Greenhouse Gas Emissions Standards for Heavy-Duty Vehicles-Phase 3

ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 1036, 1037, 1054, 1065, and 1074

[EPA-HQ-OAR-2022-0985; FRL-8952-01-OAR]

RIN 2060-AV50

Greenhouse Gas Emissions Standards for Heavy-Duty Vehicles—Phase 3

AGENCY:

Environmental Protection Agency (EPA).

ACTION:

Notice of proposed rulemaking.

SUMMARY:

The Environmental Protection Agency (EPA) is proposing to promulgate new GHG standards for heavy-duty highway vehicles starting in model year (MY) 2028 through MY 2032 and to revise certain GHG standards for MY 2027 that were established previously under EPA's Greenhouse Gas Emissions and Fuel Efficiency Standards for Medium- and Heavy-Duty Engines and Vehicles—Phase 2 rule (“HD GHG Phase 2”). This document proposes updates to discrete elements of the Averaging Banking and Trading program, including a proposal to eliminate the last MY year of the HD GHG Phase 2 advanced technology incentive program for certain types of electric highway heavy-duty vehicles. EPA is proposing to add warranty requirements for batteries and other components of zero-emission vehicles and to require customer-facing battery state-of-health monitors for plug-in hybrid and battery electric vehicles. In this document, we are also proposing additional revisions and clarifying and editorial amendments to certain highway heavy-duty vehicle provisions and certain test procedures for heavy-duty engines. Finally, as part of this action, EPA is proposing to revise its regulations addressing preemption of state regulation of new locomotives and new engines used in locomotives.

DATES:

Comments must be received on or before June 16, 2023. Comments on the information collection provisions submitted to the Office of Management and Budget (OMB) under the Paperwork Reduction Act (PRA) are best assured of consideration by OMB if OMB receives a copy of your comments on or before May 30, 2023.

Public hearing:

EPA will announce information regarding the public hearing for this proposal in a supplemental

Federal Register

document. Please refer to the

SUPPLEMENTARY INFORMATION

section for additional information on the public hearing.

ADDRESSES:

You may send comments, identified by Docket ID No. EPA-HQ-OAR-2022-0985, by any of the following methods:

•

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

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

•

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

. Include Docket ID No. EPA-HQ-OAR-2022-0985 in the subject line of the message.

•

Mail:

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

•

Hand Delivery or Courier:

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

Instructions:

All submissions received must include the Docket ID No. for this rulemaking. Comments received may be posted without change to

https://www.regulations.gov/

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

SUPPLEMENTARY INFORMATION

section of this document.

FOR FURTHER INFORMATION CONTACT:

Brian Nelson, Assessment and Standards Division, Office of Transportation and Air Quality, Environmental Protection Agency, 2000 Traverwood Drive, Ann Arbor, MI 48105; telephone number: (734) 214-4278; email address:

nelson.brian@epa.gov

.

SUPPLEMENTARY INFORMATION:

Public Participation

Written Comments

Submit your comments, identified by Docket ID No. EPA-HQ-OAR-2022-0985, at

https://www.regulations.gov

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

ADDRESSES

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

https://www.regulations.gov

any information you consider to be Confidential Business Information (CBI), Proprietary Business Information (PBI), or other information whose disclosure is restricted by statute. If you choose to submit CBI or PBI as a comment to EPA's docket, please send those materials to the person listed in the

FOR FURTHER INFORMATION CONTACT

section. Multimedia submissions (audio, video, etc.) must be accompanied by a written comment. The written comment is considered the official comment and should include discussion of all points you wish to make. The EPA will generally not consider comments or comment contents located outside of the primary submission (

i.e.,

on the web, cloud, or other file sharing system). Commenters who would like EPA to further consider in this rulemaking any relevant comments that they provided on the HD2027 NPRM regarding proposed HD vehicle GHG standards for the MYs at issue in this proposal must resubmit those comments to EPA during this proposal's comment period. Please visit

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

for additional submission methods; the full EPA public comment policy; information about CBI, PBI, or multimedia submissions; and general guidance on making effective comments.

Participation in Virtual Public Hearing

EPA will announce information regarding the public hearing for this proposal in a supplemental

Federal Register

document. The hearing notice, registration information, and any updates to the hearing schedule will also be available at

https://www.epa.gov/regulations-emissions-vehicles-and-engines/proposed-rule-greenhouse-gas-emissions-standards-heavy

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

Federal Register

announcing updates to the hearing schedule.

Docket:

All documents in the docket are listed on the

www.regulations.gov

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

e.g.,

CBI or other information whose disclosure is restricted by statute. Certain other material, such as copyrighted material, is not placed on the internet and will be publicly available only in hard copy form through the EPA Docket Center at the location listed in the

ADDRESSES

section of this document.

General Information

Does this action apply to me?

This action relates to companies that manufacture, sell, or import into the United States new heavy-duty highway vehicles and engines. This action also relates to state and local governments. Potentially affected categories and entities include the following:

Category

NAICS codes

a

NAICS title

Industry

336110

Automobile and Light Duty Motor Vehicle Manufacturing.

Industry

336120

Heavy Duty Truck Manufacturing.

Industry

336211

Motor Vehicle Body Manufacturing.

Industry

336213

Motor Home Manufacturing.

Industry

333618

Other Engine Equipment Manufacturing.

Industry

811198

All Other Automotive Repair and Maintenance.

Government

State and local governments.

b

a

NAICS Association. NAICS & SIC Identification Tools. Available online:

https://www.naics.com/search.

b

It should be noted that the proposed revisions do not impose any requirements that state and local governments must meet, but rather implement the Clean Air Act preemption provisions for locomotives.

This table is not intended to be exhaustive, but rather provides a guide for readers regarding entities potentially affected by this action. This table lists the types of entities that EPA is now aware could potentially be affected by this action. Other types of entities not listed in the table could also be affected. To determine whether your entity is regulated by this action, you should carefully examine the applicability criteria found in 40 CFR parts 1036, 1037, 1054, 1065, and 1074.

1

If you have questions regarding the applicability of this action to a particular entity, consult the person listed in the

FOR FURTHER INFORMATION CONTACT

section.

1

See 40 CFR 1036.1 through 1036.15 and 40 CFR 1037.1 through 1037.15.

What action is the Agency taking?

The Environmental Protection Agency (EPA) is proposing to promulgate new GHG standards for heavy-duty highway vehicles starting in model year (MY) 2028 through MY 2032 and to revise certain GHG standards for MY 2027 that were established previously under EPA's Greenhouse Gas Emissions and Fuel Efficiency Standards for Medium- and Heavy-Duty Engines and Vehicles—Phase 2 rule (“HD GHG Phase 2”) that we believe are appropriate and feasible considering lead time, costs, and other factors. EPA also proposes that it is appropriate to eliminate the last model year (MY 2027) of advanced technology incentives for certain electric highway heavy-duty vehicles, initially established under the HD GHG Phase 2 rule. EPA is proposing to add warranty requirements for batteries and other components of zero-emission vehicles and to require customer-facing battery state-of-health monitors for plug-in hybrid and battery electric vehicles. We are also proposing revisions and clarifying and editorial amendments to certain highway heavy-duty vehicle provisions of 40 CFR part 1037 and certain test procedures for heavy-duty engines in 40 CFR parts 1036 and 1065. In addition, in this action EPA is proposing to revise its regulations addressing preemption of state regulation of new locomotives and new engines used in locomotives, to more closely align with language in the Clean Air Act.

What is the Agency's authority for taking this action?

Clean Air Act section 202(a), 42 U.S.C. 7521(a), requires that EPA establish emission standards for air pollutants from new motor vehicles or new motor vehicle engines, which, in the Administrator's judgment, cause or contribute to air pollution that may reasonably be anticipated to endanger public health or welfare. The Administrator has found that GHG emissions from highway heavy-duty vehicles and engines cause or contribute to air pollution that may endanger public health or welfare. Therefore, the Administrator is exercising his authority under CAA section 202(a)(1)-(2) to establish standards for GHG emissions from highway heavy-duty vehicles. In addition, section 209(e)(2)(B) of the CAA, 42 U.S.C. 7543(e)(2)(B), requires EPA to promulgate regulations implementing subsection 209(e) of the Act, which addresses the prohibition of state standards regarding certain classes of new nonroad engines or new nonroad vehicles including new locomotives and new engines used in locomotives, as well as EPA's authorization criteria for certain California standards for other nonroad engines or nonroad vehicles. See Section I.D of this preamble for more information on the agency's authority for this action.

Did EPA conduct a peer review before issuing this action?

This proposed regulatory action is supported by influential scientific information. EPA, therefore, is conducting peer review in accordance with OMB's Final Information Quality Bulletin for Peer Review. Specifically, we conducted the peer review process on two analyses: (1) Emission Adjustments for Onroad Vehicles in MOVES3.R1, and (2) Greenhouse Gas and Energy Consumption Rates for Onroad Vehicles in MOVES3.R1. In addition, we plan to conduct a peer review of inputs to the Heavy-Duty Technology Resource Use Case Scenario (HD TRUCS) tool used to analyze HD vehicle energy usage and associated component costs. All peer review were or will be in the form of letter reviews conducted by a contractor. The peer review reports for each analysis will be posted in the docket for this action and will be posted at EPA's Science Inventory (

https://cfpub.epa.gov/si/

).

Table of Contents

Executive Summary

A. Need for Regulatory Action

B. The Opportunity for Clean Air Provided by Zero-Emission Vehicle Technologies

C. Summary of the Major Provisions in the Regulatory Action

D. Impacts of the Proposed Standards

I. Introduction

A. Brief Overview of the Heavy-Duty Industry

B. History of Greenhouse Gas Emission Standards for Heavy-Duty Engines and Vehicles

C. What has changed since we finalized the HD GHG Phase 2 rule?

D. EPA Statutory Authority for the Proposal

E. Coordination With Federal and State Partners

F. Stakeholder Engagement

II. Proposed CO

2

Emission Standards

A. Public Health and Welfare Need for GHG Emission Reductions

B. Summary of Comments Received From HD2027 NPRM

C. Background on the CO

2

Emission Standards in the HD GHG Phase 2 Program

D. Vehicle Technologies

E. Technology, Charging Infrastructure, and Operating Costs

F. Proposed Standards

G. EPA's Basis That the Proposed Standards Are Feasible and Appropriate Under the Clean Air Act

H. Potential Alternatives

I. Small Businesses

III. Compliance Provisions, Flexibilities, and Test Procedures

A. Proposed Revisions to the ABT Program

B. Battery Durability Monitoring and Warranty Requirements

C. Additional Proposed Revisions to the Regulations

IV. Proposed Program Costs

A. IRA Tax Credits

B. Technology Package Costs

C. Manufacturer Costs

D. Purchaser Costs

E. Social Costs

V. Estimated Emission Impacts From the Proposed Program

A. Model Inputs

B. Estimated Emission Impacts From the Proposed Standards

VI. Climate, Health, Air Quality, Environmental Justice, and Economic Impacts

A. Climate Change Impacts

B. Health and Environmental Effects Associated With Exposure to Non-GHG Pollutants

C. Air Quality Impacts of Non-GHG Pollutants

D. Environmental Justice

E. Economic Impacts

F. Oil Imports and Electricity and Hydrogen Consumption

VII. Benefits of the Proposed Program

A. Social Cost of GHGs

B. Criteria Pollutant Health Benefits

C. Energy Security

VIII. Comparison of Benefits and Costs

A. Methods

B. Results

IX. Analysis of Alternative CO

2

Emission Standards

A. Comparison of Proposal and Alternative

B. Emission Inventory Comparison of Proposal and Slower Phase-In Alternative

C. Program Costs Comparison of Proposal and Alternative

D. Benefits

E. How do the proposal and alternative compare in overall benefits and costs?

X. Preemption of State Standards and Requirements for New Locomotives or New Engines Used in Locomotives

A. Overview

B. Background

C. Evaluation of Impact of Regulatory Preemption

D. What is EPA proposing?

XI. Statutory and Executive Order Reviews

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

B. Paperwork Reduction Act (PRA)

C. Regulatory Flexibility Act (RFA)

D. Unfunded Mandates Reform Act (UMRA)

E. Executive Order 13132: Federalism

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

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

H. Executive Order 13211: Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use

I. National Technology Transfer and Advancement Act (NTTAA) and 1 CFR Part 51

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

XII. Statutory Authority and Legal Provisions

List of Subjects

Executive Summary

A. Need for Regulatory Action

The Environmental Protection Agency (EPA) is proposing this action to further reduce GHG air pollution from highway heavy-duty (hereafter referred to as “heavy-duty” or HD) engines and vehicles across the United States. Despite the significant emissions reductions achieved by previous rulemakings, GHG emissions from HD vehicles continue to impact public health, welfare, and the environment. The transportation sector is the largest U.S. source of GHG emissions, representing 27 percent of total GHG emissions.

2

Within the transportation sector, heavy-duty vehicles are the second largest contributor to GHG emissions and are responsible for 25 percent of GHG emissions in the sector.

3

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

4

Additionally, major scientific assessments continue to be released that further advance our understanding of the climate system and the impacts that GHGs have on public health and welfare both for current and future generations, as discussed in Section II.A.

2

Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990-2020 (EPA-430-R-22-003, published April 2022).

3

Ibid

.

4

74 FR 66496, December 15, 2009; see also 81 FR 54422, August 15, 2016 (making a similar endangerment and cause or contribute findings for GHGs from aircraft under section 231(a)(2)(A)). Recently, in April 2022, EPA denied administrative petitions relating to the 2009 finding, determining that “[t]he science supporting the Administrator's [2009] finding that elevated concentrations of greenhouse gases in the atmosphere may reasonably be anticipated to endanger the public health and welfare of current and future U.S. generations is robust, voluminous, and compelling, and has been strongly affirmed by recent scientific assessments. . . .” EPA's Denial of Petitions Relating to the Endangerment and Cause or Contribute Findings for Greenhouse Gases Under Section 202(a) of the Clean Air Act 1, available at

https://www.epa.gov/system/files/documents/2022-04/decision_document.pdf

.

The potential for the application of zero-emission vehicle (ZEV) technologies in the heavy-duty sector presents an opportunity for significant reductions in heavy-duty GHG emissions over the long term.

5

Major trucking fleets, HD vehicle and engine manufacturers, and U.S. states have announced plans to increase the use of heavy-duty zero-emissions technologies in the coming years. The 2021 Infrastructure Investment and Jobs Act (commonly referred to as the “Bipartisan Infrastructure Law” or BIL) and the Inflation Reduction Act of 2022 (“Inflation Reduction Act” or IRA) together include many incentives for the development, production, and sale of ZEVs, electric charging infrastructure, and hydrogen, which are expected to spur significant innovation in the heavy-duty sector.

6

In addition, supporting assessments provided by some commenters during the comment period for the EPA's March 2022 Notice of Proposed Rulemaking “Control of Air Pollution from New Motor Vehicles: Heavy-Duty Engine and Vehicle Standards” (hereafter referred to as “HD2027 NPRM”), which proposed strengthening existing MY 2027 GHG standards for heavy-duty vehicles, suggested that significant ZEV adoption rates can be achieved over the next decade.

7 8

We discuss these developments in more detail in Section I. EPA also projects that improvements in internal combustion engines, powertrains, and vehicle technologies such as those EPA projected would be used to achieve the HD GHG Phase 2 standards will also be needed to continue to reduce GHG emissions from the HD sector, and as described in Section II.D.1, these technology improvements continue to be feasible. With respect to the need for GHG reductions and these heavy-duty sector developments, EPA is proposing in this document more stringent MY 2027 HD vehicle CO

2

emission standards (

i.e.,

beyond what was finalized in HD GHG Phase 2) and new HD vehicle CO2 emission standards starting in MYs 2028 through 2032 that we believe are appropriate and feasible considering cost, lead time, and other factors, as described throughout this preamble and supporting materials in the docket for this proposed rulemaking.

5

Throughout the preamble, we use the term ZEV technologies to refer to technologies that result in zero tailpipe emissions. Example ZEV technologies include battery electric vehicles and fuel cell vehicles.

6

Infrastructure Investment and Jobs Act, Public Law 117-58, 135 Stat. 429 (2021) (“Bipartisan Infrastructure Law” or “BIL”), available at

https://www.congress.gov/117/plaws/publ58/PLAW-117publ58.pdf

; Inflation Reduction Act of 2022, Public Law 117-169, 136 Stat. 1818 (2022) (“Inflation Reduction Act” or “IRA”), available at

https://www.congress.gov/117/bills/hr5376/BILLS-117hr5376enr.pdf

.

7

Notice of Proposed Rulemaking for Control of Air Pollution from New Motor Vehicles: Heavy-Duty Engine and Vehicle Standards. 87 FR 17414 (March 28, 2022).

8

U.S. EPA, “Control of Air Pollution from New Motor Vehicles: Heavy-Duty Engine and Vehicle Standards—Response to Comments.” Section 28. Docket EPA-HQ-OAR-2019-0055.

EPA sets highway heavy-duty vehicle and engine standards for GHG emissions

under its authority in CAA section 202(a). Section 202(a)(1) states that “the Administrator shall by regulation prescribe (and from time to time revise) . . . standards applicable to the emission of any air pollutant from any class or classes of new motor vehicles or new motor vehicle engines, . . . which in his judgment cause, or contribute to, air pollution which may reasonably be anticipated to endanger public health or welfare.” Section 202(a)(2) provides that standards under section 202(a) apply to such vehicles and engines “after such period as the Administrator finds necessary to permit the development and application of the requisite technology, giving appropriate consideration to the cost of compliance within such period.” Pursuant to section 202(a)(1), such standards apply to vehicles and engines “for their useful life.” EPA also may consider other factors such as the impacts of potential GHG standards on the industry, fuel savings, oil conservation, energy security, and other relevant considerations. Congress authorized the Administrator to determine the levels of emission reductions achievable for such air pollutants through the application of technologies taking into account cost, lead time, and other factors.

Pursuant to our 202(a) authority, EPA first established standards for the heavy-duty sector in the 1970s. Since then, the Agency has revised the standards multiple times based upon updated data and information, the continued need to mitigate air pollution, and Congressional enactments directing EPA to regulate emissions from the heavy-duty sector more stringently. Since 1985, HD engine and vehicle manufacturers could comply with criteria-pollutant standards using averaging,

9

EPA also introduced banking and trading compliance flexibilities in the HD program in 1990,

10

and EPA's HD GHG standards and regulations have consistently included an averaging, banking, and trading (ABT) program from the start.

11

Since the first standards, subsequent standards have extended to additional pollutants (including GHGs), increased in stringency, and spurred the development and deployment of numerous new vehicle and engine technologies. For example, the most recent GHG standards for HD vehicles will reduce CO

2

emissions by approximately 1.1 billion metric tons over the lifetime of the new vehicles sold under the program (HD GHG Phase 2, 81 FR 73478, October 25, 2016) and the most recent criteria-pollutant standards are projected to reduce NO

X

emissions from the in-use HD fleet by almost 50 percent in 2045 (“Control of Air Pollution from New Motor Vehicles: Heavy-Duty Engine and Vehicle Standards” (hereafter referred to as “HD2027 FRM”), 88 FR 4296, January 24, 2023). This proposal builds upon this multi-decadal tradition of regulating heavy-duty vehicles and engines, by applying the Agency's clear and longstanding statutory authority considering new real-world data and information, including recent Congressional action in the Bipartisan Infrastructure Law (BIL) and Inflation Reduction Act (IRA).

9

50 FR 10606, Mar. 15, 1985; see also

NRDC

v.

Thomas

, 805 F.2d 410, 425 (D.C. Cir. 1986) (upholding emissions averaging in the 1985 HD final rule).

10

55 FR 30584, July 26, 1990.

11

76 FR 57128, September 15, 2011 (explaining ABT is a flexibility that provides an opportunity for manufacturers to make necessary technological improvements while reducing the overall cost of the program); 81 FR 73495, October 25, 2016 (explaining that ABT plays an important role in providing manufacturers flexibilities, including helping reduce costs).

This Notice of Proposed Rulemaking is consistent with Executive Order 14037 on Strengthening American Leadership in Clean Cars and Trucks, which directs the Administrator to “consider updating the existing greenhouse gas emissions standards for heavy-duty engines and vehicles beginning with model year 2027 and extending through and including at least model year 2029” and directs EPA to “consider beginning work on a rulemaking under the Clean Air Act to establish new greenhouse gas emissions standards for heavy-duty engines and vehicles to begin as soon as model year 2030.”

12

Consistent with this direction, in the HD2027 NPRM, we proposed building on and improving the existing emission control program for highway heavy-duty vehicles by further strengthening certain MY 2027 GHG standards finalized under the HD GHG Phase 2 rule. However, we did not take final action on the GHG portion of the HD2027 proposal in the final rule (HD2027 FRM). Since that time, EPA has continued its analysis of the heavy-duty vehicle sector including the recent passage of the IRA, which as we discuss further in this preamble provides significant incentives for GHG reductions in the heavy-duty vehicle sector. Based on this updated information and analysis, and consistent with EPA's authority under the Clean Air Act section 202(a), we are issuing this Notice of Proposed Rulemaking (“HD GHG Phase 3 NPRM”) to propose certain revised HD vehicle carbon dioxide (CO

2

) standards for MY 2027 and certain new HD vehicle CO

2

standards for MYs 2028, 2029, 2030, 2031, and 2032 that would achieve significant GHG reductions for these and later model years (note the MY 2032 standards would remain in place for MY 2033 and later). We are requesting comment on an alternative set of CO

2

standards that would more gradually increase in stringency than the proposed standards for the same MYs. EPA also requests comment on setting GHG standards starting in MYs 2027 through 2032 that would reflect: values less stringent than the lower stringency alternative for certain market segments, values in between the proposed standards and the alternative standards, values in between the proposed standards and those that would reflect ZEV adoption levels (

i.e.,

percent of ZEVs in production volumes) used in California's ACT, values that would reflect the level of ZEV adoption in the ACT program, and values beyond those that would reflect ZEV adoption levels in ACT such as the 50- to 60-percent ZEV adoption range represented by the publicly stated goals of several major original equipment manufacturers (OEMs) for 2030.

13 14 15 16 17

We also request comment on promulgating additional new standards with increasing stringency in MYs 2033 through 2035. EPA anticipates that the appropriate choice of final standards within this range will reflect the Administrator's judgments about the uncertainties in EPA's analyses as well as consideration of public comment and updated information where available.

12

86 FR 43583, August 5, 2021. Executive Order 14037. Strengthening American Leadership in Clean Cars and Trucks.

13

California Air Resources Board, Final Regulation Order—Advanced Clean Trucks Regulation. Filed March 15, 2021. Available at:

https://ww2.arb.ca.gov/sites/default/files/barcu/regact/2019/act2019/fro2.pdf

.

14

Scania, `Scania's Electrification Roadmap,' Scania Group, November 24, 2021,

https://www.scania.com/group/en/home/newsroom/news/2021/Scanias-electrification-roadmap.html

.

15

AB Volvo, `Volvo Trucks Launches Electric Truck with Longer Range,' Volvo Group, January 14, 2022,

https://www.volvogroup.com/en/news-and-media/news/2022/jan/news-4158927.html

.

16

Deborah Lockridge, `What Does Daimler Truck Spin-off Mean for North America?,' Trucking Info (November 11, 2021).

https://www.truckinginfo.com/10155922/what-does-daimler-truck-spin-off-mean-for-north-america

.

17

Navistar presentation at the Advanced Clean Transportation (ACT) Expo, Long Beach, CA (May 9-11, 2022).

CAA section 202(a) directs EPA to regulate emissions of air pollutants from new motor vehicles and engines, which in the Administrator's judgment, cause or contribute to air pollution that may reasonably be anticipated to endanger

public health or welfare. While standards promulgated pursuant to CAA section 202(a) are based on application of technology, the statute does not specify a particular technology or technologies that must be used to set such standards; rather, Congress has authorized and directed EPA to adapt its standards to emerging technologies. In 2009, the Administrator issued an Endangerment Finding under CAA section 202(a), concluding that GHG emissions from new motor vehicles and engines, including heavy-duty vehicles and engines, cause or contribute to air pollution that may endanger public health or welfare.

18

Pursuant to the 2009 Endangerment and Cause or Contribute Finding, EPA promulgated GHG regulations for heavy-duty vehicles and engines in 2011 and 2016, referred to as the HD GHG Phase 1 and HD GHG Phase 2 programs, respectively.

19

In the HD GHG Phase 1 and Phase 2 programs, EPA set emission standards that the Agency found appropriate and feasible, considering cost, lead time, and other factors.

18

74 FR 66496 (Dec. 15, 2009).

19

76 FR 57106 (Sept. 15, 2011); 81 FR 73478 (Oct. 25, 2016).

Over time, manufacturers have not only continued to find ways to further reduce emissions from motor vehicles, including HD vehicles, they have found ways to eliminate tailpipe emissions entirely through the use of zero-emission vehicle technologies. Since the 2009 Endangerment and Cause or Contribute Finding and issuance of the HD GHG Phase 1 and Phase 2 program regulations, there has continued to be significant technological advancement in the vehicle and engine manufacturing sectors, including for such zero-emission vehicle technologies. The HD Phase 3 regulations that we are proposing take into account the ongoing technological innovation in the HD vehicle space and reflect CO

2

emission standards that we consider appropriate and feasible considering cost, lead time, and other factors.

B. The Opportunity for Clean Air Provided by Zero-Emission Vehicle Technologies

When the HD GHG Phase 2 rule was promulgated in 2016, we established CO

2

standards on the premise that ZEV technologies, such as battery electric vehicles (BEVs) and fuel cell electric vehicles (FCEVs), would become more widely available in the heavy-duty market over time, but not in significant volume in the timeframe of the Phase 2 program. We finalized BEV, plug-in hybrid electric vehicle (PHEV), and FCEV advanced technology credit multipliers to encourage the development and sales of these advanced technologies.

Several significant developments have occurred since 2016 that point to ZEV technologies becoming more readily available much sooner than we had previously projected for the HD sector. These developments support the feasibility of ZEV technologies and render adoption of ZEV technologies to reduce GHG emissions more cost-competitive than ever before. First, the HD market has evolved such that early ZEV models are in use today for some applications and are expected to expand to many more applications; costs of ZEV technologies have gone down and are projected to continue to fall; and manufacturers have announced plans to rapidly increase their investments in ZEV technologies over the next decade. In 2022, there were a number of manufacturers producing fully electric HD vehicles for use in a number of applications, and these small volumes are expected to rise (see Section I.C and Draft Regulatory Impact Analysis (DRIA) Chapter 1). The cost to manufacture lithium-ion batteries (the single most expensive component of a BEV) has dropped significantly in the past eight years, and that cost is projected to continue to fall during this decade, all while the performance of the batteries (in terms of energy density) improves.

20 21

Many of the manufacturers that produce HD vehicles and major firms that purchase HD vehicles have announced billions of dollars' worth of investments in ZEV technologies and significant plans to transition to a zero-carbon fleet over the next ten to fifteen years.

22

20

Mulholland, Eamonn. “Cost of electric commercial vans and pickup trucks in the United States through 2040.” Page 7. January 2022. Available at

https://theicct.org/wp-content/uploads/2022/01/cost-ev-vans-pickups-us-2040-jan22.pdf

.

21

Sharpe, Ben and Hussein Basma. “A meta-study of purchase costs for zero-emission trucks”. The International Council on Clean Transportation, Working Paper 2022-09 (February 2022). Available online:

https://theicct.org/publication/purchase-cost-ze-trucks-feb22/

.

22

Environmental Defense Fund (2022) September 2022 Electric Vehicle Market Update: Manufacturer Commitments and Public Policy Initiatives Supporting Electric Mobility in the U.S. and Worldwide, available online at:

https://blogs.edf.org/climate411/files/2022/09/ERM-EDF-Electric-Vehicle-Market-Report_September2022.pdf

.

Second, the 2021 BIL and the 2022 IRA laws provide significant and unprecedented monetary incentives for the production and purchase of qualified ZEVs in the HD market. They also provide incentives for qualifying electric charging infrastructure and hydrogen, which will further support a rapid increase in market penetration of HD ZEVs. As a few examples, over the next five years, BIL provisions include $5 billion to fund the replacement of school buses with zero- or low-emission buses and $5.6 billion to support the purchase of zero- or low-emission transit buses and associated infrastructure, with up to $7.5 billion to help build out a national network of EV charging and hydrogen refueling infrastructure, some of which may be used for refueling of heavy duty vehicles. The IRA creates a tax credit of up to $40,000 per vehicle for vehicles over 14,000 pounds (and up to $7,500 per vehicle for vehicles under 14,000 pounds) for the purchase of qualified commercial clean vehicles and provides tax credits for the production and sale of battery cells and modules of up to $45 per kilowatt-hour (kWh). The wide array of incentives in both laws will help to reduce the costs to manufacture, purchase, and operate ZEVs, thereby bolstering their adoption in the market.

Third, there have been multiple actions by states to accelerate the adoption of HD ZEVs. The State of California and other states have adopted the ACT program that includes a manufacturer requirement for zero-emission truck sales.

23 24

The ACT program would require that “manufacturers who certify Class 2b-8 chassis or complete vehicles with combustion engines would be required to sell zero-emission trucks as an

23

California Air Resources Board, Final Regulation Order—Advanced Clean Trucks Regulation. Filed March 15, 2021. Available at:

https://ww2.arb.ca.gov/sites/default/files/barcu/regact/2019/act2019/fro2.pdf

.

24

See,

e.g.,

Final Advanced Clean Truck Amendments, 1461 Mass. Reg. 29 (Jan. 21, 2022) (Massachusetts). Medium- and Heavy-Duty (MHD) Zero Emission Truck Annual Sales Requirements and Large Entity Reporting, 44 N.Y. Reg. 8 (Jan. 19, 2022) (New York), available at

https://dos.ny.gov/system/files/documents/2022/01/011922.pdf

. Advanced Clean Trucks Program and Fleet Reporting Requirements, 53 N.J.R. 2148(a) (Dec. 20, 2021) (New Jersey), available at

https://www.nj.gov/dep/rules/adoptions/adopt_20211220a.pdf

(pre-publication version). Clean Trucks Rule 2021, DEQ-17-2021 (Nov. 17, 2021), available at

http://records.sos.state.or.us/ORSOSWebDrawer/Recordhtml/8581405

(Oregon). Low emission vehicles, Wash. Admin. Code. § 173-423-070 (2021), available at

https://app.leg.wa.gov/wac/default.aspx?cite=173-423-070

; 2021 Wash. Reg. 587356 (Dec. 15, 2021); Wash. Reg. 21-24-059 (Nov. 29, 2021) (amending Wash. Admin. Code. §§ 173-423 and 173-400), available at

https://lawfilesext.leg.wa.gov/law/wsrpdf/2021/24/21-24-059.pdf

(Washington).

increasing percentage of their annual [state] sales from 2024 to 2035.”

25 26

In addition, 17 states and the District of Columbia have signed a Memorandum of Understanding establishing goals to support widespread electrification of the HD vehicle market.

27

We discuss these factors further in Section I.

25

California Air Resources Board, Advanced Clean Trucks Fact Sheet (August 20, 2021), available at

https://ww2.arb.ca.gov/resources/fact-sheets/advanced-clean-trucks-fact-sheet

. See also California Air Resources Board, Final Regulation Order—Advanced Clean Trucks Regulation. Filed March 15, 2021. Available at:

https://ww2.arb.ca.gov/sites/default/files/barcu/regact/2019/act2019/fro2.pdf

.

26

EPA granted the ACT rule waiver requested by California under CAA section 209(b) on March 30, 2023. 88 FR 20688, April 6, 2023 (signed by the Administrator on March 30, 2023).

27

Multi-State MOU, available at

https://www.nescaum.org/documents/mhdv-zev-mou-20220329.pdf/

.

Recognizing the need for additional GHG reductions from HD vehicles and the growth of ZEV technologies in the HD market, last year we proposed strengthening certain existing MY 2027 HD vehicle CO

2

standards as part of the HD2027 NPRM. We received many comments on the proposed updates to those HD vehicle CO

2

emission standards.

28

Many commenters suggested that EPA should further strengthen HD vehicle CO

2

emission standards in MYs 2027 through 2029 beyond the HD2027 NPRM proposed levels because of the accelerating adoption of HD ZEV technologies, and some commenters provided a number of reports that evaluate the potential of electrification of the HD sector in terms of adoption rates, costs, and other factors. Some commenters raised concerns with the HD2027 NPRM proposed changes to certain HD GHG Phase 2 CO

2

emission standards, asserting the significant investment and lead time required for development and verification of the durability of ZEV technologies, especially given the diverse range of applications in the HD market.

28

U.S. EPA, “Control of Air Pollution from New Motor Vehicles: Heavy-Duty Engine and Vehicle Standards—Response to Comments.” Section 28. Docket EPA-HQ-OAR-2019-0055.

In the HD2027 NPRM, EPA also requested comment on several approaches to modify the existing Advanced Technology Credit Multipliers (“credit multipliers”) under the HD GHG Phase 2 program. Many commenters supported limiting the credits in some fashion, such as eliminating credit multipliers for ZEVs produced due to state requirements or phasing out the credit multipliers earlier than MY 2027, which was the last model year that multipliers could be applied under HD GHG Phase 2. Some of the commenters opposed any changes to the existing credit multipliers, indicating that the multipliers are necessary for the development of these new and higher-cost technologies into existing and new markets. We considered the concerns and information provided in these comments when developing this proposal, as discussed in Sections II and III. Commenters who would like EPA to further consider in this rulemaking any relevant comments that they provided on the HD2027 NPRM regarding proposed HD vehicle GHG standards for the MYs at issue in this proposal must resubmit those comments to EPA during this proposal's comment period.

29

29

Note, comments regarding aspects of the HD program besides those GHG standards and compliance requirements in this proposal are outside the scope of this rulemaking.

EPA believes the increased application of ZEV technologies in the HD sector presents an opportunity to strengthen GHG standards, which can result in significant reductions in heavy-duty vehicle emissions. Based on an in-depth analysis of the potential for the development and application of ZEV technologies in the HD sector, we are proposing in this Phase 3 NPRM more stringent GHG standards for MYs 2027 through 2032 and later HD vehicles heavy-duty vehicles that are appropriate and feasible considering lead time, costs, and other factors. These proposed Phase 3 standards include (1) revised GHG standards for many MY 2027 HD vehicles, with a subset of standards that would not change, and (2) new GHG standards starting in MYs 2028 through 2032, of which the MY 2032 standards would remain in place for MY 2033 and later. For the purposes of this preamble, we refer to the Phase 3 NPRM standards generally as applying to MYs 2027 through 2032 and later HD vehicles. In this NPRM, we are also requesting comment on setting additional new, progressively more stringent GHG standards beyond the MYs proposed and starting in MYs 2033 through 2035. In consideration of concerns from manufacturers about lead time needed for technology development and market investments, we request comment in this NPRM on an alternative set of GHG standards starting in MYs 2027 through 2032 that are lower than those proposed yet still more stringent than the Phase 2 standards. We also request comment, including supporting data and analysis, if there are certain market segments, such as heavy-haul vocational trucks or long-haul tractors which may require significant energy content for their intended use, for which it may be appropriate to set standards less stringent than the alternative for the specific corresponding regulatory subcategories in order to provide additional lead time to develop and introduce ZEV or other low emissions technology for those specific vehicle applications. In consideration of the environmental impacts of HD vehicles and the need for significant emission reductions, as well as the views expressed by stakeholders such as environmental justice communities, environmental nonprofit organizations, and state and local organizations for rapid and aggressive reductions in GHG emissions, we are also requesting comment on a more stringent set of GHG standards starting in MYs 2027 through 2032 whose values would go beyond the proposed standards, such as values that would reflect the level of ZEV adoption (

i.e.,

percent of ZEVs in production volumes) used in California's ACT program, values in between these proposed standards and those that would reflect ZEV adoption levels in ACT, and values beyond those that would reflect ZEV adoption levels in ACT, such as the 50-60 percent ZEV adoption range represented by the publicly stated goals of several major OEMs for 2030.

30 31 32 33 34

30

California Air Resources Board, Final Regulation Order—Advanced Clean Trucks Regulation. Filed March 15, 2021. Available at:

https://ww2.arb.ca.gov/sites/default/files/barcu/regact/2019/act2019/fro2.pdf.

31

Scania, `Scania's Electrification Roadmap,' Scania Group, November 24, 2021,

https://www.scania.com/group/en/home/newsroom/news/2021/Scanias-electrification-roadmap.html

.

32

AB Volvo, `Volvo Trucks Launches Electric Truck with Longer Range,' Volvo Group, January 14, 2022,

https://www.volvogroup.com/en/news-and-media/news/2022/jan/news-4158927.html

.

33

Deborah Lockridge, `What Does Daimler Truck Spin-off Mean for North America?,' Trucking Info (November 11, 2021).

https://www.truckinginfo.com/10155922/what-does-daimler-truck-spin-off-mean-for-north-america

.

34

Navistar presentation at the Advanced Clean Transportation (ACT) Expo, Long Beach, CA (May 9-11, 2022).

After considering the state of electrification of the HD market, new incentives, and comments received on the HD2027 NPRM regarding credit multipliers, EPA believes that the HD GHG Phase 2 levels of incentives for electrification are no longer appropriate for certain segments of the HD vehicle market. We are proposing in this document to end credit multipliers for BEVs and PHEVs one year earlier than provided in the existing HD GHG Phase 2 program (

i.e.,

no credit multipliers for BEVs and PHEVs in MYs 2027 and later).

C. Summary of the Major Provisions in the Regulatory Action

Our proposed program features several key provisions that include, based on consideration of updated data and information, updating the existing MY 2027 GHG emission standards and promulgating new GHG emission standards starting in MYs 2028 through 2032 for HD vehicles. Specifically, we are proposing to set progressively more stringent GHG emission standards that would apply to MYs 2027, 2028, 2029, 2030, 2031, and 2032 and later for numerous vocational vehicle and tractor subcategories. The proposed standards for MY 2032 and later are shown in Table ES-1 and Table ES-2 and are described in detail in Section II, while the proposed standards for MYs 2027 through 2031 are shown in Section II.F.

35

As described in Section II of this preamble, our analysis shows that the proposed revisions to HD GHG Phase 2 CO

2

standards for MY 2027 and the proposed new, progressively lower numeric values of the CO

2

standards starting in MYs 2028 through 2032 are appropriate considering feasibility, lead time, costs, and other factors. We seek comment on these proposed Phase 3 standards starting in MYs 2027 through 2032.

35

See proposed regulations 40 CFR 1037.105 and 1037.106.

Table ES-1—Proposed MY 2032 and Later Vocational Vehicle CO

2

Emission Standards (Grams/Ton-Mile) by Regulatory Subcategory

CI light heavy

CI medium heavy

CI heavy heavy

SI light heavy

SI medium heavy

Urban Vehicles

179

176

177

225

215

Multi-Purpose Vehicles

142

153

138

184

186

Regional Vehicles

103

136

97

131

165

Note:

Please see Section II.F.4 for the full set of proposed standards, including for optional custom chassis vehicles.

Table ES-2—Proposed MY 2032 and Later Tractor CO

2

Emission Standards (Grams/Ton-Mile) by Regulatory Subcategory

Class 7 all cab styles

Class 8 day cab

Class 8 sleeper cab

Low Roof Tractor

63.5

48.4

48.1

Mid Roof Tractor

68.2

51.5

52.2

High Roof Tractor

66.0

50.0

48.2

Note:

Please see Section II.F.4 for the full set of proposed standards, including for heavy-haul tractors.

The proposed standards do not mandate the use of a specific technology, and EPA anticipates that a compliant fleet under the proposed standards would include a diverse range of technologies (

e.g.,

transmission technologies, aerodynamic improvements, engine technologies, battery electric powertrains, hydrogen fuel cell powertrains, etc.). The technologies that have played a fundamental role in meeting the Phase 2 GHG standards will continue to play an important role going forward as they remain key to reducing the GHG emissions of HD vehicles powered by internal combustion engines (referred to in this proposal as ICE vehicles). In developing the proposed standards, EPA has also considered the key issues associated with growth in penetration of zero-emission vehicles, including charging infrastructure and hydrogen production. In our assessment that supports the appropriateness and feasibility of these proposed standards, we developed a technology pathway that could be used to meet each of the standards. The technology package includes a mix of ICE vehicles with CO

2

-reducing technologies and ZEVs. EPA developed an analysis tool to evaluate the design features needed to meet the energy and power demands of various HD vehicle types when using ZEV technologies. The overarching analysis is premised on ensuring each of the ZEVs could perform the same work as its ICE counterpart while oversizing the battery to account for its usable range and that batteries deteriorate over time. The fraction of ZEVs in the technology packages are shown in Table ES-3 and described further in Section II of this preamble.

Table ES-3—Projected ZEV Adoption Rates in Technology Packages for the Proposed Standards

Regulatory subcategory grouping

MY 2027

(%)

MY 2028

(%)

MY 2029

(%)

MY 2030

(%)

MY 2031

(%)

MY 2032

(%)

Light-Heavy Duty Vocational

22

28

34

39

45

57

Medium Heavy-Duty Vocational

19

21

24

27

30

35

Heavy-Heavy-Duty Vocational

16

18

19

30

33

40

Day Cab Tractors

10

12

15

20

30

34

Sleeper Cab Tractors

0

0

0

10

20

25

Note:

Please see Section II.F.1 for the full set of technology packages, including for optional custom chassis vehicles.

We are requesting comment on an alternative set of CO

2

standards that would more gradually increase in stringency than the proposed standards starting in MY 2027 through 2032, further described in Section II.H. We developed a technology pathway that could be used to meet the alternatives standards, which projects the aggregated

ZEV adoption rates shown in Table ES-4 and described further in Section II of this preamble. As described in more detail in Section II, we also are seeking comment on setting GHG standards starting in MYs 2027 through 2032 that would reflect values less stringent than the lower stringency alternative for certain market segments as well as comment on values in between the proposed standards and the alternative standards. Also described in Section II, we are seeking comment on setting GHG standards starting in MYs 2027 through 2032 that would reflect values above the level of the proposed standards. Some of the HD2027 NPRM commenters provided specific recommendations for ZEV adoption rates to include in our analysis, and these adoption rates are on the order of 40 percent or more electrification by MY 2029.

36 37 38 39

The California Air Resources Board's (CARB's) ACT regulation sets ZEV sales requirements for vocational vehicles at 40 percent and for tractors at 25 percent in MY 2029 (Table ES-4). Announcements by major manufacturers project their HD ZEV sales to be in the 50 percent range for 2030 globally, with one manufacturer projecting sales as high as 60 percent for North America in that year.

40 41 42 43

We request comment and data that would support more stringent GHG standards than we are proposing for MYs 2027 through 2032, including comment and data on different technologies' penetration rates than we included in the technology packages described in Section II of the preamble. Specifically, EPA requests comment on values that would reflect the level of ZEV adoption used in California's ACT program, values in between these proposed standards and those that would reflect ZEV adoption levels in ACT, and values beyond those that would reflect ZEV adoption levels in ACT such as the 50-60 percent ZEV adoption range represented by the publicly stated goals of several major OEMs for 2030.

44 45 46 47 48

We further request comment on promulgating progressively more stringent standards out through MY 2035.

36

ACEEE Comments to the HD2027 NPRM. See Docket Entry EPA-HQ-OAR-2019-0055-2852-A1. Referencing Catherine Ledna et al., `Decarbonizing Medium-& Heavy-Duty On-Road Vehicles: Zero-Emission Vehicles Cost Analysis' (NREL, March 2022),

https://www.nrel.gov/docs/fy22osti/82081.pdf

.

37

EDF Comments to the HD2027 NPRM. See Docket Entry EPA-HQ-OAR-2019-0055-1265-A1, pp. 16-17.

38

ICCT Comments to the HD2027 NPRM. See Docket Entry EPA-HQ-OAR-2019-0055-1211-A1, p. 6.

39

Moving Forward Network Comments to the HD2027 NPRM. See Docket Entry EPA-HQ-OAR-2019-0055-1277-A1, pp. 19-20.

40

Scania, `Scania's Electrification Roadmap,' Scania Group, November 24, 2021,

https://www.scania.com/group/en/home/newsroom/news/2021/Scanias-electrification-roadmap.html

; AB Volvo, `Volvo Trucks Launches Electric Truck with Longer Range,' Volvo Group, January 14, 2022,

https://www.volvogroup.com/en/news-and-media/news/2022/jan/news-4158927.html

.

41

David Cullen, `Daimler to Offer Carbon Neutral Trucks by 2039,' (October 25, 2019).

https://www.truckinginfo.com/343243/daimler-aims-to-offer-only-co2-neutral-trucks-by-2039-in-key-markets

.

42

Deborah Lockridge, `What Does Daimler Truck Spin-off Mean for North America?,' Trucking Info (November 11, 2021).

https://www.truckinginfo.com/10155922/what-does-daimler-truck-spin-off-mean-for-north-america

.

43

Navistar presentation at the Advanced Clean Transportation (ACT) Expo, Long Beach, CA (May 9-11, 2022).

44

California Air Resources Board, Final Regulation Order—Advanced Clean Trucks Regulation. Filed March 15, 2021. Available at:

https://ww2.arb.ca.gov/sites/default/files/barcu/regact/2019/act2019/fro2.pdf

.

45

Scania, `Scania's Electrification Roadmap,' Scania Group, November 24, 2021,

https://www.scania.com/group/en/home/newsroom/news/2021/Scanias-electrification-roadmap.html

.

46

AB Volvo, `Volvo Trucks Launches Electric Truck with Longer Range,' Volvo Group, January 14, 2022,

https://www.volvogroup.com/en/news-and-media/news/2022/jan/news-4158927.html

.

47

Deborah Lockridge, `What Does Daimler Truck Spin-off Mean for North America?,' Trucking Info (November 11, 2021).

https://www.truckinginfo.com/10155922/what-does-daimler-truck-spin-off-mean-for-north-america

.

48

Navistar presentation at the Advanced Clean Transportation (ACT) Expo, Long Beach, CA (May 9-11, 2022).

Table ES-4—Aggregated Projected ZEV Adoption Rates in Technology Packages for the Proposed Standards, Aggregated Projected ZEV Adoption Rates in Technology Packages for the Alternative Standards, and California ACT ZEV Sales Requirements

MY 2027

(%)

MY 2028

(%)

MY 2029

(%)

MY 2030

(%)

MY 2031

(%)

MY 2032

and later

(%)

Proposed:

Vocational

20

25

30

35

40

50

Short-Haul Tractors

10

12

15

20

30

35

Long-Haul Tractors

0

0

0

10

20

25

Alternative:

Vocational

14

20

25

30

35

40

Short Haul Tractors

5

8

10

15

20

25

Long Haul Tractors

0

0

0

10

15

20

CARB ACT:

Vocational

20

30

40

50

55

60

Tractors

15

20

25

30

35

40

As discussed in Section II and DRIA Chapters 1 and 2, EPA recognizes that charging and refueling infrastructure for BEVs and FCEVs is critically important for the success in the increasing development and adoption of these vehicle technologies. There are significant efforts already underway to develop and expand heavy-duty electric charging and hydrogen refueling infrastructure. The U.S. government is making large investments through the BIL and the IRA, as discussed in more detail in DRIA Chapter 1.3.2. (

e.g.,

this includes a tax credit for charging or hydrogen refueling infrastructure) as well as billions of additional dollars for programs that could help fund charging infrastructure if purchased alongside an electric vehicle).

49 50

However, private investments will also play a critical role in meeting future infrastructure needs. We expect many BEV or fleet owners to invest in charging infrastructure for depot charging. (See DRIA Chapter 2.6 for information on our analysis of depot charging needs and costs associated with this proposal.) Manufacturers, charging network providers, energy companies and others are also investing

in high-power public or other stations that could support en-route charging. This includes over a billion dollars for recently announced projects to support electric truck or other commercial vehicle charging in the United States and Europe.

51

For example, Daimler Truck North America is partnering with electric power generation company NextEra Energy Resources and BlackRock Renewable Power to collectively invest $650 million to create a nationwide U.S. charging network for commercial vehicles with a later phase of the project also supporting hydrogen fueling stations.

52

Volvo Group and Pilot recently announced their intent to offer public charging for medium- and heavy-duty BEVs at over 750 Pilot and Flying J North American truck stops and travel plazas.

53

(See DRIA Chapter 1.6.2 for a more detailed discussion of private investments in heavy-duty infrastructure.)

49

Inflation Reduction Act, Public Law 117-169 (2022).

50

Bipartisan Infrastructure Law, Public Law 117-58, 135 Stat. 429 (2021).

51

BloombergNEF. “Zero-Emission Vehicles Factbook A BloombergNEF special report prepared for COP27.” November 2022. Available online:

https://www.bloomberg.com/professional/download/2022-zero-emissions-vehicle-factbook/

.

52

NextEra Energy. News Release: “Daimler Truck North America, NextEra Energy Resources and BlackRock Renewable Power Announce Plans to Accelerate Public Charging Infrastructure for Commercial Vehicles Across The U.S.” January 31, 2022. Available online:

https://newsroom.nexteraenergy.com/news-releases?item=123840

.

53

Adler, Alan. “Pilot and Volvo Group add to public electric charging projects”. FreightWaves. November 16, 2022. Available online:

https://www.freightwaves.com/news/pilot-and-volvo-group-add-to-public-electric-charging-projects

.

These recent heavy-duty charging announcements come during a period of rapid growth in the broader market for charging infrastructure serving cars or other electric vehicles. BloombergNEF estimates that annual global investment was $62 billion in 2022, nearly twice that of the prior year.

54

Private charging companies have already attracted billions globally in venture capital and mergers and acquisitions.

55

In the United States, there was $200 million or more in mergers and acquisition activity in 2022 according to the capital market data provider Pitchbook,

56

indicating strong interest in the future of the charging industry. Domestic manufacturing capacity is also increasing with over $600 million in announced investments to support the production of charging equipment and components at existing or new U.S. facilities.

57 58

54

BloombergNEF. “Next $100 Billion EV-Charger Spend to Be Super Fast.” January 20, 2023. Available online:

https://about.bnef.com/blog/next-100-billion-ev-charger-spend-to-be-super-fast/

.

55

Hampleton.”Autotech & Mobility M&A market report 1H2023.” 2023. Available online:

https://www.hampletonpartners.com/fileadmin/user_upload/Report_PDFs/Hampleton-Partners-Autotech-Mobility-Report-1H2023-FINAL.pdf

.

56

St. John, Alexa, and Nora Naughton.” Automakers need way more plug-in stations to make their EV plans work. That has sparked a buyer frenzy as big charging players gobble up smaller ones.” Insider, November 24, 2022. Available online:

https://www.businessinsider.com/ev-charging-industry-merger-acquisition-meet-electric-vehicle-demand-2022-11

.

57

Joint Office of Energy and Transportation. “Private Sector Continues to Play Key Part in Accelerating Buildout of EV Charging Networks.” February 15, 2023. Available online:

https://driveelectric.gov/news/#private-investment

.

58

North Carolina Office of the Governor. “Manufacturer of Electric Vehicle Charging Stations Selects Durham County for New Production Facility”. February 7, 2023. Available online:

https://governor.nc.gov/news/press-releases/2023/02/07/manufacturer-electric-vehicle-charging-stations-selects-durham-county-new-production-facility

.

These important early actions and market indicators suggest strong growth in charging and refueling ZEV infrastructure in the coming years. Furthermore, as described in Section II of this document, our analysis of charging infrastructure needs and costs supports the feasibility of the future growth of ZEV technology of the magnitude EPA is projecting in this proposal's technology package. EPA has heard from some representatives from the heavy-duty vehicle manufacturing industry both optimism regarding the heavy-duty industry's ability to produce ZEV technologies in future years at high volume, but also concern that a slow growth in ZEV charging and refueling infrastructure can slow the growth of heavy-duty ZEV adoption, and that this may present challenges for vehicle manufacturers ability to comply with future EPA GHG standards. Several heavy-duty vehicle manufacturers have encouraged EPA to consider ways to address this concern both in the development of the Phase 3 program, and in the structure of the Phase 3 program itself.

59

EPA requests comment on this concern, both in the Phase 3 rulemaking process, and in consideration of whether EPA should consider undertaking any future actions related to the Phase 3 standards, if finalized, with respect to the future growth of the charging and refueling infrastructure for ZEVs. EPA has a vested interest in monitoring industry's performance in complying with mobile source emission standards, including the highway heavy-duty industry. EPA monitors industry's performance through a range of approaches, including regular meetings with individual companies and regulatory requirements for data submission as part of the annual certification process. EPA also provides transparency to the public through actions such as publishing industry compliance reports (such as has been done during the heavy-duty GHG Phase 1 program).

60

EPA requests comment on what, if any, additional information and data EPA should consider collecting and monitoring during the implementation of the Phase 3 standards; we also request comment on whether there are additional stakeholders EPA should work with during implementation of the Phase 3 standards, if finalized, and what measures EPA should consider to help ensure success of the Phase 3 program, including with respect to the important issues of refueling and charging infrastructure for ZEVs.

59

Truck and Engine Manufacturers Association. “EPA GHG Phase 3 Rulemaking: H-D Vehicle Manufacturers' Perspective” presentation to the Society of Automotive Engineers Government and Industry Meeting. January 18, 2023.

60

See EPA Reports EPA-420-R-21-001B covering Model Years 2014-2018, and EPA report EPA-420-R-22-028B covering Model Years 2014—2020, available online at

https://www.epa.gov/compliance-and-fuel-economy-data/epa-heavy-duty-vehicle-and-engine-greenhouse-gas-emissions

.

As described in Section III.B of this preamble, we are also proposing updates to the advanced technology incentives in the ABT program for HD GHG Phase 2 for electric vehicles. Given the ZEV-related factors outlined in this section and further described in Sections I and II that have arisen since the adoption of HD GHG Phase 2, EPA believes it is appropriate to limit the availability of credit multipliers, but we also recognize the role these credits play in developing new markets. We are proposing in this action to eliminate the advanced technology vehicle credit multipliers for BEVs and PHEVs for MY 2027, one year before these credit multipliers were set to end under the existing HD GHG Phase 2 program. We propose retaining the existing FCEV credit multipliers, because the HD market for this technology continues to be in the early stage of development. We request comment on this approach. In addition to this preamble, we have also prepared a Draft Regulatory Impact Analysis (DRIA) which is available on our website and in the public docket for this rulemaking. The DRIA provides additional data, analysis, and discussion. We request comment on the analysis and data in the DRIA.

D. Impacts of the Proposed Standards

Our estimated emission reductions, average per-vehicle costs, program costs, and monetized benefits of the proposed program are summarized in this section and detailed in Sections IV through VIII of the preamble and Chapters 3 through 8 of the DRIA. EPA notes that, consistent with CAA section 202, in

evaluating potential GHG standards, we carefully weigh the statutory factors, including GHG emissions impacts of the GHG standards, and the feasibility of the standards (including cost of compliance in light of available lead time). We monetize benefits of the proposed GHG standards and evaluate other costs in part to better enable a comparison of costs and benefits pursuant to E.O. 12866, but we recognize that there are benefits that we are currently unable to fully quantify. EPA's consistent practice has been to set standards to achieve improved air quality consistent with CAA section 202, and not to rely on cost-benefit calculations, with their uncertainties and limitations, in identifying the appropriate standards. Nonetheless, our conclusion that the estimated benefits considerably exceed the estimated costs of the proposed program reinforces our view that the proposed GHG standards represent an appropriate weighing of the statutory factors and other relevant considerations.

Our analysis of emissions impacts accounts for downstream emissions,

i.e.,

from emission processes such as engine combustion, engine crankcase exhaust, vehicle evaporative emissions, and vehicle refueling emissions. Vehicle technologies would also affect emissions from upstream sources that occur during, for example, electricity generation and the refining and distribution of fuel. This proposal's analyses include emissions impacts from electrical generating units (EGUs).

61

We also account for refinery emission impacts on non-GHG pollutants in these analyses.

61

We are continuing and are not reopening the existing approach taken in both HD GHG Phase 1 and Phase 2, that compliance with the vehicle exhaust CO

2

emission standards is based on CO

2

emissions from the vehicle.

The proposed GHG standards would achieve significant reductions in GHG emissions. As seen in Table ES-5, through 2055 the program would result in significant downstream GHG emission reductions. In addition, considering both downstream and EGU cumulative emissions from calendar years 2027 through 2055, the proposed standards would achieve approximately 1.8 billion metric tons in CO

2

emission reductions (see Section V of the preamble and Chapter 4 of the DRIA for more detail).

62

As discussed in Section VI of this preamble, these GHG emission reductions would make an important contribution to efforts to limit climate change and its anticipated impacts. These GHG reductions would benefit all U.S. residents, including populations such as people of color, low-income populations, indigenous peoples, and/or children that may be especially vulnerable to various forms of damages associated with climate change. We project a cumulative increase from calendar years 2027 through 2055 of approximately 0.4 billion metric tons of CO

2

emissions from EGUs as a result of the increased demand for electricity associated with the proposal, although those projected impacts decrease over time because of projected changes in the future power generation mix, including cleaner combustion technologies and increases in renewables.

63

62

As discussed in Section V, in this proposal we estimated refinery emissions impacts only for non-GHG emissions. Were we to estimate impacts on refinery GHG emissions, we expect that the decrease in liquid fuel consumption associated with this rule would lead to a reduction in those emissions, and that the total GHG emissions reductions from this proposal (including downstream, EGU, and refinery) would exceed 1.8 billion metric tons.

63

We expect IRA incentives, particularly sections 45X, 45Y, and 48E of the Internal Revenue Code (

i.e.,

Title 26) added by sections 13502 (Advanced Manufacturing Production Credit), 13701 (Clean Electricity Production Credit), and 13702 (Clean Electricity Investment Credit), respectively, to contribute significantly to increases in renewables in the future power generation mix.

Table ES-5—Cumulative Downstream GHG Impacts of the Proposal From Calendar Years 2027 Through 2055 in Billion Metric Tons (BMT)

a

Pollutant

Reduction in BMT

Percent impact

(%)

Carbon Dioxide (CO

2

)

2.2

−18

Methane (CH

4

)

0.00035

−17

Nitrous Oxide (N

2

O)

0.00028

−17

CO

2

Equivalent (CO

2

e)

2.3

−18

a

Downstream emissions processes are those that come directly from a vehicle, such as tailpipe exhaust, crankcase exhaust, evaporative emissions, and refueling emissions.

We expect the proposed GHG emission standards would lead to an increase in HD ZEVs relative to our reference case without the proposed rule, which would also result in reductions of vehicle emissions of non-GHG pollutants that contribute to ambient concentrations of ozone, particulate matter (PM

2.5

), NO

2

, CO, and air toxics. Exposure to these non-GHG pollutants is linked to adverse human health impacts such as premature death as well as other adverse public health and environmental effects (see Section VI). As shown in Table ES-6, by 2055, when considering downstream, EGU, and refinery emissions, we estimate a net decrease in emissions from all pollutants modeled (

i.e.,

NO

X

, PM

2.5

, VOC, and SO

2

). In this year alone, the proposed standards would reduce downstream PM

2.5

by approximately 970 U.S. tons (about 39 percent of heavy-duty sector downstream PM

2.5

emissions) and downstream oxides of nitrogen (NO

X

) by over 70,000 U.S. tons (about 28 percent of heavy-duty sector downstream NO

X

emissions) (see Section V of the preamble and Chapter 4 of the DRIA for more detail). These reductions in non-GHG emissions from vehicles would reduce air pollution near roads. As described in Section VI of this preamble, there is substantial evidence that people who live or attend school near major roadways are more likely to be of a non-White race, Hispanic ethnicity, and/or low socioeconomic status. In addition, emissions from HD vehicles and engines can significantly affect individuals living near truck freight routes. Based on a study EPA conducted of people living near truck routes, an estimated 72 million people live within 200 meters of a truck freight route.

64

Relative to the rest of the population, people of color and those with lower incomes are more likely to live near truck routes.

65

In addition, children who attend school near major roads are disproportionately

represented by children of color and children from low-income households.

66

64

U.S. EPA (2021). Estimation of Population Size and Demographic Characteristics among People Living Near Truck Routes in the Conterminous United States. Memorandum to the Docket EPA-HQ-OAR-2019-0055.

65

See Section VI.D for additional discussion on our analysis of environmental justice impacts of this NPRM.

66

Kingsley, S., Eliot, M., Carlson, L. et al. Proximity of U.S. schools to major roadways: a nationwide assessment. J Expo Sci Environ Epidemiol 24, 253-259 (2014).

https://doi.org/10.1038/jes.2014.5

.

Similar to GHG emissions, we project that non-GHG emissions from EGUs would increase as a result of the increased demand for electricity associated with the proposal, and we expect those projected impacts to decrease over time due to EGU regulations and changes in the future power generation mix, including impacts of the IRA. We also project that non-GHG emissions from refineries would decrease as a result of the lower demand for liquid fuel associated with the proposed GHG standards (Section V and DRIA Chapter 4).

Table ES-6—Projected Non-GHG Heavy-Duty Emission Impacts

a

in Calendar Year 2055 Due to the Proposal

Pollutant

Downstream

(U.S short tons)

EGU

(U.S. short tons)

Refinery

(U.S. short tons)

Net impact

(U.S. short tons)

Nitrogen Oxides (NO

X

)

−71,000

790

−1,800

−72,000

Primary Exhaust PM

2.5

−970

750

−440

−650

Volatile Organic Compounds (VOC)

−21,000

750

−1200

−21,000

Sulfur Dioxide (SO

2

)

−520

910

−640

−250

a

We present emissions reductions as negative numbers and emission increases as positive numbers.

We estimate that the present value, at 3 percent, of costs to manufacturers would be $9 billion dollars before considering the IRA battery tax credits. With those battery tax credits, which we estimate to be $3.3 billion, the cost to manufacturers of compliance with the program would be $5.7 billion. The manufacturer cost of compliance with the proposed rule on a per-vehicle basis are shown in Table ES-7. We estimate that the MY 2032 fleet average per-vehicle cost to manufacturers by regulatory group would range between a cost savings for LHD vocational vehicles to $2,300 for HHD vocational vehicles and between $8,000 and $11,400 per tractor. EPA notes the projected costs per vehicle for this proposal are similar to the fleet average per-vehicle costs projected for the HD GHG Phase 2 rule, where the tractor standards were projected to cost between $10,200 and $13,700 per vehicle (81 FR 73621 (October 25, 2016)) and the MY 2027 vocational vehicle standards were projected to cost between $1,486 and $5,670 per vehicle (81 FR 73718 (October 25, 2016)). For this proposal, EPA finds that the expected the additional vehicle costs are reasonable in light of the GHG emissions reductions.

67

67

For illustrative purposes, these average costs would represent an approximate two percent increase for vocational vehicles and 11 percent increase of tractors if we assume an approximate minimum vehicle price of $100,000 for vocational vehicles and $100,000 for tractors (81 FR 73482). We also note that these average upfront costs are taken across the HD vehicle fleet and are not meant as an indicator of average price increase.

Table ES-7—Manufacturer Costs To Meet the Proposed MY 2032 Standards Relative to the Reference Case

[2021$]

Regulatory group

Incremental

ZEV adoption rate

in technology package

(%)

Per-ZEV

manufacturer

RPE on

average

Fleet-average

per-vehicle

manufacturer RPE

Light Heavy-Duty Vocational

45

−$9,515

−$4,326

Medium Heavy-Duty Vocational

24

1,358

326

Heavy Heavy-Duty Vocational

28

8,146

2,300

Day Cab Tractors

30

26,364

8,013

Sleeper Cab Tractors

21

54,712

11,445

The proposed GHG standards would reduce adverse impacts associated with climate change and exposure to non-GHG pollutants and thus would yield significant benefits, including those we can monetize and those we are unable to quantify. Table ES-8 summarizes EPA's estimates of total monetized discounted costs, operational savings, and benefits. The results presented here project the monetized environmental and economic impacts associated with the proposed program during each calendar year through 2055. EPA estimates that the present value of monetized net benefits to society would be approximately $320 billion through the year 2055 (annualized net benefits of $17 billion through 2055), more than 5 times the cost in vehicle technology and associated electric vehicle supply equipment (EVSE) combined. Regarding social costs, EPA estimates that the cost of vehicle technology (not including the vehicle or battery tax credits) and EVSE would be approximately $9 billion and $47 billion respectively, and that the HD industry would save approximately $250 billion in operating costs (

e.g.,

savings that come from less liquid fuel used, lower maintenance and repair costs for ZEV technologies as compared to ICE technologies, etc.). The program would result in significant social benefits including $87 billion in climate benefits (with the average SC-GHGs at a 3 percent discount rate). Between $15 and $29 billion of the estimated total benefits through 2055 are attributable to reduced emissions of non-GHG pollutants, primarily those that contribute to ambient concentrations of

PM

2.5

. Finally, the benefits due to reductions in energy security externalities caused by U.S. petroleum consumption and imports would be approximately $12 billion under the proposed program. A more detailed description and breakdown of these benefits can be found in Section VIII of the preamble and Chapter 7 of the DRIA.

Table ES-8—Monetized Discounted Costs, Benefits, and Net Benefits of the Proposed Program for Calendar Years 2027 Through 2055

[Billions of 2021 dollars]

a

b

c

d

e

Present value

3% Discount rate

7% Discount rate

Annualized value

3% Discount rate

7% Discount rate

Vehicle Technology Costs

$9

$10

$0.47

$0.82

EVSE Costs

47

29

2.5

2.3

Operational Savings

250

120

13

10

Energy Security Benefits

12

6.0

0.62

0.49

GHG Benefits

87

87

4.6

4.6

Non-GHG Benefits

15 to 29

5.8 to 11

0.78 to 1.5

0.47 to 0.91

Net Benefits

320

180

17

12

Notes:

a

Values rounded to two significant figures; totals may not sum due to rounding. Present and annualized values are based on the stream of annual calendar year costs and benefits included in the analysis (2027-2055) and discounted back to year 2027.

b

Climate benefits are based on reductions in CO2, CH4, and N2O emissions and are calculated using four different estimates of the social cost of each GHG (SC-GHG model average at 2.5%, 3%, and 5% discount rates; 95th percentile at 3% discount rate), which each increase over time. In this table, we show the benefits associated with the average SC-GHGs at a 3% discount rate, but the Agency does not have a single central SC-GHG point estimate. We emphasize the importance and value of considering the benefits calculated using all four SC-GHG estimates and present them later in this preamble. As discussed in Chapter 7 of the DRIA, a consideration of climate benefits calculated using discount rates below 3 percent, including 2 percent and lower, is also warranted when discounting intergenerational impacts. We note that in this proposal we are using the SC-GHG estimates presented in the February 2021 Technical Support Document (TSD): Social Cost of Carbon, Methane, and Nitrous Oxide Interim Estimates under E.O. 13990 (IWG 2021). For further discussion of SC-GHG and how EPA accounted for these estimates, please refer to Section VII of this preamble.

c

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

d

Non-GHG health benefits are presented based on two different long-term exposure studies of mortality risk: a Medicare study (Wu et al., 2020) and a National Health Interview Survey study (Pope III et al., 2019). Non-GHG impacts associated with the standards presented here do not include the full complement of health and environmental effects that, if quantified and monetized, would increase the total monetized benefits. Instead, the non-GHG benefits are based on benefit-per-ton values that reflect only human health impacts associated with reductions in PM

2.5

exposure.

e

Net benefits reflect the operational savings plus benefits minus costs. For presentational clarity, the present and equivalent annualized value of net benefits for a 3 percent discount rate reflect benefits based on the Pope III et al. study while the present and equivalent annualized value of net benefits for a 7 percent discount rate reflect benefits based on the Wu et al. study.

Regarding the costs to purchasers as shown in Table ES-9, for the proposed program we estimated the average upfront incremental cost to purchase a new MY 2032 HD BEV or FCEV relative to an ICE vehicle for a vocational BEV and EVSE, a short-haul tractor BEV and EVSE, a short-haul tractor FCEV, and a long-haul tractor FCEV. These incremental costs account for the IRA tax credits, specifically battery and vehicle tax credits, as discussed in Section II.E.4 and Section IV.C and IV.D. We also estimated the operational savings each year (

i.e.,

savings that come from the lower costs to operate, maintain, and repair BEV technologies) and payback period (

i.e.,

the year the initial cost increase would pay back). Table ES-9 shows that for the vocational vehicle ZEVs, short-haul tractor ZEVs, and long-haul tractor FCEVs the incremental upfront costs (after the tax credits) are recovered through operational savings such that pay back occurs after between one and three years on average for vocational vehicles, after three years for short-haul tractors and after seven years on average for long-haul tractors. We discuss this in more detail in Sections II and IV of this preamble and DRIA Chapters 2 and 3.

Table ES-9—MY 2032 Estimated Average Per-Vehicle Purchaser Upfront Cost and Annual Savings Difference Between BEV/FCEV and ICE Technologies for the Proposed Program

[2021 dollars]

a

Regulatory group

Upfront

vehicle cost

difference

(including

tax credits)

Upfront

EVSE costs

on average

Total upfront

costs on average

Annual

incremental

operating costs

on average

Payback period

(year) on average

LHD Vocational

−$9,608

$10,552

$944

−$4,043

1

MHD Vocational

−2,907

14,312

11,405

−5,397

3

HHD Vocational

−8,528

17,233

8,705

−7,436

2

Short Haul (Day Cab) Tractors

582

16,753

17,335

−6,791

3

Long Haul (Sleeper Cab) Tractors

14,712

0

14,712

−2,290

7

a

Undiscounted dollars.

I. Introduction

A. Brief Overview of the Heavy-Duty Industry

Heavy-duty highway vehicles range from commercial pickup trucks to vocational vehicles that support local and regional transportation, construction, refuse collection, and delivery work, to line-haul tractors (semi trucks) that move freight cross-country. This diverse array of vehicles is categorized into weight classes based on gross vehicle weight ratings (GVWR). These weight classes span Class 2b pickup trucks and vans from 8,500 to 10,000 pounds GVWR through Class 8 line-haul tractors and other commercial vehicles that exceed 33,000 pounds GVWR. While Class 2b and 3 complete pickups and vans are not included in this proposed rulemaking, Class 2b and 3 vocational vehicles are included in this rulemaking (as discussed further in Section III.E.3).

68

68

Class 2b and 3 vehicles with GVWR between 8,500 and 14,000 pounds are primarily commercial pickup trucks and vans and are sometimes referred to as “medium-duty vehicles”. The vast majority of Class 2b and 3 vehicles are chassis-certified vehicles, and we intend to include those vehicles in a combined light-duty and medium-duty rulemaking action, consistent with E.O. 14037, Section 2a. Heavy-duty engines and vehicles are also used in nonroad applications, such as construction equipment; nonroad heavy-duty engines, equipment, and vehicles are not within the scope of this NPRM.

Heavy-duty highway vehicles are powered through an array of different means. Currently, the HD vehicle fleet is primarily powered by diesel-fueled, compression-ignition (CI) engines. However, gasoline-fueled, spark-ignition (SI) engines are common in the lighter weight classes, and smaller numbers of alternative fuel engines (

e.g.,

liquified petroleum gas, compressed natural gas) are found in the heavy-duty fleet. We refer to the vehicles powered by internal combustion engines (ICE, including SI and CI engines) as ICE vehicles throughout this preamble. An increasing number of HD vehicles are powered by zero emission vehicle (ZEV) technologies such as battery electric vehicle (BEV) technology,

e.g.,

EPA certified 380 HD BEVs in MY 2020 but that number jumped to 1,163 HD BEVs in MY 2021. We use the term ZEV technologies throughout the preamble to refer to technologies that result in zero tailpipe emissions, which in this preamble we refer to collectively as ZEVs. Example ZEV technologies include BEVs and fuel cell vehicles (FCEVs). While hybrid vehicles (including plug-in hybrid electric vehicles) include energy storage features such as batteries, they also include an ICE, which do not result in zero tailpipe emissions.

The industry that designs and manufactures HD vehicles is composed of three primary segments: vehicle manufacturers, engine manufacturers and other major component manufacturers, and secondary manufacturers (

i.e.,

body builders). Some vehicle manufacturers are vertically integrated—designing, developing, and testing their engines in-house for use in their vehicles; others purchase some or all of their engines from independent engine suppliers. At the time of this proposal, only one major independent engine manufacturer supports the HD industry, though some vehicle manufacturers sell their engines or “incomplete vehicles” (

i.e.,

chassis that include their engines, the frame, and a transmission) to body builders who design and assemble the final vehicle. Each of these subindustries is often supported by common suppliers for subsystems such as transmissions, axles, engine controls, and emission controls.

In addition to the manufacturers and suppliers responsible for producing HD vehicles, an extended network of dealerships, repair and service facilities, and rebuilding facilities contribute to the sale, maintenance, and extended life of these vehicles and engines. HD vehicle dealerships offer customers a place to order such vehicles from a specific manufacturer and often include service facilities for those vehicles and their engines. Dealership service technicians are generally trained to perform regular maintenance and make repairs, which generally include repairs under warranty and in response to manufacturer recalls. Some trucking fleets, businesses, and large municipalities hire their own technicians to service their vehicles in their own facilities. Many refueling centers along major trucking routes have also expanded their facilities to include roadside assistance and service stations to diagnose and repair common problems.

The end-users for HD vehicles are as diverse as the applications for which these vehicles are purchased. Smaller weight class HD vehicles are commonly purchased by delivery services, contractors, and municipalities. The middle weight class vehicles tend to be used as commercial vehicles for business purposes and municipal work that transport people and goods locally and regionally or provide services such as utilities. Vehicles in the heaviest weight classes are generally purchased by businesses with high load demands, such as construction, towing or refuse collection, or freight delivery fleets and owner-operators for regional and long-haul goods movement. The competitive nature of the businesses and owner-operators that purchase and operate HD vehicles means that any time at which the vehicle is unable to operate due to maintenance or repair (

i.e.,

downtime) can lead to a loss in income. The customers' need for reliability drives much of the vehicle manufacturers innovation and research efforts.

B. History of Greenhouse Gas Emission Standards for Heavy-Duty Engines and Vehicles

EPA has a longstanding practice of regulating GHG emissions from the HD sector. In 2009, EPA and the U.S. Department of Transportation's (DOT's) National Highway Traffic Safety Administration (NHTSA) began working on a joint regulatory program to reduce GHG emissions and fuel consumption from HD vehicles and engines.

69

The first phase of the HD GHG and fuel efficiency program was finalized in 2011 (76 FR 57106, September 15, 2011) (“HD GHG Phase 1”).

70

The HD GHG Phase 1 program largely adopted approaches consistent with recommendations from the National Academy of Sciences. The HD GHG Phase 1 program, which began in MY 2014 and phased in through MY 2018, included separate standards for HD vehicles and HD engines. The program offered flexibility allowing manufacturers to attain these standards through a mix of technologies and the option to participate in an emissions credit ABT program.

69

Greenhouse gas emissions from heavy-duty vehicles are primarily carbon dioxide (CO

2

), but also include methane (CH

4

), nitrous oxide (N

2

O), and hydrofluorocarbons (HFC).

70

National Research Council; Transportation Research Board. The National Academies' Committee to Assess Fuel Economy Technologies for Medium- and Heavy-Duty Vehicles; “Technologies and Approaches to Reducing the Fuel Consumption of Medium- and Heavy-Duty Vehicles.” 2010. Available online:

https://www.nap.edu/catalog/12845/technologies-and-approaches-to-reducing-the-fuel-consumption-of-medium-and-heavy-duty-vehicles

.

In 2016, EPA and NHTSA finalized the HD GHG Phase 2 program.

71

The HD GHG Phase 2 program included technology-advancing, performance-based emission standards for HD vehicles and HD engines that phase in over the long term, with initial standards for most vehicles and engines commencing in MY 2021, increasing in stringency in MY 2024, and culminating in even more stringent MY 2027 standards. HD GHG Phase 2 built upon the Phase 1 program and set standards

based not only on then-currently available technologies, but also on technologies that were either still under development or not yet widely deployed at the time of the HD GHG Phase 2 final rule. To ensure adequate time for technology development, HD GHG Phase 2 provided up to 10 years lead time to allow for the development and phase-in of these control technologies. EPA recently finalized technical amendments to the HD GHG Phase 2 rulemaking (“HD Technical Amendments”) that included changes to the test procedures for heavy-duty engines and vehicles to improve accuracy and reduce testing burden.

72

71

81 FR 73478, October 25, 2016.

72

86 FR 34308, June 29, 2021.

As with the previous HD GHG Phase 1 and Phase 2 rules and light-duty GHG rules, EPA has coordinated with the DOT and NHTSA during the development of this proposed rule. This included coordination prior to and during the interagency review conducted under E.O. 12866. EPA has also consulted with CARB during the development of this proposal, as EPA also did during the development of the HD GHG Phase 1 and 2 and light-duty rules. See Section I.E for additional detail on EPA's coordination with DOT/NHTSA, CARB, and additional Federal Agencies.

C. What has changed since we finalized the HD GHG Phase 2 rule?

In 2016, we established the HD GHG Phase 2 CO

2

standards on the premise that zero-emission technologies would not be available and cost-competitive in significant volumes in the timeframe of the HD GHG Phase 2 program but would become more widely available in the HD market over time. To encourage that availability at faster pace, we finalized BEV, PHEV, and FCEV advanced technology credit multipliers for HD vehicles. As described in the Executive Summary and Section II of this preamble, we have considered new data and recent policy changes and we are now projecting that ZEV technologies will be readily available and technologically feasible much sooner than we had projected. We list the developments pointing to this increased application of ZEV technologies again in the following paragraphs (and we discuss their impacts on the HD market in more detail in the Sections I.C.1 through I.C.3):

First, the HD market has evolved such that early ZEV models are in use today for some applications and are expected to expand to many more applications, ZEV technologies costs have gone down and are projected to continue to fall, and manufacturers have announced plans to rapidly increase their investments in ZEV technologies over the next decade. For example, in 2022, several manufacturers are producing fully electric HD vehicles in several applications, and these applications are expected to expand (see Section I.C.1 and DRIA Chapter 1). Furthermore, several HD manufacturers have announced their ZEV projections that signify a rapid increase in BEVs over the next decade. This increase in HD ZEVs is in part due to the significant decrease in cost to manufacture lithium-ion batteries, the single most expensive component of a BEV, in the past decade; those costs are projected to continue to fall during this decade, all while the performance of these batteries in terms of energy density has improved and is projected to continue to improve.

73 74

Many of the manufacturers who produce HD vehicles and firms that purchase HD vehicles have announced billions of dollars' worth of investments in ZEV technologies and significant plans to transition to a zero-carbon fleet over the next ten to fifteen years.

75

73

Mulholland, Eamonn. “Cost of electric commercial vans and pickup trucks in the United States through 2040.” Page 7. January 2022. Available at

https://theicct.org/wp-content/uploads/2022/01/cost-ev-vans-pickups-us-2040-jan22.pdf

.

74

Environmental Defense Fund. “Technical Review of Medium- and Heavy-Duty Electrification Costs for 2027-2030.” February 2, 2022. Available online at:

https://blogs.edf.org/climate411/files/2022/02/EDF-MDHD-Electrification-v1.6_20220209.pdf

.

75

Environmental Defense Fund (2022) Electric Vehicle Market Update: Manufacturer Commitments and Public Policy Initiatives Supporting Electric Mobility in the U.S. and Worldwide, September 2022, available online at:

https://blogs.edf.org/climate411/files/2022/09/ERM-EDF-Electric-Vehicle-Market-Report_September2022.pdf

.

Second, the 2021 BIL and the 2022 IRA laws have been enacted, and together these two laws provide significant and unprecedented monetary incentives for the production and purchase of ZEVs in the HD market, as well as incentives for electric vehicle charging and hydrogen, which will further support a rapid increase in market penetration of ZEVs.

Third, there have been multiple actions by states to accelerate the adoption of HD ZEVs. The State of California and other states have adopted the ACT program that includes a manufacturer requirement for zero-emission truck sales.

76 77

The ACT program provides that “manufacturers who certify Class 2b-8 chassis or complete vehicles with combustion engines would be required to sell zero-emission trucks as an increasing percentage of their annual [state] sales from 2024 to 2035.”

78 79

In addition, 17 states and the District of Columbia have signed a Memorandum of Understanding establishing goals to support widespread electrification of the HD vehicle market.

80

76

California Air Resources Board, Final Regulation Order—Advanced Clean Trucks Regulation. Filed March 15, 2021. Available at:

https://ww2.arb.ca.gov/sites/default/files/barcu/regact/2019/act2019/fro2.pdf

.

77

Oregon adopted ACT on 11/17/2021:

https://www.oregon.gov/deq/rulemaking/Pages/ctr2021.aspx

. Washington adopted ACT on 11/29/2021:

https://ecology.wa.gov/Regulations-Permits/Laws-rules-rulemaking/Rulemaking/WAC-173-423-400

. New York adopted ACT on 12/29/2021:

https://www.dec.ny.gov/regulations/26402.html.

New Jersey adopted ACT on 12/20/2021:

https://www.nj.gov/dep/rules/adoptions.html.

Massachusetts adopted ACT on 12/30/2021:

https://www.mass.gov/regulations/310-CMR-700-air-pollution-control#proposed-amendments-public-comment.

78

California Air Resources Board, Advanced Clean Trucks Fact Sheet (August 20, 2021), available at

https://ww2.arb.ca.gov/resources/fact-sheets/advanced-clean-trucks-fact-sheet

. See also California Air Resources Board, Final Regulation Order—Advanced Clean Trucks Regulation. Filed March 15, 2021. Available at:

https://ww2.arb.ca.gov/sites/default/files/barcu/regact/2019/act2019/fro2.pdf

.

79

EPA granted the ACT rule waiver requested by California under CAA section 209(b) on March 30, 2023.

80

Multi-State MOU, available at

https://www.nescaum.org/documents/mhdv-zev-mou-20220329.pdf/

.

We note that the improvements in internal combustion engine technologies that began under the HD GHG Phase 1 program and are being advanced under the HD GHG Phase 2 standards are still necessary for reducing GHG emissions from the HD sector. As we discuss in Section II.D.1, these technology improvements exist today and we believe they will continue to be feasible during the timeframe at issue in this proposed rulemaking.

1. The HD Zero-Emission Vehicle Market

Since 2012, manufacturers have developed a number of prototype and demonstration HD BEV projects, particularly in the State of California, establishing technological feasibility and durability of BEV technology for specific applications used for specific services, as well as building out necessary infrastructure.

81

In 2019, approximately 60 makes and models of HD BEVs were available for purchase, with additional product lines in prototype or other early development stages.

82 83 84

According to the Global

Commercial Vehicle Drive to Zero Zero-Emission Technology Inventory (ZETI), 160 BEV models were commercially available on the market in the United States and Canada region in 2021, and around 200 BEV models are projected to be available by 2024.

85

DRIA Chapter 1 provides a snapshot of BEV models in the HD vehicle market.

81

NACFE (2019) “Guidance Report: Viable Class

7/8

Electric, Hybrid and Alternative Fuel Tractors”, available online at:

https://nacfe.org/downloads/viable-class-7-8-alternative-vehicles/

.

82

Nadel, S. and Junga, E. (2020). “Electrifying Trucks: From Delivery Vans to Buses to 18-

Wheelers.” American Council for an Energy-Efficient Economy White Paper, available at:

https://aceee.org/white-paper/electrifying-trucks-delivery-vans-buses-18

.

83

The composition of all-electric truck models was: 36 buses, 10 vocational trucks, 9 step vans, 3 tractors, 2 street sweepers, and 1 refuse truck (Nadel and Junga (2020) citing AFDC (Alternative Fuels Data Center). 2018. “Average Annual Vehicle Miles Traveled by Major Vehicle Categories.”

www.afdc.energy.gov/data/widgets/10309

.

84

Note that there are varying estimates of BEV and FCEV models in the market; NACFE (2019) “Guidance Report: Viable Class

7/8

Electric, Hybrid and Alternative Fuel Tractors”, available at:

https://nacfe.org/downloads/viable-class-7-8-alternative-vehicles/

. (NACFE 2019) provided slightly lower estimates than those included here from Nadel and Junga 2020. A recent NREL study suggests that there may be more models available, but it is unclear how many are no longer on the market since the inventory includes vehicles introduced and used in commerce starting in 2012 (Smith et al. 2019).

85

Global Commercial Vehicle Drive to Zero. “ZETI Data Explorer”. CALSTART. Version 1.1, accessed February 2023. Available online:

https://globaldrivetozero.org/tools/zeti-data-explorer/

.

Current production volumes of HD BEVs originally started increasing in the transit bus market, where electric bus sales grew from 300 to 650 in the United States between 2018 to 2019.

86 87

In 2020, the market continued to expand beyond transit, with approximately 900 HD BEVs sold in the United States and Canada combined, consisting of transit buses (54 percent), school buses (33 percent), and straight trucks (13 percent).

88

By 2021, M.J. Bradley's analysis of the HD BEV market found that 30 manufacturers had at least one BEV model for sale and an additional nine companies had made announcements to begin BEV production by 2025.

89

In April 2022, the Environmental Defense Fund (EDF) projected deployments and major orders of electric trucks and buses in the United States to rise to 54,000 by 2025 based on an analysis of formal statements and announcements by auto manufacturers, as well as analysis of the automotive press and data from financial and market analysis firms that regularly cover the auto industry.

90

Given the dynamic nature of the BEV market, the number and types of vehicles available are increasing fairly rapidly.

91

86

Tigue, K. (2019) “U.S. Electric Bus Demand Outpaces Production as Cities Add to Their Fleets” Inside Climate News, November 14.

https://insideclimatenews.org/news/14112019/electric-bus-cost-savings-health-fuel-charging

.

87

Note that ICCT (2020) estimates 440 electric buses were sold in the U.S. and Canada in 2019, with 10 of those products being FCEV pilots. The difference in estimates of number of electric buses available in the U.S. may lie in different sources looking at production vs. sales of units.

88

International Council on Clean Transportation. “Fact Sheet: Zero-Emission Bus and Truck Market in the United States and Canada: A 2020 Update.” Pages 3-4. May 2021.

89

M.J. Bradley and Associates (2021) “Medium- and Heavy-Duty Vehicles: Market Structure, Environmental Impact, and EV Readiness.” Page 21. July 2021.

90

Environmental Defense Fund. “Electric Vehicle Market Update: Manufacturer Commitments and Public Policy Initiatives Supporting Electric Mobility in the U.S. and Worldwide”. April 2022. Available online:

https://blogs.edf.org/climate411/files/2022/04/electric_vehicle_market_report_v6_april2022.pdf

.

91

Union of Concerned Scientists (2019) “Ready for Work: Now Is the Time for Heavy-Duty Electric Vehicles,” available at

www.ucsusa.org/resources/ready-work

.

The current market for HD FCEVs is not as developed as the market for HD BEVs, but models are being designed, tested, and readied for purchase in the coming years. According to ZETI,

92

at least 16 HD FCEV models are expected to become commercially available for production in the United States and Canada region by 2024, as listed in DRIA Chapter 1. The Hydrogen Fuel Cell Partnership reports that fuel cell electric buses have been in commercial development for 20 years and, as of May 2020, over 100 buses are in operation or in planning in the United States.

93

Foothill Transit in Los Angeles County ordered 33 transit buses that they expect to be operating in early 2023.

94

Ten Toyota-Kenworth Class 8 fuel cell tractors were successfully tested in the Port of Los Angeles and surrounding area through 2022.

95

Hyundai is scheduled to test 30 Class 8 tractors in the Port of Oakland in 2023.

96

Nikola has agreements with fleets to purchase or lease over 200 Class 8 trucks upon satisfactory completion of demonstrations

97 98 99

and is building a manufacturing facility in Coolidge, Arizona, with an expected production capacity of up to 20,000 BEV and FCEV trucks by the end of 2023.

100

92

Global Commercial Vehicle Drive to Zero. “ZETI (Zero-Emission Technology Inventory)”. CALSTART. Version 8.0, accessed November 2022. Available online:

https://globaldrivetozero.org/tools/zeti/

.

93

Hydrogen Fuel Cell Partnership. “Buses & Trucks”. Available online:

https://h2fcp.org/buses_trucks

.

94

Scauzillo, Steve. “First hydrogen-powered transit bus in LA County hits streets in December, starting new trend”. San Gabriel Valley Tribune. November 22, 2022. Available online:

https://ourcommunitynow.com/post/first-hydrogen-powered-transit-bus-in-la-county-hits-streets-in-december-starting-new-trend

.

95

Heavy Duty Trucking. “FCEV Drayage Trucks Prove Themselves in LA Port Demonstration Project.” HDT Truckinginfo. September 22, 2022. Available online:

https://www.truckinginfo.com/10181655/fcev-drayage-trucks-prove-themselves-in-la-port-demonstration-project

.

96

Hyundai. “Hyundai Motors Details Plans to Expand into U.S. Market with Hydrogen-powered XCIENT Fuel Cells at ACT Expo.” May 10, 2022. Available online:

https://www.hyundai.com/worldwide/en/company/newsroom/hyundai-motor-details-plans-to-expand-into-u.s.-market-with-hydrogen-powered-xcient-fuel-cells-at-act-expo-0000016825

.

97

Heavy Duty Trucking. “Pennsylvania Flatbed Carrier to Lease 100 Nikola Tre FCEVs.” HDT Truckinginfo. October 14, 2021. Available online:

https://www.truckinginfo.com/10153974/pennsylvania-flatbed-carrier-to-lease-100-nikola-tre-evs

.

98

Green Car Congress. “Covenant Logistics Group signs letter of intent for 10 Nikola Tre BEVs and 40 Tre FCEVs.” January 12, 2022. Available online:

https://www.greencarcongress.com/2022/01/20220112-covenant.html

.

99

Adler, Alan. “Plug Power will buy up to 75 Nikola fuel cell trucks.” Freightwaves. December 15, 2022. Available online;

https://www.freightwaves.com/news/plug-power-will-buy-up-to-75-nikola-fuel-cell-trucks

.

100

Nikola. “Nikola Corportation Celebrates the Customer Launch of Serial Production in Coolidge, Arizona.” April 27, 2022. Available online:

https://nikolamotor.com/press_releases/nikola-corporation-celebrates-the-customer-launch-of-serial-production-in-coolidge-arizona-163#:~:text=Phase%201%20of%20the%20Coolidge,per%20year%20on%20two%20shifts

.

For this proposed rulemaking, EPA conducted an analysis of manufacturer-supplied end-of-year production reports provided to us as a requirement of the process to certify HD vehicles to our GHG emission standards.

101

Based on the end-of-year production reports for MY 2019, manufacturers produced approximately 350 certified HD BEVs. This is out of nearly 615,000 HD diesel ICE vehicles produced in MY 2019 and represents approximately 0.06 percent of the HD vehicles market. In MY 2020, 380 HD BEVs were certified, an increase of 30 BEVs from 2019. The BEVs were certified in a variety of the Phase 1 vehicle subcategories, including light, medium, and heavy heavy-duty vocational vehicles and vocational tractors. Out of the 380 HD BEVs certified in MY 2020, a total of 177 unique makes and models were available for purchase by 52 manufacturers in Classes 3-8. In MY 2021, EPA certified 1,163 heavy-duty BEVs, representing 0.2 percent of the HD vehicles. There were no HD FCEVs certified through MY 2021. We note that these HD BEV certifications preceded implementation of incentives in the 2022 IRA, which we expect to increase adoption (and certification) of BEV and FCEV technology in the heavy-duty sector.

101

Memo to Docket. Heavy-Duty Greenhouse Gas Emissions Certification Data. March 2023. Docket EPA-HQ-OAR-2022-0985.

Based on current trends, manufacturer announcements, the 2021 BIL and 2022 IRA, and state-level actions, electrification of the HD market is

expected to substantially increase over the next decade from current levels. The projected rate of growth in electrification of the HD vehicle sector currently varies widely. After passage of the IRA, EDF's September 2022 report update projected deployments and major orders of electric trucks and buses to rise to 166,000 by the end of 2022.

102

ERM updated an analysis for EDF that projected five scenarios that span a range of between 13 and 48 percent Class 4-8 ZEV sales in 2029, with an average of 29 percent.

103

The International Council for Clean Transportation (ICCT) and Energy Innovation conducted an analysis of the impact of the IRA on electric vehicle uptake, projecting between 39 and 48 percent Class 4-8 ZEV sales in 2030 across three scenarios and between 47 and 56 percent in 2035.

104

102

Environmental Defense Fund. “Electric Vehicle Market Update: Manufacturer Commitments and Public Policy Initiatives Supporting Electric Mobility in the U.S. and Worldwide”. September 2022. Available online:

https://blogs.edf.org/climate411/files/2022/09/ERM-EDF-Electric-Vehicle-Market-Report_September2022.pdf

.

103

Robo, Ellen and Dave Seamonds. Technical Memo to Environmental Defense Fund: Investment Reduction Act Supplemental Assessment: Analysis of Alternative Medium- and Heavy-Duty Zero-Emission Vehicle Business-As-Usual Scenarios. ERM. August 19, 2022. Available online:

https://www.erm.com/contentassets/154d08e0d0674752925cd82c66b3e2b1/edf-zev-baseline-technical-memo-addendum.pdf

.

104

ICCT and Energy Innovation. “Analyzing the Impact of the Inflation Reduction Act on Electric Vehicle Uptake in the United States”. January 2023. Available online:

https://theicct.org/wp-content/uploads/2023/01/ira-impact-evs-us-jan23-2.pdf

.

One of the most important factors influencing the extent to which BEVs are available for purchase and able to enter the market is the cost of lithium-ion batteries, the single most expensive component of a BEV. According to Bloomberg New Energy Finance, average lithium-ion battery costs have decreased by more than 85 percent since 2010, primarily due to global investments in battery production and ongoing improvements in battery technology.

105

A number of studies, including the Sharpe and Basma meta-study of direct manufacturing costs from a variety of papers, show that battery pack costs are projected to continue to fall during this decade.

106 107 108

Cost reductions in battery packs for electric trucks are anticipated due to continued improvement of cell and battery pack performance and advancements in technology associated with energy density, materials for cells, and battery packaging and integration.

109

105

Bloomberg. “Battery Pack Prices Cited Below $100/kWh for the First Time in 2020, While Market Average Sits at $137/kWh”. Available online:

https://about.bnef.com/blog/battery-pack-prices-cited-below-100-kwh-for-the-first-time-in-2020-while-market-average-sits-at-137-kwh/

.

106

Mulholland, Eamonn. “Cost of electric commercial vans and pickup trucks in the United States through 2040.” Page 7. January 2022. Available at

https://theicct.org/wp-content/uploads/2022/01/cost-ev-vans-pickups-us-2040-jan22.pdf

.

107

Environmental Defense Fund. “Technical Review of Medium- and Heavy-Duty Electrification Costs for 2027-2030.” February 2, 2022. Available online:

https://blogs.edf.org/climate411/files/2022/02/EDF-MDHD-Electrification-v1.6_20220209.pdf

.

108

Sharpe, Ben and Hussein Basma. “A meta-study of purchase costs for zero-emission trucks”. The International Council on Clean Transportation, Working Paper 2022-09 (February 2022). Available online:

https://theicct.org/wp-content/uploads/2022/02/purchase-cost-ze-trucks-feb22-1.pdf

.

109

Sharpe, Ben and Hussein Basma. “A meta-study of purchase costs for zero-emission trucks”. The International Council on Clean Transportation.

https://theicct.org/wp-content/uploads/2022/02/purchase-cost-ze-trucks-feb22-1.pdf

.

Currently, the fuel cell stack is the most expensive component of a HD FCEV, due primarily to the technological requirements of manufacturing rather than raw material costs.

110

Projected costs are expected to decrease as manufacturing matures and materials improve.

111

Larger production volumes are anticipated as global demand increases for fuel cell systems for HD vehicles, which would improve economies of scale.

112

Costs of the onboard hydrogen storage tank, another component unique to a FCEV, are also projected to drop due to lighter weight and lower cost carbon fiber-reinforced materials, technology improvements, and economies of scale.

113

110

Deloitte China. “Fueling the Future of Mobility: Hydrogen and fuel cell solutions for transportation, Volume 1”. 2020. Available online:

https://www2.deloitte.com/content/dam/Deloitte/cn/Documents/finance/deloitte-cn-fueling-the-future-of-mobility-en-200101.pdf

.

111

Sharpe, Ben and Hussein Basma. “A Meta-Study of Purchase Costs for Zero-Emission Trucks”. The International Council on Clean Transportation. February 2022. Available online:

https://theicct.org/wp-content/uploads/2022/02/purchase-cost-ze-trucks-feb22-1.pdf

.

112

Deloitte China. “Fueling the Future of Mobility: Hydrogen and fuel cell solutions for transportation, Volume 1”. 2020. Available online:

https://www2.deloitte.com/content/dam/Deloitte/cn/Documents/finance/deloitte-cn-fueling-the-future-of-mobility-en-200101.pdf

.

113

Ibid

.

As the cost of components has come down, manufacturers have increasingly announced their projections for zero-emission HD vehicles, and these projections signify a rapid increase in BEVs and FCEVs over the next decade. For example, Volvo Trucks and Scania announced a global electrification target of 50 percent of trucks sold being electric by 2030.

114

Daimler Trucks North America has committed to offering only what they refer to as “carbon-neutral” trucks in the United States. by 2039 and expects that by 2030 as much as 60 percent of its sales will be ZEVs.

115 116

Navistar has a goal of having 50 percent of its sales volume be ZEVs by 2030, and it has committed to achieve 100 percent zero emissions by 2040.

117

Cummins targets net-zero carbon emissions by 2050.

118 119

114

Scania, `Scania's Electrification Roadmap,' Scania Group, November 24, 2021,

https://www.scania.com/group/en/home/newsroom/news/2021/Scanias-electrification-roadmap.html

; AB Volvo, `Volvo Trucks Launches Electric Truck with Longer Range,' Volvo Group, January 14, 2022,

https://www.volvogroup.com/en/news-and-media/news/2022/jan/news-4158927.html

.

115

David Cullen, `Daimler to Offer Carbon Neutral Trucks by 2039,' (October 25, 2019).

https://www.truckinginfo.com/343243/daimler-aims-to-offer-only-co2-neutral-trucks-by-2039-in-key-markets

.

116

Deborah Lockridge, `What Does Daimler Truck Spin-off Mean for North America?,' Trucking Info (November 11, 2021).

https://www.truckinginfo.com/10155922/what-does-daimler-truck-spin-off-mean-for-north-america

.

117

Navistar presentation at the Advanced Clean Transportation (ACT) Expo, Long Beach, CA (May 9-11, 2022).

118

Cummins, Inc. “Cummins Unveils New Environmental Sustainability Strategy to Address Climate Change, Conserve Natural Resources.” November 14, 2019. Last accessed on September 10, 2021 at

https://www.cummins.com/news/releases/2019/11/14/cummins-unveils-new-environmental-sustainability-strategy-address-climate

.

119

Environmental Defense Fund (2022) September 2022 Electric Vehicle Market Update: Manufacturer Commitments and Public Policy Initiatives Supporting Electric Mobility in the U.S. and Worldwide, available online at:

https://blogs.edf.org/climate411/files/2022/09/ERM-EDF-Electric-Vehicle-Market-Report_September2022.pdf

.

On a parallel path, large private HD fleet owners are also increasingly committing to expanding their electric fleets.

120

A report by the International Energy Agency (IEA) provides a comprehensive accounting of recent announcements made by UPS, FedEx, DHL, Walmart, Anheuser-Busch, Amazon, and PepsiCo for fleet electrification.

121

Amazon and UPS, for example, placed orders in 2020 for 10,000 BEV delivery vans from EV start-ups Rivian and Arrival, respectively, and Amazon has plans to scale up to 100,000 BEV vans by

2030.

122 123

Likewise, in December 2022, PepsiCo added the first of 100 planned Tesla Semis to its fleet.

124

These announcements include not only orders for electric delivery vans and semi-trucks, but more specific targets and dates to full electrification or net-zero emissions. Amazon, FedEx, DHL, and Walmart have set a commitment to fleet electrification and/or achieving net-zero emissions by 2040.

125 126 127 128

We recognize that certain delivery vans will likely fall into the Class 2b and 3 regulatory category, the vast majority of which are not covered in this rule's proposed updates; we intend to address this category in a separate light and medium-duty vehicle rulemaking.

129

120

Environmental Defense Fund (2021) EDF analysis finds American fleets are embracing electric trucks. July 28, 2021. Available online at:

https://blogs.edf.org/energyexchange/2021/07/28/edf-analysis-finds-american-fleets-are-embracing-electric-trucks/

.

121

International Energy Association. Global EV Outlook 2021. April 2021. Available online at:

https://iea.blob.core.windows.net/assets/ed5f4484-f556-4110-8c5c-4ede8bcba637/GlobalEVOutlook2021.pdf

.

122

Amazon, Inc. “Introducing Amazon's first custom electric delivery vehicle.” October 8, 2020. Last accessed on October 18, 2022 at

https://www.aboutamazon.com/news/transportation/introducing-amazons-first-custom-electric-delivery-vehicle

.

123

Arrival Ltd. “UPS invests in Arrival and orders 10,000 Generation 2 Electric Vehicles.” April 24, 2020. Last accessed on October 18, 2022 at

https://arrival.com/us/en/news/ups-invests-in-arrival-and-orders-10000-generation-2-electric-vehicles

.

124

Akash Sriram. “Musk delivers first Tesla truck, but no update on output, pricing.” Reuters. December 2, 2022. Last accessed on January 4, 2023 at

https://www.reuters.com/business/autos-transportation/musk-delivers-first-tesla-semi-trucks-2022-12-02/

.

125

Robo, Ellen and Dave Seamonds. Technical Memo to Environmental Defense Fund: Investment Reduction Act Supplemental Assessment: Analysis of Alternative Medium- and Heavy-Duty Zero-Emission Vehicle Business-As-Usual Scenarios. ERM. August 19, 2022. Available online:

https://www.erm.com/contentassets/154d08e0d0674752925cd82c66b3e2b1/edf-zev-baseline-technical-memo-addendum.pdf

.

126

FedEx Corp. “FedEx Commits to Carbon-Neutral Operations by 2040.” March 3, 2021. Last accessed on October 18, 2022 at

https://newsroom.fedex.com/newsroom/asia-english/sustainability2021

.

127

Deutsche Post DHL Group. “Zero emissions by 2050: DHL announces ambitious new environmental protection target.” March 2017. Last accessed on October 18, 2022 at

https://www.dhl.com/global-en/delivered/sustainability/zero-emissions-by-2050.html

.

128

Walmart Inc. “Walmart Sets Goal to Become a Regenerative Company.” September 21, 2020. Last accessed on October 18, 2022 at

https://corporate.walmart.com/newsroom/2020/09/21/walmart-sets-goal-to-become-a-regenerative-company

.

129

Complete heavy-duty vehicles at or below 14,000 pounds. GVWR are chassis-certified under 40 CFR part 86, while incomplete vehicles at or below 14,000 pounds. GVWR may be certified to either 40 CFR part 86 (meeting standards under subpart S) or 40 CFR part 1037 (installed engines would then need to be certified under 40 CFR part 1036). Class 2b and 3 vehicles are primarily chassis-certified complete commercial pickup trucks and vans. We intend to pursue a combined light-duty and medium-duty rulemaking to set more stringent standards for complete and incomplete vehicles at or below 14,000 pounds. GVWR that are certified under 40 CFR part 86, subpart S. The standards proposed in this rule would apply for all heavy-duty vehicles above 14,000 pounds. GVWR, except as noted in 40 CFR 1037.150(l). The proposed standards in this rule would also apply for incomplete heavy-duty vehicles at or below 14,000 pounds. GVWR if vehicle manufacturers opt to certify those vehicles under 40 CFR part 1037 instead of certifying under 40 CFR part 86, subpart S.

Amazon and Walmart are among fleets owners and operators that are also considering hydrogen. Amazon signed an agreement with Plug Power,

130

a company building an end-to-end hydrogen ecosystem, to supply hydrogen for up to 800 HD long-haul trucks or 30,000 forklifts (which are commonly powered using hydrogen) starting in 2025 through 2040.

131

Walmart is purchasing hydrogen from Plug Power

132

and plans to expand pilots of fuel cell forklifts, yard trucks, and possibly HD long-haul trucks by 2040.

133

Plug Power has agreed to purchase up to 75 Nikola Class 8 fuel cell trucks over the next three years in exchange for supplying the company with hydrogen fuel.

134

130

Plug Power. “Plug and Amazon Sign Green Hydrogen Agreement”. Available online:

https://www.ir.plugpower.com/press-releases/news-details/2022/Plug-and-Amazon-Sign-Green-Hydrogen-Agreement/default.aspx

.

131

Amazon. “Amazon adopts green hydrogen to help decarbonize its operations”. August 25, 2022. Available online:

https://www.aboutamazon.com/news/sustainability/amazon-adopts-green-hydrogen-to-help-decarbonize-its-operations

.

132

Plug Power. “Plug Supplies Walmart with Green Hydrogen to Fuel Retailer's Fleet of Material Handling Lift Trucks”. April 19, 2022. Available online:

https://www.ir.plugpower.com/press-releases/news-details/2022/Plug-Supplies-Walmart-with-Green-Hydrogen-to-Fuel-Retailers-Fleet-of-Material-Handling-Lift-Trucks/default.aspx

.

133

Proactive. “WalMart eyes benefits of hydrogen delivery vehicles in wider trials”. Proactive 13:17. June 8, 2022. Available online:

https://www.proactiveinvestors.co.uk/companies/news/984360/walmart-eyes-benefits-of-hydrogen-delivery-vehicles-in-wider-trials-984360.html

.

134

Adler, Alan. “Plug Power will buy up to 75 Nikola fuel cell trucks”. Freightwaves. December 15, 2022. Available online:

https://www.freightwaves.com/news/plug-power-will-buy-up-to-75-nikola-fuel-cell-trucks

.

The lifetime total cost of ownership (TCO), which includes maintenance and fuel costs, is likely a primary factor for HD vehicle and fleet owners considering BEV and FCEV purchases. In fact, a 2018 survey of fleet owners showed “lower cost of ownership” as the second most important motivator for electrifying their fleet.

135

An ICCT analysis from 2019 suggests that TCO for light and medium heavy-duty BEVs could reach cost parity with comparable diesel ICE vehicles in the early 2020s, while heavy HD BEVs and FCEVs are likely to reach cost parity with comparable diesel ICE vehicles closer to the 2030 timeframe.

136

Recent findings from Phadke et al. suggest that BEV TCO could be 13 percent less than that of a comparable diesel ICE vehicle if electricity pricing is optimized.

137

These studies do not consider the IRA. The Rocky Mountain Institute found that because of the IRA, the TCO of electric trucks will be lower than the TCO of comparable diesel trucks about five years faster than without the IRA. They expect cost parity as soon as 2023 for urban and regional duty cycles that travel up to 250 miles and 2027 for long-hauls that travel over 250 miles.

138

135

The primary motivator for fleet managers was “Sustainability and environmental goals”; the survey was conducted by UPS and GreenBiz.

136

ICCT (2019) “Estimating the infrastructure needs and costs for the launch of zero-emissions trucks”; available online at:

https://theicct.org/publications/zero-emission-truck-infrastructure

.

137

Phadke, A., et. al. (2021) “Why Regional and Long-Haul Trucks are Primed for Electrification Now”; available online at:

https://eta-publications.lbl.gov/sites/default/files/updated_5_final_ehdv_report_033121.pdf

.

138

Kahn, Ari, et. al. “The Inflation Reduction Act Will Help Electrify Heavy-Duty Trucking”. Rocky Mountain Institute. August 25, 2022. Available online:

https://rmi.org/inflation-reduction-act-will-help-electrify-heavy-duty-trucking/

.

As the ICCT and Phadke et al. studies suggest, fuel costs are an important part of TCO. While assumptions about vehicle weight and size can make direct comparisons between HD ZEVs and ICE vehicles challenging, data show greater energy efficiency of battery-electric and fuel cell technology relative to ICE technologies.

139 140

Better energy efficiency leads to lower electricity or hydrogen fuel costs for ZEVs relative to ICE fuel costs.

141 142

Maintenance and service costs are also an important component within TCO; although there is limited data available on actual maintenance costs for HD ZEVs, early experience with BEV medium HD vehicles and transit buses suggests the potential for lower maintenance costs after an initial period of learning to refine both component durability and maintenance procedures.

143

We expect similar trends for FCEVs, as discussed in Chapter 2 of the DRIA. To facilitate HD fleets transitioning to ZEVs, some manufacturers are currently including maintenance in leasing agreements with fleets; it is unclear the extent to which a full-service leasing model will persist or will be transitioned to a more

traditional purchase model after an initial period of learning.

144 145

139

NACFE (2019) “Guidance Report: Viable Class 7/8 Electric, Hybrid and Alternative Fuel Tractors”, available online at:

https://nacfe.org/downloads/viable-class-7-8-alternative-vehicles/

.

140

Nadel, S. and Junga, E. (2020) “Electrifying Trucks: From Delivery Vans to Buses to 18-Wheelers”. American Council for an Energy-Efficient Economy White Paper, available online at:

https://aceee.org/white-paper/electrifying-trucks-delivery-vans-buses-18

.

141

NACFE (2019) “Guidance Report: Viable Class 7/8 Electric, Hybrid and Alternative Fuel Tractors”, available online at:

https://nacfe.org/downloads/viable-class-7-8-alternative-vehicles/

.

142

Nadel, S. and Junga, E. (2020) “Electrifying Trucks: From Delivery Vans to Buses to 18-Wheelers”. American Council for an Energy-Efficient Economy White Paper, available online at:

https://aceee.org/white-paper/electrifying-trucks-delivery-vans-buses-18

.

143

U.S. Department of Energy Alternative Fuels Data Center (AFDC), “Developing Infrastructure to Charge Plug-In Electric Vehicles”,

https://afdc.energy.gov/fuels/electricity_infrastructure.html

(accessed 2-27-20).

144

Fisher, J. (2019) “Volvo's First Electric VNR Ready for the Road.” Fleet Owner, September 17.

www.fleetowner.com/blue-fleets/volvo-s-first-electric-vnr-ready-road

.

145

Gnaticov, C. (2018). “Nikola One Hydrogen Electric Semi Hits the Road in Official Film.”

Carscoops

, Jan. 26.

www.carscoops.com/2018/01/nikola-one-hydrogen-electric-semi-hits-road-official-film/

.

The growth in incentive programs will continue to play an important role in the HD ZEV market. For example, as discussed in more detail in this section, FHWA-approved plans providing $1.5 billion in funding for expanding charging on over 75,000 miles of highway encourages states to consider station designs and power levels that could support heavy-duty vehicles. In a 2017 survey of fleet managers, upfront purchase price was listed as the primary barrier to HD fleet electrification. This suggests that federal incentive programs like those in the BIL and IRA (discussed in Section I.C.2) to offset ZEV purchase costs, as well as state and local incentives and investments, can be influential in the near term, with improvements in BEV and FCEV component costs playing an increasing role in reducing costs in the longer term.

146 147

For example, BEV incentive programs for transit and school buses have experienced growth and are projected to continue to influence BEV markets. The Los Angeles Department of Transportation (LADOT) is one of the first transit organizations in the country to develop a program committed to transitioning its transit fleets to ZEVs by 2030—a target that is 10 years sooner than CARB's Innovative Clean Transportation (ICT) regulation requiring all public transit to be electric by 2040.

148

Since these announcements, LADOT has purchased 27 BEV transit and school buses from BYD and Proterra; by 2030, the number of BEV buses in the LADOT fleet is expected to grow to 492 buses. Outside of California, major metropolitan areas including Chicago, Seattle, New York City, and Washington, DC, have zero-emissions transit programs with 100 percent ZEV target dates ranging from 2040 to 2045.

149 150 151 152

EV school bus programs, frequently in partnership with local utilities, are also being piloted across the country and are expanding under EPA's Clean School Bus Program (CSB).

153

These programs initially included school districts in, but not limited to, California, Virginia, Massachusetts, Michigan, Maryland, Illinois, New York, and Pennsylvania.

154 155 156 157 158

Going forward, they will continue to expand with BIL funding of over $5 billion over the next five years (FY 2022-2026) to replace existing school buses with zero-emission and low-emission models, as discussed more in Section I.C.2.

146

Other barriers that fleet managers prioritized for fleet electrification included: Inadequate charging infrastructure—our facilities, inadequate product availability, inadequate charging infrastructure—public; for the full list of top barriers see Nadel and Junga (2020), citing UPS and GreenBiz 2018.

147

Nadel, S. and Junga, E. (2020) “Electrifying Trucks: From Delivery Vans to Buses to 18-Wheelers”. American Council for an Energy-Efficient Economy White Paper, available online at:

https://aceee.org/white-paper/electrifying-trucks-delivery-vans-buses-18

.

148

LADOT, (2020). “LADOT Transit Zero-Emission Bus Rollout Plan”

https://ww2.arb.ca.gov/sites/default/files/2020-12/LADOT_ROP_Reso_ADA12172020.pdf

.

149

Sustainable Bus. “CTA Chicago tests electric buses and pursues 100% e-fleet by 2040”. April 29, 2021. Available online:

https://www.sustainable-bus.com/electric-bus/cta-chicago-electric-buses/

.

150

Pascale, Jordan. “Metro Approves Plans For Fully Electric Bus Fleet By 2045”. DCist. June 10, 2021. Available online:

https://dcist.com/story/21/06/10/metro-goal-entirely-electric-bus-fleet-2045/

.

151

King County Metro. “Transitioning to a zero-emissions fleet”. Available online:

https://kingcounty.gov/depts/transportation/metro/programs-projects/innovation-technology/zero-emission-fleet.aspx

.

152

Hallum, Mark. “MTA's recent purchase of zero emissions buses will be 33% bigger than expected”. AMNY. May 25, 2021. Available online:

https://www.amny.com/transit/mta-says-45-to-60-more-buses-in-recent-procurement-will-be-zero-emissions/

.

153

U.S. Environmental Protection Agency. “Clean School Bus Program”. Available online:

https://www.epa.gov/cleanschoolbus

.

154

Commonwealth of Massachusetts. “EV Programs & Incentives”. Available online:

https://www.mass.gov/info-details/ev-programs-incentives

.

155

Morris, Charles. “NYC's new school bus contract includes electric bus pilot”.

Charged—Electric Vehicles Magazine

. July 7, 2021. Available online:

https://chargedevs.com/newswire/nycs-new-school-bus-contract-includes-electric-bus-pilot/

.

156

Soneji, Hitesh, et. al. “Pittsburg USD Electric School Bus Final Project Report”. Olivine, Inc. September 23, 2020. Available online:

https://olivineinc.com/wp-content/uploads/2020/10/Pittsburg-USD-Electric-School-Bus-Final-Project-Report-Final.pdf

.

157

Shahan, Cynthia. “Largest Electric School Bus Program in United States Launching in Virginia”.

CleanTechnica

. January 12, 2020. Available online:

https://cleantechnica.com/2020/01/12/largest-electric-school-bus-program-in-united-states-launching-in-virginia/

.

158

St. John, Jeff. “Highland Electric Raises $235M, Lands Biggest Electric School Bus Contract in the US”.

gtm

. February 25, 2021. Available online:

https://www.greentechmedia.com/articles/read/on-heels-of-253m-raise-highland-electric-lands-biggest-electric-school-bus-contract-in-the-u.s

.

In summary, the HD ZEV market is growing rapidly, and ZEV technologies are expected to expand to many applications across the HD sector. As the industry is dynamic and changing rapidly, the examples presented here represent only a sampling of the ZEV HD investment policies and markets. DRIA Chapter 1 provides a more detailed characterization of the HD ZEV technologies in the current and projected ZEV market. We request comment on our assessment of the HD ZEV market and any additional data sources we should consider.

2. Bipartisan Infrastructure Law and Inflation Reduction Act

i. BIL

The BIL

159

was enacted on November 15, 2021, and contains provisions to support the deployment of low- and zero-emission transit buses, school buses, and trucks that service ports, as well as electric vehicle charging infrastructure and hydrogen. These provisions include Section 71101 funding for EPA's Clean School Bus Program,

160

with $5 billion to fund the replacement of ICE school buses with clean and zero-emission buses over the next five years. In its first phase of funding for the Clean School Bus Program, EPA is issuing nearly $1 billion in rebates (up to a maximum of $375,000 per bus, depending on the bus fuel type, bus size, and school district prioritization status)

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for replacement clean and zero-emission buses and associated infrastructure costs.

162 163

The BIL also includes funding for DOT's Federal Transit Administration (FTA) Low- or No-Emission Grant Program,

164

with over $5.6 billion over the next five years to support the purchase of zero- or low-emission transit buses and associated infrastructure.

165

159

United States, Congress. Public Law 117-58. Infrastructure Investment and Jobs Act of 2021.

Congress.gov

,

www.congress.gov/bill/117th-congress/house-bill/3684/text

. 117th Congress, House Resolution 3684, passed 15 Nov. 2021.

160

U.S. Environmental Protection Agency. “Clean School Bus Program”. Available online:

https://www.epa.gov/cleanschoolbus

.

161

U.S. Environmental Protection Agency. “2022 Clean School Bus (CSB) Rebates Program Guide”. May 2022. Available online:

https://nepis.epa.gov/Exe/ZyPDF.cgi/P1014WNH.PDF?Dockey=P1014WNH.PDF

.

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Some recipients are able to claim up to $20,000 per bus for charging infrastructure.

163

U.S. Environmental Protection Agency, “EPA Clean School Bus Program Second Report to Congress Fiscal Year 2022,” EPA-420-R-23-002, February 2023. Available online:

https://www.epa.gov/system/files/documents/2023-02/420r23002.pdf

(last accessed February 9, 2023).

164

U.S. Department of Transportation, Federal Transit Administration. “Low or No Emission Vehicle Program—5339(c)”. Available online:

https://www.transit.dot.gov/lowno

(last accessed February 10, 2023).

165

U.S. Department of Transportation, Federal Transit Administration. “Bipartisan Infrastructure Law Fact Sheet: Grants for Buses and Bus Facilities”. Available online:

https://www.transit.dot.gov/funding/grants/fact-sheet-buses-and-bus-facilities-program

(last accessed February 10, 2023).

The BIL includes up to $7.5 billion to help build out a national network of EV

charging and hydrogen fueling through DOT's Federal Highway Administration (FHWA). This includes $2.5 billion in discretionary grant programs for charging and fueling infrastructure

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along designated alternative fuel corridors and in communities (Section 11401)

167

and $5 billion for the National Electric Vehicle Infrastructure (NEVI) Formula Program (under Division J, Title VIII).

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In September 2022, the FHWA approved the first set of plans for the NEVI program covering all 50 states, Washington, DC, and Puerto Rico. The approved plans provide $1.5 billion in funding for fiscal years (FY) 2022 and 2023 to expand charging on over 75,000 miles of highway.

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While jurisdictions are not required to build stations specifically for heavy-duty vehicles, FHWA's guidance encourages states to consider station designs and power levels that could support heavy-duty vehicles.

170

166

Fueling infrastructure includes hydrogen, propane, and natural gas.

167

U.S. Department of Transportation, Federal Highway Administration, “The National Electric Vehicle Infrastructure (NEVI) Formula Program Guidance,” February 10, 2022. Available online:

https://www.fhwa.dot.gov/environment/alternative_fuel_corridors/nominations/90d_nevi_formula_program_guidance.pdf

(last accessed February 10, 2023).

168

U.S. Department of Transportation, Federal Highway Administration. “Bipartisan Infrastructure Law, Fact Sheets: National Electric Vehicle Infrastructure Formula Program”. February 10, 2022. Available online:

https://www.fhwa.dot.gov/bipartisan-infrastructure-law/nevi_formula_program.cfm

.

169

U.S. Department of Transportation. “Historic Step: All Fifty States Plus DC and Puerto Rico Grenlit to Move EV Charging Networks Forward, Covering 75,000 miles of Highway”. Available online:

https://www.transportation.gov/briefing-room/historic-step-all-fifty-states-plus-dc-and-puerto-rico-greenlit-move-ev-charging

.

170

U.S. Department of Transportation, Federal Highway Administration. “National Electric Vehicle Infrastructure Formula Program: Bipartisan Infrastructure Law—Program Guidance”. February 10, 2022. Available online:

https://www.fhwa.dot.gov/environment/alternative_fuel_corridors/nominations/90d_nevi_formula_program_guidance.pdf

.

The BIL funds other programs that could support HD vehicle electrification. For example, there is continued funding of the Congestion Mitigation and Air Quality (CMAQ) Improvement Program, with more than $2.5 billion authorized for FY 2022 through FY 2026. The BIL (Section 11115) amended the CMAQ Improvement Program to add, among other things, “the purchase of medium- or heavy-duty zero emission vehicles and related charging equipment” to the list of activities eligible for funding. The BIL establishes a program under Section 11402 “Reduction of Truck Emissions at Port Facilities” that includes grants to be administered through FHWA aimed at reducing port emissions, including through electrification. In addition, the BIL includes funding for DOT's Maritime Administration (MARAD) Port Infrastructure Development Program;

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and DOT's Federal Highway Administration (FHWA) Carbon Reduction Program.

172

171

U.S. Department of Transportation, Maritime Administration. “Bipartisan Infrastructure Law: Maritime Administration”. Available online:

https://www.maritime.dot.gov/about-us/bipartisan-infrastructure-law-maritime-administration

.

172

U.S. Department of Transportation, Federal Highway Administration. “Bipartisan Infrastructure Law, Fact Sheets: Carbon Reduction Program (CRP)”. April 20, 2022. Available online:

https://www.fhwa.dot.gov/bipartisan-infrastructure-law/crp_fact_sheet.cfm

.

The BIL also targets batteries used for electric vehicles. It funds DOE's Battery Materials Processing and Battery Manufacturing program,

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which grants funds to promote U.S. processing and manufacturing of batteries for automotive and electric grid use through demonstration projects, the construction of new facilities, and the retooling, retrofitting, and expansion of existing facilities. This includes a total of $3 billion for battery material processing and $3 billion for battery manufacturing and recycling, with additional funding for a lithium-ion battery recycling prize competition, research and development activities in battery recycling, state and local programs, and the development of a collection system for used batteries. In addition, the BIL includes $200 million for the Electric Drive Vehicle Battery Recycling and Second-Life Application Program for research, development, and demonstration of battery recycling and second-life applications.

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U.S. Department of Energy. “Biden Administration Announces $3.16 Billion From Bipartisan Infrastructure Law to Boost Domestic Battery Manufacturing and Supply Chains. May 2, 2022. Available online:

https://www.energy.gov/articles/biden-administration-announces-316-billion-bipartisan-infrastructure-law-boost-domestic

.

Hydrogen provisions of the BIL include funding for several programs to accelerate progress towards the Hydrogen Shot goal, launched on June 7, 2021, to reduce the cost of clean hydrogen

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production by 80 percent to $1 for 1 kg in 1 decade

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and jumpstart the hydrogen market in the United States. This includes $8 billion for the Department of Energy's Regional Clean Hydrogen Hubs Program to establish networks of clean hydrogen producers, potential consumers, and connective infrastructure in close proximity; $1 billion for a Clean Hydrogen Electrolysis Program; and $500 million for Clean Hydrogen Manufacturing and Recycling Initiatives.

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The BIL also called for development of a Clean Hydrogen Production Standard to guide DOE hub and Research, Development, Deployment, and Diffusion (RDD&D) actions; and a National Clean Hydrogen Strategy and Roadmap to facilitate widescale production, processing, delivery, storage, and use of clean hydrogen. These BIL programs are currently under development, and further details are expected over the course of calendar year (CY) 2023.

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The BIL defines “clean hydrogen” as hydrogen produced in compliance with the GHG emissions standard established under 42 U.S. Code section 16166(a), including production from any fuel source, where the standard developed shall define the term to mean hydrogen produced with a carbon intensity equal to or less than 2 kilograms of carbon dioxide-equivalent produced at the site of production per kilogram of hydrogen produced.

175

Satyapal, Sunita. “2022 AMR Plenary Session”. U.S. Department of Energy, Hydrogen and Fuel Cell Technologies Office. June 6, 2022. Available online:

https://www.energy.gov/sites/default/files/2022-06/hfto-amr-plenary-satyapal-2022-1.pdf

.

176

U.S. Department of Energy. “DOE Establishes Bipartisan Infrastructure Law's $9.5 Billion Clean Hydrogen Initiatives”. February 15, 2022. Available online:

https://www.energy.gov/articles/doe-establishes-bipartisan-infrastructure-laws-95-billion-clean-hydrogen-initiatives

.

ii. IRA Sections 13502 and 13403

The IRA,

177

which was enacted on August 16, 2022, contains several provisions relevant to vehicle electrification and the associated infrastructure via tax credits, grants, rebates, and loans through CY 2032, including two key provisions that provide a tax credit to reduce the cost of producing qualified batteries (battery tax credit) and to reduce the cost of purchasing qualified ZEVs (vehicle tax credit). The battery tax credit in “Advanced Manufacturing Production Credit” in IRA section 13502 and the “Qualified Commercial Clean Vehicles” vehicle tax credit in IRA section 13403 are included quantitatively in our analysis.

177

Inflation Reduction Act of 2022, Public Law 117-169, 136 Stat. 1818 (2022) (“Inflation Reduction Act” or “IRA”), available at

https://www.congress.gov/117/bills/hr5376/BILLS-117hr5376enr.pdf

.

IRA section 13502, “Advanced Manufacturing Production Credit,” provides tax credits for the production and sale of battery cells and modules of up to $45 per kilowatt-hour (kWh), and for 10 percent of the cost of producing applicable critical minerals (including those found in batteries and fuel cells, provided that the minerals meet certain specifications), when such components or minerals are produced in the United States. These credits begin in CY 2023 and phase down starting in CY 2030, ending after CY 2032. With projected direct manufacturing costs for heavy-

duty vehicle batteries on the order of $65 to $275/kWh in the 2025-2030 timeframe,

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this tax credit has the potential to noticeably reduce the cost of qualifying batteries and, by extension, the cost of BEVs and FCEVs with qualifying batteries. We did not include a detailed cost breakdown of fuel cells quantitatively in our analysis, but the potential impact on fuel cells may also be significant because platinum (an applicable critical mineral commonly used in fuel cells) is a major contributor to the cost of fuel cells.

179

178

Sharpe, B., Basma, H. “A meta-study of purchase costs for zero-emission trucks”. International Council on Clean Transportation. February 17, 2022. Available online:

https://theicct.org/wp-content/uploads/2022/02/purchase-cost-ze-trucks-feb22-1.pdf

.

179

Leader, Alexandra & Gaustad, Gabrielle & Babbitt, Callie. (2019). The effect of critical material prices on the competitiveness of clean energy technologies. Materials for Renewable and Sustainable Energy. 8. 10.1007/s40243-019-0146-z.

We limited our assessment of this tax credit in our DRIA Chapter 2 analysis to the tax credits for battery cells and modules. Pursuant to the IRA, qualifying battery cells must have an energy density of not less than 100 watt-hours per liter, and we expect that batteries for heavy-duty BEVs and FCEVs will exceed this requirement as described in DRIA Chapter 2.4.2.2. Qualifying battery cells must be capable of storing at least 12 watt-hours of energy and qualifying battery modules must have an aggregate capacity of not less than 7 kWh (or, for FCEVs, not less than 1 kWh); typical battery cells and modules for motor vehicles also exceed these requirements.

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Additionally, the ratio of the capacity of qualifying cells and modules to their maximum discharge amount shall not exceed 100:1. We expect that battery cells and modules in heavy-duty BEVs and FCEVs will also meet this requirement because the high costs and weight of the batteries and the competitiveness of the heavy-duty industry will pressure manufacturers to allow as much of their batteries to be useable as possible. We did not consider the tax credits for critical minerals quantitatively in our analysis. However, we note that any applicability of the critical mineral tax credit may further reduce the costs of batteries.

180

Islam, Ehsan Sabri, Ram Vijayagopal, Aymeric Rousseau. “A Comprehensive Simulation Study to Evaluate Future Vehicle Energy and Cost Reduction Potential”, Report to the U.S. Department of Energy, Contract ANL/ESD-22/6, October 2022. See Medium- and heavy-duty vehicles (techno-economic analysis with BEAN). Available online:

https://vms.taps.anl.gov/research-highlights/u-s-doe-vto-hfto-r-d-benefits/

.

We included this battery tax credit by reducing the direct manufacturing costs of batteries in BEVs and FCEVs, but not the associated indirect costs. At present, there are few manufacturing plants for HD vehicle batteries in the United States, which means that few batteries would qualify for the tax credit now. We expect that the industry will respond to this tax credit incentive by building more domestic battery manufacturing capacity in the coming years, but this will take several years to come to fruition. Thus, we have chosen to model this tax credit by assuming that HD BEV and FCEV manufacturers fully utilize the module tax credit (which provides $10 per kWh) and gradually increase their utilization of the cell tax credit (which provides $35 per kWh) for MY 2027-2029 until MY 2030 and beyond, when they earn 100 percent of the available cell and module tax credits. Further discussion of this battery tax credit and our battery costs can be found in DRIA Chapter 2.4.3.1.

IRA section 13403, “Qualified Commercial Clean Vehicles,” creates a tax credit of up to $40,000 per Class 4 through 8 HD vehicle (up to $7,500 per Class 2b or 3 vehicle) for the purchase or lease of a qualified commercial clean vehicle. This tax credit is available from CY 2023 through CY 2032 and is based on the lesser of the incremental cost of the clean vehicle over a comparable ICE vehicle or the specified percentage of the basis of the clean vehicle, up to the maximum applicable limitation. By effectively reducing the price a vehicle owner must pay for a HD ZEV and the incremental difference in cost between it and a comparable ICE vehicle—by $40,000 in many cases—more vehicle purchasers will be poised to take advantage of the cost savings anticipated from total cost of ownership, including operational cost savings from fuel and maintenance and repair compared with ICE vehicles. Among other specifications, these vehicles must be on-road vehicles (or mobile machinery) that are propelled to a significant extent by a battery-powered electric motor or are qualified fuel cell motor vehicles (also known as fuel cell electric vehicles, FCEVs). For the former, the battery must have a capacity of at least 15 kWh (or 7 kWh if it has a gross vehicle weight rating of less than 14,000 pounds (Class 3 or below)) and must be rechargeable from an external source of electricity. This limits the qualified vehicles to BEVs and plug-in hybrid electric vehicles (PHEVs), in addition to FCEVs. Since this tax credit overlaps with the model years for which we are proposing standards (MYs 2027 through 2032), we included it in our calculations for each of those years in our feasibility analysis for our proposed standards (see DRIA Chapter 2).

For BEVs and FCEVs, the per-vehicle tax credit is equal to the lesser of the following, up to the cap limitation: (A) 30 percent of the BEV or FCEV cost, or (B) the incremental cost of the BEV or FCEV when compared to a comparable (in size and use) ICE vehicle. The limitation on this tax credit is $40,000 for vehicles with a gross vehicle weight rating of equal to or greater than 14,000 pounds (Class 4-8 commercial vehicles) and $7,500 for vehicles with a gross vehicle weight rating of less than 14,000 pounds (commercial vehicles Class 3 and below). For example, if a BEV with a gross vehicle weight rating of equal to or greater than 14,000 pounds costs $350,000 and a comparable ICE vehicle costs $150,000,

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the tax credit would be the lesser of the following, subject to the limitation: (A) 30 percent × $350,000 = $105,000 or (B) $350,000−$150,000 = $200,000. (A) is less than (B), but (A) exceeds the limit of $40,000, so the tax credit would be $40,000. For PHEVs, the per-vehicle tax credit follows the same calculation and cap limitation as for BEVs and FCEVs except that (A) is 15 percent of the PHEV cost.

181

Sharpe, B., Basma, H. “A meta-study of purchase costs for zero-emission trucks”. International Council on Clean Transportation. February 17, 2022. Available online:

https://theicct.org/wp-content/uploads/2022/02/purchase-cost-ze-trucks-feb22-1.pdf

.

In order to estimate the impact of this tax credit in our feasibility analysis for BEVs and FCEVs, we first applied a retail price equivalent to our direct manufacturing costs for BEVs, FCEVs, and ICE vehicles. Note that the direct manufacturing costs of BEVs and FCEVs were reduced by the amount of the battery tax credit in IRA section 13502, as described in DRIA Chapter 2.4.3.1. We calculated the purchaser's incremental cost of BEVs and FCEVs compared to ICE vehicles and not the full cost of vehicles in our analysis. We based our calculation of the tax credit on this incremental cost. When the incremental cost exceeded the tax credit limitation (determined by gross vehicle weight rating as described in the previous paragraph), we decreased the incremental cost by the tax credit limitation. When the incremental cost was between $0 and the tax credit limitation, we reduced the incremental cost to $0 (

i.e.,

the tax credit received by the purchaser was equal to the incremental cost). When the incremental cost was negative (

i.e.,

the BEV or FCEV was cheaper to purchase than the ICE vehicle), no tax credit was given. In order for this calculation to be appropriate, we determined that all

Class 4-8 BEVs and FCEVs must cost more than $133,333 such that 30 percent of the cost is at least $40,000 (or $25,000 and $7,500, respectively, for BEVs and FCEVs Class 3 and below), which is reasonable based on our review of the literature on the costs of BEVs and FCEVs.

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The tax credit amounts for each vehicle type included in our analysis in MYs 2027 and 2032 are shown in DRIA Chapter 2.8.2.

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Burnham, A., Gohlke, D., Rush, L., Stephens, T., Zhou, Y., Delucchi, M. A., Birky, A., Hunter, C., Lin, Z., Ou, S., Xie, F., Proctor, C., Wiryadinata, S., Liu, N., Boloor, M. “Comprehensive Total Cost of Ownership Quantification for Vehicles with Different Size Classes and Powertrains”. Argonne National Laboratory. April 1, 2021. Available at

https://publications.anl.gov/anlpubs/2021/05/167399.pdf

.

We project that the impact of the IRA vehicle tax credit will be significant, as shown in DRIA Chapter 2.8.2. In many cases, the incremental cost (with the tax credit) of a BEV compared to an ICE vehicle is eliminated, leaving only the cost of the electric vehicle supply equipment (EVSE) as an added upfront cost to the BEV owner. Similarly, in some cases, the tax credit eliminates the upfront cost of a FCEV compared to an ICE vehicle.

iii. Other IRA Provisions

There are many other provisions of the IRA that we expect will support electrification of the heavy-duty fleet. Importantly, these other provisions do not serve to reduce ZEV adoption rates from our current projections. Due to the complexity of analyzing the combined potential impact of these provisions, we did not quantify their potential impact in our assessment of costs and feasibility, but we note that they may help to reduce many obstacles to electrification of HDVs and may further support or even increase ZEV adoption rates beyond the levels we currently project. Our assessment of the impacts of these provisions of the IRA on ZEV adoption rates are, therefore, somewhat conservative.

Section 13404, “Alternative Fuel Refueling Property Credit,” modifies an existing tax credit that applies to alternative fuel refueling property (

e.g.,

electric vehicle chargers and hydrogen fueling stations) and extends the tax credit through CY 2032. The credit also applies to refueling property that stores or dispenses specified clean-burning fuels, including at least 85 percent hydrogen, into the fuel tank of a motor vehicle. Starting in CY 2023, this provision provides a tax credit of up to 30 percent of the cost of the qualified alternative fuel refueling property (

e.g.,

HD BEV charger), and up to $100,000 when located in low-income or non-urban area census tracts and certain other requirements are met. We expect that many HD BEV owners will need chargers installed in their depots for overnight charging, and this tax credit will effectively reduce the costs of installing charging infrastructure and, in turn, further effectively reduce the total costs associated with owning a BEV for many HD vehicle owners. Additionally, this tax credit may offset some of the costs of installing very high-powered public and private chargers that are necessary to recharge HD BEVs with minimal downtime during the day. Similarly, we expect that this tax credit will reduce the costs associated with refueling heavy-duty FCEVs, whose owners may rely on public hydrogen refueling stations or those installed in their depots. We expect that this tax credit will help incentivize the build out of the charging and hydrogen refueling infrastructure necessary for high BEV and FCEV adoption, which may further support increased BEV and FCEV uptake.

Section 60101, “Clean Heavy-duty Vehicles,” amends the CAA to add new section 132 (42 U.S.C. 7432) and appropriates $1 billion to the Administrator, including $600 million generally for carrying out CAA section 132 (3 percent of which must be reserved for administrative costs necessary to carry out the section's provisions) and $400 million to make awards under CAA section 132 to eligible recipients/contractors that propose to replace eligible vehicles to serve one or more communities located in an air quality area designated pursuant to CAA section 107 as nonattainment for any air pollutant, in FY 2022 and available through FY 2031. CAA section 132 requires the Administrator to implement a program to make awards of grants and rebates to eligible recipients (defined as States, municipalities, Indian tribes, and nonprofit school transportation associations), and to make awards of contracts to eligible contractors for providing rebates, for up to 100 percent of costs for: (1) the incremental costs of replacing a Class 6 or Class 7 heavy-duty vehicle that is not a zero-emission vehicle with a zero-emission vehicle (as determined by the Administrator based on the market value of the vehicles); (2) purchasing, installing, operating, and maintaining infrastructure needed to charge, fuel, or maintain zero-emission vehicles; (3) workforce development and training to support the maintenance, charging, fueling, and operation of zero-emission vehicles; and (4) planning and technical activities to support the adoption and deployment of zero-emission vehicles.

Section 60102, “Grants to Reduce Air Pollution at Ports,” amends the CAA to add a new section 133 (42 U.S.C. 7433) and appropriates $3 billion (2 percent of which must be reserved for administrative costs necessary to carry out the section's provisions), $750 million of which is for projects located in areas of nonattainment for any air pollutant, in FY 2022 and available through FY 2027, to reduce air pollution at ports. Competitive rebates or grants are to be awarded for the purchase or installation of zero-emission port equipment or technology for use at, or to directly serve, one or more ports; to conduct any relevant planning or permitting in connection with the purchase or permitting of zero-emission port equipment or technology; and to develop qualified climate action plans. The zero-emission equipment or technology either (1) produces zero emissions of GHGs, listed criteria pollutants, and hazardous air pollutants or (2) it captures 100 percent of the emissions produced by an ocean-going vessel at berth.

Section 60103, “Greenhouse Gas Reduction Fund,” amends the CAA to add a new section 134 (42 U.S.C. 7434) and appropriates $27 billion, $15 billion of which is for low-income and disadvantaged communities, in FY 2022 and available through FY 2024, for a GHG reduction grant program. The program supports direct investments in qualified projects at the national, regional, State, and local levels, and indirect investments to establish new or support existing public, quasi-public, not-for-profit, or nonprofit entities that provide financial assistance to qualified projects. The program foc

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