Up until the ACC program waiver request, CARB had relied on the ZEV
requirements as a compliance option for reducing criteria pollutants.
Specifically, California first included the ZEV requirement as part of
its first LEV program, which was then known as LEV I, that mandated a
ZEV sales requirement that phased-in starting with the 1998 MY through
2003 MY. EPA issued a waiver of preemption for these regulations on
January 13, 1993 (58 FR 4166 (January 13, 1993). Since this initial
waiver of preemption, California has made multiple amendments to the
ZEV requirements and EPA has subsequently granted waivers for those
amendments. In the ACC program waiver request California also included
a waiver of preemption request for ZEV amendments that related to 2012
MY through 2017 MY and imposed new requirements for 2018 MY through
2025 MY (78 FR 2118-9). Regarding the ACC program ZEV requirements,
CARB's waiver request noted that there was no criteria emissions
benefit in terms of vehicle (tank-to-wheel--TTW) emissions because its
LEV III criteria pollutant fleet standard was responsible for those
emission reductions.\560\ CARB further noted that its ZEV regulation
was intended to focus primarily on zero emission drive--that is,
battery electric (BEVs), plug-in hybrid electric vehicles (PHEVs), and
hydrogen fuel cell vehicles (FCVs)--in order to move advanced, low GHG
vehicles from demonstration phase to commercialization (78 FR 2122,
2130-31). Specifically, for 2018 MY through 2025 MY, the ACC program
ZEV requirements mandate use of technologies such as BEVs, PHEVs and
FCVs, in up to 15% of a manufacturer's California fleet and in each of
the section 177 States by MY 2025 \561\ (78 FR 2114). Additionally, the
ACC program regulations provide various compliance flexibilities
allowing for substitution of compliance with one program requirement
for another. For instance, manufacturers may opt to over-comply with
the GHG fleet standard in order to offset a portion of their ZEV
compliance requirement for MY 2018 through 2021. Further, until MY
2018, sales of BEVs (since MY 2018, limited to FCVs) in California
count toward a manufacturer's credit requirement in section 177 States.
This is known as the ``travel provision'' (78 FR 2120).\562\ For their
part, the GHG emission regulations include an optional compliance
provision that allows manufacturers to demonstrate compliance with
CARB's GHG standards by complying with applicable Federal GHG
standards. This is known as the ``deemed to comply'' provision.\563\ A
complete description of the ACC program can be found in CARB's waiver
request, located in the docket for the January 2013 waiver action,
Docket No. EPA-HQ-OAR-2012-0562.
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    \560\ CARB ACC waiver request at EPA-HQ-OAR-2012-0562-0004.
    \561\ Under section 177, any State that has state implementation
plan provisions approved under part D of Subchapter I of the Act may
opt to adopt and enforce standards that are identical to standards
for which EPA has granted a waiver of preemption to California under
CAA section 209(b). EPA's longstanding interpretation of section
209(b) and its relationship with section 177 is that it is not
appropriate under section 209(b)(1)(C) to review California
regulations, submitted by CARB, through the prism of adopted or
potentially adopted regulations by section 177 States.
    \562\ On March 11, 2013, the Association of Global Automakers
and Alliance of Automobile Manufacturers filed a petition for
reconsideration of the January 2013 waiver grant, requesting that
EPA reconsider the decision to grant a waiver for MYs 2018 through
2025 ZEV standards on technological feasibility grounds. Petitioners
also asked for consideration of the impact of the travel provision,
which they argue raise technological feasibility issues in section
177 States, as part of the agency's review under section
209(b)(1)(C). EPA continues to evaluate the petition.
    \563\ On May 7, 2018, California issued a notice seeking
comments on ``potential alternatives to a potential clarification''
of this provision for MY vehicles that would be affected by
revisions to the Federal GHG standards. The notice is available at
https://www.arb.ca.gov/msprog/levprog/leviii/leviii_dtc_notice05072018.pdf.
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2. Statutory Provisions Applicable to the Proposed Action
    Under section 209(b) of the Clean Air Act, EPA may reconsider a
grant of a waiver of preemption and withdraw same if the Administrator
makes any one of the three findings in section 209(b)(1)(A), (B) and
(C). EPA's authority to reconsider and withdraw the grant of a waiver
for the ACC program is implicit in section 209(b) given that the
authority to revoke a grant of authority is implied in the authority
for such a grant. Further support for EPA's authority is based on the
legislative history for section 209(b), and the judicial principle that
agencies possess inherent authority to reconsider their decisions.\564\
The legislative history from the 1967 CAA amendments where Congress
enacted the provisions now codified in section 209(a) and (b) provides
support for this view. The Administrator has ``the right . . . to
withdraw the waiver at any time [if] after notice and an opportunity
for public hearing he finds that the State of California no longer
complies with the conditions of the waiver.'' S. Rep. No. 50-403, at 34
(1967). Additionally, subject to certain limitations, administrative
agencies possess inherent authority to reconsider their decisions in
response to changed circumstances. It is well settled that EPA has
inherent authority to reconsider, revise, or repeal past decisions to
the extent permitted by law so long as the Agency provides a reasoned
explanation. This authority exists in part because EPA's
interpretations of the statutes it administers ``are not carved in
stone.'' Chevron U.S.A. Inc. v. NRDC, Inc., 467 U.S. 837, 863 (1984).
An agency ``must consider varying interpretations and the wisdom of its
policy on a continuing basis.'' Id. at 863-64. This is true when, as is
the case here, review is undertaken ``in response to . . . a change in
administration.'' National Cable & Telecommunications Ass'n v. Brand X
internet Services, 545 U.S. 967, 981 (2005). The EPA must also be
cognizant

where it is changing a prior position and articulate a reasoned basis
for the change. FCC v. Fox Television Stations, Inc., 556 U.S. 502, 515
(2009). This proposal reflects changed circumstances that have arisen
since the initial grant of the 2013 ACC program waiver of preemption.
They include the agency's reconsideration of California's record
support for, and EPA's decision and underlying statutory interpretation
on, California's need for GHG and ZEV standards, as well as costs and
technological feasibility considerations that differ from California's
assumptions and which were bases for agency conclusions that were made
at that time.
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    \564\ In 2009, EPA reconsidered the 2008 GHG waiver denial at
CARB's request and granted it upon reconsideration. 72 FR 32744. The
EPA noted the authority to ``withdraw a waiver in the future if
circumstances make such action appropriate.'' See 74 FR 32780 n.222;
see also 32752-53 n.50 (citing 50 S. Rep. No. 403, at 33-34), 32755
n.74.
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    When California submits a package of standards for EPA review
pursuant to CAA section 209, EPA has long interpreted the statute as
authorizing EPA to approve certain provisions and defer action on
others. EPA believes this approach of partially approving submissions
is implicit in section 209, particularly given the fact that EPA's
evaluation of the technological feasibility of standards is best
understood as in effect an evaluation of each standard for each year
(i.e., standards that are submitted together may vary substantially in
their effect and some may require longer lead time than others).
Furthermore, since California always retains the authority as a matter
of state law to determine whether to implement state standards for
which a waiver of preemption has been granted, we do not believe this
approach poses the risk that a partial approval could force California
to implement a program they would not have chosen had they anticipated
EPA's decision. EPA believes that because its authority to grant
waivers of preemption is best understood as applying on a granular
level--where the feasibility of compliance for a particular year can be
assessed--rather than being limited to approving or disapproving
preemption for an entire package of standards submitted together, it
follows that EPA's authority to withdraw the grant of waiver of
preemption should also apply on a granular level, i.e., for any model
year for which EPA concludes the conditions for waiver of preemption no
longer exist or for which it concludes that it erred in its prior
determination that one of the conditions triggering a denial a waiver
was not met. Further, because neither the Clean Air Act nor the
Administrative Procedure Act specify deadlines for reconsideration of
agency action, EPA may, issue a new final action to change a prior
action, taking into account statutory mandates and any applicable court
orders.\565\
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    \565\ On March 11, 2013, EPA received a petition for
reconsideration from the Association of Global Automakers and
Alliance of Automobile Manufacturers of the decision to grant a
waiver for MYs 2018 through 2025 ZEV standards.
---------------------------------------------------------------------------

    EPA is proposing to withdraw the grant of a waiver of preemption
for California to enforce the GHG and ZEV standards of the ACC program
for MY 2021-2025. EPA proposes to withdraw due to separate proposed
findings under section 209(b)(1)(B), and (C).\566\
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    \566\ Under this provision, a waiver is not permitted if (A) the
protectiveness determination of the State is arbitrary and
capricious; (B) the State does not need such State standards to meet
compelling and extraordinary conditions; or (C) such State standards
and accompanying enforcement procedures are not consistent with
section 202(a) of the Act.
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    Under section 209(b)(1)(B), EPA is proposing to find that
California does not need its ZEV and GHG standards to meet compelling
and extraordinary conditions in California. EPA is proposing to find
that CARB does not need its own GHG and ZEV standards to meet
compelling and extraordinary conditions in California given that
``compelling and extraordinary conditions'' mean environmental problems
with causes and effects in California whereas GHG emissions present
global air pollution problems. Additionally, California does not need
the ZEV requirements to meet ``compelling and extraordinary''
conditions in California given that it allows manufacturers to generate
credits in section 177 states as a means to satisfy those
manufacturers' obligations to comply with the mandate that a certain
percentage of their vehicles sold in California be ZEV (or be credited
as such from sales in section 177 States).
    Under section 209(b)(1)(C), EPA is proposing to find that CARB's
GHG and ZEV standards are not consistent with section 202(a) based on
changed circumstances since the January 2013 waiver. Specifically, the
agency is, in this action, jointly proposing with NHTSA revisions to
the Federal GHG and fuel economy standards based on proposed
conclusions that the current (or augural) standards for MY 2021 through
2025 are not feasible. The proposed findings in this notice call into
question CARB's projections and assumptions that underlay the
technological feasibility findings for its waiver application for the
GHG standards and thus the technological findings made by EPA in 2013
in connection with the grant of the waiver for the ACC program.
    Similarly, with regard to ZEV standards, this notice also raises
questions as to CARB's technological projections for ZEV-type
technologies, which are a compliance option for both the ZEV mandate
and GHG standards. As also previously discussed, above, CARB's ZEV
regulations include the travel provision, which previously allowed
manufacturers to earn credit for ZEVs sold in California (which,
despite very slow ZEV sales, far outpaces any other State in these
sales) to comply with credit requirements in section 177 States.
Starting with MY 2018, this provision only applies to FCVs. When the
travel provision was adopted, it was anticipated that by MY 2018,
incentives of this type for BEV sales would no longer be necessary--
i.e., that consumers would adopt such vehicles on their own.
Unfortunately, there has been a serious lack of market penetration,
consumer demand levels, and lack of or slow development of necessary
infrastructure for any ZEVs--BEV or otherwise--in such States. This in
turn means that manufacturers' sales of ZEVs in section 177 States are
unlikely, contrary to CARB's projections in its submissions to support
its application for the ACC waiver, to generate sufficient credits to
satisfy those manufacturers' obligations to comply with the mandate
that a certain percentage of their vehicles sold in California be ZEV
(or be credited as such from sales in section 177 States). In short,
EPA is now of the view that CARB's projections and assumptions at the
time of the waiver request were overly ambitious and likely will not be
realized within the provided lead time. Thus, EPA is also proposing to
find that CARB's ZEV standards for MY 2021 through 2025, and the GHG
standards which rely on the ZEV requirement as a compliance option, are
technologically infeasible and therefore, not consistent with section
209(b)(1)(C).
    As described above, EPA is proposing to withdraw the waiver with
respect to California's ZEV standards based on findings made pursuant
to sections 209(b)(1)(B) and 209(b)(1)(C). EPA is proposing to withdraw
the waiver with respect to California's GHG standards based on findings
made under these three prongs as well as a separate finding made under
section 209(b)(1)(B). Additionally, because the ZEV and GHG standards
are closely interrelated, as demonstrated by the description above of
their complex, overlapping compliance regimes, EPA is proposing to
withdraw the waiver of preemption for ZEV standards under the second
and third prongs of section 209(b)(1).
    EPA believes that a finding made pursuant to any of the prongs of
section 209(b)(1) is an independent and

adequate ground to withdraw the waiver. In this regard, EPA notes that
the statute provides that ``No such waiver shall be granted if the
Administrator finds that--(B) the State does not need such State
standards to meet compelling and extraordinary conditions; or (C) such
State standards and accompanying enforcement procedures are not
consistent with section 202(a) of the Act.'' (Emphasis added.)
Consequently, a final waiver withdrawal decision that relies on more
than one of these provisions would present independent and severable
bases for the decision to withdraw. And, separate and apart from its
analysis under 209(b)(1)(A)-(C), EPA proposes to determine that if
NHTSA finalizes its proposed determination that EPCA preempts
California's standards, that would provide an independent and adequate
ground to withdraw the waiver for those standards. EPA proposes to
interpret section 209(b)(1) to only authorize it to waive CAA
preemption for standards that are not independently preempted by EPCA.
    Additionally, under CAA section 177, States that have designated
nonattainment areas may opt to adopt and enforce standards that are
identical to standards for which EPA has granted a waiver of preemption
to California under CAA section 209(b). For States that have adopted
the ZEV standards, the consequence of any final withdrawal action would
be that they cannot implement these standards. (A State may not ``make
attempt[s] to enforce'' California standards for which EPA has not
waived preemption. Motor Vehicle Mfrs. Ass'n v. NYS Dep. of Envtl
Conservation, 17 F.3d 521, 534 (2d Cir. 1994)). Where states have
adopted CARB's ZEV and GHG standards into their SIPs, under section
177, the provisions of the SIP would continue to be enforceable until
revised. If this proposal is finalized, EPA may subsequently consider
whether to employ the appropriate provisions of the CAA to identify
provisions in section 177 states' SIPs that may require amendment and
to require submission of such amendments.
    EPA is taking comments on all aspects of this proposal.
(a) Burden and Standard of Proof in Waiver Decisions
    Here, the Administrator is proposing the withdrawal of a previously
granted waiver of preemption. As discussed in section III.A. below, EPA
proposes to find that there is clear and compelling evidence that
California's protectiveness determination for its ZEV and GHG standards
was arbitrary and capricious. Motor and Equip. Mfrs. Ass'n v. EPA, 627
F.2d 1095, 1112 (D.C. Cir. 1979) (MEMA I). Additionally, as discussed
in section III.B, below, EPA proposes to find that there is clear and
compelling evidence that California does not need its ZEV and GHG
standards to meet compelling and extraordinary conditions. Similarly,
as discussed in section III.C, below, there is clear and compelling
evidence that both the ZEV and GHG standards are not technologically
feasible.\567\
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    \567\ EPA is assuming without agreeing that the burden of proof
requires clear and compelling evidence but believes a preponderance
of the evidence is the proper burden of proof. Regardless, EPA
firmly believes that it has clear and compelling evidence to support
the agency's statutory findings.
---------------------------------------------------------------------------

    In MEMA I, 627 F.2d 1095, the U.S. Court of Appeals for D.C.
Circuit found that ``the burden of proving [that California's
regulations do not comply with the CAA] is on whoever attacks them.
California must present its regulations and findings at the hearing and
thereafter the parties opposing the waiver request bear the burden of
persuading the Administrator that the waiver request should be
denied.'' \568\
---------------------------------------------------------------------------

    \568\ MEMA I, 627 F.2d at 1122.
---------------------------------------------------------------------------

    MEMA I dealt with a challenge brought by Motor and Equipment
Manufacturers Association against EPA's grant of a waiver of preemption
for California's accompanying enforcement procedures, which in this
instance were vehicle in-use maintenance regulations. The specific
challenge to EPA's action contested EPA's findings that section 209
allowed for a waiver of preemption for CARB's in-use maintenance
regulations. MEMA I also specifically considered the standards of proof
for two findings that EPA must make in order to grant a waiver for an
``accompanying enforcement procedure'' (as opposed to standards): (1)
Protectiveness in the aggregate and (2) consistency with section 202(a)
findings. The court instructed that ``the standard of proof must take
account of the nature of the risk of error involved in any given
decision, and it therefore varies with the finding involved. We need
not decide how this standard operates in every waiver decision.'' \569\
---------------------------------------------------------------------------

    \569\ Id.
---------------------------------------------------------------------------

    The court upheld the Agency's position that denying a waiver
required ``clear and compelling evidence'' to show that proposed
enforcement procedures undermine the protectiveness of California's
standards.\570\ The court noted that this standard of proof ``also
accords with the congressional intent to provide California with the
broadest possible discretion in setting regulations it finds protective
of the public health and welfare.'' \571\
---------------------------------------------------------------------------

    \570\ Id.
    \571\ Id.
---------------------------------------------------------------------------

    With respect to the consistency finding, MEMA I did not articulate
a standard of proof applicable to all proceedings but found that the
opponents of the waiver were unable to meet their burden of proof even
if the standard were a mere preponderance of the evidence.
    As the agency has consistently explained, although MEMA I did not
explicitly consider the standard of proof for ``standards,'' as
compared to ``accompanying enforcement procedures,'' nothing in the
opinion suggests that the court's analysis would not apply with equal
force to such determinations.\572\ Moreover, the normal standard of
proof in civil matters is a preponderance of the evidence.
International Harvester Co. v. Ruckelshaus, 478 F.2d 615, 643 (D.C.
Cir. 1979).
---------------------------------------------------------------------------

    \572\ 74 FR 32748.
---------------------------------------------------------------------------

    The role of the Administrator in considering California's
application for a preemption waiver is to make a reasonable evaluation
of the information in the record in coming to the waiver decision. The
Administrator is required to ``consider all evidence that passes the
threshold test of materiality and . . . thereafter assess such material
evidence against a standard of proof to determine whether the parties
favoring a denial of the waiver have shown that the factual
circumstances exist in which Congress intended a denial of the
waiver.'' \573\
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    \573\ MEMA I, 627 F.2d at 1122.
---------------------------------------------------------------------------

    As the court in MEMA I stated, if the Administrator ignores
evidence demonstrating that the waiver should not be granted, or if he
seeks to overcome that evidence with unsupported assumptions of his
own, he runs the risk of having his waiver decision set aside as
``arbitrary and capricious.'' \574\ Therefore, the Administrator's
burden is to act ``reasonably.'' \575\
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    \574\ Id. at 1126.
    \575\ Id.
---------------------------------------------------------------------------

    The instant action involves a decision whether to withdraw a
previous grant of a waiver of preemption as compared to the initial
evaluation of and decision whether to grant a waiver request from
California. Specifically, as discussed in Section III, below, EPA is
proposing findings for the withdrawal of preemption for CARB's ACC
program under multiple criteria set out in section 209(b)(1). For
example, EPA is proposing to withdraw the waiver based

on considerations such as the nature of GHG concentrations as a global
air pollution problem, rather than a regional or local air pollution
problem, whether or not CARB's particular GHG standards actually would
reduce GHG emissions in California, whether a waiver for CARB's GHG
standards is permissible if those regulations are preempted by EPCA,
and the effect of technological infeasibility for the 2012 Federal GHG
standards for MY 2021-2025. Natural Resources Defense Council v. EPA,
655 F.2d 318, 331 (D.C. Cir. 1981) (``[T]here is substantial room for
deference to the EPA's expertise in projecting the likely course of
[technological] development.'') (Emphasis added.) EPA believes that
these are kinds of issues that extend well beyond the boundaries of
California's authority under section 209(b). EPA posits, therefore,
that the decision to withdraw the waiver would warrant exercise of the
Administrator's judgment.
    Furthermore, that decision entails matters not only of policy
judgment but of statutory interpretation, chief among which is the
question of what is the appropriate inquiry under section 209(b)(1)
when the Administrator is faced with a request for a preemption waiver
for standards designed to address a global environmental problem. EPA
has previously expressed the view that certain waiver requests might
call for the Administrator to exercise judgment in determining
California's need for particular standards, under section 209(b)(1)(B).
Specifically, in the March 6, 2008 GHG waiver denial, EPA posited that
it was neither required nor appropriate for the Agency to defer to
California on the statutory interpretation of the Clean Air Act,
including the issue of the confines or limits of state authority
established by section 209(b)(1)(B), especially given that EPA's
evaluation of California's request for a waiver to enforce GHG
standards would relate to the limits of California's authority to
regulate GHG emissions from new motor vehicles, instead of particular
regulatory provisions that California was seeking to enforce. There,
EPA construed section 209(b)(1)(B) as calling for either a
consideration of environmental problems with causes that were specific
to California, or in the alternative, environmental effects specific to
California in comparison to the rest of the nation. EPA further
explained that this interpretation called for its own judgment because
it necessitated a determination of whether elevated concentrations of
GHGs lie within the confines of state air pollution programs as covered
by section 209(b)(1)(B). It would also be consistent with the GHG
waiver denial for EPA to exercise its own judgment in making the
requisite findings called for under section 209(b)(1)(B) in the instant
action.
    EPA is, thus, soliciting comments on the appropriate burden and
standard of proof for withdrawing a previously issued waiver, taking
into consideration that different approaches may apply to the various
criteria of Section 209(b) and that EPA is not merely responsible for
evaluating a request by California and comments thereon but is
proposing withdrawal of a grant of preemption.
3. Discussion: Analysis Under Section 209(b)(1)(B), (C)
(a) Proposed Finding Under Section 209(b)(1)(B): California Does Not
Need its Standards To Meet Compelling and Extraordinary Conditions
(1) Introduction
    Section 209(b)(1)(B) provides that no waiver of section 209(a)
preemption will be granted if the Administrator finds that California
does not need ``such standards to meet compelling and extraordinary
conditions.'' EPA is proposing to withdraw the grant of waiver of
preemption for CARB's GHG and ZEV standards for 2021 MY through 2025 MY
based on a finding that California does not need these standards to
meet compelling and extraordinary conditions, as contemplated under
section 209(b)(1)(B). As shown below, EPA is proposing to determine
that the ACC program GHG and ZEV standards are standards that would not
meaningfully address global air pollution problems posed by GHG
emissions in contrast to local or regional air pollution problem with
causal ties to conditions in California. As also shown below, EPA is
proposing to find that while potential conditions related to global
climate change in California could be substantial, they are not
sufficiently different from the potential conditions in the nation as a
whole to justify separate state standards under CAA section
209(b)(1)(B). Moreover, the GHG and ZEV standards would not have a
meaningful impact on the potential conditions related to global climate
change. EPA is thus proposing to find that California does not need GHG
standards to meet compelling and extraordinary conditions, as
contemplated under section 209(b)(1)(B). Additionally, California does
not need the ZEV requirements to meet ``compelling and extraordinary''
conditions in California given that it allows manufacturers to generate
credits in section 177 states as a means to satisfy those
manufacturers' obligations to comply with the mandate that a certain
percentage of their vehicles sold in California be ZEV (or be credited
as such from sales in section 177 States). This finding is premised on
agency review of the interpretation and application of section
209(b)(1)(B) in the January 2013 ACC waiver request. Thus, EPA is
required to articulate a reasoned basis for the change in its position.
FCC v. Fox Television Stations, Inc., 556 U.S. 502, 515 (2009).
(2) Historical Waiver Practices Under Section 209(b)(1)(B)
    Up until the 2008 GHG waiver denial, EPA had interpreted section
209(b)(1)(B) as requiring a consideration of California's need for a
separate motor vehicle program designed to address local or regional
air pollution problems and not whether the specific standard that is
the subject of the waiver request is necessary to meet such conditions
(73 FR 12156; March 6, 2008). Additionally, California typically would
seek a waiver of particular aspects of its new motor vehicle program up
until the ACC program waiver request. In the 2008 GHG waiver denial,
which was a waiver request for only GHG emissions standards, however,
EPA determined that its prior interpretation of section 209(b)(1)(B)
was not appropriate for GHG standards because such standards are
designed to address global air pollution problems in contrast to local
or regional air pollution problems specific to and caused by conditions
specific to California (73 FR 12156-60).
    In the 2008 denial, EPA further explained that its previous reviews
of California's waiver request under section 209(b)(1)(B) had usually
been cursory and undisputed, as the fundamental factors leading to
California's air pollution problems--geography, local climate
conditions (like thermal inversions), significance of the motor vehicle
population--had not changed over time and over different local and
regional air pollutants. These fundamental factors applied similarly
for all of California's air pollution problems that are local or
regional in nature.
    In the 2008 denial, EPA noted that atmospheric concentrations of
GHG are substantially uniform across the globe, based on their long
atmospheric life and the resulting mixing in the atmosphere. Therefore,
with regard to atmospheric GHG concentrations and their environmental
effects, the California-specific causal factors that EPA had considered
when reviewing previous waiver applications under section

209(b)(1)(B)--the geography and climate of California, and the large
motor vehicle population in California, which were considered the
fundamental causes of the air pollution in California--do not have the
same relevance to the question at hand. The atmospheric concentration
of GHG in California is not affected by the geography and climate of
California. The long duration of these gases in the atmosphere means
they are well-mixed throughout the global atmosphere, such that their
concentrations over California and the U.S. are substantially the same
as the global average. The number of motor vehicles in California,
while still a notable percentage of the national total and still a
notable source of GHG emissions in the State, is not a significant
percentage of the global vehicle fleet and bears no closer relation to
the levels of GHG in the atmosphere over California than any other
comparable source or group of sources of GHG anywhere in the world.
Emissions of greenhouse gases from California cars do not generally
remain confined within California's local environment but instead
become one part of the global pool of GHG emissions, with this global
pool of emissions leading to a relatively homogenous concentration of
GHG over the globe. Thus, the emissions of motor vehicles in California
do not affect California's air pollution problem in any way different
from emissions from vehicles and other pollution sources all around the
world. Similarly, the emissions from California's cars do not only
affect the atmosphere in California but in fact become one part of the
global pool of GHG emissions that affect the atmosphere globally and
are distributed throughout the world, resulting in basically a uniform
global atmospheric concentration.
    EPA then applied the reasoning laid out above to the GHG standards
at issue in the 2008 waiver denial. Having limited the meaning of this
provision to situations where the air pollution problem was local or
regional in nature, EPA found that California's GHG standards did not
meet this criterion.
    In the 2008 waiver denial, EPA also applied an alternative
interpretation where EPA would consider effects of the global air
pollution problem in California in comparison to the effects on the
rest of the country and again addressed the GHG standards separately
from the rest of California's motor vehicle program. Under this
alternative interpretation, EPA considered whether impacts of global
climate change in California were sufficiently different from impacts
on the rest of the country such that California could be considered to
need its GHG standards to meet compelling and extraordinary conditions.
EPA determined that the waiver should be denied under this alternative
interpretation as well.
(3) Interpretation of Section 209(b)(1)(B)
    Under section 209(b)(1)(B), EPA cannot grant a waiver request if
EPA finds that California ``does not need such State standards to meet
compelling and extraordinary conditions.'' The statute does not define
the phrase ``compelling and extraordinary conditions,'' and EPA
considers the text of section 209(b)(1)(B), and in particular the
meaning and scope of this phrase, to be ambiguous.
    First, the provision is ambiguous with respect to the scope of
EPA's analysis. It is unclear whether EPA is meant to evaluate the
particular standard or standards at issue in the waiver request or all
of California's standards in the aggregate. Section 209(b)(1)(B)
references the need for ``such State standards.'' Section 209(b)(1)(B)
does not specifically employ terms that could only be construed as
calling for a standard-by-standard analysis or each individual
standard. For example, it does not contain phrases such as ``each State
standard'' or ``the State standard.'' Nor does the use of the plural
term ``standards'' definitively answer the question of the proper scope
of EPA's analysis, given that the variation in the use of singular and
plural form of a word in the same law \576\ is often insignificant and
a given waiver request typically encompasses multiple ``standards.''
Thus, while it is clear that ``such State standards'' refers at least
to all of the standards that are the subject of the particular waiver
request before the Administrator, that phrase can reasonably be
considered as referring either to the standards in the entire
California program, the program for similar vehicles, or the particular
standards for which California is requesting a waiver under the pending
request.
---------------------------------------------------------------------------

    \576\ ``Words [in Acts of Congress] importing the singular
include and apply to several persons.'' 1 U.S.C. 1.
---------------------------------------------------------------------------

    There are reasons to doubt that the phrase ``such State standards''
in section 209(b)(1)(B) is intended to refer to all standards in
California's program, including all the standards it has historically
adopted and obtained waivers for previously. The waiver under 209(b) is
a waiver of, and is logically dependent on and presupposes the
existence of, the prohibition under 209(a), which forbids (absent a
waiver) any state to ``adopt or attempt to enforce any standard
[singular] relating to the control of emissions from new motor vehicles
or new motor vehicle engines subject to this part.'' (Emphasis added.)
States are forbidden from adopting a standard, singular; California
requests waivers seriatim by submitting a standard or package of
standards to EPA; follows that EPA considers those submissions as it
receives them, individually, not in the aggregate with all standards
for which it has previously granted waivers.
    Furthermore, reading the phrase ``such State standards'' as
requiring EPA always and only to consider California's entire program
in the aggregate limits the application of the criterion. Once EPA had
determined that California needed its very first set of submitted
standards to meet extraordinary and compelling conditions, it is
unclear that EPA would ever have the discretion to determine that
California did not need any subsequent standards for which it sought a
successive waiver--unless EPA is authorized to consider a later
submission separate from its earlier finding. Moreover, up until the
ACC program waiver request, California's waiver request involved
individual standards or particular aspects of California's new motor
vehicle program.\577\ As previously explained, however, the ACC waiver
program could be considered as the entire new motor vehicle program for
California given that it is a single coordinated program comprising a
suite of standards that California intended to be a cohesive program
for addressing emissions from a wide variety of vehicles, specifically,
new passenger cars, light duty trucks, medium passenger vehicles, and
certain heavy duty vehicles.
---------------------------------------------------------------------------

    \577\ The 2009 and Subsequent MY GHG standards for New Motor
Vehicles, 73 FR 12156 (March 6, 2008); The On-Board diagnostics
system requirements (OBD II) 81 FR 78144 (November 7, 2016), The ZEV
program regulations 76 FR 61096 (October 3, 2011), 71 FR 78190
(December 26, 2006)) and the Heavy-duty Truck idling requirements 77
FR 9239 (February 16, 2012).
---------------------------------------------------------------------------

    The application of the phrase ``such State standards'' to state
standards in the aggregate may have appeared more reasonable in the
context of, for example, the 1984 PM waiver request, as opposed to the
present context, as it relates to an application for a waiver with
regard to GHG and ZEV standards.\578\ In the 1984 request, the agency
confronted the need for a reading of ``such State standards'' in
section 209(b)(1)(B) that would be consistent with the State's ``in the
aggregate, at least as protective'' finding under the root text of
209(b)(1),''

because Congress explicitly allows California to adopt some standards
that are less stringent than Federal standards. EPA explained that the
phrase ``in the aggregate'' was specifically aimed at allowing
California to adopt less stringent CO standards at the same time when
California wanted to adopt NOX standards that were tighter
than the Federal NOX standards, to address ozone
problems.\579\ California reasoned that a relaxed CO standard would
facilitate the technological feasibility of the desired more stringent
NOX standards. When evaluating that waiver request, EPA
noted that it would be inconsistent for Congress to allow EPA to look
at each air pollutant separately for purposes of determining compelling
and extraordinary conditions for that air pollution problem, while at
the same time allowing California to adopt standards for a particular
air pollutant that was less stringent than the Federal standards for
that same pollutant. EPA proposes to determine that the balance of
textual, contextual, purposive, and legislative-history evidence at
minimum supports the conclusion that it is ambiguous whether the
Administrator may consider whether California needs the particular
standard or standards under review to meet compelling and extraordinary
conditions.
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    \578\ 49 FR 18887 (May 3, 1984).
    \579\ The intent of the 1977 amendment was to accommodate
California's particular concern with NOX, which the State
regards as a more serious threat to public health and welfare than
carbon monoxide. California was eager to establish oxides of
nitrogen standards considerably higher than applicable Federal
standards, but technological developments posed the possibility that
emission control devices could not be constructed to meet both the
high California oxides of nitrogen standard and the high Federal
carbon monoxide standard. MEMA I, 627 F.2d at 1110 n.32.
---------------------------------------------------------------------------

    Second, the statute does not speak with precision as to the
substance of EPA's analysis. ``Compelling and extraordinary
conditions,'' as the history of the 2008 waiver denial and 2009
reconsideration and grant narrated above demonstrates, is a phrase
susceptible of multiple interpretations, particularly in the context of
GHG emissions and associated, global environmental problems. EPA
believes that the term ``extraordinary'' is most reasonably read to
refer to circumstances that are specific to California and the term is
reasonably interpreted to refer to circumstances that are primarily
responsible for causing the air pollution problems that the standards
are designed to address, such as thermal inversions resulting from
California's local geography and wind patterns. (Conditions that are
similar on a global scale are not ``extraordinary,'' especially where
``extraordinary'' conditions are a predicate for a local deviation from
national standards.) Support for this interpretation can be found in
pertinent legislative history that refers to California's ``peculiar
local conditions'' and ``unique problems.'' S. Rep. No. 403, 90th Cong.
1st Sess., at 32 (1967). This legislative history also indicates that
California is to demonstrate ``compelling and extraordinary
circumstances sufficiently different from the nation as a whole to
justify standards on automobile emissions which may, from time to time,
need to be more stringent than national standards.'' Id. (Emphasis
added.) EPA believes this is evidence of Congressional intent that
separate standards in California are justified only by a showing of
particular circumstances in California that are different from
circumstances in the nation as a whole to justify separate standards in
California. EPA thus, reads the term ``extraordinary'' in this
statutory context as referring primarily to factors that tend to
produce higher levels of pollution: Geographical and climatic
conditions (like thermal inversions) that in combination with large
numbers and high concentrations of automobiles, create serious air
pollution problems in California (73 FR 12156, 12159-60).
    Additional relevant legislative history supports a decision to
examine California's need for GHG standards ``in the context of global
climate change.'' See, e.g., 73 FR 12161. Specifically, this
legislative history demonstrates that Congress did not justify this
provision based on the need for California to enact separate standards
to address pollution problems of a more national or global nature.
Rather relevant legislative history ``indicates that Congress allowed
waivers of preemption for California motor vehicle standards based on
the particular effects of local conditions in California on the air
pollution problems in California.'' Congress discussed ``the unique
problems faced in California as a result of its climate and
topography.'' H.R. Rep. No. 728, 90th Cong. 1st Sess., at 21 (1967).
See also Statement of Cong. Holifield (CA), 113 Cong. Rec. 30942-43
(1967). Congress also noted the large effect of local vehicle pollution
on such local problems. See, e.g., Statement of Cong. Bell (CA) 113
Cong. Rec. 30946. In particular, Congress focused on California's smog
problem, which is especially affected by local conditions and local
pollution. See Statement of Cong. Smith (CA) 113 Cong. Rec. 30940-41
(1967); Statement of Cong. Holifield (CA), id., at 30942. See also,
MEMA I, 627 F.2d at 1109 (noting the discussion of California's
``peculiar local conditions'' in the legislative history).
    The EPA thus, believes that it is appropriate, in evaluating
California's need for a waiver under section 209(b)(1)(B), to examine
California's program as a whole to the extent that the problem is
designed to address local or regional air pollution problems,
particularly in light of the fact that the State's aggregate analysis
under the root text of 209(1)(b)(1) is designed in part to permit
California to adopt standards for some criteria pollutants that are
less stringent than the Federal standards as a trade-off for standards
for other criteria pollutants, where the levels of criteria pollutants
addressed by California's standards are caused by conditions specific
to California, and contribute primarily to environmental effects that
are specific to California. EPA could also review California's GHG
standards themselves even where, as in the instant ACC waiver package,
the waiver request is for a single coordinated package of requirements
and amendments that include standards designed to address global
environmental effects caused by a globally distributed a globally
distributed pollutant, such as GHGs as well as requirements for a
compliance mechanism that could likely address both criteria pollutants
and GHG emissions, which in this instance are the ZEV requirements. The
EPA further notes that in keeping with its pre-2008 interpretation, its
review of California's ACC program request under section 209(b)(1)(B)
was cursory and undisputed, given that view that the fundamental
factors leading to California's air pollution problems--geography,
local climate conditions (like thermal inversions), significance of the
motor vehicle population--had not changed over time and over different
local and regional air pollutants. Additionally, as previously
explained, up until the ACC program waiver, California had relied on
the ZEV requirements as a compliance mechanism for criteria pollutants
as compared to the ACC program, where CARB for the first time relied on
it for GHG emissions reductions. Here, as previously explained, CARB
specifically noted that that there was no criteria emissions benefit
for its ZEV standards in terms of vehicle emissions because its LEV III
criteria pollutant fleet standard was responsible for those emission

reductions.\580\ The EPA therefore, believes a review of the grant of
the ACC program waiver and the agency reasoning underpinning the grant
are appropriate at this time. As previously explained, an agency ``must
consider . . . the wisdom of its policy on a continuing basis.''
Chevron, 467 U.S. at 863-64. This is true when, as is the case here,
review is undertaken ``in response to . . . a change in
administration.'' Brand X Internet Services, 545 U.S. at 981. In sum,
EPA proposed to conclude that the pre-2008 interpretation of section
209(b)(1)(B) would allow for review of California's GHG standards in
themselves, given that the ACC program is a single coordinated motor
vehicle emission control program that is designed to address both
traditional, local environmental causes and effects (including via
criteria pollutants) and global air pollution problems. Thus, EPA is
proposing that at this time its review has led it to propose to
determine that California does not need its own GHG and ZEV standards,
to the extent California intended the ZEV requirements to serve as a
compliance option for GHG standards, because GHG emissions do not
present conditions specific to California--in the terms of the
legislative history discussed above, GHG emissions do not present
``unique problems'' in California as compared to the whole country. As
shown below, GHG emissions could be associated with potential adverse
effects in California, but EPA does not believe that these would be
sufficiently different from potential adverse effects in either coastal
States like Florida, Massachusetts, and Louisiana or the nation as a
whole, to constitute a ``need'' for separate state standards under
section 209(b)(1)(B). EPA is of the view, therefore, that GHG emissions
would not be associated with ``peculiar local conditions'' in
California that Congress alluded to in promulgating section
209(b)(1)(B). In the alternative, EPA is proposing to determine that
California does not need the ACC program GHG and ZEV standards to
address compelling and extraordinary conditions, because they will not
meaningfully address global air pollution problems like the kinds
associated with GHG emissions and would not have any meaningful impact
on potential adverse effects related to global climate change in
California. As shown below, based on this reading of section
209(b)(1)(B), the agency is proposing to find that GHG emissions
impacts cannot be considered ``compelling and extraordinary
conditions'' such that California ``need[s]'' separate GHG and ZEV
standards for new motor vehicles for MY 2021 through MY 2025.
---------------------------------------------------------------------------

    \580\ CARB ACC waiver request at EPA-HQ-OAR-2012-0562-0004.
---------------------------------------------------------------------------

(4) Proposed Determination That California Does Not Need Its ACC
Program Regulations To Meet Compelling and Extraordinary Conditions
    EPA is proposing to withdraw the waiver of preemption of the GHG
and ZEV standards on two alternative grounds: (1) California ``does not
need'' the standards ``to meet compelling and extraordinary
conditions,'' under section 209(b)(1)(B); (2) even if California does
have compelling and extraordinary conditions in the context of global
climate change, California does not ``need'' these standards under
section 209(b)(1)(B) because they will not meaningfully address global
air pollution problems of the sort associated with GHG emissions. EPA
is interpreting section 209(b)(1)(B) to permit the Agency to
specifically review California's need for GHG standards--i.e.,
standards for a globally distributed air pollutant which is of concern
for its connection to global environmental effects--as opposed to
reviewing California's need for its motor vehicle program as a whole
(including both its GHG-targeting and non-GHG-targeting components), in
part because the rest of California's ACC program consists of standards
that are designed to address local or regional air pollution problems.
Accordingly, EPA is proposing to find that GHG emitted by California
motor vehicles become part of the global pool of GHG emissions that
affect concentrations of GHGs on a uniform basis throughout the world.
The local climate and topography in California have no significant
impact on the long-term atmospheric concentrations of greenhouse gases
in California. More importantly, California's standards for GHG
emissions (both the GHG and ZEV standards) would not materially affect
global concentrations of GHG levels. Accordingly, even if EPA were to
assume California had compelling and extraordinary conditions that were
uniquely impacted by high levels of GHGs, California's GHG and ZEV
standards would not meaningfully address those concerns and conditions.
    In the alternative, EPA believes that even if California has
compelling and extraordinary conditions, California does not need these
standards under section 209(b)(1)(B) because they will not meaningfully
address global air pollution problems like the kinds associated with
GHG emissions. EPA believes that the number of motor vehicles in
California bears no significant relationship to the levels of GHGs in
California. This is because GHGs emissions from cars located in
California are relatively small part of the global pool of GHG
emissions. Thus, GHG emissions of motor vehicles in California do not
affect California's conditions related to global climate change in any
way different from emissions from vehicles and other pollution sources
all around the world. Similarly, the GHG emissions from cars in
California become one part of the global pool of GHG emissions that
affect the atmosphere globally and are distributed throughout the
world, resulting in basically a uniform global atmospheric
concentration. This is in contrast to the kinds of motor vehicle
emissions normally associated with ozone levels, such as VOCs and
NOX, and the local climate and topography that in the past
have led to the conclusion that California has the need for state
standards to meet compelling and extraordinary conditions. Therefore,
California does not need its GHG and ZEV standards to ``meet'' the
conditions: a problem does not cause you to ``need'' something that
would not meaningfully address the problem.
    In justifying the need for its GHG standards, CARB extensively
described climatic conditions in California. ``Record-setting fires,
deadly heat waves, destructive storm surges, loss of winter snowpack--
California has experienced all of these in the past decade and will
experience more in the coming decades. California's climate--much of
what makes the state so unique and prosperous--is already changing, and
those changes will only accelerate and intensify in the future. Extreme
weather will be increasingly common as a result of climate change. In
California, extreme events such as floods, heat waves, droughts and
severe storms will increase in frequency and intensity. Many of these
extreme events have the potential to dramatically affect human health
and well-being, critical infrastructure and natural systems'' (78 FR
2129). CARB also provided a summary report on the third assessment from
the California Climate Change Center (2012), which described dramatic
sea level rises and increases in temperatures (78 FR 2129). These are
similar, if not identical to, the justifications that EPA addressed and
rejected in the 2008 GHG waiver denial. Notably, in the 2008 denial EPA
observed that some of these events--increased temperatures, heat waves,
sea level rises, wildfires--were also

occurring across the U.S. (73 FR 12163, 12165-68). CARB further noted
that the South Coast and San Joaquin Valley Air Basins continue to
experience some of the worst air quality in the nation and continue to
be in non-attainment with the PM and ozone national ambient air quality
standards (78 FR 2128-9). The EPA has typically considered
nonattainment air quality in California as falling within the purview
of ``compelling and extraordinary conditions.'' California however, did
not indicate how the GHG standards would help California in the
attainment efforts for these areas. Moreover, as previously noted, the
ACC ZEV requirements are intended in part as a GHG compliance mechanism
for MYs 2018 through 2025.
    EPA believes that any effects of global climate change would apply
to the nation, indeed the world, in ways similar to the conditions
noted in California.\581\ For instance, California's claims that it is
uniquely susceptible to certain risks because it is a coastal State
does not differentiate California from other coastal States such as
Massachusetts, Florida, and Louisiana.\582\ Any effects of global
climate change (e.g. water supply issues, increases in wildfires,
effects on agriculture) could certainly affect California. But those
effects would also affect other parts of the United States. Many parts
of the United States, especially western States, may have issues
related to drinking water (e.g., increased salinity) and wildfires, and
effects on agriculture; these occurrences are by no means limited to
California. These are issues of national, indeed international,
concern. Further, these are some of the effects that EPA considered as
bases for the section 202(a) GHG endangerment finding, which was a
prerequisite for the Federal GHG standards for motor vehicles.\583\ EPA
has also previously opined that evaluation of whether California's
standards are necessary to meet compelling and extraordinary conditions
is not contingent on or directly related to EPA's cause or contribution
finding for the section 202(a) GHG endangerment finding, which was a
completely different determination than whether California needs its
mobile source pollution program to meet compelling and extraordinary
conditions in California (79 FR 46256, 46262: August 7, 2014).
    See also Utility Air Regulatory Group v. EPA, 134 S. Ct. 2427
(2014) (partially reversing the GHG ``Tailoring'' Rule on grounds that
the section 202(a) endangerment finding for GHG emissions from motor
vehicles did not compel regulation of all sources of GHG emissions
under the Prevention of Significant Deterioration and Title V permit
programs).
---------------------------------------------------------------------------

    \581\ IPCC. 2015. Intergovernmental Panel on Climate Change
(IPCC) Observed Climate Change Impacts Database, available at http://sedac.ipcc-data.org/ddc/observed_ar5/index.html.
    \582\ They are also similar to previous claims marshalled by
Massachusetts over a decade ago. Massachusetts v. EPA, 549 U.S. 497,
522-24 (2007). According to Massachusetts, at the time, global sea
levels rose between 10 and 20 centimeters over the 20th century as a
result of global warming and had begun to swallow its coastal areas.
    \583\ 74 FR 66496, 66517-19, 66533 (December 15, 2009).
---------------------------------------------------------------------------

    As also previously indicated, California is to demonstrate
``compelling and extraordinary circumstances sufficiently different
from the nation as a whole to justify standards on automobile emissions
which may, from time to time, need to be more stringent than national
standards.'' S. Rep. No. 403, 90th Cong. 1st Sess., at 32 (1967).
(Emphasis added.) EPA does not believe that these conditions, mentioned
above, merit separate GHG standards in California. Rather, these
effects, as previously explained, are widely shared and do not present
``unique problems'' with respect to the nature or degree of the effect
California would experience. In sum, EPA finds that any effects of
global climate change in California are not ``extraordinary'' as
compared to the rest of the country. EPA is thus, proposing to find
that CARB has not demonstrated that these negative impacts it
attributes to global climate change are ``extraordinary'' to merit
separate GHG and ZEV standards.
    The ACC program waiver contained references to the potential GHG
benefits or attributes of CARB's GHG and ZEV standards program (78 FR
2114, 2130-2131). CARB repeatedly touted the benefits of both the ZEV
and GHG standards as it related to the GHG emissions reductions in
California. In one instance, CARB stated that the ACC program
regulations for the 2017 through 2025 MYs were designed to respond to
California's identified goals of reducing GHG emissions to 80% below
1990 levels by 2050 and in the near term to reduce GHG levels to 1990
levels by 2020 (78 FR 2114, 2130-31). CARB's Resolution 12-11, (January
26, 2012).\584\ In another instance, CARB noted that the ZEV regulation
amendments were intended to focus primarily on zero emission drive--
that is BEVs, FCVs, and PHEVs in order to move advanced, low GHG
vehicles from demonstration phase to commercialization (78 FR 2130).
CARB further noted that ``ZEVs have ultra-low GHG emission levels that
are far lower than non-ZEV technology'' (78 FR 2139). In yet another
instance, CARB relied on conclusions from the September 2010 Joint
Technical Assessment Report (TAR), which was developed by EPA, NHTSA,
and CARB, on effects of the ZEV requirements on GHG standards. This
report concluded that ``electric drive vehicles including hybrid(s) . .
. battery electric vehicles . . . plug-in hybrid(s) . . . and hydrogen
fuel cell vehicles . . . can dramatically reduce petroleum consumption
and GHG emissions compared to conventional technologies. The future
rate of penetration of these technologies into the vehicle fleet is not
only related to future GHG and corporate average fuel economy (CAFE)
standards, but also to future reductions in HEV/PHEV/EV battery costs,
[and] the overall performance and consumer demand for the advanced
technologies'' (78 FR 2142). But nowhere does CARB either show or
purport to show a causal connection between its GHG standards and
reducing any adverse effects of climate change in California. EPA does
not believe that identifying methods for reducing GHG emissions and
then noting the potential dangers of climate change are sufficient to
demonstrate that California needs its standards to meet compelling and
extraordinary circumstances as contemplated under section 209(b)(1)(B).
California also does not need the ZEV requirements to meet ``compelling
and extraordinary'' conditions in California given that the FCV
``travel provision'' allow manufacturers to generate credits in section
177 states as a means to satisfy those manufacturers' obligations to
comply with the mandate that a certain percentage of their vehicles
sold in California be ZEV (or be credited as such from sales in section
177 States). In sum, California did not quantify and demonstrate
climate benefits in California that may result from the GHG standards.
EPA therefore, proposes to find that it is not appropriate to waive
preemption for California to enforce its GHGs standards. EPA continues
to believe that any problems related to atmospheric concentrations of
GHG are global in nature and any reductions achieved as a result of
California's separate GHG standards will not accrue meaningful benefits
to California. Thus, GHG emissions raise issues that do not bear the
same causal link between local emissions and local benefits to health
and welfare in California as do local or

regional air pollution problems (such as criteria pollutants). EPA
further finds that atmospheric concentrations of GHGs are not the kind
of local or regional air pollution problem Congress intended to
identify in the second criterion of section 209(b)(1)(B). These
findings also apply to the ZEV provisions given that CARB, in a change
from prior practice, and as previously explained, cited its ZEV
standards as a means to reduce GHG emissions instead of criteria
pollutants for MY 2021 through MY 2025. Thus, EPA is proposing to
withdraw the waiver of preemption for the GHG and ZEV requirements for
MYs 2021 through 2025 because California does not need these provisions
to meet compelling and extraordinary conditions.
---------------------------------------------------------------------------

    \584\ Available in the docket for the January 2013 waiver
decision, Docket No. EPA-HQ-OAR-2012-0562.
---------------------------------------------------------------------------

(b) Proposed Finding Under Section 209(b)(1)(C): California's Standards
Are Not Consistent With Section 202(a)
(1) Introduction
    Under section 209(b)(1)(C), EPA cannot grant a waiver request if
EPA finds that California's ``standards and accompanying enforcement
procedures are not consistent with section 202(a) of the Act.'' \585\
The EPA is also proposing to find that both ZEV and GHG standards for
new MY 2021 through 2025 are not consistent with Section 202(a) of the
Clean Air Act, as contemplated by section 209(b)(1)(C). Specifically,
EPA is proposing to determine that there is inadequate lead time to
permit the development of technology necessary to meet those
requirements, giving appropriate consideration to cost of compliance
within the lead time provided in the 2013 waiver. This finding reflects
the assessments in today's proposal on the technological feasibility of
the Federal GHG standards for MY 2021 through 2025.\586\
---------------------------------------------------------------------------

    \585\ Section 202(a) provides that an emission standard shall
take effect after such period of time as the Administrator finds
necessary to permit development and application of the requisite
technology, giving appropriate consideration to compliance costs.
    \586\ Although this section generally discusses the
technological feasibility of CARB's GHG standards for MY 2021-2025,
we believe the current Federal standards are sufficiently similar to
(if not less stringent than) the current California standards to
serve as an appropriate proxy for considering the technological
feasibility of the current California standards. Compare Cal. Code
Regs. Tit. 13, Sec.  1961.3 with 40 CFR 89.1818-12.
---------------------------------------------------------------------------

    As previously explained, the MY 2021 through 2025 Federal and CARB
GHG standards were the results of collaboration between CARB and EPA.
The respective standards are equally stringent and have the same lead
time. (78 FR 2135) CARB's GHG standards also rely on emerging
technology that are similar to the ones for the Federal GHG standards,
including ZEV-type technologies (78 FR 2136-7). Most importantly,
CARB's feasibility finding, and EPA's decision to grant the waiver,
noted a ``deemed to comply'' provision that allowed manufacturers of
advanced technology vehicles to comply with CARB GHG standards through
compliance with the Federal GHG standards as well as utilize the EPA
accounting provisions for these vehicles (78 FR 2136). Revisions to the
Federal GHG standards, in light of the technology development and
availability assessment for those standards, would therefore, implicate
the technological feasibility findings that served as the underpinning
for EPA's grant of CARB's GHG standards waiver.
    Further, because EPA believes that the ZEV and GHG standards are
intertwined as shown in some of the program complexities discussed
above, EPA believes that this provides further justification for
withdrawing the waiver of preemption for both standards, under section
209(b)(1)(C). For example, in the waiver request CARB stated that the
``ZEV regulation must be considered in conjunction with the proposed
LEV III amendments. Vehicles produced as a result of the ZEV regulation
are part of a manufacturer's light-duty fleet and are therefore
included when calculating fleet averages for compliance with the LEV
III GHG amendments.'' CARB's Initial Statement of Reasons at 62-63,
which is in the docket for the waiver decision.\587\ CARB also noted
``[b]ecause the ZEVs have ultra-low GHG emission levels that are far
lower than non-ZEV technology, they are a critical component of
automakers' LEV III GHG standard compliance strategies.'' Id. CARB
further explained that ``the ultra-low GHG ZEV technology is a major
component of compliance with the LEV III GHG fleet standards for the
overall light duty fleet.'' Id.
---------------------------------------------------------------------------

    \587\ Docket ID No. EPA-HQ-OAR-2012-0562.
---------------------------------------------------------------------------

    Similarly, with regard to CARB's ZEV standards, EPA is now
cognizant that certain ZEV sales requirements mandated by CARB are
technologically infeasible within the provided lead-time for purposes
of CAA 209(b)(1)(C). Specifically, today's proposal also raises
questions as to CARB's technological projections for ZEV-type
technologies, which are a compliance option for both the ZEV mandate
and GHG standards. CARB's ZEV regulations also include the travel
provision, which allowed manufacturers of ZEVs sold in California to
count toward compliance in section 177 States, but which was limited to
FCVs starting with MY 2018. The manufacturer credit system was premised
on ever increasing numbers of ZEVs that would be sold in each of the
section 177 States. Challenges for ZEVs in these States include lack of
market penetration, consumer demand levels that are lower than
projections at the time of the grant of the ACC waiver in 2013, and
lack of or slow development of necessary infrastructure. This in turn
means that manufacturers in section 177 States are unlikely to meet
CARB's projections that their sales in those States will generate the
necessary credits as CARB projected to support the ZEV sales
requirement mandate in the lead time provided.
    Today's proposal indicates challenges for the adoption of all ZEV
technologies such as lack of required infrastructure and a lower level
of consumer demand for FCVs in both California and individual section
177 States, and EPA believes it is now unlikely that manufacturers will
be able to generate requisite credits in section 177 States in the lead
time provided. In short, EPA is now of the view that CARB's projections
and assumptions that underlay its ACC program and its 2013 waiver
application were overly ambitious and likely will not be realized
within the provided lead time. Thus, EPA is also proposing to find that
CARB's ZEV standards for MY 2021 through 2025 are not technologically
feasible and therefore, are not consistent with section 209(b)(1)(C).
(2) Historical Waiver Practices Under Section 209(b)(1)(C)
    In prior waivers of Federal preemption, under section 209(b), EPA
has explained that California's standards are not consistent with
section 202(a) if there is inadequate lead time to permit the
development of technology necessary to meet those requirements, given
appropriate consideration to the cost of compliance within that time.
California's accompanying enforcement procedures would also be
inconsistent with section 202(a) if the Federal and California test
procedures were inconsistent.
    EPA also relies on two key decisions handed down by the U.S. Court
of Appeals for the D.C. Circuit for guidance regarding the lead time
requirements of section 202(a): Natural Resources Defense Council v.
EPA (NRDC), 655 F.2d 318 (D.C. Cir. 1981) (upholding EPA's lead time
projections for emerging technologies as reasonable), and International
Harvester v. Ruckelshaus (International Harvester), 478 F.2d 615 (D.C.
Cir. 1979)

(reversing EPA's refusal to extend compliance deadline where technology
was presently available on grounds that hardship would likely result if
it were a wrongful denial of compliance deadline extension.). EPA
further notes the court's conclusion in NRDC.

    Given this time frame [a 1980 decision on 1985 model year
standards], we feel that there is substantial room for deference to
the EPA's expertise in projecting the likely course of development.
The essential question in this case is the pace of that development,
and absent a revolution in the study of industry, defense of such a
projection can never possess the inescapable logic of a mathematical
deduction. We think that the EPA will have demonstrated the
reasonableness of its basis for projection if it answers any
theoretical objections to the [projected control technology],
identifies the major steps necessary in refinement of the
technology, and offers plausible reasons for believing that each of
those steps can be completed in the time available.

NRDC, 655 F.2d at 331 (emphasis added).
    With regard to appropriate lead time in the section 209(b) waiver
context, EPA considers whether adequate control technology is presently
available or already in existence and in use at the time CARB adopts
standards for which it seeks a waiver. If adequate control technology
is not presently available, EPA determines whether CARB has provided
adequate lead time for the development and application of necessary
technology prior to the effective date of applicable standards. As
explained above, considerations under this criterion include adequacy
of lead time, technological feasibility and costs as well as test
procedures consistency. Notably, there are similar considerations for
Federal standards setting under section 202(a). For example, in
adopting the MY 2017 through 2025 GHG standards, section 202(a)
required and EPA found in October 2012 that the MY 2017 through 2025
GHG standards are feasible in the lead time provided and that
technology costs were reasonable (77 FR 62671-73; October 15, 2012).
Even where technology is available, EPA can consider hardships that
could result to manufacturers from either a short lead time or not
granting a compliance extension. International Harvester, 478 F.2d at
626.
    Where CARB relies on emerging technology (i.e., where technology is
unavailable at time of grant of waiver), EPA will review CARB's
prediction of future technological developments and determine whether
CARB has provided reasoned explanations for the time period selected.
Any projections by CARB would have to be subject to ``restraints of
reasonableness and does not open the door to crystal ball inquiry.''
NRDC v. EPA, 655 F.2d at 329. ``The Clean Air Act requires the EPA to
look to the future in setting standards, but the agency must also
provide a reasoned explanation of its basis for believing that its
projection is reliable.'' Id.
    EPA will make a consistency finding where CARB provides for longer
lead time in instances in of emerging or unavailable technology at the
time CARB adopts its standards. In sum, EPA's review of CARB's
technological feasibility involves both evaluations of predictions for
future technological advances and presently available technology. EPA
also believes that a longer lead time would allow CARB ``modify its
standards if the actual future course of technology diverges from
expectation.'' Id.
    As previously mentioned above, costs considerations are also tied
to the compliance timing for a particular standard and are thus,
relevant for purposes of the consistency determination called for by
the third waiver criterion under section 209(b)(1)(C). In evaluating
compliance costs for CARB standards, EPA considers the actual cost of
compliance in the time provided by applicable California regulations.
Compliance costs ``relates to the timing of standards and procedures.''
MEMA I, 627 F.2d at 1118 (emphasis in original). Where technology is
not presently available, EPA also considers the period necessary to
permit development and application of the requisite technology.
    In terms of waiver practice, EPA has previously taken the position
that technology control costs must be excessive for EPA to find that
California's standards are inconsistent with section 202(a).\588\ (See
MEMA I, 627 F.2d at 1118 ``Congress wanted to avoid undue economic
disruption in the automotive manufacturing industry and also sought to
avoid doubling or tripling of the cost of motor vehicles to
purchasers.'') Consistent with this practice, in the ACC program
waiver, EPA contended that control costs for the ZEV standards were
``not excessive.'' ``Under EPA's traditional analysis of cost in the
waiver context, because [an incremental cost of $12,900 in MY 2020]
does not represent a `doubling or tripling' of the vehicle cost, such
cost is not excessive nor does it represent an infeasible standard''
(78 FR 2142). EPA now believes that its prior view that a doubling or
tripling of vehicle cost constitutes an excessive cost or represents an
infeasible standard was incorrect. Such a bright line (and extreme)
test is inappropriate. Instead, the agency should holistically consider
whether technology control costs are infeasible by considering the
availability of the technology, the reasonableness of costs associated
with adopting it within the required lead time, and consumer
acceptance.
---------------------------------------------------------------------------

    \588\ 74 FR 32744, 32774 (July 8, 2009); 47 FR 7306, 7309
(February 18, 1982); 46 FR 26371, 26373 (May 12, 1981), 43 FR 25735
(June 14, 1978).
---------------------------------------------------------------------------

(3) Interpretation of Section 209(b)(1)(C)
    EPA cannot grant a waiver, under section 209(b)(1)(C), if
California's ``standards and accompanying enforcement procedures are
not consistent with section [202(a)].'' Relevant legislative history
from the 1967 CAA amendments indicates that EPA is to grant a waiver
unless it finds that there is ``inadequate time to permit the
development of the necessary technology given the cost of compliance
within that time period.'' This is similar to language found in section
202(a), which is discussed below. Additional relevant legislative
history indicates that EPA is not to grant a waiver where ``California
standards are not consistent with the intent of section 202(a) of the
Act, including economic practicability and technological feasibility.''
The cross-reference to section 202(a) is an indication of the role EPA
plays in reviewing California's waiver request under section
209(b)(1)(C).
    With regard to section 202(a), standards promulgated under section
202(a)(1) ``shall take effect after such period as the Administrator
finds necessary to permit the development and application of the
requisite technology, giving appropriate consideration to the cost of
compliance within such period.'' Section 202(a). Pertinent legislative
history from the 1970 and 1977 amendments indicate that EPA ``was
expected to press for the development and application of improved
technology rather than be limited by that which exists today.'' S. Rep.
No. 1196, 91st Cong., 2d Sess. 24 (1970); H.R. Rep. No. 294, 95th
Cong., 1st Sess. 273 (1977). In sum, EPA believes that section 202(a)
allows for a projection of lead time as to future technological
developments.
(4) Proposed Finding That California's Standards Are Not Consistent
With Section 202(a)
    As previously mentioned, today's proposal now cast significant
doubts on EPA's predictions for future and timely availability of
emerging technologies for compliance with Federal GHG standards for MY
2021-2025. It highlights in

particular challenges for ZEV-type technologies, such as BEVs and
PHEVs, that California relied on as compliance options for the ZEV
mandate requirements and GHG standards. As also previously mentioned
CARB's GHG standards were developed jointly by EPA and CARB with the
result that CARB's GHG standards share a similar structure with EPA GHG
standards in terms of both lead time and stringency. For instance, the
methodology and underlying data used by CARB to assess technologies and
costs were similar to and, in many instances, the same as those used by
EPA to assess the Federal GHG standards (78 FR 2136). Also, the
technological feasibility analyses underlying CARB's standards were
based on several emerging technologies similar to control technologies
considered by EPA and NHTSA in evaluating Federal GHG standards for MYs
2021-2025. Id. Additionally, CARB's feasibility finding was premised on
a finding of reduced compliance costs and flexibility because of the
deemed to comply provisions, which allowed for compliance with Federal
GHG standards in lieu of California's standards.\589\ In sum, EPA's
findings of technological feasibility for the GHG and ZEV standards
were premised on the availability of both current and emerging
technologies in the lead-time CARB provided for new MY 2021-2025 motor
vehicles (78 FR 2138-2139, 2143). These kinds of control technologies
would include ZEV-type technologies, which are used as a compliance
option for CARB's GHG standards because their GHG emissions levels are
significantly lower than non-ZEV technology. As the NPRM discusses,
certain control technology would likely not be fully developed in time
for deployment in MY 2021 through 2025 motor vehicles.
---------------------------------------------------------------------------

    \589\ On May 7, 2018, California issued a notice seeking
comments on ``potential alternatives to a potential clarification''
of this provision for MY vehicles that would be affected by
revisions to the Federal GHG standards. The notice is available at:
https://www.arb.ca.gov/msprog/levprog/leviii/leviii_dtc_notice05072018.pdf. EPA proposes to determine that the
``deemed to comply'' provision in California's program does not
prevent EPA from finding that California's ZEV and GHG standards are
inconsistent with section 202(a), for two reasons. First, the
``deemed to comply'' provision is in flux; the state process that
may ``clarify[]'' it renders it unclear whether California will
continue to deem a program that may be revised as proposed in this
joint rulemaking to comply with its own program. Second, EPA
proposes to determine that a ``deemed to comply'' provision is
logically incompatible with a preemption waiver analysis. The entire
premise of 209(a) preemption and 209(b)(1) waivers is that
California's standards will differ from the Federal standards. If
``deemed to comply'' provisions in California's program prevented
EPA from determining that California's standards is inconsistent
with section 202(a), then those provisions' presence would prevent
EPA's analysis under this prong (209(b)(1)(C) from denying it a
waiver no matter the content of those standards.
---------------------------------------------------------------------------

    With regard to the ZEV standards, CARB's waiver request contained
projections and explanations for ZEVs that included projected sales of
FCVs in both California and section 177 States. Specifically, CARB's
projections, at the time, were that nearly every vehicle manufacturer
would be introducing BEVs and PHEVs within the next one to three years,
and five manufacturers would be commercially introducing FCVs by
2015.\590\ As explained above, the ZEV regulations contains the travel
provision that allow manufacturers to comply with the ZEV sales mandate
by generating credits for vehicle sales in section 177 States and vice
versa. At the grant of the ACC program waiver, EPA found CARB's
assumptions and projections appeared reasonable within the provided
lead time for MYs 2021 through 2025 (78 FR 2141-42).
---------------------------------------------------------------------------

    \590\ CARB waiver request at 27-28, which can be found in Docket
ID No. EPA-HQ-OAR-2012-0562.
---------------------------------------------------------------------------

    Technological challenges may serve as basis for either a future
compliance deadline extension or modifications to the federal GHG
standards that would be consistent with today's proposal and would then
raise questions as to CARB's predictions and projections of
technological feasibility and costs. At this time, however, CARB has
shown no indication that it intends to either extend the compliance
deadline for or modify its standards by providing additional compliance
flexibilities. EPA believes it is reasonable, therefore, to consider
any expected hardship that would be posed to manufacturers if EPA does
not withdraw CARB's waiver. NRDC, 655 F.2d at 330. An early withdrawal
of the waiver would also provide a measure of certainty to all
manufacturers. `` `[T]the base hour for commencement of production is
relatively distant, and until that time the probable effect of a
relaxation of the standard would be to mitigate the consequences of any
strictness in the final rule, not to create new hardships.'' \591\
Further, from past experience with waivers for challenging standards,
EPA is aware that CARB has subsequently either modified compliance
deadlines or provided additional compliance flexibilities for such
standards.\592\ EPA also notes that even at the time of the waiver
request, CARB was already cognizant of challenges presented by both ZEV
and GHG standards. CARB noted that although several individual
technologies offered substantial CO2 reduction potential
many of the technologies had only limited deployment in new vehicle
models (78 FR 2136). CARB also extended the travel provisions beyond
2017 for FCVs due to insufficient refueling infrastructure in section
177 States as compared to other kinds of ZEV technologies (78 FR 2120;
CARB Resolution 12-11 at 15). EPA is, therefore, acting in anticipation
of the challenges presented by its GHG and ZEV standards. As previously
explained, a late modification or extension of time carries attendant
hardships for technologically advanced manufacturers who might have
made major investment commitments (International Harvester, 478 F.2d
615). EPA believes that today's proposal, when finalized, would be
sufficiently ahead of the compliance deadline for MY 2021 through 2025
and thus, manufacturers would not incur any hardships. Indeed, the
expectation is that the proposed withdrawal would provide notice to
manufacturers of the intended compliance deadline modifications for MYs
2021 through 2025.
---------------------------------------------------------------------------

    \591\ Id. The ``hardships'' referred to are hardships that would
be created for manufacturers able to comply with the more stringent
standards being relaxed late in the process.
    \592\ For example, CARB has made multiple revisions to its on-
Board diagnostics (OBD) (81 FR 78144 (November 7, 2016)) and the ZEV
program regulations (76 FR 61096 (October 3, 2011)).
---------------------------------------------------------------------------

    Finally, the agency is acting on the likelihood of increased
compliance costs as shown in today's proposal. (These are costs that
will likely be passed on to consumers in most instances.). As
previously explained, because compliance technologies that California
relied on for both ZEV and GHG standards are similar to the
technologies considered by EPA in evaluating the feasibility of
standards for MYs 2021 through 2025, economies of scale were expected
to drive down both manufacturing and technology costs. The EPA,
however, now expects that manufacturers may no longer be willing to
commit to investments for a limited market as compared to the broader
national market, which was contemplated by the federal and California
GHG standards.
    Today's proposal also confirms slower pace of development of ZEV
technology and differences in projected manufacturing costs in states
that have adopted these standards under section 177 as well as lower
consumer demands for FCVs. The EPA also now expects that the pace of
technological developments as it relates to infrastructure for FCVs
will slow down.

The EPA is thus, proposing to find that CARB's ZEV standards for MYs
2021 through 2025 are technologically infeasible in the lead time
provided and therefore, that CARB's ZEV standards are not consistent
with section 202(a).
    As previously mentioned EPA is proposing to withdraw the grant of
waiver for both standards on grounds that they are not consistent with
section 202(a). In light of all the foregoing, the agency finds that is
necessary and reasonable to reconsider the grant of waiver for CARB's
GHG and ZEV standards. EPA requests comments on all aspects of this
proposal, especially specific costs for the ZEV requirements as it
relates to MYs 2021 through 2025.
4. States Cannot Adopt California's GHG Standards for NAAQS
Nonattainment Purposes Under Section 177
    As explained above, CAA section 177 provides that other States,
under certain circumstances and with certain conditions, may ``adopt
and enforce'' standards that are ``identical to the California
standards for which a waiver has been granted for [a given] model
year.'' 42 U.S.C. 7507. The EPA proposes to determine that this section
does not apply to CARB's GHG standards.
    In this regard, the EPA notes that the section is titled ``New
motor vehicle emission standards in nonattainment areas'' and that its
application is limited to ``any State which has [state implementation]
plan provisions approved under this part''--i.e., under CAA title I
part D, which governs ``Plan requirements for nonattainment areas.''
Areas are only designated nonattainment with respect to criteria
pollutants for which EPA has issued a NAAQS, and nonattainment SIPs are
intended to assure that those areas attain the NAAQS. It would be
illogical to require approved nonattainment SIP provisions as a
predicate for allowing States to adopt California's standards if states
could use this authority to adopt California standards that addressed
environmental problems other than nonattainment of criteria pollutant
standards. Furthermore, the placement of section 177 in title I part D,
rather than title II (the location of the California waiver provision)
would make no sense if it functioned as a waiver applicable to all
subjects, as does the California-focused provision under section
209(b), rather than as a provision specifically targeting criteria
pollutants and nonattainment areas, as does the rest of title I part D.
    Therefore, the text, context, and purpose of section 177 suggest,
and the EPA proposes to conclude, that it is limited to providing
States the ability, under certain circumstances and with certain
conditions, to adopt and enforce standards identical to those for which
California has obtained a waiver--provided that those standards are
designed to control criteria pollutants to address NAAQS nonattainment.
EPA solicits comment on how and when this new interpretation should be
adopted and implemented, if finalized (e.g., whether EPA should adopt
it as of the effective date of a final rule, or as of a later date,
such as model year 2021 or calendar year 2020, in order to allow
additional time for planning and transition).
5. Severability and Judicial Review
    EPA considers its proposed decision on the appropriate federal
standards for light duty greenhouse gas vehicles for MY 2021-2025 to be
severable from its decision on withdrawing the ACC waiver, particularly
with respect to the requirements of CAA 209(b)(1)(B). Our proposed
interpretation of CAA 209(b)(1)(B), and our evaluation of the ACC
waiver under that provision, does not depend on our decision to
finalize, and a court's decision to uphold, the light duty vehicles
standards being proposed today under CAA 202(a). EPA solicits comment
on the severability of these actions, particularly with respect to the
other criteria of CAA 209(b).
    Section 307(b)(1) of the CAA provides in which Federal courts of
appeal petitions of review of final actions by EPA must be filed. This
section provides, in part, that petitions for review must be filed in
the Court of Appeals for the District of Columbia Circuit if (i) the
Agency action consists of ``nationally applicable regulations
promulgated, or final action taken, by the Administrator,'' or (ii)
such action is locally or regionally applicable, but ``such action is
based on a determination of nationwide scope or effect and if in taking
such action the Administrator finds and publishes that such action is
based on such a determination.'' Separate and apart from whether a
court finds this action to be locally or regionally applicable, the
Administrator is proposing to find that any final action resulting from
this rulemaking is based on a determination of ``nationwide scope or
effect'' within the meaning of section 307(b)(1).
    This decision, when finalized, will affect persons in California
and those manufacturers and/or owners/operators of new motor vehicles
nationwide who must comply with California's new motor vehicle
requirements. For instance, manufacturers may generate credits in
section 177 states as a means to satisfy those manufacturers'
obligations to comply with the mandate that a certain percentage of
their vehicles sold in California be ZEV (or be credited as such from
sales in section 177 States). In addition, because other states have
adopted aspects of California's ACC program this decision would also
affect those states and those persons in such states, which are located
in multiple EPA regions and federal circuits. For these reasons, EPA
determines and finds for purposes of section 307(b)(1) that any final
withdrawal action would be of national applicability, and also that
such action would be based on a determination of nationwide scope or
effect for purposes of section 307(b)(1). Pursuant to section
307(b)(1), judicial review of this final action may be sought only in
the United States Court of Appeals for the District of Columbia
Circuit. Judicial review of any final action may not be obtained in
subsequent enforcement proceedings, pursuant to section 307(b)(2).

VII. Impacts of the Proposed CAFE and CO[bdi2] Standards

A. Overview

    New CAFE and CO2 standards will have a range of impacts.
EPCA/EISA and NEPA require DOT to consider such impacts when making
decisions about new CAFE standards, and the CAA requires EPA to do so
when making decisions about new emissions standards. Like past
rulemakings, today's announcement is supported by the analysis of many
potential impacts of new standards. Today's announcement proposes new
standards through model year 2026, explicitly estimates manufacturers'
responses to standards through model year 2029, and considers impacts,
throughout those vehicles' useful lives. The agencies do not know today
what would actually come to pass decades from now under the proposed
standards or under any of alternatives under consideration. The
analysis is thus properly interpreted not as a forecast, but rather as
an assessment--reflecting the best judgments regarding many different
factors--of impacts that could occur.\593\ As discussed below, the
analysis was conducted to explore the sensitivity of this assessment to
a variety of potential changes in key analytical inputs (e.g., fuel
prices).
---------------------------------------------------------------------------

    \593\ ``Prediction is very difficult, especially if it's about
the future.'' Attributed to Niels Bohr, Nobel laureate in Physics.
---------------------------------------------------------------------------

    This section summarizes various impacts of the preferred
alternative (i.e., the proposed standards) defined above in Section
III. The no-action alternative

defined in Section IV provides the baseline relative to which all
impacts are shown. Because the proposed standards (and other standards
considered below), being of a ``deregulatory'' nature, are less
stringent than the no-action alternative, all impacts are directionally
opposite impacts reported in recent CAFE and CO2
rulemakings. For example, while past rulemakings reported positive
values for fuel consumption avoided under new standards, today's
proposal reports negative values, as fuel consumption will be somewhat
greater under today's proposed standards than under standards defining
the baseline no-action alternative. Reported negative values for
avoided fuel consumption could also be properly interpreted as simply
``additional fuel consumption.'' Similarly, reported negative values
for costs could be properly interpreted as ``avoided costs'' or
``benefits,'' and reported negative values for benefits could be
properly interpreted as ``foregone benefits'' or ``costs.'' However,
today's notice retains reporting conventions consistent with past
rulemakings, anticipating that, compared to other options, doing so
will facilitate review by most stakeholders.
    Today's analysis presents results for individual model years in two
different ways. The first way is similar to past rulemakings and shows
how manufacturers could respond in each model year under the proposed
standards and each alternative covering MYs 2021/2-2026. The second,
expanding on the information provided in past rulemakings, evaluates
incremental impacts of new standards proposed for each model year, in
turn. In past rulemaking analyses, NHTSA modeled year-by-year impacts
under the aggregation of standards applied in all model years, and EPA
modeled manufacturers' hypothetical compliance with a single model
years' standards in that model year. Especially considering multiyear
planning effects, neither approach provides a clear basis to attribute
impacts to specific standards first introduced in each of a series of
model years. For example, of the technology manufacturers applied in MY
2016, some would have been applied even under the MY 2014 standards,
and some were likely applied to position manufacturers toward
compliance with (including credit banking to be used toward) MY 2018
standards. Therefore, of the impacts attributable to the model year
2016 fleet, only a portion can be properly attributed to the MY 2016
standards, and the impacts of the MY 2016 standards involve fleets
leading up and extending well beyond MY 2016. Considering this, the
proposed standards were examined on an incremental basis, modeling each
new model year's standards over the entire span of included model
years, using those results as a baseline relative to which to measure
impacts attributable to the next model year's standards. For example,
incremental costs attributable to the standards proposed today for MY
2023 are calculated as follows:
COSTProposed,MY 2023 = (COSTProposed\through\MY 2023-COSTNo-
Action\through\MY 2023--(COSTProposed\through\MY 2022-COSTNo-
Action\through\MY 2022)

Where:

COSTProposed,MY 2023: Incremental technology cost during MYs 2017-
2030 and attributable to the standards proposed for MY 2023.
COSTProposed\through\MY 2022: Technology cost for MYs 2017-2030
under standards proposed through MY 2022.
COSTProposed\through\MY 2023: Technology cost for MYs 2017-2030
under standards proposed through MY 2023.
COSTNo-Action\through\MY 2022: Technology cost for MYs 2017-2030
under no-action alternative standards through MY 2022.
COSTNo-Action\through\MY 2023: Technology cost for MYs 2017-2030
under no-action alternative standards through MY 2023.

    Additionally, today's analysis includes impacts on new vehicle
sales volumes and the use (i.e., survival) of vehicles of all model
years, such that standards introduced in a model year produce impacts
attributable to vehicles having been in operation for some time. For
example, as modeled here, standards for MY 2021 will impact the prices
of new vehicles starting in MY 2017, and those price impacts will
affect the survival of all vehicles still in operation in calendar
years 2017 and beyond (e.g., MY 2021 standards impact the operation of
MY 2007 vehicles in calendar year 2027). Therefore, while past
rulemaking analyses focused largely on impacts over the useful lives of
the explicitly modeled fleets, much of today's analysis considers all
model years through 2029, as operated, throughout those vehicles'
useful lives. For some impacts, such as on technology penetration
rates, average vehicle prices, and average vehicle ownership costs, the
focus was on the useful life of the MY 2030 fleet, as the simulation of
manufacturers' technology application and credit use (when included in
the analysis) continues to evolve after model year 2026, stabilizing by
model year 2030.
    Effects were evaluated from four perspectives: The social
perspective, the manufacturer perspective, the private perspective, and
the physical perspective. The social perspective focuses on economic
benefits and costs, setting aside economic transfers such as fuel taxes
but including economic externalities such as the social cost of
CO2 emissions. The manufacturer perspective focuses on
average requirements and levels of performance (i.e., average fuel
economy level and CO2 emission rates), compliance costs, and
degrees of technology application. The private perspective focuses on
costs of vehicle purchase and ownership, including outlays for fuel
(and fuel taxes). The physical perspective focuses on national-scale
highway travel, fuel consumption, highway fatalities, and greenhouse
gas and criteria pollutant emissions.
    This analysis does not explicitly identify ``co-benefits'' from its
proposed action to change fuel economy standards, as such a concept
would include all benefits other than cost savings to vehicle buyers.
Instead, it distinguishes between private benefits--which include
economic impacts on vehicle manufacturers, buyers of new cars and light
trucks, and owners (or users) of used cars and light trucks--and
external benefits, which represent indirect benefits (or costs) to the
remainder of the U.S. economy that stem from the proposal's effects on
the behavior of vehicle manufacturers, buyers, and users. In this
accounting framework, changes in fuel use and safety impacts resulting
from the proposal's effects on the number of used vehicles in use
represent an important component of its private benefits and costs,
despite the fact that previous analyses have failed to recognize these
effects. The agency's presentation of private costs and benefits from
its proposed action clearly distinguishes between those that would be
experienced by owners and users of cars and light trucks produced
during previous model years and those that would be experienced by
buyers and users of cars and light trucks produced during the model
years it would affect. Moreover, it clearly separates these into
benefits related to fuel consumption and those related to safety
consequences of vehicle use. This is more meaningful and informative
than simply identifying all impacts other than changes in fuel savings
to buyers of new vehicles as ``co-benefits.''
    For the social perspective, the following effects for model years
through 2029 as operated throughout those vehicles' useful lives are
summarized:

     Technology Costs: Incremental cost, as expected to be
paid by vehicle purchasers, of

fuel-saving technology beyond that added under the no-action
alternative.
     Welfare Loss: Loss of value to vehicle owners resulting
from incremental increases in the numbers of strong and plug-in
hybrid electric vehicles (strong HEVs or SHEVs, and PHEVs) and/or
battery electric vehicles (BEVs), beyond increases occurring under
the no-action alternative. The loss of value is a function of the
factors that lead to different valuations for conventional and
electric versions of similar-size vehicles (e.g., differences in:
travel range, recharging time versus refueling time, performance,
and comfort).
     Pre-tax Fuel Savings: Incremental savings, beyond those
achieved under the no-action alternative, in outlays for fuel
purchases, setting aside fuel taxes.
     Mobility Benefit: Value of incremental travel, beyond
that occurring under the no-action alternative.
     Refueling Benefit: Value of incremental reduction,
compared to the no-action alternative, of time spent refueling
vehicles.
     Non-Rebound Fatality Costs: Social value of additional
fatalities, beyond those occurring under the no-action alternative,
setting aside any additional travel attributable to the rebound
effect.
     Rebound Fatality Costs: Social value of additional
fatalities attributable to the rebound effect, beyond those
occurring under the no-action alternative.
     Benefits Offsetting Rebound Fatality Costs: Assumed
further value, offsetting rebound fatality costs, of additional
travel attributed to the rebound effect.
     Non-Rebound Non-Fatal Crash Costs: Social value of
additional crash-related losses (other than fatalities), beyond
those occurring under the no-action alternative, setting aside any
additional travel attributable to the rebound effect.
     Rebound Non-Fatal Crash Costs: Social value of
additional crash-related losses (other than fatalities) attributable
to the rebound effect, beyond those occurring under the no-action
alternative.
     Benefits Offsetting Rebound Non-Fatal Crash Costs:
Assumed further value, offsetting rebound non-fatal crash costs, of
additional travel attributed to the rebound effect.
     Additional Congestion and Noise (Costs): Value of
additional congestion and noise resulting from incremental travel,
beyond that occurring under the no-action alternative.
     Energy Security Benefit: Value of avoided economic
exposure to petroleum price ``shocks,'' the avoided exposure
resulting from incremental reduction of fuel consumption beyond that
occurring under the no-action alternative.
     Avoided CO2 Damages (Benefits): Social value of
incremental reduction of CO2 emissions, compared to
emissions occurring under the no-action alternative.
     Other Avoided Pollutant Damages (Benefits): Social
value of incremental reduction of criteria pollutant emissions,
compared to emissions occurring under the no-action alternative.
     Total Costs: Sum of incremental technology costs,
welfare loss, fatality costs, non-fatal crash costs, and additional
congestion and noise costs.
     Total Benefits: Sum of pretax fuel savings, mobility
benefits, refueling benefits, Benefits Offsetting Rebound Fatality
Costs, Benefits Offsetting Rebound Non-Fatal Crash Costs, energy
security benefits, and benefits from reducing emissions of
CO2, other GHGs, and criteria pollutants.
     Net Benefits: Total benefits minus total costs.
     Retrievable Electrificaiton Costs: The portion of HEV,
PHEV, and BEV technology costs which can be passed onto consumers,
using the willingness to pay analysis described above.
     Electrification Tax Credits: Estimates of the portion
of HEV, PHEV, and BEV technology costs which are covered by federal
or state tax incentives.
     Irretreivable Electrification Costs: The portion of
HEV, PHEV, and BEV technology costs OEM's must either absorb as a
profit loss, or cross-subsidize with the prices of internal
combustion engine (ICE) vehicles.
     Total Electrification Costs: Total incremental
technology costs attributable to HEV, PHEV, or BEV vehicles.

    For the manufacturer perspective, the following effects for the
aggregation of model years 2017-2029 are summarized:

     Average Required Fuel Economy: Average of
manufacturers' CAFE requirements for indicated fleet(s) and model
year(s).
     Percent Change in Stringency from Baseline: Percentage
difference between averages of fuel economy requirements under no-
action and indicated alternatives.
     Average Required Fuel Economy: Industry-wide average of
fuel economy levels achieved by indicated fleet(s) in indicated
model year(s).
     Percent Change in Stringency from Baseline: Percentage
difference between averages of fuel economy levels achieved under
no-action and indicated alternatives.
     Total Technology Costs ($b): Cost of fuel-saving
technology beyond that applied under no-action alternative.
     Total Civil Penalties ($b): Cost of civil penalties
(for the CAFE program) beyond those levied under no-action
alternative.
     Total Regulatory Costs ($b): Sum of technology costs
and civil penalties.
     Sales Change (millions): Change in number of vehicles
produced for sale in U.S., relative to the number estimated to be
produced under the no-action alternative.
     Revenue Change ($b): Change in total revenues from
vehicle sales, relative to total revenues occurring under the no-
action alternative.
     Curb Weight Reduction: Reduction of average curb
weight, relative to MY 2016.
     Technology Penetration Rates: MY 2030 average
technology penetration rate for indicated ten technologies (three
engine technologies, advanced transmissions, and six degrees of
electrification).
     Average Required CO2: Average of manufacturers'
CO2 requirements for indicated fleet(s) and model
year(s).
     Percent Change in Stringency from Baseline: Percentage
difference between averages of CO2 requirements under no-
action and indicated alternatives.
     Average Achieved CO2: Average of manufacturers'
CO2 emission rates for indicated fleet(s) and model
year(s).

    For the private perspective, the following effects for the MY 2030
fleet are summarized:

     Average Price Increase: Average increase in vehicle
price, relative to the average occurring under the no-action
alternative.
     Welfare Loss (Costs): Average loss of value to vehicle
owners resulting from incremental increases in the numbers of strong
HEVs, PHEVs) and/or BEVs, beyond increases occurring under the no-
action alternative. The loss of value is a function of the factors
that lead to different valuations for conventional and electric
versions of similar-size vehicles (e.g., differences in: Travel
range, recharging time versus refueling time, performance, and
comfort).
     Ownership Costs: Average increase in some other costs
of vehicle ownership (taxes, fees, financing), beyond increase
occurring under no-action alternative.
     Fuel Savings: Average of fuel outlays (including taxes)
avoided over a vehicles' expected useful lives, compared to outlays
occurring under no-action alternative.
     Mobility Benefit: Average incremental value of
additional travel over average vehicles' useful lives, compared to
travel occurring under no-action alternative.
     Refueling Benefit: Average incremental value of avoided
time spent refueling over average vehicles' useful lives, compared
to time spent refueling under no-action alternative.
     Total Costs: Sum of average price increase, welfare
loss, and ownership costs.
     Total Benefits: Sum of fuel savings, mobility benefit,
and refueling benefit.
     Net Benefits: Total benefits minus total costs.

    For the physical perspective, the following effects for model years
through 2029 as operated throughout those vehicles' useful lives are
summarized:

     Greenhouse gases include carbon dioxide
(CO2), methane (CH4), and nitrous oxide
(N2O), and values are reported separately for vehicles
(tailpipe) and upstream processes (combining fuel production,
distribution, and delivery) and shown as reductions relative to the
no-action alternative.
     Criteria pollutants include carbon monoxide (CO),
volatile organic compounds (VOC), nitrogen oxides (NOX),
sulfur dioxide (SO2) and particulate matter (PM), and
values are shown as reductions relative to the no-action
alternative.
     Fuel consumption aggregates all fuels, with
electricity, hydrogen, and compressed natural gas (CNG) included on
a gasoline-equivalent-gallon (GEG) basis, and values are shown as
reductions relative to the no-action alternative.
     VMT, with rebound (billion miles): Increase in highway
travel (as vehicle miles traveled), relative to the no-action
alternative, and including the rebound effect.

     VMT, without rebound (billion miles): Increase in
highway travel (as vehicle miles traveled), relative to the no-
action alternative, and excluding the rebound effect.
     Fatalities, with rebound: Increase in highway
fatalities, relative to the no-action alternative, and including the
rebound effect.
     Fatalities, without rebound: Increase in highway
fatalities, relative to the no-action alternative, and excluding the
rebound effect.
     Fuel Consumption, with rebound (billion gallons):
Reduction of fuel consumption, relative to the no-action
alternative, and including the rebound effect.
     Fuel Consumption, without rebound (billion gallons):
Reduction of fuel consumption, relative to the no-action
alternative, and excluding the rebound effect.

    Below, this section tabulates results for each of these four
perspectives and does so separately for the proposed CAFE and
CO2 standards. More detailed results are presented in the
Preliminary Regulatory Impact Analysis (PRIA) accompanying today's
notice, and additional and more detailed analysis of environmental
impacts for CAFE regulatory alternatives is provided in the
corresponding Draft Environmental Impact Statement (DEIS). Underlying
CAFE model output files are available (along with input files, model,
source code, and documentation) on NHTSA's website.\594\ Summarizing
and tabulating results for presentation here involved considerable
``off model'' calculations (e.g., to combine results for selected model
years and calendar years, and to combine various components of social
and private costs and benefits); tools Volpe Center staff used to
perform these calculations are also available on NHTSA's website.\595\
---------------------------------------------------------------------------

    \594\ Compliance and Effects Modeling System, National Highway
Traffic Safety Administration, https://www.nhtsa.gov/corporate-average-fuel-economy/compliance-and-effects-modeling-system (last
visited June 25, 2018).
    \595\ These tools, available at the same location, are scripts
executed using R, a free software environment for statistical
computing. R is available through https://www.r-project.org/.
---------------------------------------------------------------------------

    While the National Environmental Policy Act (NEPA) requires NHTSA
to prepare an EIS documenting estimating environmental impacts of the
regulatory alternatives under consideration in CAFE rulemakings, NEPA
does not require EPA to do so for EPA rulemakings. CO2
standards for each regulatory alternative being harmonized as practical
with corresponding CAFE standards, environmental impacts of GHG
standards should be directionally identical and similar in magnitude to
those of CAFE standards. Nevertheless, in this section, following the
series of tables below, today's announcement provides a more detailed
analysis of estimated impacts of the proposed CAFE and CO2
standards. Results presented herein for the CAFE standards differ
slightly from those presented in the DEIS; while, as discussed above,
EPCA/EISA requires that the Secretary determine the maximum feasible
levels of CAFE standards in manner that, as presented here, sets aside
the potential use of CAFE credits or application of alternative fuels
toward compliance with new standards, NEPA does not impose such
constraints on analysis presented in corresponding DEISs, and the DEIS
presents results of an ``unconstrained'' analysis that considers
manufacturers' potential application of alternative fuels and use of
CAFE credits.
    In terms of all estimated impacts, including estimated costs and
benefits, results of today's analysis are different for CAFE and
CO2 standards. Differences arise because, even when the
mathematical functions defining fuel economy and CO2 targets
are ``harmonized,'' surrounding regulatory provisions may not be. For
example, while both CAFE and CO2 standards allow credits to
be transferred between fleets and traded between manufacturers, EPCA/
EISA places explicit and specific limits on the use of such credits,
such as by requiring that each domestic passenger car fleet meet a
minimum CAFE standard (as discussed above). The CAA provides no
specific direction regarding CO2 standards, and while EPA
has adopted many regulatory provisions harmonized with specific EPCA/
EISA provisions (e.g., separate standards for passenger cars and light
trucks), EPA has not adopted all such provisions. For example, EPA has
not adopted the EPCA/EISA provisions limiting transfers between
regulated fleet or requiring separate compliance by domestic and
imported passenger car fleets. Such differences introduce differences
between impacts estimated under CAFE standards and under CO2
standards. Also, as mentioned above, Congress has required that new
CAFE standards be considered in a manner that sets aside the potential
use of CAFE credits and the potential additional application of
alternative fuel vehicles (such as electric vehicles) during the model
years under consideration. Congress has provided no corresponding
direction regarding the analysis of potential CO2 standards,
and today's analysis does consider these potential responses to
CO2 standards.
    As mentioned above, analysis was conducted to examine the
sensitivity of results to changes in key inputs. Following the detailed
consideration of potential environmental impacts, this section
concludes with a tabular summary of results of this sensitivity
analysis.

B. Impacts of Proposed Standards on Requirements, Performance, and
Costs to Manufacturers in Specific Model Years

    As mentioned above, impacts are presented from two different
perspectives for today's proposal. From either perspective, overall
impacts are the same. The first perspective, following the approach
taken by NHTSA in past CAFE rulemakings, examines impacts of the
overall proposal--i.e., the entire series of year-by-year standards--on
each model year. This perspective is especially relevant to
understanding how the overall proposal may impact manufacturers in
terms of year-by-year compliance, technology pathways, and costs. The
second, presented below in Section VII.C, provides a clearer
characterization of the incremental impacts attributable to standards
introduced in each successive model year.

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C. Incremental Impacts of Standards Proposed for Each Model Year

    As mentioned above, impacts are presented from two different
perspectives for today's proposal. From either perspective, overall
impacts are the same. The first perspective, taken above in VI.A,
examines impacts of the overall proposal -- i.e., the entire series of
year-by-year standards -- on each model year. The second perspective,
presented here, provides a clearer characterization of the incremental
impacts attributable to standards introduced in each successive model
year. For example, the standards proposed for MY 2023 are likely to
impact manufacturers' application of

technology in model years prior to MY 2023, as well as model years
after MY 2023. By conducting analysis that successively introduces
standards for each MY, in turn, isolates the incremental impacts
attributable to new standards introduced in each MY, considering the
entire span of MYs (1977-2029) included in the underlying modeling,
throughout those vehicles' useful lives. Tables appearing below
summarize results as aggregated across these model and calendar years.
Underlying model output files \596\ report physical impacts and
specific monetized costs and benefits attributable to each model year
in each calendar (thus providing information needed to, for example,
differentiate between impacts attributable to the MY 1977-2016 and MY
2017-2029 cohorts). The PRIA presents costs and benefits for individual
model years (with MY's 1977-2016 in a single bucket) for the preferred
alternative.
---------------------------------------------------------------------------

    \596\ Available at https://www.nhtsa.gov/corporate-average-fuel-economy/compliance-and-effects-modeling-system.
---------------------------------------------------------------------------

1. What are the Social Costs and Benefits of the Proposed Standards?
(a) CAFE Standards
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(b) CO2 Standards
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2. What are the private costs and benefits of the proposed standards,
relative to the no-action alternative?
(a) What are the impacts on producers of new vehicles?
(b) CAFE Standards

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(c) CO2 Standards
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(d) What are the impacts on buyers of new vehicles?
(e) CAFE Standards
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(f) CO2 Standards

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D. What are the Energy and Environmental Impacts?
    Today's proposal directly involves the fuel economy and average
CO2 emissions of light-duty vehicles, and the proposal is
expected to most directly and significantly impact national fuel
consumption and CO2 emissions. Fuel economy and
CO2 emissions are so closely related that it is expected the
impacts on national fuel consumption and national CO2
emissions will track in virtual lockstep with each other.
    Today's proposal does not directly involve pollutants such as
carbon monoxide, smog-forming pollutants (nitrogen oxides and unburned
hydrocarbons), final particles, or ``air toxics'' (e.g., formaldehyde,
acetaldehyde, benzene). While today's proposal is expected to
indirectly impact such emissions (by reducing travel demand and
accelerating fleet turnover to newer and cleaner vehicles on one hand
while, on the other, increasing activity at refineries and in the fuel
distribution system), it is expected that these impacts will be much
smaller than impacts on fuel use and CO2 emissions because
standards

for these other pollutants are independent of those for CO2
emissions.
    Following decades of successful regulation of criteria pollutants
and air toxics, modern vehicles are already vastly cleaner than in the
past, and it is expected that new vehicles will continue to improve.
For example, the following chart shows trends in new vehicles' emission
rates for volatile organic compounds (VOCs) and nitrogen oxides
(NOX) -- the two motor vehicle criteria pollutants that
contribute to the formation of smog.
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    Because new vehicles are so much cleaner than older models, it is
expected that under any of the alternatives considered here for fuel
economy and CO2 standards, emissions of smog-forming
pollutants would continue to decline nearly identically over the next
two decades. The following chart shows estimated total fuel
consumption, CO2 emissions, and smog-forming emissions under
the baseline and proposed standards (CAFE standards -- trends for
CO2 standards would be very similar), using units that allow
the three to be shown together:

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    While the differences in fuel use and CO2 emissions
trends under the baseline and proposed standards are clear, the
corresponding difference in smog-forming emissions trends is too small
to discern. For these three measures, the following table shows
percentage differences between the amounts shown above:

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    As indicated, for most of the coming two decades, it is estimated
that, even as fuel consumption and CO2 emissions would
increase under the proposed standards (compared to fuel consumption and
CO2 emissions under the baseline standards), smog-forming
pollution would actually decrease. During the two decades shown above,
it is estimated that the proposed standards would increase aggregate
fuel consumption and CO2 emissions by about four percent but
would decrease aggregate smog-forming pollution by about 0.1% (because
impacts of the reduced travel and accelerated fleet turnover would
outweigh those of increased refining and fuel distribution).
    As the analysis affirms, while fuel economy and CO2
emissions are two sides (or, arguably, the same side) of the same coin,
fuel economy and CO2 are only incidentally related to
pollutants such as smog, and any positive or negative impacts of
today's notice on these other air quality problems would most likely be
far too small to observe.
    The remainder of this section summarizes the impacts on fuel
consumption and emissions for both the proposed CAFE standards and the
proposed CO2 standards.
1. Energy and Warming Impacts
    Section V discusses, among other things, the need of the Nation to
conserve energy, providing context for the estimated impacts on
national-scale fuel consumption summarized below. Corresponding to
these changes in fuel consumption, the agencies estimate that today's
proposal will impact CO2 emissions. CO2 is one of
several greenhouse gases that absorb infrared radiation, thereby
trapping heat and making the planet warmer. The most important
greenhouse gases directly emitted by human activities include carbon
dioxide (CO2), methane (CH4), nitrous oxide
(N2O), and several fluorine-containing halogenated
substances. Although CO2, CH4, and N2O