed the FE1 and FE2 Adjustments databases (the main database and the database specific to plug-in hybrid electric vehicles, applicable to those vehicles' operation on electricity) and the Battery Costs database. DOT developed these databases using a large set of full vehicle and accompanying battery cost model simulations developed by Argonne National Laboratory. The Argonne simulation outputs, battery costs, and other reference materials are also discussed in the following sections.

To be used as files provided separately from the model and loaded every time the model is executed, these databases are prohibitively large, spanning more than a million records and more than half a gigabyte. To conserve memory and speed model operation, DOT has integrated the databases into the CAFE Model executable file. When the model is run, however, the databases are extracted and placed in an accessible location on the user's disk drive.

The Argonne workbooks included in the docket for this proposal include ten databases that contain the outputs of the Autonomie full vehicle simulations, two summary workbooks of assumptions used for the full vehicle simulations, a data dictionary, and the lookup tables for battery costs generated using the BatPaC battery cost model.

The following discussion in this section and in Section III.D expands on the inputs used in the compliance analysis. Further detail is included in Chapters 2 and 3 of the TSD accompanying this proposal, and all input values relevant to the compliance analysis can be seen in the Market Data, Technologies, fuel consumption and battery cost database files, and Argonne

summary files included in the docket for this proposal. As previously mentioned, other model input files underlie the effects analysis, and these are discussed in detail in Sections III.C through III.H. NHTSA seeks comment on the above discussion.

2. The Market Data File

The Market Data file contains the detailed description of the vehicle models and model configurations each manufacturer produces for sale in the U.S. This snapshot of the recent light duty vehicle market, termed the analysis fleet, or baseline fleet, is the starting point for the evaluation of different stringency levels for future fuel economy standards. The analysis fleet provides a reference from which to project how manufacturers could apply additional technologies to vehicles to cost-effectively improve vehicle fuel economy, in response to regulatory action and market conditions.

For this analysis, the MY 2020 light duty fleet was selected as the baseline for further evaluation of the effects of different fuel economy standards. The Market Data file also contains a range of other inputs that, though not specific to individual vehicle models, may be specific to individual manufacturers.

The CAFE Model does not generate compliance paths a manufacturer should, must, or will deploy. It is intended as a tool to demonstrate a compliance pathway a manufacturer

could

choose. It is almost certain all manufacturers will make compliance choices differing from those projected by the CAFE Model.

The Market Data file is an Excel spreadsheet that contains five worksheets. Three worksheets, the Vehicles worksheet, Engines worksheet, and Transmissions worksheet, characterize the baseline fleet for this analysis. The three worksheets contain a characterization of every vehicle sold in MY 2020 and their relevant technology content, including the engines and transmissions that a manufacturer uses in its vehicle platforms and how those technologies are shared across platforms. In addition, the Vehicles worksheet includes baseline economic and safety inputs linked to each vehicle that allow the CAFE Model to estimate economic and safety impacts resulting from any simulated compliance pathway. The remaining two worksheets, the Manufacturers worksheet and Credits and Adjustments worksheet, include baseline compliance positions for each manufacturer, including each manufacturer's starting CAFE credit banks and whether the manufacturer is willing to pay civil penalties for noncompliance with CAFE standards, among other inputs.

New inputs have been added for this analysis in the Vehicles worksheet and Manufacturers worksheet. The new inputs indicate which vehicles a manufacturer may reasonably be expected to convert to a zero emissions vehicle (ZEV) at first redesign opportunity, to comply with several States' ZEV program provisions. The new inputs also indicate if a manufacturer has entered into an agreement with California to achieve more stringent CO

emissions reductions targets than those promulgated in the 2020 final rule.

The following sections discuss how we built the Market Data file, including characterizing vehicles sold in MY 2020 and their technology content, and baseline safety, economic, and manufacturer compliance positions. A detailed discussion of the Market Data file development process is in TSD Chapter 2.2. NHTSA seeks comment on the below discussion and the agency's approach to developing the Market Data file for this proposal.

(a) Characterizing Vehicles and Their Technology Content

The Market Data file integrates information from many sources, including manufacturer compliance submissions, publicly available information, and confidential business information. At times, DOT must populate inputs using analyst judgment, either because information is still incomplete or confidential, or because the information does not yet exist.

For this analysis DOT uses mid-model year 2020 compliance data as the basis of the analysis fleet. The compliance data is supplemented for each vehicle nameplate with manufacturer specification sheets, usually from the manufacturer media website, or from online marketing brochures.

For additional information about how specification sheets inform MY 2020 vehicle technology assignments, see the technology specific assignments sections in Section III.D.

Forward looking refresh/redesign cycles are one example of when analyst judgement is necessary.

The catalogue of reference specification sheets (broken down by manufacturer, by nameplate) used to populate information in the market data file is available in the docket.

DOT uses the mid-model year 2020 compliance data to create a row on the Vehicles worksheet in the Market Data file for each vehicle (or vehicle variant

) that lists a certification fuel economy, sales volume, regulatory class, and footprint. DOT identifies which combination of modeled technologies reasonably represents the fuel saving technologies already on each vehicle, and assigns those technologies to each vehicle, either on the Vehicles worksheet, the Engines worksheet, or the Transmissions worksheet. The fuel saving technologies considered in this analysis are listed in Table III-1.

The market data file often includes a few rows for vehicles that may have identical certification fuel economies, regulatory classes, and footprints (with compliance sales volumes divided out among rows), because other pieces of information used in the CAFE Model may be dissimilar. For instance, in the reference materials used to create the Market Data file, for a nameplate curb weight may vary by trim level (with premium trim levels often weighing more on account of additional equipment on the vehicle), or a manufacturer may provide consumers the option to purchase a larger fuel tank size for their vehicle. These pieces of information may not impact the observed compliance position directly, but curb weight (in relation to other vehicle attributes) is important to assess mass reduction technology already used on the vehicle, and fuel tank size is directly relevant to saving time at the gas pump, which the CAFE Model uses when calculating the value of avoided time spent refueling.

BILLING CODE 4910-59-P

EP03SE21.035

EP03SE21.036

EP03SE21.037

BILLING CODE 4910-59-C

For additional information on the characterization of these technologies (including the cost, prevalence in the 2020 fleet, effectiveness estimates, and considerations for their adoption) see the appropriate technology section in Section III.D or TSD Chapter 3.

DOT also assigns each vehicle a technology class. The CAFE Model uses the technology class (and engine class, discussed below) in the Market Data file to reference the most relevant technology costs for each vehicle, and fuel saving technology combinations. We assign each vehicle in the fleet a technology class using a two-step algorithm that takes into account key characteristics of vehicles in the fleet compared to the baseline characteristics of each technology class.

As discussed further in Section III.C.4.b), there are ten technology classes used in the CAFE analysis that span five vehicle types and two performance variants. The

technology class algorithm and assignment process is discussed in more detail in TSD Chapter 2.4.2.

Baseline 0 to 60 mph accelerations times are assumed for each technology class as part of the Autonomie full vehicle simulations. DOT calculates class baseline curb weights and footprints by averaging the curb weights and footprints of vehicles within each technology class as assigned in previous analyses.

We also assign each vehicle an engine technology class so that the CAFE Model can reference the powertrain costs in the Technologies file that most reasonably align with the observed vehicle. DOT assigns engine technology classes for all vehicles, including electric vehicles. If an electric powertrain replaces and internal combustion engine, the electric motor specifications may be different (and hence costs may be different) depending on the capabilities of the internal combustion engine it is replacing, and the costs in the technologies file (on the engine tab) account for the power output and capability of the gasoline or electric drivetrain.

Parts sharing helps manufacturers achieve economies of scale, deploy capital efficiently, and make the most of shared research and development expenses, while still presenting a wide array of consumer choices to the market. The CAFE Model simulates part sharing by implementing shared engines, shared transmissions, and shared mass reduction platforms. Vehicles sharing a part (as recognized in the CAFE Model), will adopt fuel saving technologies affecting that part together. To account for parts sharing across products, vehicle model/configurations that share engines are assigned the same engine code,

vehicle model/configurations that share transmissions have the same transmission code, and vehicles that adopt mass reduction technologies together share the same platform. For more information about engine codes, transmission codes, and mass reduction platforms see TSD Chapter 3.

Engines (or transmissions) may not be exactly identical, as specifications or vehicle integration features may be different. However, the architectures are similar enough that it is likely the powertrain systems share research and development (R&D), tooling, and production resources in a meaningful way.

Manufacturers often introduce fuel saving technologies at a major redesign of their product or adopt technologies at minor refreshes in between major product redesigns. To support the CAFE Model accounting for new fuel saving technology introduction as it relates to product lifecycle, the Market Data file includes a projection of redesign and refresh years for each vehicle. DOT projects future redesign years and refresh years based on the historical cadence of that vehicle's product lifecycle. For new nameplates, DOT considers the manufacturer's treatment of product lifecycles for past products in similar market segments. When considering year-by-year analysis of standards, the sizing of redesign and refresh intervals will affect projected compliance pathways and how quickly manufacturers can respond to standards. TSD Chapter 2.2.1.7 includes additional information about the product design cycles assumed for this proposal based on historical manufacturer product design cycles.

The Market Data file also includes information about air conditioning (A/C) and off-cycle technologies, but the information is not currently broken out at a row level, vehicle by vehicle.

Instead, historical data (and forecast projections, which are used for analysis regardless of regulatory scenario) are listed by manufacturer, by fleet on the Credits and Adjustments worksheet of the Market Data file. Section III.D.8 shows model inputs specifying estimated adjustments (all in grams/mile) for improvements to air conditioner efficiency and other off-cycle energy consumption, and for reduced leakage of air conditioner refrigerants with high global warming potential (GWP). DOT estimated future values based on an expectation that manufacturers already relying heavily on these adjustments would continue do so, and that other manufacturers would, over time, also approach the limits on adjustments allowed for such improvements.

Regulatory provisions regarding off-cycle technologies are new, and manufacturers have only recently begun including related detailed information in compliance reporting data. For this analysis, though, such information was not sufficiently complete to support a detailed representation of the application of off-cycle technology to specific vehicle model/configurations in the MY 2020 fleet.

(b) Characterizing Baseline Safety, Economic, and Compliance Positions

In addition to characterizing vehicles and their technology content, the Market Data file contains a range of other inputs that, though not specific to individual vehicle models, may be specific to individual manufacturers, or that characterize baseline safety or economic information.

First, the CAFE Model considers the potential safety effect of mass reduction technologies and crash compatibility of different vehicle types. Mass reduction technologies lower the vehicle's curb weight, which may improve crash compatibility and safety, or not, depending on the type of vehicle. DOT assigns each vehicle in the Market Data file a safety class that best aligns with the mass-size-safety analysis. This analysis is discussed in more detail in Section III.H of this proposal and TSD Chapter 7.

The CAFE Model also includes procedures to consider the direct labor impacts of manufacturer's response to CAFE regulations, considering the assembly location of vehicles, engines, and transmissions, the percent U.S. content (that reflects percent U.S. and Canada content),

and the dealership employment associated with new vehicle sales. The Market Data file therefore includes baseline labor information, by vehicle. Sales volumes also influence total estimated direct labor projections in the analysis.

Percent U.S. content was informed by the 2020 Part 583 American Automobile Labeling Act Reports, appearing on NHTSA's website.

We hold the percent U.S. content constant for each vehicle row for the duration of the analysis. In practice, this may not be the case. Changes to trade policy and tariff policy may affect percent U.S. content in the future. Also, some technologies may be more or less likely to be produced in the U.S., and if that is the case, their adoption could affect future U.S. content. NHTSA does not have data at this time to support varying the percent U.S. content.

We also hold the labor hours projected in the Market Data file per unit transacted at dealerships, per unit produced for final assembly, per unit produced for engine assembly, and per unit produced for transmission assembly constant for the duration of the analysis, and project that the origin of these activities to remain unchanged. In practice, it is reasonable to expect that plants could move locations, or engine and transmission technologies are replaced by another fuel saving technology (like electric motors and fixed gear boxes) that could require a meaningfully different amount of assembly labor hours. NHTSA does not have data at this time to support varying labor hours projected in the Market Data file, but we will continue to explore methods to estimate the direct labor impacts of manufacturer's responses to CAFE standards in future analyses.

As observed from Table III-2, manufacturers employ U.S. labor with varying intensity. In many cases, vehicles certifying in the light truck (LT) regulatory class have a larger percent U.S. content than vehicles certifying in the passenger car (PC) regulatory class.

EP03SE21.038

Next, manufacturers

may over-comply with CAFE standards and bank so-called over compliance credits. As discussed further in Section III.C.7, manufacturers may use these credits later, sell them to other manufacturers, or let them expire. The CAFE Model does not explicitly trade credits between and among manufacturers, but staff have adjusted starting credit banks in the Market Data file to reflect trades that are likely to happen when the simulation begins (in MY 2020). Considering information manufacturers have reported regarding compliance credits, and considering recent manufacturers' compliance positions, DOT estimates manufacturers' potential use of compliance credits in earlier MYs. This aligns to an extent that represents how manufacturers could deplete their credit banks rather than producing high volume vehicles with fuel saving technologies in earlier MYs. This also avoids the unrealistic application of technologies for manufacturers in early analysis years that typically rely on credits. For a complete discussion about how this data is collected and assigned in the Market Data file, see TSD Chapter 2.2.2.3.

Tesla does not have internal combustion engines, or multi-speed transmissions, even though they are identified as producing engine and transmission systems in the United States in the Market Data file.

The Market Data file also includes assumptions about a vehicle manufacturer's preferences towards civil penalty payments. EPCA requires that if a manufacturer does not achieve compliance with a CAFE standard in a given model year and cannot apply credits sufficient to cover the compliance shortfall, the manufacturer must pay civil penalties (

i.e.,

fines) to the Federal Government. If inputs indicate that a manufacturer treats civil penalty payment as an economic choice (

i.e.,

one to be taken if doing so would be economically preferable to applying further technology toward compliance), the CAFE Model, when evaluating the manufacturer's response to CAFE standards in a given model year, will apply fuel-saving technology only up to the point beyond which doing so would be more expensive (after subtracting the value of avoided fuel outlays) than paying civil penalties.

For this analysis, DOT exercises the CAFE Model with inputs treating all manufacturers as treating civil penalty

payment as an economic choice through model year 2023. While DOT expects that only manufacturers with some history of paying civil penalties would actually treat civil penalty payment as an acceptable option, the CAFE Model does not currently simulate compliance credit trading between manufacturers, and DOT expects that this treatment of civil penalty payment will serve as a reasonable proxy for compliance credit purchases some manufacturers might actually make through model year 2023. These input assumptions for model years through 2023 reduce the potential that the model will overestimate technology application in the model years leading up to those for which the agency is proposing new standards. As in past CAFE rulemaking analyses (except that supporting the 2020 final rule), DOT has treated manufacturers with some history of civil penalty payment (

i.e.,

BMW, Daimler, FCA, Jaguar-Land Rover, Volvo, and Volkswagen) as continuing to treat civil penalty payment as an acceptable option beyond model year 2023, but has treated all other manufacturers as unwilling to do so beyond model year 2023.

Next, the CAFE Model uses an “effective cost” metric to evaluate options to apply specific technologies to specific engines, transmissions, and vehicle model configurations. Expressed on a $/gallon basis, the analysis computes this metric by subtracting the estimated values of avoided fuel outlays and civil penalties from the corresponding technology costs, and then dividing the result by the quantity of avoided fuel consumption. The analysis computes the value of fuel outlays over a “payback period” representing the manufacturer's expectation that the market will be willing to pay for some portion of fuel savings achieved through higher fuel economy. Once the model has applied enough technology to a manufacturer's fleet to achieve compliance with CAFE standards (and CO

standards and ZEV mandates) in a given model year, the model will apply any further fuel economy improvements estimated to produce a negative effective cost (

i.e.,

any technology applications for which avoided fuel outlays during the payback period are larger than the corresponding technology costs). As discussed above in Section III.A and below in Section III.C, DOT anticipates that manufacturers are likely to act as if the market is willing to pay for avoided fuel outlays expected during the first 30 months of vehicle operation.

We seek comment on whether this expectation is appropriate, or whether some other amount of time should be used. If commenters believe a different amount of time should be used for the payback assumption, it would be most helpful if commenters could define the amount of time, provide an explanation of why that amount of time is preferable, provide any data or information on which the amount of time is based, and provide any discussion of how changing this assumption would interact with other elements in the analysis.

In addition, the Market Data file includes two new sets of inputs for this analysis. In 2020, five vehicle manufacturers reached a voluntary commitment with the state of California to improve the fuel economy of their future nationwide fleets above levels required by the 2020 final rule. For this analysis, compliance with this agreement is in the baseline case for designated manufacturers. The Market Data file contains inputs indicating whether each manufacturer has committed to exceed Federal requirements per this agreement.

Finally, when considering other standards that may affect fuel economy compliance pathways, DOT includes projected zero emissions vehicles (ZEV) that would be required for manufacturers to meet standards in California and Section 177 States, per the waiver granted under the Clean Air Act. To support the inclusion of the ZEV program in the analysis, DOT identifies specific vehicle model/configurations that could adopt BEV technology in response to the ZEV program, independent of CAFE standards, at the first redesign opportunity. These ZEVs are identified in the Market Data file as future BEV200s, BEV300s, or BEV400s. Not all announced BEV nameplates appear in the MY 2020 Market Data file; in these cases, in consultation with CARB, DOT used the volume from a comparable vehicle in the manufacturer's Market Data file portfolio as a proxy. The Market Data file also includes information about the portion of each manufacturer's sales that occur in California and Section 177 states, which is helpful for determining how many ZEV credits each manufacturer will need to generate in the future to comply with the ZEV program with their own portfolio in the rulemaking timeframe. These new procedures are described in detail below and in TSD Chapter 2.3.

3. Simulating the Zero Emissions Vehicle Program

California's Zero Emissions Vehicle (ZEV) program is one part of a program of coordinated standards that the California Air Resources Board (CARB) has enacted to control emissions of criteria pollutants and greenhouse gas emissions from vehicles. The program began in 1990, within the low-emission vehicle (LEV) regulation,

and has since expanded to include eleven other states.

These states may be referred to as Section 177 states, in reference to Section 177 of the Clean Air Act's grant of authority to allow these states to adopt California's air quality standards,

but it is important to note that not all Section 177 states have adopted the ZEV program component.

In the following discussion of the incorporation of the ZEV program into the CAFE Model, any reference to the Section 177 states refers to those states that have adopted California's ZEV program requirements.

California Air Resource Board (CARB), Zero-Emission Vehicle Program. California Air Resources Board. Accessed April 12, 2021.

https://ww2.arb.ca.gov/our-work/programs/zero-emission-vehicle-program/about.

At the time of writing, the Section 177 states that have adopted the ZEV program are Colorado, Connecticut, Maine, Maryland, Massachusetts, New Jersey, New York, Oregon, Rhode Island, Vermont, and Washington.

See

Vermont Department of Environmental Conservation, Zero Emission Vehicles. Accessed April 12, 2021.

https://dec.vermont.gov/air-quality/mobile-sources/zev#:~:text=To%20date%2C%2012%20states%20have,ZEVs%20over%20the%20next%20decade.

Section 177 of the Clean Air Act allows other states to adopt California's air quality standards.

At the time of writing, Delaware and Pennsylvania are the two states that have adopted the LEV standards, but not the ZEV portion.

To account for the ZEV program, and particularly as other states have recently adopted California's ZEV standards, DOT includes the main provisions of the ZEV program in the CAFE Model's analysis of compliance pathways. As explained below, incorporating the ZEV program into the model includes converting vehicles that have been identified as potential ZEV candidates into battery-electric vehicles (BEVs) at the first redesign opportunity, so that a manufacturer's fleet meets calculated ZEV credit requirements. Since ZEV program compliance pathways happen independently from the adoption of fuel saving technology in response to increasing CAFE standards, the ZEV program is considered in the baseline of the analysis, and in all other regulatory alternatives.

Through its ZEV program, California requires that all manufacturers that sell cars within the state meet ZEV credit standards. The current credit requirements are calculated based on manufacturers' California sales volumes. Manufacturers primarily earn ZEV credits through the production of BEVs, fuel cell vehicles (FCVs), and

transitional zero-emissions vehicles (TZEVs), which are vehicles with partial electrification, namely plug-in hybrids (PHEVs). Total credits are calculated by multiplying the credit value each ZEV receives by the vehicle's volume.

The ZEV and PHEV/TZEV credit value per vehicle is calculated based on the vehicle's range; ZEVs may earn up to 4 credits each and PHEVs with a US06 all-electric range capability of 10 mi or higher receive an additional 0.2 credits on top of the credits received based on all-electric range.

The maximum PHEV credit amount available per vehicle is 1.10.

Note however that CARB only allows intermediate-volume manufacturers to meet their ZEV credit requirements through PHEV production.

US06 is one of the drive cycles used to test fuel economy and all-electric range, specifically for the simulation of aggressive driving.

See

Dynamometer Drive Schedules | Vehicle and Fuel Emissions Testing | U.S. EPA for more information, as well as Section III.C.4 and Section III.D.3.d).

13 CCR 1962.2(c)(3).

DOT's method for simulating the ZEV program involves several steps; first, DOT calculates an approximate ZEV credit target for each manufacturer based on the manufacturer's national sales volumes, share of sales in Section 177 states, and the CARB credit requirements. Next, DOT identifies a general pathway to compliance that involves accounting for manufacturers' potential use of ZEV overcompliance credits or other credit mechanisms, and the likelihood that manufacturers would choose to comply with the requirements with BEVs rather than PHEVs or other types of compliant vehicles, in addition to other factors. For this analysis, as discussed further below, DOT consulted with CARB to determine reasonable assumptions for this compliance pathway. Finally, DOT identifies vehicles in the MY 2020 analysis fleet that manufacturers could reasonably adapt to comply with the ZEV standards at the first opportunity for vehicle redesign, based on publicly announced product plans and other information. Each of these steps is discussed in turn, below, and a more detailed description of DOT's simulation of the ZEV program is included in TSD Chapter 2.3.

The CAFE Model is designed to present outcomes at a national scale, so the ZEV analysis considers the Section 177 states as a group as opposed to estimating each state's ZEV credit requirements individually. To capture the appropriate volumes subject to the ZEV requirement, DOT calculates each manufacturer's total market share in Section 177 states. DOT also calculates the overall market share of ZEVs in Section 177 states, in order to estimate as closely as possible the number of predicted ZEVs we expect all manufacturers to sell in those states. These shares are then used to scale down national-level information in the CAFE Model to ensure that we represent only Section 177 states in the final calculation of ZEV credits that we project each manufacturer to earn in future years.

DOT uses model year 2019 National Vehicle Population Profile (NVPP) from IHS Markit—Polk to calculate these percentages.

These data include vehicle characteristics such as powertrain, fuel type, manufacturer, nameplate, and trim level, as well as the state in which each vehicle is sold, which allows staff to identify the different types of ZEVs manufacturers sell in the Section 177 state group. DOT may make use of future Polk data in updating the analysis for the final rule and may include other states that join the ZEV program after the publication of this proposal, if necessary.

National Vehicle Population Profile (NVPP) 2020, IHS Markit—Polk. At the time of the analysis, model year 2019 data from the NVPP contained the most current estimate of market shares by manufacturer, and best represented the registered vehicle population on January 1, 2020.

We calculate sales volumes for the ZEV credit requirement based on each manufacturer's future assumed market share in Section 177 states. DOT decided to carry each manufacturer's ZEV market shares forward to future years, after examination of past market share data from model year 2016, from the 2017 version of the NVPP.

Comparison of these data to the 2020 version showed that manufacturers' market shares remain fairly constant in terms of geographic distribution. Therefore, we determined that it was reasonable to carry forward the recently calculated market shares to future years.

National Vehicle Population Profile (NVPP) 2017, IHS Markit—Polk.

We calculate total credits required for ZEV compliance by multiplying the percentages from CARB's ZEV requirement schedule by the Section 177 state volumes. CARB's credit percentage requirement schedule for the years covered in this analysis begins at 9.5% in 2020 and ramps up in increments to 22% by 2025.

Note that the requirements do not currently change after 2025.

See

13 CCR 1962.2(b). The percentage credit requirements are as follows: 9.5% in 2020, 12% in 2021, 14.5% in 2022, 17% in 2023, 19.5% in 2024, and 22% in 2025 and onward.

13 CCR 1962.2(b).

We generate national sales volume predictions for future years using the Compliance Report, a CAFE Model output file that includes simulated sales by manufacturer, fleet, and model year. We use a Compliance Report that corresponds to the baseline scenario of 1.5% per year increases in standards for both passenger car and light truck fleets. The resulting national sales volume predictions by manufacturer are then multiplied by each manufacturer's total market share in the Section 177 states to capture the appropriate volumes in the ZEV credits calculation. Required credits by manufacturer, per year, are determined by multiplying the Section 177 state volumes by CARB's ZEV credit percentage requirement. These required credits are subsequently added to the CAFE Model inputs as targets for manufacturer compliance with ZEV standards in the CAFE baseline.

The estimated ZEV credit requirements serve as a target for simulating ZEV compliance in the baseline. To achieve this, DOT determines a modeling philosophy for ZEV pathways, reviews various sources for information regarding upcoming ZEV programs, and inserts those programs into the analysis fleet inputs. As manufacturers can meet ZEV standards in a variety of different ways, using various technology combinations, the analysis must include certain simplifying assumptions in choosing ZEV pathways. We made these assumptions in conjunction with guidance from CARB staff. The following sections discuss the approach used to simulate a pathway to ZEV program compliance in this analysis.

First, DOT targeted 2025 compliance, as opposed to assuming manufacturers would perfectly comply with their credit requirements in each year prior to 2025. This simplifying assumption was made upon review of past history of ZEV credit transfers, existing ZEV credit banks, and redesign schedules. DOT focused on integrating ZEV technology throughout that timeline with the target of meeting 2025 obligations; thus, some manufacturers are estimated to over-comply or under-comply, depending on their individual situations, in the years 2021-2024.

Second, DOT determined that the most reasonable way to model ZEV compliance would be to allow under-compliance in certain cases and assume that some manufacturers would not meet their ZEV obligation on their own in 2025. Instead, these manufacturers were assumed to prefer to purchase credits from another manufacturer with a credit surplus. Reviews of past ZEV credit transfers between manufacturers informed the decision to make this

simplifying assumption.

CARB advised that for these manufacturers, the CAFE Model should still project that each manufacturer meet approximately 80% of their ZEV requirements with technology included in their own portfolio. Manufacturers that were observed to have generated many ZEV credits in the past or had announced major upcoming BEV initiatives were projected to meet 100% of their ZEV requirements on their own, without purchasing ZEV credits from other manufacturers.

See https://ww2.arb.ca.gov/our/work/programs/advanced-clean-cars-program/zev-program-zero-emission-vehicle-credit-balances

for past credit balances and transfer information.

The following manufacturers were assumed to meet 100% ZEV compliance: Ford, General Motors, Hyundai, Kia, Jaguar Land Rover, and Volkswagen Automotive. Tesla was also assumed to meet 100% of its required standards, but the analyst team did not need to add additional ZEV substitutes to the baseline for this manufacturer.

Third, DOT agreed that manufacturers would meet their ZEV credit requirements in 2025 though the production of BEVs. As discussed above, manufacturers may choose to build PHEVs or FCVs to earn some portion of their required ZEV credits. However, DOT projected that manufacturers would rely on BEVs to meet their credit requirements, based on reviews of press releases and industry news, as well as discussion with CARB. Since nearly all manufacturers have announced some plans to produce BEVs at a scale meaningful to future ZEV requirements, DOT agreed that this was a reasonable assumption.

Furthermore, as CARB only allows intermediate-volume manufacturers to meet their ZEV credit requirements through the production of PHEVs, and the volume status of these few manufacturers could change over the years, assuming BEV production for ZEV compliance is the most straightforward path.

See

TSD Chapter 2.3 for a list of potential BEV programs recently announced by manufacturers.

Fourth, to account for the new BEV programs announced by some manufacturers, DOT identified vehicles in the 2020 fleet that closely matched the upcoming BEVs, by regulatory class, market segment, and redesign schedule. DOT made an effort to distribute ZEV candidate vehicles by CAFE regulatory class (light truck, passenger car), by manufacturer, in a manner consistent with the 2020 manufacturer fleet mix. Since passenger car and light truck mixes by manufacturer could change in response to the CAFE policy alternative under consideration, this effort was deemed necessary in order to avoid redistributing the fleet mix in an unrealistic manner. However, there were some exceptions to this assumption, as some manufacturers are already closer to meeting their ZEV obligation through 2025 with BEVs currently produced, and some manufacturers underperform their compliance targets more so in one fleet than another. In these cases, DOT deviated from keeping the LT/PC mix of BEVs evenly distributed across the manufacturer's portfolio.

The GM light truck and passenger car distribution is one such example.

DOT then identified future ZEV programs that could plausibly contribute towards the ZEV requirements for each manufacturer by 2025. To obtain this information, DOT examined various sources, including trade press releases, industry announcements, and investor reports. In many cases, these BEV programs are in addition to programs already in production.

Some manufacturers have not yet released details of future electric vehicle programs at the time of writing, but have indicated goals of reaching certain percentages of electric vehicles in their portfolios by a specified year. In these cases, DOT reviewed the manufacturer's current fleet characteristics as well as the aspirational information in press releases and other news in order to make reasonable assumptions about the vehicle segment and range of those future BEVs. DOT may reassign some manufacturer's ZEV programs in the analysis fleet for the final rule based on stakeholder comments or other public information releases that occur in time for the final rule analysis.

Examples of BEV programs already in production include the Nissan Leaf and the Chevrolet Bolt.

Overall, analysts assumed that manufacturers would lean towards producing BEV300s rather than BEV200s, based on the information reviewed and an initial conversation with CARB.

Phase-in caps were also considered, especially for BEV200, with the understanding that the CAFE Model will always pick BEV200 before BEV300 or BEV400, until the quantity of BEV200s is exhausted. See Section III.D.3.c) for details regarding BEV phase-in caps.

BEV300s are 300-mile range battery-electric vehicles.

See

Section III.D.3.b) for further information regarding electrification fleet assignments.

BEVs, especially BEVs with smaller battery packs and less range, are less likely to meet all the performance needs of traditional pickup truck owners today. However, new markets for BEVs may emerge, potentially in the form of electric delivery trucks and some light-duty electric truck applications in state and local government. The extent to which BEVs will be used in these and other new markets is difficult to project. DOT did identify certain trucks as upcoming BEVs for ZEV compliance, and these BEVs were expected to have higher ranges, due to the specific performance needs associated with these vehicles. Outside of the ZEV inputs described here, the CAFE Model does not handle the application of BEV technology with any special considerations as to whether the vehicle is a pickup truck or not. Comments from manufacturers are solicited on this issue.

Finally, in order to simulate manufacturers' compliance with their particular ZEV credits target, 142 rows in the analysis fleet were identified as substitutes for future ZEV programs. As discussed above, the analysis fleet summarizes the roughly 13.6 million light-duty vehicles produced and sold in the United States in the 2020 model year with more than 3,500 rows, each reflecting information for one vehicle type observed. Each row includes the vehicle's nameplate and trim level, the sales volume, engine, transmission, drive configuration, regulatory class, projected redesign schedule, and fuel saving technologies, among other attributes.

As the goal of the ZEV analysis is to simulate compliance with the ZEV program in the baseline, and the analysis fleet only contains vehicles produced during model year 2020, DOT identified existing models in the analysis fleet that shared certain characteristics with upcoming BEVs. DOT also focused on identifying substitute vehicles with redesign years similar to the future BEV's introduction year. The sales volumes of those existing models, as predicted for 2025, were then used to simulate production of the upcoming BEVs. DOT identified a combination of rows that would meet the ZEV target, could contribute productively towards CAFE program obligations (by manufacturer and by fleet), and would introduce BEVs in each manufacturer's portfolio in a way that reasonably aligned with projections and announcements. DOT tagged each of these rows with information in the Market Data file, instructing the CAFE Model to apply the specified BEV technology to the row at the first redesign year, regardless of the scenario or type of CAFE or GHG simulation.

The CAFE Model does not optimize compliance with the ZEV mandate; it relies upon the inputs described in this section in order to estimate each

manufacturer's resulting ZEV credits. The resulting amount of ZEV credits earned by manufacturer for each model year can be found in the CAFE Model's Compliance file.

Not all ZEV-qualifying vehicles in the U.S. earn ZEV credits, as they are not all sold in states that have adopted ZEV regulations. In order to reflect this in the CAFE Model, which only estimates sales volumes at the national level, the percentages calculated for each manufacturer are used to scale down the national-level volumes. Multiplying national-level ZEV sales volumes by these percentages ensures that only the ZEVs sold in Section 177 states count towards the ZEV credit targets of each manufacturer.

See Section 5.8 of the CAFE Model Documentation for a detailed description of how the model applied these ZEV technologies and any changes made to the model's programming for the incorporation of the ZEV program into the baseline.

The single exception to this assumption is Mazda, as Mazda has not yet produced any ZEV-qualifying vehicles at the time of writing. Thus, the percentage of ZEVs sold in Section 177 states cannot be calculated from existing data. However, Mazda has indicated its intention to produce ZEV-qualifying vehicles in the future, so DOT assumed that 100% of future ZEVs would be sold in Section 177 states for the purposes of estimating ZEV credits in the CAFE Model.

As discussed above, DOT made an effort to distribute the newly identified ZEV candidates between CAFE regulatory classes (light truck and passenger car) in a manner consistent with the proportions seen in the 2020 analysis fleet, by manufacturer. As mentioned previously, there were a few exceptions to this assumption in cases where manufacturers' regulatory class distribution of current or planned ZEV programs clearly differed from their regulatory class distribution as a whole.

In some instances, the regulatory distribution of flagged ZEV candidates leaned towards a higher portion of PCs. The reasoning behind this differs in each case, but there is an observed pattern in the 2020 analysis fleet of fewer BEVs being light trucks, especially pickups. The 2020 analysis fleet contains no BEV pickups in the light truck segment. The slow emergence of electric pickups could be linked to the specific performance needs associated with pickup trucks. However, the market for BEVs may emerge in unexpected ways that are difficult to project. Examples of this include anticipated electric delivery trucks and light-duty electric trucks used by state and local governments. Due to these considerations, DOT tagged some trucks as BEVs for ZEV, and expected that these would generally be of higher ranges.

TSD Chapter 2.3 includes more information about the process we use to simulate ZEV program compliance in this analysis.

4. Technology Effectiveness Values

The next input we use to simulate manufacturers' decision-making processes for the year-by-year application of technologies to specific vehicles are estimates of how effective each technology would be at reducing fuel consumption. For this analysis, we use full-vehicle modeling and simulation to estimate the fuel economy improvements manufacturers could make to a fleet of vehicles, considering the vehicles' technical specifications and how combinations of technologies interact. Full-vehicle modeling and simulation uses physics-based models to predict how combinations of technologies perform as a full system under defined conditions. We use full vehicle simulations performed in Autonomie, a physics-based full-vehicle modeling and simulation software developed and maintained by the U.S. Department of Energy's Argonne National Laboratory.

Islam, E. S., A. Moawad, N. Kim, R. Vijayagopal, and A. Rousseau.

A Detailed Vehicle Simulation Process to Support CAFE Standards for the MY 2024-2026 Analysis.

ANL/ESD-21/9 [hereinafter Autonomie model documentation].

A model is a mathematical representation of a system, and simulation is the behavior of that mathematical representation over time. In this analysis, the model is a mathematical representation of an entire vehicle,

including its individual components such as the engine and transmission, overall vehicle characteristics such as mass and aerodynamic drag, and the environmental conditions, such as ambient temperature and barometric pressure. We simulate the model's behavior over test cycles, including the 2-cycle laboratory compliance tests (or 2-cycle tests),

to determine how the individual components interact.

Each full vehicle model in this analysis is composed of sub-models, which is why the full vehicle model could also be referred to as a full system model, composed of sub-system models.

EPA's compliance test cycles are used to measure the fuel economy of a vehicle. For readers unfamiliar with this process, it is like running a car on a treadmill following a program—or more specifically, two programs. The “programs” are the “urban cycle,” or Federal Test Procedure (abbreviated as “FTP”), and the “highway cycle,” or Highway Fuel Economy Test (abbreviated as “HFET” or “HWFET”), and they have not changed substantively since 1975. Each cycle is a designated speed trace (of vehicle speed versus time) that all certified vehicles must follow during testing. The FTP is meant roughly to simulate stop and go city driving, and the HFET is meant roughly to simulate steady flowing highway driving at about 50 mph.

Using full-vehicle modeling and simulation to estimate technology efficiency improvements has two primary advantages over using single or limited point estimates. An analysis using single or limited point estimates may assume that, for example, one fuel economy-improving technology with an effectiveness value of 5 percent by itself and another technology with an effectiveness value of 10 percent by itself, when applied together achieve an additive improvement of 15 percent. Single point estimates generally do not provide accurate effectiveness values because they do not capture complex relationships among technologies. Technology effectiveness often differs significantly depending on the vehicle type (

e.g.,

sedan versus pickup truck) and the way in which the technology interacts with other technologies on the vehicle, as different technologies may provide different incremental levels of fuel economy improvement if implemented alone or in combination with other technologies. Any oversimplification of these complex interactions leads to less accurate and often overestimated effectiveness estimates.

In addition, because manufacturers often implement several fuel-saving technologies simultaneously when redesigning a vehicle, it is difficult to isolate the effect of individual technologies using laboratory measurement of production vehicles alone. Modeling and simulation offer the opportunity to isolate the effects of individual technologies by using a single or small number of baseline vehicle configurations and incrementally adding technologies to those baseline configurations. This provides a consistent reference point for the incremental effectiveness estimates for each technology and for combinations of technologies for each vehicle type. Vehicle modeling also reduces the potential for overcounting or undercounting technology effectiveness.

An important feature of this analysis is that the incremental effectiveness of each technology and combinations of technologies should be accurate and relative to a consistent baseline vehicle. For this analysis, the baseline absolute fuel economy value for each vehicle in the analysis fleet is based on CAFE compliance data for each make and model.

The absolute fuel economy values of the full vehicle simulations are

used only to determine incremental effectiveness and are never used directly to assign an absolute fuel economy value to any vehicle model or configuration. For subsequent technology changes, we apply the incremental effectiveness values of one or more technologies to the baseline fuel economy value to determine the absolute fuel economy achieved for applying the technology change.

See

Section III.C.2 for further discussion of CAFE compliance data in the Market Data file.

As an example, if a Ford F-150 2-wheel drive crew cab and short bed in the analysis fleet has a fuel economy value of 30 mpg for CAFE compliance, 30 mpg will be considered the reference absolute fuel economy value. A similar full vehicle model node in the Autonomie simulation may begin with an average fuel economy value of 32 mpg, and with incremental addition of a specific technology X its fuel economy improves to 35 mpg, a 9.3 percent improvement. In this example, the incremental fuel economy improvement (9.3 percent) from technology X would be applied to the F-150's 30 mpg absolute value.

We determine the incremental effectiveness of technologies as applied to the thousands of unique vehicle and technology combinations in the analysis fleet. Although, as mentioned above, full-vehicle modeling and simulation reduces the work and time required to assess the impact of moving a vehicle from one technology state to another, it would be impractical—if not impossible—to build a unique vehicle model for every individual vehicle in the analysis fleet. Therefore, as discussed in the following sections, the Autonomie analysis relies on ten vehicle technology class models that are representative of large portions of the analysis fleet vehicles. The vehicle technology classes ensure that key vehicle characteristics are reasonably represented in the full vehicle models. The next sections discuss the details of the technology effectiveness analysis input specifications and assumptions. NHTSA seeks comment on the following discussion.

(a) Full Vehicle Modeling and Simulation

As discussed above, for this analysis we use Argonne's full vehicle modeling tool, Autonomie, to build vehicle models with different technology combinations and simulate the performance of those models over regulatory test cycles. The difference in the simulated performance between full vehicle models, with differing technology combination, is used to determine effectiveness values. We consider over 50 individual technologies as inputs to the Autonomie modeling.

These inputs consist of engine technologies, transmission technologies, powertrain electrification, lightweighting, aerodynamic improvements, and tire rolling resistance improvements. Section III.D broadly discusses each of the technology groupings definitions, inputs, and assumptions. A deeper discussion of the Autonomie modeled subsystems, and how inputs feed the sub models resulting in outputs, is contained in the Autonomie model documentation that accompanies this analysis. The 50 individual technologies, when considered with the ten vehicle technology classes, result in over 1.1 million individual vehicle technology combination models. For additional discussion on the full vehicle modeling used in this analysis see TSD Chapter 2.

See

Autonomie model documentation; ANL—All Assumptions_Summary_NPRM_022021.xlsx; ANL—Data Dictionary_January 2021.xlsx.

While Argonne built full-vehicle models and ran simulations for many combinations of technologies, it did not simulate literally every single vehicle model/configuration in the analysis fleet. Not only would it be impracti

This text is long and has been trimmed here. Open the source document for the complete record.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.