credits are unavailable or that it is unlikely that the plan will
result in the manufacturer earning sufficient credits to offset the
shortfall. If a plan is approved, NHTSA will revise the manufacturer's
credit account accordingly. If a plan is rejected, NHTSA will notify
the manufacturer and request a revised plan or payment of the
appropriate fine.
b. Flexibilities
    As mentioned above, there are flexibilities manufacturers can use
in the CAFE program for compliance purposes. Two general types of
flexibilities that exist for the CAFE program include (1) FCIVs that
can be used to increase CAFE values; and (2) credit flexibilities. To
provide context for the changes NHTSA is proposing, a discussion of two
types of FCIVs is provided below. These credits are for

the addition of technologies that improve air/conditioning efficiency
(AC FCIVs) and other ``off-cycle'' technologies that reduce fuel
consumption that are not accounted for in the 2-cycle testing (OC
FCIVs).\610\ NHTSA is not proposing any changes to credit
flexibilities. A discussion of these flexibilities can be found in
previous rulemakings.\611\
---------------------------------------------------------------------------

    \610\ Manufacturers may also earn FCIVs for full size pickup
trucks which have hybrid or electric drivetrains or have advanced
technologies as specified in 40 CFR 86.1870-12. NHTSA is not
providing an overview of these credits because NHTSA is not
proposing any changes for these credits. For an an explanation of
these credits see the May 2, 2022 final rule (87 FR 25710, page
26025).
    \611\ October 15, 2012 (77 FR 63125, starting at page 62649) and
May 2, 2022 (87 FR 25710, starting at page 26025).
---------------------------------------------------------------------------

    As mentioned above, the LD program provides fuel consumption
improvement values (FCIVs) for improving the efficiency of AC
systems.\612\ Improving the efficiency of these systems is important
because AC usage places a load on the Internal Combustion (IC) that
results in additional fuel consumption, and AC systems are virtually
standard automotive accessories, with more than 95 percent of new cars
andlight trucks sold in the U.S. equipped with mobile AC systems.
Together, this means that AC efficiency can have a signifant impact on
total fuel consumption. The AC FCIV program is designed to incentivize
the adoption of more efficient systems, thereby reducing energy
consumption across the fleet.
---------------------------------------------------------------------------

    \612\ 40 CFR 1868-12.
---------------------------------------------------------------------------

    Manufacturers can improve the efficiency of AC systems through
redesigned and refined AC system components and controls. These
improvements, however, are not measurable or recognized using 2-cycle
test procedures because the AC is turned off during the CAFE compliance
2-cycle testing. Any AC system efficiency improvements that reduce load
on the engine and improve fuel economy, therefore, cannot be accounted
for in those tests.
    NHTSA adopted EPA's AC efficiency program in the 2017-2025 CAFE
final rule.\613\ The program provides a technology menu that specifies
improvement values for the addition of specific technologies and
specifies testing requirements to confirm that the technologies provide
emissions reductions when installed as a system on vehicles.\614\ A
vehicle's total AC efficiency FCIV is calculated by summing the
individual values for each efficiency improving technology used on the
vehicle, as specified in the AC menu or by the AC17 test result.\615\
The total AC efficiency FCIV sum for each vehicle is capped at 5.0
grams/mile for cars and 7.2 grams/mile for trucks.\616\ Related to AC
efficiency improvements, the off-cycle program, discussed in the next
section, contains fuel consumption improvement opportunities for
technologies that reduce the thermal loads on a vehicle from
environmental conditions (solar loads or parked interior air
temperature), that ultimately reduces the total energy required for AC
operation. These technologies are listed on a thermal control menu that
provides a predefined improvement value for each technology.\617\ If a
vehicle has more than one thermal load improvement technology, the
improvement values are added together, but subject to a cap of 3.0
grams/mile for cars and 4.3 grams/mile for trucks.\618\ Manufacturers
seeking FCIVs beyond the regulated caps may request the added benefit
for AC technology under the off-cycle program.
---------------------------------------------------------------------------

    \613\ October 15, 2012 final rule (77 FR 62624).
    \614\ See 40 CFR 86.1868-12(e) through (g).
    \615\ See 40 CFR 1868-12(g)(2)(iii).
    \616\ See 40 CFR 1868-12(b)(2).
    \617\ See 40 CFR 86.1869-12(b)(1)(viii)(A) through (E).
    \618\ See 40 CFR 86.1869-12(b)(1)(viii).
---------------------------------------------------------------------------

    In additon to allowing improvements for AC efficiency technologies,
the CAFE program also provides FCIVs for off-cycle technologies. ``Off-
cycle'' technologies are those that reduce vehicle fuel consumption in
the real world, but for which the fuel consumption reduction benefits
cannot be fully measured under the 2-cycle test procedures used to
determine compliance with the fleet average standards. The FTP and HFET
cycles are effective in measuring improvements in most fuel efficiency
improving technologies; however, they are unable to measure or do not
adequately represent certain fuel economy improving technologies
because of limitations in the test cycles. For example, off-cycle
technologies that improve emissions and fuel efficiency at idle (such
as ``stop start'' systems) and those technologies that improve fuel
economy to the greatest extent at highway speeds (such as active grille
shutters that improve aerodynamics) are not fully accounted for in the
2-cycle tests.
    In the 2017-2025 CAFE rulemaking, EPA, in coordination with NHTSA,
established regulations extending benefits for off-cycle technologies
and created FCIVs for the CAFE program starting with MY 2017.\619\
Under its EPCA authority for CAFE, EPA determined that the summation of
the all the FCIVs values (for AC, OC, and advanced technology full size
pickup trucks) in grams per mile could be converted to equivalent
gallons per mile totals for improving CAFE values. More specifically,
EPA normalizes the FCIVs values based on the manufacturer's total fleet
production and then applies the values in an equation that can increase
the manufacturer's CAFE values for each fleet instead of treating them
as separate credits as they are in the GHG program.\620\
---------------------------------------------------------------------------

    \619\ Off-cycle credits were extened to LDVs under the CAFE
program in the October 15, 2012 final rule (77 FR 62624).
    \620\ FCIVAC and FCIVOC are each deducted
as separately calculated credit values from the fleet fuel economy
per 40 CFR 600.510 12(c)(1)(ii) and 40 CFR 600.510 12(c)(3)(i)
through (ii). AC efficiency credit falls under FCIVAC,
while thermal load improvement technology credit falls under
FCIVOC.
---------------------------------------------------------------------------

    For determining FCIV benefits, EPA and NHTSA created three
compliance pathways for the off-cycle program: (1) menu technologies,
(2) 2 to 5-Cycle Testing, and (3) an alternative approval methodology.
Manufacturers may generate off-cycle credits or improvements through
the EPA and NHTSA approved menu pathway without agency approval.
Manufacturers report the inclusion of pre-defined technologies for
vehicle configurations that utilize the technologies, from the pre-
determined values listed in 40 CFR 1869-12(b), in their PMY and MMY
reports to NHTSA and then in their final reports to EPA.
    For off-cycle technologies both on and off the pre-defined
technology list, EPA allows manufacturers to use 5-cycle testing to
demonstrate off-cycle improvements.\621\ Starting in MY 2008, EPA
developed the ``five-cycle'' test methodology to measure fuel economy
for the purpose of improving new car window stickers (labels) and
giving consumers better information about the fuel economy they could
expect under real-world driving conditions. The ``five-cycle''
methodology was also able to capture real-world fuel consumption
improvements that weren't fully reflected on the ``two-cycle'' test and
EPA established this methodology as a pathway for a manufacturer to
obtain FCIVs. The additional testing allows emission benefits to be
demonstrated over some elements of real-world driving not captured by
the two-cycle testing, including high speeds, rapid accelerations, hot
temperatures, and cold temperatures. Under this pathway, manufacturers
submit test data to EPA,

and EPA determines whether there is sufficient technical basis to
approve the value of the off-cycle credit or fuel consumption
improvement.
---------------------------------------------------------------------------

    \621\ See 40 CFR 86.1869-12(c).
---------------------------------------------------------------------------

    The final pathway allowed for manufacturers to earn OC FCIVs is an
alternative pathway that requires a manufacturer to seek EPA review and
approval.\622\ This path allows a manufacturer to submit an application
to EPA to request approval of off-cycle benefits using an alternative
methodology. The application must describe the off-cycle technology and
how it functions to reduce CO2 emissions under conditions
not represented in the 2-cycle testing, as well as provide a complete
description of the methodology used to estimate the off-cycle benefit
of the technology and all supporting data, including vehicle testing
and in-use activity data. A manufacturer may request that EPA, in
coordination with NHTSA, informally review their methodology prior to
undertaking testing and/or data gathering efforts in support of their
application. Once a manufacturer submits an application, EPA publishes
a notice of availability in the Federal Register notifying the public
of a manufacturer's proposed alternative off-cycle benefit calculation
methodology.\623\ EPA makes a decision whether to approve the
methodology after consulting with NHTSA and considering the public
comments.
---------------------------------------------------------------------------

    \622\ 40 CFR 86.1869-12(d).
    \623\ EPA may waive the notice and comment requirements for
technologies for which EPA has previously approved a methodology for
determining credits. See 40 CFR 86.1869-12(d)(2)(ii).
---------------------------------------------------------------------------

c. Civil Penalties
    If a manufacturer does not comply with a CAFE standard and cannot
or chooses not to cover the shortfall with credits, EPCA provides for
the assessment of civil penalties. The Act specifies a precise formula
for determining the amount of civil penalties for such noncompliance.
Starting in MY 2023, the penalty, as adjusted for inflation by law, is
$16 for each tenth of a mpg that a manufacturer's average fuel economy
falls short of the standard multiplied by the total volume of those
vehicles in the affected fleet (i.e., import passenger vehicles,
domestic passenger vehicles, or light trucks), manufactured for that
MY.\624\ On November 2, 2015, the Federal Civil Penalties Inflation
Adjustment Act Improvements Act (Inflation Adjustment Act or 2015 Act),
Pub. L. 114-74, Section 701, was signed into law. The 2015 Act required
Federal agencies to promulgate an interim final rule to make an initial
``catch-up'' adjustment to the civil monetary penalties they
administer, and then to make subsequent annual adjustments. The amount
of the penalty may not be reduced except under the unusual or extreme
circumstances specified in the statute,\625\ which have never been
exercised by NHTSA in the history of the CAFE program.
---------------------------------------------------------------------------

    \624\ See 49 U.S.C. 32912(b) and 49 CFR 578.6(h)(2). For MYs
before 2019, the penalty is $5.50; for MYs 2019 through 2021, the
civil penalty is $14; for MY 2022, the civil penalty is $15.
    \625\ See 49 U.S.C. 32913.
---------------------------------------------------------------------------

    NHTSA may also assess general civil penalties as prescribed by
Congress under 49 U.S.C. 32912(a). A person that violates section
32911(a) of title 49 is liable to the United States Government for a
civil penalty of not more than $49,534 for each violation. A separate
violation occurs for each day the violation continues. These penalties
apply in cases in which NHTSA finds a violation outside of not meeting
CAFE standards, such as those that may occur due to violating
information request or reporting requirements as specified by Congress
or codified in NHTSA's regulations.
2. Heavy-Duty Pickup Trucks and Vans
    As with the CAFE enforcement program, there are three primary
components to NHTSA's compliance program for HD vehicles: (1)
determining compliance; (2) using flexibilities and incentives; and (3)
paying civil penalties for shortfalls. The following table provides an
overview of the Heavy-Duty Fuel Efficiency Program for HDPUVs.

 Table V-25--Overview of Compliance for Heavy-Duty Fuel Efficiency Program for Pickup and Vans (Vehicles With a
                                       GVWR Between 8,500 and 14,000 lbs.)
----------------------------------------------------------------------------------------------------------------
                                         Fleet performance requirements
-----------------------------------------------------------------------------------------------------------------
                                      Applicable regulation                                    Proposed changes
            Component                 (statutory authority)          General description           in NPRM?
----------------------------------------------------------------------------------------------------------------
Fuel Efficiency Standards.......  49 CFR 535.5 (49 U.S.C.       Standards are attribute-      Yes: Proposed
                                   32902(k)).                    based fleet average           amendments to 49
                                                                 standards expressed in        CFR 535.5(a) to
                                                                 gallons per 100 miles. The    set standards for
                                                                 standards are based on the    MY2030 and onward
                                                                 capability of each model to   (with increases
                                                                 perform work. A model's       in the proposed
                                                                 work-factor is a measure of   standards between
                                                                 its towing and payload        MY 2030 and
                                                                 capacities and whether        2035).
                                                                 equipped with a 4-wheel
                                                                 drive configuration. In
                                                                 setting standards for the
                                                                 Heavy-Duty National
                                                                 Program, NHTSA seeks to
                                                                 implement standards
                                                                 designed to achieve the
                                                                 maximum feasible
                                                                 improvement in fuel
                                                                 efficiency, adopting and
                                                                 implementing test
                                                                 procedures, measurement
                                                                 metrics, fuel economy
                                                                 standards, and compliance
                                                                 and enforcement protocols
                                                                 that are appropriate, cost
                                                                 effective, and
                                                                 technologically feasible.
----------------------------------------------------------------------------------------------------------------
                      Determining Average Fleet Performance and Certification Flexibilities
----------------------------------------------------------------------------------------------------------------
2-Cycle Testing.................  49 CFR 535.6(a) citing 40     Vehicle testing is conducted  No proposed
                                   CFR 86.1819-14.               by EPA using the Federal      changes.
                                                                 Test Procedure and Highway
                                                                 Fuel Economy Test (HFET or
                                                                 ``highway'' test).
Exclusion of Vehicles Not         49 CFR 535.5(a)(5)..........  The standards for heavy duty  No proposed
 Certified as Complete Vehicles.                                 pickup trucks do not apply    changes.
                                                                 to vehicles that are
                                                                 chassis-certified with
                                                                 respect to EPA's criteria
                                                                 pollutant test procedure in
                                                                 40 CFR part 86, subpart S.
                                                                 Instead, the vehicles must
                                                                 comply with the vehicle
                                                                 standards in 49 CFR
                                                                 535.5(b) and the engines
                                                                 used in these vehicles must
                                                                 comply with 49 CFR
                                                                 535.5(d).
Sister Vehicles.................  49 CFR 535.5(a)(6)..........  Manufacturers may certify     No proposed
                                                                 cab-complete vehicles based   changes.
                                                                 on a complete sister
                                                                 vehicle for purposes of the
                                                                 fuel consumption standards
                                                                 in 49 CFR 535.5.
                                                                 Manufacturers may also ask
                                                                 to apply the sister vehicle
                                                                 provision to Class 2b and
                                                                 Class 3 incomplete vehicles
                                                                 in unusual circumstances.

Loose Engines...................  49 CFR 535.5(a)(7)..........  For MY 2023 and earlier,      No proposed
                                                                 manufacturers may certify     changes. The
                                                                 spark-ignition engines with   loose engine
                                                                 identical hardware compared   program ends
                                                                 with engines used in          after MY 2023.
                                                                 complete pickup trucks as
                                                                 having a fuel consumption
                                                                 target value and test
                                                                 result equal to that of the
                                                                 complete vehicle in the
                                                                 applicable test group with
                                                                 the highest equivalent test
                                                                 weight except that a
                                                                 manufacturer may not
                                                                 generate fuel consumption
                                                                 credits.
Optional Certification for        49 CFR 535.5(a)(6)(i).......  Manufacturers may certify     No proposed
 Heavier Vehicles.                                               any complete or cab-          changes.
                                                                 complete spark-ignition
                                                                 vehicles above 14,000
                                                                 pounds GVWR and at or below
                                                                 26,000 pounds GVWR to the
                                                                 fuel consumption standards
                                                                 for heavy duty pickup
                                                                 trucks and vans in 49 CFR
                                                                 535.5(a).
Alternative Fuel Conversions....  49 CFR 535.5(a)(8) citing 40  Alternative fuel vehicle      No proposed
                                   CFR 85.525.                   conversions may demonstrate   changes.
                                                                 compliance with the
                                                                 standards of this part or
                                                                 other alternative
                                                                 compliance approaches
                                                                 allowed by EPA in 40 CFR
                                                                 85.525.
----------------------------------------------------------------------------------------------------------------
                     Earning and Using Credits for Overcompliance and Addressing Shortfalls
----------------------------------------------------------------------------------------------------------------
Earning Credits.................  49 CFR 535.7(a).............  Manufacturers earn fuel       No proposed
                                                                 consumption credits (FCCs)    changes.
                                                                 for the weighted value
                                                                 representing the extent to
                                                                 which a vehicle or engine
                                                                 family or fleet within a
                                                                 particular averaging set
                                                                 performs better than the
                                                                 standard.
Advanced technology credits.....  49 CFR 535.7(a)(1)(iii); 49   Manufacturer may generate     No proposed
                                   CFR 535.7(f)(1) citing 40     credits for vehicle or        changes.
                                   CFR 86.1819-14 and 86.1865.   engine families or
                                                                 subconfigurations
                                                                 containing vehicles with
                                                                 advanced technologies
                                                                 (i.e., hybrids with
                                                                 regenerative braking,
                                                                 vehicles equipped with
                                                                 Rankine-cycle engines,
                                                                 electric and fuel cell
                                                                 vehicles).

Advanced technology credit        49 CFR 535.5(a)(9) and        In the 2016 Phase 2 Final     Yes: Proposed
 multiplier.                       535.7(f)(1).                  Rule, EPA and NHTSA           technical
                                                                 explained that                amendments to
                                                                 manufacturers may increase    accurately
                                                                 advanced technology credits   reflect changes
                                                                 by a 3.5 multiplier for       contemplated by
                                                                 plug-in hybrid electric       2016 final rule
                                                                 vehicles, 4.5 for all-        establishing
                                                                 electric vehicles, and 5.5    requirements for
                                                                 for fuel cell vehicles        Phase 2. The
                                                                 through My 2027.              multiplier for
                                                                                advanced
                                                                                technology
                                                                                credits ends
                                                                                after MY 2027.
Innovative and off-cycle          49 CFR 535.7(a)(1)(iv); 49    Manufacturer may generate     Yes: Proposed
 technology credits.               CFR 535.7(f)(2) citing 49     credits for vehicle or        changes to
                                   CFR 86.1819-14(d)(13),        engine families or            eliminate
                                   1036.610 and 1037.610.        subconfigurations having      innovative and
                                                                 fuel consumption reductions   off-cycle
                                                                 resulting from technologies   technology
                                                                 not reflected in the GEM      credits for heavy-
                                                                 simulation tool or in the     duty pickup
                                                                 FTP chassis dynamometer.      trucks and vans.
Banked Surplus Credits..........  49 CFR 535.7 (a)(3)(i)......  Manufacturers may carry-      No proposed
                                                                 forward credits up to 5       changes.
                                                                 model years into the
                                                                 future.
Credit Deficit..................  49 CFR 535.7(a)(5)..........  Manufacturers may carry-back  No proposed
                                                                 credits up to 3 model years   changes.
                                                                 into the past.
Credit Transfers................  49 CFR 535.7................  Manufacturers may transfer    Yes: Proposed
                                                                 advanced technology credits   technical
                                                                 across averaging sets.        amendment to
                                                                                reflect, as
                                                                                intended in the
                                                                                2016 Phase 2 rule
                                                                                that advanced
                                                                                technology
                                                                                credits may not
                                                                                be transferred
                                                                                across averaging
                                                                                sets for Phase 2
                                                                                and beyond.\626\
Credit Trading..................  49 CFR 535.7 (a)(4).........  Manufacturers may trade an    No proposed
                                                                 unlimited quantity of         changes.
                                                                 credits to other
                                                                 manufacturers in the same
                                                                 averaging set. Traded
                                                                 credits, other than
                                                                 advanced technology
                                                                 credits, may be used only
                                                                 within the averaging set in
                                                                 which they were generated.
Civil Penalties.................  49 CFR 535.9(b) and 49 CFR    In cases of noncompliance,    No proposed
                                   578.6(i) (49 U.S.C. 32912.).  NHTSA assesses civil          changes.
                                                                 penalties based upon
                                                                 consideration of a variety
                                                                 of factors. The maximum
                                                                 civil penalty for a
                                                                 violation of is not more
                                                                 than $48,779 per vehicle or
                                                                 engine. The maximum civil
                                                                 penalty for a related
                                                                 series of violations shall
                                                                 be determined by
                                                                 multiplying $48,779 times
                                                                 the vehicle or engine
                                                                 production volume for the
                                                                 model year in question
                                                                 within the regulatory
                                                                 averaging set.
----------------------------------------------------------------------------------------------------------------
\626\ Docket ID NHTSA-2020-0079-0001.

a. Determining Compliance
    In general, NHTSA finalizes attribute-based fleet average standards
for fuel consumption of HDPUVs on a gal/100-mile basis using a similar
compliance strategy as required for light-vehicles in the CAFE program.
For these vehicles, the agencies set standards based on attribute
factors relative to the capability of each model to perform work, which
the agencies defined as ``work factor.'' More specifically, the work-
factor of each model is a measure of its towing and payload capacities
and whether equipped with a 4-wheel drive configuration. Each
manufacturer must comply with the fleet average standard derived from
the unique subconfiguration target standards (or groups of
subconfigurations approved by EPA in accordance with 40 CFR 86.1819-
14(a)(4)) of the model types that make up the manufacturer's fleet in a
given MY. Each subconfiguration has a unique attribute-based target
standard, defined by each group of vehicles having the same work
factor. These target standards are taken from a set of curves
(mathematical functions), with separate performance curves for gasoline
and diesel vehicles.\627\ In general, in calculating HDPUVs, fleets
with a mixture of vehicles with increased payloads or greater towing
capacity (or utilizing four-wheel drive configurations) will face
numerically less stringent standards than fleets consisting of less
powerful vehicles. Vehicle testing for both the HD and LDV programs is
conducted on chassis dynamometers using the drive cycles from FTP and
HFET.\628\ While the FTP and the HFET driving patterns are identical to
that of the LD test cycles, other test parameters for running them,
such as test vehicle loaded weight, are specific to complete HD
vehicles.
---------------------------------------------------------------------------

    \627\ However, both gasoline and diesel vehicles in this
category are included in a single averaging set for generating and
using credit flexibilities.
    \628\ The LD FTP is a vehicle driving cycle that was originally
developed for certifying LDVs and subsequently applied to HD chassis
testing for criteria pollutants. This contrasts with the Heavy-duty
FTP, which refers to the transient engine test cycles used for
certifying heavy-duty engines (with separate cycles specified for
diesel and spark-ignition engines).
---------------------------------------------------------------------------

    Due to the variations in designs and construction processes,
optional requirements were added to simplify testing and compliance
burdens for cab-chassis Class 2b and 3 vehicles. Requirements were
added to treat cab-chassis Class 2b and 3 vehicles (vehicles sold as
incomplete vehicles with the cab substantially in place but without the
primary load-carrying enclosure) equivalent to the complete van or
truck product from which they are derived. Manufacturers determine
which complete vehicle configurations most closely matches the cab-
chassis product leaving its facility and include each of these cab-
chassis vehicles in the fleet averaging calculations, as though it were
identical to the corresponding complete ``sister'' vehicle. The Phase 1
MDHD program also added a flexibility known as the ``loose engine''
provision. Under the provision, spark-ignition (SI) engines produced by
manufacturers of HDPUVs and sold to chassis manufacturers and intended
for use in vocational vehicles need not meet the separate SI engine
standard, and instead may be averaged with the manufacturer's HDPUVs
fleet.\629\ This provision was adopted primarily to address small
volume sales of engines used in complete vehicles that are also sold to
other manufacturers.
---------------------------------------------------------------------------

    \629\ See 40 CFR 86.1819-14(k)(8).
---------------------------------------------------------------------------

    And finally, at the end of each MY NHTSA confirms whether a
manufacturer's fleet average performance for its fleet of HDPUVs
exceeds the applicable target-based fleet standard using the model type
work factors. Compliance with the fleet average standards is determined
using 2-cycle test procedures. However, manufacturers may also earn
credits for the addition of technologies that result in real-world fuel
improvements that are not accounted for in the 2-cycle testing. If the
fleet average performance exceeds the standard, the manufacturer
complies for the MY. If the manufacturer's fleet does not meet the
standard, the manufacturer may address the shortfall by using a credit
flexibility equal to the credit shortage in the averaging set. The
averaging set balance is equal to the balance of earned credits in the
account plus any credits that are traded into or out of the averaging
set during the MY. If a manufacturer cannot meet the standard using
credit flexibilities, NHTSA may assess a civil penalty for any
violation of this part under 49 CFR 535.9(b).
b. Flexibilities
    Broadly speaking, there are two types of flexibilities available to
manufacturers for HDPUVs. Manufacturers may improve fleet averages by
(1) earning fuel consumption incentive benefits and by (2) transferring
or trading in credits that were earned through overcompliance with the
standards. First, as mentioned above, manufacturers may earn credits
associated with fuel efficiencies that are not accounted for in the 2-
cycle testing.\630\ Second, manufacturers may transfer credits into
like fleets (i.e., averaging sets) from other manufacturers through
trades.\631\
---------------------------------------------------------------------------

    \630\ Off-cycle benefits were extened to heavy-duty pickup
trucks and vans through the-MDHD--Phase 1 program in the September
15, 2011 final rule (76 FR 57106).
    \631\ See 49 CFR 535.7(a)(2)(iii) and 49 CFR 535.7(a)(4).
---------------------------------------------------------------------------

    Unlike the LDV program, there is no AC credit program for HDPUVs.
Currently, these vehicles may only earn fuel consumption improvement
credits through an off-cycle program, which may include earning credits
for AC efficiency improvements. In order to receive these credits,
manufacturers must submit a request to EPA and NHTSA with data
supporting that the technology will result in measurable, demonstrable,
and verifiable real-world CO2 emission reductions and fuel
savings. After providing an opportunity for the public to comment on
the manufacturer's methodology, the agencies make a decision whether to
approve the methodolgy and credits.\632\
---------------------------------------------------------------------------

    \632\ See 49 CFR 535.7(f)(2), 40 CFR 86.1819-14(d)(13), and 40
CFR 86.1869-12(c) through (e).
---------------------------------------------------------------------------

    In addition to earning additional OC FCIVs, manufacturers have the
flexibility to transfer credits into their fleet to meet the standards.
Manufacturers may transfer in credits from past (carry-forward credits)
MYs of the same averaging set. \633\ Manufacturers may also trade in
credits earned by another manufacturer, as long as the credits are
traded into the same averaging set/fleet type. Manufacturers may not
transfer credits between LD CAFE fleets and HD fleets. Likewise, a
manufacturer cannot trade in credits from another manufacturer's LD
fleet to cover shortfalls in their HD fleets. NHTSA oversees these
credit transfer and trades through regulations issued in 49 CFR 535.7,
which includes reporting requirements for credit trades and transfers
for medium- and HD vehicles.
---------------------------------------------------------------------------

    \633\ See 49 CFR 535.7(a)(3)(i), 49 CFR 535.7(a)(3)(iv), 49 CFR
535.7(a)(2)(v), and 49 CFR 535.7(a)(5).
---------------------------------------------------------------------------

c. Civil Penalties
    The framework established by Congress and codified by NHTSA for
civil penalties for the HD program is quite different from the LD
program. Congress did not prescribe a specific rate for the fine amount
for civil penalties but instead gave NHTSA general authority under
EISA, as codified at 49 U.S.C. 32902(k), to establish requirements
based upon appropriate measurement metrics, test procedures, standards,
and compliance and enforcement protocols for HD vehicles. NHTSA
interpreted its

authority and developed an enforcement program to include the authority
to determine and assess civil penalties for noncompliance that would
impose penalties based on the following criteria, as codified in 49 CFR
535.9(b).
    In cases of noncompliance, NHTSA assesses civil penalties based
upon consideration of the following factors:
     Gravity of the violation.
     Size of the violator's business.
     Violator's history of compliance with applicable fuel
consumption standards.
     Actual fuel consumption performance related to the
applicable standard.
     Estimated cost to comply with the regulation and
applicable standard.
     Quantity of vehicles or engines not complying.
     Civil penalties paid under CAA section 205 (42 U.S.C.
7524) for noncompliance for the same vehicles or engines.
    NHTSA considers these factors in determining civil penalties to
help ensure, given NHTSA's wide discretion, that penalties would be
fair and appropriate, and not duplicative of penalties that could be
imposed by EPA. NHTSA goal is to avoid imposing duplicative civil
penalties, and both agencies consider civil penalties imposed by the
other in the case of non-compliance with GHG and fuel consumption
regulations. NHTSA also uses the ``estimated cost to comply with the
regulation and applicable standard,'' \634\ to ensure that any
penalties for non-compliance will not be less than the cost of
compliance. It would be contrary to the purpose of the regulation for
the penalty scheme to incentivize noncompliance. Further, NHTSA set its
maximum civil penalty amount not to exceed the limit that EPA is
authorized to impose under the CAA. The agencies agreed that violations
under either program should not create greater punitive damage for one
program over the other. Therefore, NHTSA's maximum civil penalty for a
manufacturer would be calculated as the: Aggregate Maximum Civil
Penalty for a Non-Compliant Regulatory Category = (CAA Limit) x
(production volume within the regulatory category). This approach
applies for all HD vehicles including pickup trucks and vans as well as
engines regulated under NHTSA's fuel consumption programs.
---------------------------------------------------------------------------

    \634\ See 49 CFR 535.9(b)(4).
---------------------------------------------------------------------------

C. Proposed Changes

    The following sections describe four changes NHTSA is proposing in
order to update its enforcement programs for LDVs and for HDPUVs. These
changes reflect experience gained in the past few years and are
intended to improve to the programs overall.
3. Elimination of OC and AC Efficiency FCIVs for BEVs in the CAFE
Program
    NHTSA is proposing to remove AC and OC FCIVs for BEVs, which
manufacturers can use to comply with CAFE standards, because the FCIVs
represent energy savings for vehicles with ICEs. The CAFE program
currently provides for credits for vehicles equipped with technologies
that improve the efficiency of the vehicles' AC systems and otherwise
reduce fuel consumption but are not accounted for in the 2-cycle
testing.
    Beginning in MY 2027, NHTSA proposes to eliminate eligibility to
gain FCIVs for any vehicles that do not have IC engines. Thus, BEVs
would no longer be eligible for these credits after MY 2026. NHTSA
believes that eliminating AC and OC FCIVs is appropriate because BEVs
are currently generating credits in a program designed to provide
credits based on reductions in emissions and fuel consumption of IC
engine vehicles. In the OC program specifically, we note that the
values associated with menu technologies were based on IC engine
vehicles with exhaust emissions and fuel consumption. While there may
be AC and other technologies that improve BEV energy consumption, the
values associated with AC FCIVs and the OC menu FCIVs are based on IC
engine vehicles and, therefore, are not appropriate to consider for
BEVs. When EPA and NHTSA adopted these flexibilities in the MY 2012
rule, there was little concern about this issue because BEV sales were
only a small fraction of total sales, and no upstream net emissions
were considered as part of the GHG and fuel economy final
standards.635 636 Now, however, BEVs are earning FCIVs as
part of the fleet compliance that aren't representative of real-world
fuel consumption reduction. Therefore, NHTSA is proposing to end off-
cycle and AC efficiency FCIVs for LDVs with no IC engine beginning in
MY 2027. NHTSA is seeking comments on this proposal.
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    \635\ See 77 FR 62811 (October 15, 2012).
    \636\ 2022 EPA Automotive Trends Report at Table 4.1 on page 74.
---------------------------------------------------------------------------

    Relatedly, NHTSA is also seeking comment on three other possible
changes for FCIVs. First, NHTSA is seeking comment on whether it
should, instead of eliminating FCIVs for BEVs completely, propose new
off-cycle and AC values for BEVs that are based on BEV powertrains
rather than IC engines, and, if so, how those proposed values should be
calculated. Additionally, in light of its proposal to eliminate FCIVs
for BEVs, NHTSA is seeking comment on whether it should propose
adjusting FCIVs for PHEVs based on utility factor for the portion only
operated by IC engine. For CAFE compliance purposes, the fuel economy
of dual-fueled vehicles, such as PHEVs, is calculated by EPA using a
utility factor to account the portion of power energy consumption from
the different energy sources. A utility factor of 0.3, for example,
means that the vehicle is estimated to operate as an IC Engine vehicle
70 percent of the vehicle's VMT. NHTSA is requesting comment on whether
it should propose reducing FCIVs for PHEVs proportional to the
estimated percentage of VMT that the vehicles would be operated as EVs.
    NHTSA is also requesting comment on whether it should propose
phasing out OC FCIVs for all vehicles before MY 2031. For example, one
such approach could be to phase-down the off-cycle menu cap by reducing
it to10 g/mi in MY 2027, 8 g/mi in MY 2028, 6 g/mi in MY 2029, and 3 g/
mi in MY 2030 before eliminating OC FCIVs in MY 2031. As noted above,
FCIVs were added to the CAFE program by the October 15, 2012 final rule
and manufacturers were able to start earning OC FCIVs starting in MY
2017.\637\ The value of FCIVs for OC technologies listed on the
predefined list are derived from estimated emissions reductions
associated with the technologies which is then converted into an
equivalent improvement in MPG. These values, however, were established
based on MY 2008 vehicles and technologies assessed during the 2012
rulemaking and, therefore, the credit levels are potentially becoming
less representative of the fuel savings provided by the off-cycle
technologies as fuel economy is improved. There is not currently a
mechanism to confirm that the off-cycle technologies provide fuel
savings commensurate with the level of the credits the menu provides.
Further, issues such as the synergistic effects and overlap among off-
cycle technologies take on more importance as the FCIVs represent a
larger portion of the vehicle fuel economy. Over time NHTSA's standards
for CAFE have increased while FCIVs for some menu technologies have
remained the same, which may result in the FCIVs being less
representative of MPG improvements provided by the off-cycle
technologies. Therefore, NHTSA is requesting comment on whether it

should phase out FCIVs for off-cycle technologies for ICE vehicles.
Alternatively, NHTSA is requesting comment on whether it should propose
new values for off-cycle technologies that are more representative of
the real-world fuel savings provided by these technologies, and if so,
how NHTSA should calculate the appropriate values for these
technologies.
---------------------------------------------------------------------------

    \637\ 77 FR 62624.
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    To help NHTSA understand the potential impacts of some of these
additional changes for FCIVs, we conducted sensitivity analyses on
removing FCIVs for BEVs, and also for phasing out all FCIVs. These
sensitivities are discussed in Chapter 9 of the accompanying PRIA.
NHTSA is requesting comment on these analyses as well as whether there
may be a more appropriate approach to modeling the impacts of these
potential changes.
4. Elimination of the 5-Cycle and Alternative Approval Pathways for
CAFE
    NHTSA is proposing to eliminate both the 5-cycle pathway and the
alternative pathway for off-cycle FCIVs for LDVs starting in MY 2027.
NHTSA is proposing this change because we do not believe that the
benefit to manufacturers is significant enough to justify that the
programs require a significant amount of time and resources to be
committed to reviewing and approving requests. Further, based on the
general degree of robustness of data provided by manufacturers to EPA
and NHTSA for approval consideration, the analysis is often delayed
and/or ultimately unproductive, causing undesirable and often
unnecessary delays to final compliance processing.
    NHTSA does not believe that the 5-cycle pathway is beneficial to
manufacturers or to NHTSA, as the pathway is used infrequently,
provides minimal benefits, and requires a significant amount of time
for review. Historically, only a few technologies have been approved
for FCIVs through 5-cycle testing. The 5-cycle demonstrations are less
frequent than the alternate pathway due to the complexity and cost of
demonstrating real-world emissions reductions for technologies not
listed on the menu. Therefore, NHTSA proposes to eliminate the 5-cycle
pathway, starting in MY 2027 for earning off-cycle fuel economy
improvements. NHTSA is seeking comments on this proposal.
    NHTSA is also proposing to eliminate the alternative approval
process for off-cycle FCIVs starting in MY 2027. Manufacturers
currently seek EPA review, in consultation with NHTSA, through a notice
and comment process, to use an alternative methodology other than the
menu or 5-cycle methodology. Manufacturers must provide supporting data
on a case-by-case basis demonstrating the benefits of the off-cycle
technology on their vehicle models. Manufacturers may also use the
alternative approval pathway to apply for FCIVs for menu technologies
where the manufacturer is able to demonstrate FCIVs greater than those
provided by the menu.
    NHTSA is proposing to eliminate the alternative approval process
for off-cycle credits starting in MY 2027. The alternative approval
process was used successfully by several manufacturers for high
efficiency alternators, resulting in EPA adding them to the off-cycle
menu beginning in MY 2021.\638\ The program has resulted in a number of
concepts for potential off-cycle technologies over the years, but few
have been implemented, at least partly due to the difficulty in
demonstrating the quantifiable real-world fuel consumption reductions
associated with using the technology. Many FCIVs sought by
manufacturers have been relatively small (less than 1 g/mile).
Manufacturers have commented several times that the process takes too
long, but the length of time is often associated with the need for
additional data and information or issues regarding whether a
technology is eligible for FCIVs. NHTSA has been significantly impacted
in conducting its final compliance processes due to the untimeliness of
OC approvals. Therefore, NHTSA proposes to eliminate the alternative
approval process for earning off-cycle fuel economy improvements
starting in MY 2027. NHTSA is seeking comments on this proposal.
---------------------------------------------------------------------------

    \638\ See 85 FR 25236 (April 30, 2020).
---------------------------------------------------------------------------

5. Elimination of OC FCIVs for Heavy-Duty Pickup Trucks and Vans
Starting in MY 2030
    NHTSA is proposing to eliminate OC FCIVs for HDPUVs for the same
reasons discussed above for proposing to eliminate the 5-cycle and
alternative pathways for OC FCIVs starting in MY 2030. Currently,
manufacturers of HDPUVs may only earn FCIVs through an off-cycle
program that involves requesting public comment and case-by-case review
and approval. Since its inception, the program has involved lengthy and
resource-intensive processes that have not resulted in significant
benefits to the HDPUV fleet. At this time, NHTSA does not believe the
benefit provided by these credits justifies NHTSA's time and resources.
Accordingly, NHTSA is proposing to end the off-cycle program for HDPUVs
starting in MY 2030. NHTSA is requesting comment on this proposal.
    NHTSA is also requesting comment on eliminating OC FCIVs for BEVs
if NHTSA does not eliminate OC FCIVs for all HDPUVs. In the current
regulation, we are considering all BEVs and PHEVs to have no fuel usage
in that they consume zero g/mile for compliance. Accordingly, these
vehicles would go to negative compliance values if we allowed OC FCIVs
to be applied.
6. Requirement To Respond to Requests for Information Regarding Off-
Cycle Requests Within 60 Days for LDVs for MYs 2025 and 2026
    For MY 2025 and MY 2026, NHTSA is proposing to create a time limit
to respond to requests for information regarding request for OC
petitions for LDVs. This proposal is intended to allow for the timelier
processing of OC petitions. In the last rule, NHTSA added provisions
clarifying and outlining the deadlines for manufacturers to submit off-
cycle requests.\639\ Since laying out those new requirements, NHTSA has
identified another point in the OC request process that is delaying the
timely processing of the requests. When considering OC petitions, NHTSA
and EPA frequently need to request additional information from the
manufacturer, and NHTSA observes that it has sometimes taken OEMs an
extended amount of time to respond to these requests.
---------------------------------------------------------------------------

    \639\ See 49 CFR 531.6(b)(3)(i) and 49 CFR 533.6(c)(4)(i).
---------------------------------------------------------------------------

    NHTSA proposes to create a deadline of 60 days for responding to
requests for additional information regarding OC petitions. If the
manufacturer does not respond within the 60-day limit with the
requested information, NHTSA may deny the petition for the petitioned
MY. NHTSA may grant an extension for responding if the manufacturer
responds within 60 days with a reasonable timeframe for when the
requested information can be provided to the agencies. If an OEM does
not respond to NHTSA/EPA's call for additional data regarding the
request within a timely manner, the request will be denied. The request
will no longer be considered for the MY in question, but the OEM may
still request consideration of the credits for the following year. A
manufacturer may request consideration for later MYs by responding to
NHTSA/EPA's data request and expressing such interest.

7. Technical Amendments for Advanced Technology Credits
    NHTSA is proposing to make technical amendments to the current
regulations pertaining to advanced technology credits. In the Phase 2
rule for the Heavy-Duty National Program, NHTSA and EPA jointly
explained that we were adopting advanced technology credit multipliers
for three types of advanced technologies. As described in the final
rule, there would be a 3.5 multiplier for advanced technology credits
for plug-in hybrid vehicles, a 4.5 multiplier for advanced technology
credits for all-electric vehicles, and a 5.5 multiplier for advanced
technology credits for fuel cell vehicles. The agencies stated that
their intention in adopting these multipliers was to create a
meaningful incentive to manufacturers considering adopting these
technologies in their vehicles. The agencies further noted that the
adoption rates for these advanced technologies in heavy vehicles was
essentially non-existent at the time the final rule was issued and
seemed unlikely to grow significantly within the next decade without
additional incentives. Because of their large size, the agencies
decided to adopt them as an interim program that would continue through
MY 2027. These changes, however, were not accurately reflected in the
regulatory changes made by the final rule. NHTSA is now correcting the
regulations to clarify that for Phase 2, advanced technology credits
may be increased by the corresponding multiplier through MY 2027.
    Additionally, the final rule also explained that because of the
adoption of the large multipliers, the agencies were discontinuing the
allowance to use advanced technology credits across averaging sets.
This change was also not accurately reflected in the regulatory
changes. NHTSA is also proposing to make the technical correction to
reflect the intended change.
    In the interim and until the proposed technical amendment is
implemented, there is no multiplier for advanced technology credits for
Phase 2. However, NHTSA will permit manufacturers to use the larger
multipliers with the condition that if they choose to do so, they will
not be permitted to transfer the increased advanced technology credits
across averaging sets.
8. Additional Technical Amendments
    In addition to the proposed changes discussed above, NHTSA is also
proposing to make minor technical amendments to 49 CFR parts 531, 533,
535, and 537. These amendments are largely to update statutory
citations and to update cross-references. Specifically, NHTSA is
proposing to make the following technical amendments:

    a. Change references to section 502 of the Motor Vehicle
Informaiton and Cost Savings Act to the appropriate codified
provision (i.e., 49 U.S.C. 32901 or 32902) in 49 CFR 531.1, 531.4,
533.1, 533.4, 535.4, 537.3, and 537.4.
    b. Amend Sec.  531.4 to include a definition for ``domestically
manufactured passenger autobile'' which references 49 U.S.C.
32904(b)(3) and 40 CFR 600.511-08.
    c. Amend Sec.  531.5 to correct a cross reference to the
provision containing NHTSA's standards for low-volume motor vehicles
(found in 49 CFR 531.5(e)) and to include references to the
provision as appropriate.
    d. Amend Sec.  535.4 to correct a typographical error to change
``Alterers'' to ``Alterer.''
    e. Amend Sec.  535.7(b)(2) to correct a cross-reference to the
EPA provision's provision regarding fuel consumption values for
advanced technologies.
    f. Amend Sec.  537.2 to correct a typographical error.
    g. Amend Sec.  537.3 to end the reporting requirements in
(c)(7)(iii) end after MY 2027 to coincide with the sunset date for
FCIVs for advanced full-size pickup trucks.

D. Decision Not To Propose Non-Fuel Saving Credits or Flexibilities

    In a comment to the August 16, 2022 EIS scoping notice for MY 2027
and beyond CAFE standards,\640\ Hyundai requested that NHTSA consider
``developing an optional program that provides additional credits or
flexibilities to manufacturers who target higher fuel economy vehicle
distribution in communities of color, tribal communities, and other
historically underserved communities.'' \641\ Hyundai stated that
``[t]he NEPA process, and specifically the EIS, is an appropriate and,
indeed, critical opportunity for NHTSA to consider EJ and effects of
its proposed action on EJ communities--i.e., communities of color,
tribal communities, and other disadvantaged, underserved, or
historically marginalized communities that often absorb negative
environmental effects.''
---------------------------------------------------------------------------

    \640\ Notice of Intent To Prepare an Environmental Impact
Statement for MYs 2027 and Beyond Corporate Average Fuel Economy
Standards and MYs 2029 and Beyond Heavy-Duty Pickup Trucks and Vans
Vehicle Fuel Efficiency Improvement Program Standards (87 FR 50386).
    \641\ Docket ID NHTSA-2022-0075-0011.
---------------------------------------------------------------------------

    Hyundai stated that ``in evaluating the range of alternatives for
establishing new CAFE standards, Hyundai encourages NHTSA to consider
alternatives that have lower impact on, and in fact benefit, EJ
communities.'' Hyundai stated that more specifically, NHTSA should
consider ``developing and evaluating an optional program that would
allow a manufacturer to earn some type of value or flexibility--whether
that includes an additional type of credit or a higher flexibility
cap--for vehicles that benefit EJ communities.'' Hyundai said that
NHTSA is well-suited to explore this concept, given NHTSA's precedent
for such additional types of optional credits or flexibilities, ``such
as AC credits and off-cycle credits as part of the CAFE program.''
Hyundai proposed that ``[t]he optional credits could be based on the
placement of certain vehicle types in programs intended to provide
verifiable benefits to EJ communities and could be equivalent to a
corresponding EPA program that generates GHG credits. Similar to the
off-cycle program, these credits could be converted/adjusted to apply
to a manufacturer's fuel economy fleet performance.''
    Hyundai encouraged NHTSA to ``consider such alternatives that will
allow manufacturers the option to earn additional credits for focusing
on vehicle development and deployment programs that benefit EJ
communities . . . Proposed additional ``EJ credits'' could apply to
EVs, PHEV, HEVs, and better-performing combustion engines, such as
super-ultra low emission vehicles (``SULEVs'') providing verifiable
benefits to EJ communities.'' Hyundai stated that in addition to NHTSA
evaluating alternatives that ``create an incentive for high-performing
fuel economy and advanced technology vehicles that benefit EJ
communities, such as the optional programs described above,'' NHTSA
should ``analyze the impacts on these communities of programs that do
not create such an incentive.'' Hyundai stated that they would provide
more specific suggestions for implementation of such alternatives as
part of the comment process for this proposal.
    Because creation of any such program would be a part of NHTSA's
CAFE Compliance and Enforcement program, we respond to this comment
here rather than in the Draft EIS.
    NHTSA has been examining EJ considerations of CAFE standards since
the earliest CAFE EISs in the 2000s.\642\ Since that time, we have
received feedback from States, non-government organizations, Native
American Tribes, faith groups, and individuals on how

NHTSA can better consider EJ when setting CAFE standards. It is an
important milestone that automakers now want to begin engaging in this
conversation, as including communities with EJ concerns in their
product planning can provide verifiable benefits to those communities,
as Hyundai recognized.
---------------------------------------------------------------------------

    \642\ See Draft Environmental Impact Statement Corporate Average
Fuel Economy Standards, Passenger Cars and Light Trucks, MYs 2012-
2016 (September 2009).
---------------------------------------------------------------------------

    While NHTSA shares Hyundai's desire for underserved and EJ
communities to have greater access to higher fuel economy vehicles--and
welcomes any further suggestions from Hyundai or other stakeholders
about how NHTSA could, consistent with its statutory authority, work
with the automotive industry to structure the CAFE program to better
benefit communities with EJ concerns--NHTSA did not propose an EJ
credit program as part of this document. The following section
discusses the factors that NHTSA considered in response to Hyundai's
comment. We believe framing these considerations will be instructive
for any more specific suggestions for implementations of EJ credits
from Hyundai or other stakeholders as part of the comment process for
this proposal.
    In addition to NEPA and its implementing regulations,\643\ relevant
E.O.s,\644\ and DOT Order 5610.2C, U.S. Department of Transportation
Actions to Address Environmental Justice in Minority Populations and
Low-Income Populations,\645\ NHTSA considers EJ as it sets vehicle fuel
economy standards pursuant to EPCA/EISA. Without repeating extensively
the purpose of EPCA, which is described above, ``Congress created
mandatory vehicle fuel economy standards, intended to be technology
forcing, with the recognition that ``market forces . . . may not be
strong enough to bring about the necessary fuel conservation which a
national energy policy demands.'' '' \646\ Congress provided one
explicit statutory flexibility for vehicle manufacturers in EPCA: when
a vehicle manufacturer's fleet achieves a higher CAFE value than its
CAFE standard, the fleet earns overcompliance credits that can be
carried backwards and forwards and traded between fleets, or to other
manufacturers.\647\ However, Congress recognized that one credit is not
necessarily equal to another,\648\ and ensured this flexibility would
conserve energy by commanding NHTSA to administer the credit program in
such a way that that total oil savings associated with the original
overcompliance would be preserved.\649\
---------------------------------------------------------------------------

    \643\ 42 U.S.C. 4321 et seq; 40 CFR parts 1500 through 1508.
    \644\ E.O. 12898 on Federal Actions To Address Environmental
Justice in Minority Populations and Low-Income Populations; E.O.
14008 on Tackling the Climate Crisis at Home and Abroad; E.O. 13990
on Protecting Public Health and the Environment and Restoring
Science to Tackle the Climate Crises; E.O. 13985 on Advancing Racial
Equity and Support for Underserved Communities Through the Federal
Government.
    \645\ DOT Order 5610.2C, U.S. Department of Transportation
Actions to Address Environmental Justice in Minority Populations and
Low-Income Populations (May 16, 2021). DOT's Order defines
``environmental justice'' as the fair treatment and meaningful
involvement of all people, regardless of race, ethnicity, income,
national origin, or educational level, with respect to the
development, implementation and enforcement of environmental laws,
regulations and policies. For the purpose of DOT's Environmental
Justice Strategy, fair treatment means that no population, due to
policy or economic disempowerment, is forced to bear a
disproportionate burden of the negative human health and
environmental impacts, including social and economic effects,
resulting from transportation decisions, programs and policies made,
implemented and enforced at the Federal, State, local or tribal
level.
    \646\ Ctr. for Auto Safe'y v. Nat'l Highway Traffic Safety
Admin., 793 F.2d 1322, 1339 (D.C. Cir. 1986) (citing S.REP. NO. 179,
94th Cong., 1st Sess. 2 (1975), U.S. Code Cong. & Admin.News 1975,
p. 1762).
    \647\ 49 U.S.C. 32903.
    \648\ For example, the fuel savings lost if the average fuel
economy of a manufacturer falls one-tenth of a mpg below the level
of a relatively low standard are greater than the fuel savings
gained by raising the average fuel economy of a manufacturer one-
tenth of a mpg above the level of a relatively high CAFE standard.
See also 73 FR 24462 (May 2, 2008), Table IX-I.--Comparison of Fuel
Savings at Different Fuel Economy Baselines.
    \649\ 49 U.S.C. 32903(f).
---------------------------------------------------------------------------

    NHTSA has created some additional flexibilities by regulation
consistent with its EPCA authority (not expressly included or
prohibited by EPCA) to harmonize better with some of EPA's programmatic
decisions under the CAA's more flexible regulatory structure. However,
neither flexibilities for AC efficiency and off-cycle technology fuel
consumption improvement values,\650\ nor the incentive for pickup truck
performance and hybridization,\651\ seem to provide the precedent that
Hyundai suggests. These flexibilities are intended to promote greater
fuel economy by recognizing technologies that reduce gasoline
consumption, and in particular in vehicle classes that previously
struggled to adopt fuel saving technology while maintaining utility
requirements. NHTSA has declined to provide credits for vehicle
technologies that do not provide fuel savings connected to a specific
technology's adoption.\652\ Hyundai's proposal for EJ credits would not
promote greater fuel economy. Instead, the proposal would grant credit
for technologies that are already present on vehicles.
---------------------------------------------------------------------------

    \650\ Vehicle manufacturers have the option to generate
``credits'' for off-cycle technologies and improved AC systems under
the EPA's CO2 program; however, under NHTSA's CAFE
program, manufacturers receive a fuel consumption improvement value
(FCIV) equal to the value of the technology benefit not captured on
the 2-cycle test. The FCIV is not a ``credit'' in the NHTSA CAFE
program--unlike, for example, the statutory overcompliance credits
described above--but FCIVs directly increase the reported fuel
economy of a manufacturer's fleet, which is used to determine
compliance. FCIVs are only a ``credit'' to the extent that a
manufacturer using these specific technologies on a vehicle
increases their fleet fuel economy level above and beyond their CAFE
standard. NHTSA provides for these FCIVs because there is a direct
link between these technologies improving the fuel economy of a
vehicle in real-world operation above and beyond the vehicle's rated
fuel economy value on the two-cycle test.
    \651\ See 49 (copyright) 553.6(c). Like AC and off-cycle FCIVs,
the performance and hybrid pickup truck incentive in NHTSA's program
is an adjustment to the fuel economy value of a vehicle, per EPA's
EPCA measurement and testing authority, and not a ``credit.'' EPA
and NHTSA ensured that these credits would not dilute potential
increases in fleet fuel economy or decreases in GHG emissions by
only providing the credit if a manufacturer includes the technology
on significant increasing quantities of its full-sized pickup
trucks. For example, in MY 2021 a manufacturer could only receive
the credit if at least 80% of its full-size pickup trucks met the
incentive's requirements. Note also that to date, no manufacturer
has claimed the hybrid and performance pickup truck credit.
    \652\ 77 FR 62732-3 (Oct. 15, 2012) (``The agencies believe that
there is a very significant distinction between technologies
providing direct and reliably quantifiable improvements to fuel
economy and GHG emission reductions, and technologies which provide
those improvements by indirect means, where the improvement is not
reliably quantifiable, and may be speculative (or in many instances,
non-existent), or may provide benefit to other vehicles on the road
more than for themselves. As the agencies have reiterated, and many
commenters have likewise maintained, credits should be available
only for technologies providing real-world improvements, the
improvements must be verifiable, and the process by which credits
are granted and implemented must be transparent.'').
---------------------------------------------------------------------------

    This is not the first time that manufacturers have requested
credits for technologies that are already present on a vehicle that
contribute to the vehicle's increased fuel economy or decreased
CO2 emissions values.\653\ In the 2012 rule for MYs 2017 and
beyond, EPA and NHTSA declined to grant off-cycle credits and FCIVs for
technologies that are integral or inherent to the basic vehicle design
like the vehicle's engine or transmission. The agencies appropriately
stated then that ``there are fundamental issues as to whether these
technologies would ever warrant off-cycle credits. Being integral,
there is no need to provide an incentive for their use, and (more
important), these technologies would be incorporated regardless.
Granting credits would be a windfall.'' \654\ The powertrain
technologies that Hyundai proposes to be eligible for EJ credits
include all of the same technologies that are integral to basic vehicle
designs required by

more stringent standards under EPCA and the CAA.
---------------------------------------------------------------------------

    \653\ 77 FR 62732 (Oct. 15, 2012).
    \654\ Id.
---------------------------------------------------------------------------

    It is not at all clear that EPCA would allow such a program, but
NHTSA also believes that any new incentive program for vehicle
manufacturers would need to (1) provide verifiable benefits for EJ
communities, and (2) support EPCA's overarching purpose of energy
conservation. Accordingly, we have identified some initial substantive
issues and questions that we believe would be helpful for Hyundai or
any other stakeholder to address before moving forward submitting a
proposal to NHTSA for EJ or other similar credits.
    CAFE standards have the potential to benefit communities with
environmental justice concerns. Hyundai appears to imply in their
comment letter that CAFE regulatory alternatives that do not include an
EJ credit would not benefit EJ communities.\655\ There are a few
reasons why we do not believe this is the case.
---------------------------------------------------------------------------

    \655\ Hyundai, at 4. (``At this early scoping stage, we
encourage NHTSA to consider and evaluate such alternatives that
create an incentive for high-performing fuel economy and advanced
technology vehicles that benefit EJ communities, such as the
optional programs described above. For comprehensive analysis, we
also recommend that NHTSA analyze the impacts on these communities
of programs that do not create such an incentive.'').
---------------------------------------------------------------------------

    Evidence suggests that the CAFE program produces fuel savings
benefits for purchasers of vehicles, and that these benefits may be
particularly important to households that spend a disproportionate
share of their income on fuel, like lower income households. While it
is true that lower income households are more likely to purchase used
vehicles, and NHTSA's authority to regulate vehicle fuel economy
applies to new vehicles that a manufacturer produces for sale in each
MY,\656\ research suggests that all income groups will benefit from
improvements in fuel efficiency. The 2015 NAS report found that CAFE
standards made both new and used cars more affordable due to the value
of added fuel savings realized over the lifetime of the vehicle.\657\
Additionally, the net benefits extended to consumers from the standards
were estimated to be greater for low-income households.\658\
---------------------------------------------------------------------------

    \656\ NHTSA does consider the impact of CAFE regulatory costs on
new vehicles when setting standards, and in particular for this
proposal, concluded that the increases in regulatory costs are more
than offset by the fuel savings that consumers will experience.
However, some factors related to vehicle affordability--specifically
manufacturer and dealer pricing strategies--are beyond NHTSA's
control.
    \657\ 2015 NAS report, at 331.
    \658\ Id. The NAS report estimated that some low-income
households spent almost 50 percent more on fuel than on vehicles in
2011. The study estimated that the standards assessed in 2015 would
increase vehicle prices by about 6 percent but reduce fuel
consumption by one-third relative to the 2016 standards.
---------------------------------------------------------------------------

    More recent data affirms that fuel spending constitutes a higher
percentage of earnings in low-income households: U.S. households
earning less than $25,000 spend 50 percent of their income on vehicle
ownership and operation annually, or about $7,400.\659\ Research has
shown that CAFE standards provide distributed benefits across household
income ranges, with low-income households in the lower 80 percent of
the U.S. income distribution receiving annual net savings on vehicles
and fuel estimated between 0.5 and 2.0 percent of their average annual
income from 1980 to 2014.\660\
---------------------------------------------------------------------------

    \659\ Bauer, Gordon & Hsu, Chih-Wei & Lutsey, Nicholas. (2021).
When might lower-income drivers benefit from electric vehicles?
Quantifying the economic equity implications of electric vehicle
adoption. (citing U.S. Bureau of Labor Statistics, 2020).
    \660\ Greene & Welch, 2018, Energy Policy, 122: 528-541.
---------------------------------------------------------------------------

    Separately, this proposal incorporates the use of a proposed PEF
value that better reflects EV fuel efficiency and also a less stringent
rate of CAFE increase for passenger cars than light trucks. This should
allow manufacturers to increase their fleet fuel economy so that fuel
economy improvements are not concentrated in either the vehicles that
were traditionally the smallest and least expensive (and would then
become more expensive from the addition of fuel-economy-improving
technology), or in the most expensive vehicles (which would have more
fuel economy improvements but would not be targeted towards EJ
communities). This will also benefit buyers in the used car market
(who, again, are more likely to be low-income buyers), as they will
have more options for fuel efficient vehicles. The new standards
should, in theory, incentivize manufacturers to increase the fuel
economy of their entire fleet, and the entire range of income groups
would receive distributed benefits accordingly.
    CAFE standards also have the potential to benefit EJ communities
because increasing fleet fuel economy produces important environmental
and health-related benefits, including reductions in GHGs as well as
reductions in harmful air pollutants that are emitted from upstream
sources of gasoline production and from vehicle exhaust systems.
    As noted in the Draft EIS, a body of scientific literature signals
disproportionate exposure of low-income and minority populations to
poor air quality and proximity of minority and low-income populations
to industrial, manufacturing, and hazardous waste facilities like oil
production and refining facilities. Similarly, research shows that
minority and low-income populations are disproportionately located in
proximity to electric power plants and are thus exposed to pollutants
associated with power generation. Research also shows that communities
that live near heavily trafficked roadways--disproportionately low
income and communities of color--are disproportionately exposed to
vehicle exhaust pollutants. Finally, research demonstrates that EJ
communities are more likely to suffer the consequences of climate
change including more ozone pollution and more exposure to potentially
deadly heatwaves, among other impacts. Health-related sensitivities in
low-income and minority populations additionally increase the risk of
damaging impacts from poor air quality under climate change,
underscoring the potential benefits of improving air quality for
communities overburdened by poor environmental quality.
    The combined CAFE and HDPUV standards contribute to a reduction in
fuel use, meaning that to the extent that minority and low-income
populations live closer to upstream sources of vehicle-related
emissions, like oil extraction, distribution, and refining facilities
or are more susceptible to their impacts (e.g., health and other
impacts relating to emissions, vibration, or noise from the oil
extraction, distribution, and refining process), they are more likely
to experience reduced impacts resulting from a reduction in these
activities. In addition, negative impacts from electric power plant
emissions may be mitigated to the extent that the electrical grid
becomes cleaner and draws more from renewable energy generation, which
is projected to occur. The EIA's AEO 2023 projects that renewable
sources of energy will displace fossil fuels in the electric power
sector due to declining renewable technology costs and rising subsidies
for renewable power. Finally, emissions of most vehicle-based criteria
pollutant and air toxic emissions are also anticipated to decrease
across all alternatives analyzed in the Draft EIS compared to the No-
Action Alternative, even considering an increase in vehicle miles
traveled due to vehicles becoming more efficient (i.e., the rebound
effect). When the power sector emission projections are updated in the
analysis that will accompany the final standards, these emission
reductions are likely to be greater and universal across different
pollutant types.
    Relatedly, adverse health impacts from criteria pollutant emissions
are

projected to decrease nationwide under each of the action alternatives
compared to the No-Action Alternative. To the extent that EJ
communities are disproportionately located closer to sources of
upstream and downstream pollution that decrease as a result of
increased CAFE standards, those communities could see health benefits
due to decreasing emissions.
    Finally, all action alternatives are projected to result in small
but incrementally important decreases in global mean surface
temperature, atmospheric CO2 concentrations, sea level rise,
and increases in ocean pH. The reduction of air pollutants and GHGs
could result in improvements in air quality, decreases in total health
effects, and a reduction in the number and severity of outbreaks of
vector-borne illnesses related to climate change for minority and low-
income communities. Fleetwide improvements in fuel economy, in other
words, have the potential to benefit EJ communities by reducing
disproportionate environmental impacts on those overburdened
communities.
    Ensuring the incentive benefits environmental justice communities
by not ``double counting'' across regulatory programs. Hyundai stated
that ``[p]roposed additional ``EJ credits'' could apply to EVs, PHEV,
HEVs, and better-performing combustion engines, such as [SULEVs]
providing verifiable benefits to EJ communities.'' However, Congress
has already provided an explicit incentive in EPCA for manufacturers to
produce better-performing combustion engines; manufacturers earn
overcompliance credits when their fleet of vehicles performs at a level
more than the ``maximum feasible'' level that NHTSA determines can be
achieve in a MY.\661\ Relatedly, Congress also provided an incentive in
EPCA to encourage the production of alternative fueled vehicles.\662\
Similarly, Congress requires manufacturers to sell better-forming
combustion engines such as SULEVs under the CAA. In fact, under EPA's
Tier 3 emissions standards and California's Low Emission Vehicle (LEV
III) standards, vehicle exhaust emissions are required to decrease
significantly by MY 2025.\663\
---------------------------------------------------------------------------

    \661\ 49 U.S.C. 32903.
    \662\ See 87 FR 25995-6 (May 2, 2022) (``NHTSA agrees that the
intent of 32902(h), when combined with the other statutory
incentives in EPCA such as those at 49 U.S.C. 32905 and 32906, was
to encourage production of alternative fueled vehicles. NHTSA
disagrees that the approach taken [in regulations setting CAFE
standards] to modeling the current existence of alternative fueled
vehicles (AFVs) and their possible application in MYs beyond those
for which we are setting standards in any way disincentivizes their
application or conflicts with EPA or Administration electrification
goals.'').
    \663\ 79 FR 23414 (April 28, 2014); U.S. EPA Green Vehicle
Guide, Smog Rating (last updated April 4, 2023), https://www.epa.gov/greenvehicles/smog-rating; 13 CCR 1961.2.
---------------------------------------------------------------------------

    It is not clear how giving manufacturers a credit for doing
something they are already required to do would benefit communities
with EJ concerns without simply providing a credit windfall for
manufacturers, which would itself reduce the air pollution reduction
co-benefits which directly benefit these communities.
    Ensuring continued increases in overall fleet fuel economy in
accordance with EPCA. While the CAFE standards proposed will ensure
that manufacturers improve the fuel economy level of vehicles across
their entire fleets, NHTSA is concerned that EJ credits may actually
create a perverse incentive by allowing fuel economy increases in a
manufacturer's fleet to stagnate. EJ credits may allow manufacturers to
produce a few highly fuel-efficient vehicles that allow several other
low-efficiency vehicles to be sold. Credits (overcompliance, proposed
EJ, or otherwise) allow manufacturers to meet their CAFE standard
without applying additional technology to vehicles. And, as Congress
recognized in EPCA through its mandate to NHTSA to preserve total oil
savings in credit exchanges, a gallon of fuel saved by technology
application is worth more than a credit applied so that a manufacturer
does not have to improve its fleet fuel economy through technology
application. NHTSA is interested in comments from Hyundai or other
stakeholders about how EJ credits would ensure continued increases in a
manufacturer's fleet fuel economy level. Would a minimum production
threshold, like with the full-size pickup truck incentives, be
appropriate in a proposed EJ credit program?
    Separate from Hyundai's request, NHTSA remains mindful of its
obligations to consider the effects of its rules on EJ communities, in
accordance with NEPA, all relevant EOs, including President Biden's
E.O. 14008, and the DOT's EJ strategies. The Draft EIS and this
preamble both discuss NHTSA's considerations about the effects of this
proposal on EJ communities. In addition, Section V of this preamble
discusses NHTSA's considerations on the additional cost of technology
required to meet the proposal's preferred level of CAFE standards.

VII. Public Participation

    NHTSA requests comments on all aspects of this NPRM. This section
describes how you can participation in this process.

How do I prepare and submit comments?

    Your comments must be written and in English.\664\ To ensure that
your comments are correctly filed in the docket, please include the
docket number NHTSA-2023-0022 in your comments. Your comments must not
be more than 15 pages long.\665\ NHTSA established this limit to
encourage you to write your primary comments in a concise fashion.
However, you may attach necessary additional documents to your
comments, and there is no limit on the length of the attachments If you
are submitting comments electronically as a PDF (Adobe) file, we ask
that the documents please be scanned using the Optical Character
Recognition (OCR) process, thus allowing NHTSA to search and copy
certain portions of your submissions.\666\ Please note that pursuant to
the Data Quality Act, in order for substantive data to be relied upon
and used by NHTSA, it must meet the information quality standards set
forth in the OMB and DOT Data Quality Act guidelines. Accordingly, we
encourage you to consult the guidelines in preparing your comments.
OMB's guidelines may be accessed at https://www.gpo.gov/fdsys/pkg/FR-2002-02-22/pdf/R2-59.pdf. DOT's guidelines may be accessed at https://www.transportation.gov/dot-information-dissemination-quality-guidelines.
---------------------------------------------------------------------------

    \664\ 49 CFR 553.21.
    \665\ Id.
    \666\ OCR is the process of converting an image of text, such as
a scanned paper document or electronic fax file, into computer-
editable text.
---------------------------------------------------------------------------

Tips for Preparing Your Comments

    When submitting comments, please remember to:
     Identify the rulemaking by docket number and other
identifying information (subject heading, Federal Register date, and
page number).
     Explain why you agree or disagree, suggest alternatives,
and substitute language for your requested changes.
     Describe any assumptions and provide any technical
information and/or data that you used.
     If you estimate potential costs or burdens, explain how
you arrived at your estimate in sufficient detail to allow for it to be
reproduced.
     Provide specific examples to illustrate your concerns and
suggest alternatives.

     Explain your views as clearly as possible, avoiding the
use of profanity or personal threats.
     Make sure to submit your comments by the comment period
deadline identified in the DATES section above.

How can I be sure that my comments were received?

    If you submit your comments to NHTSA's docket by mail and wish DOT
Docket Management to notify you upon receipt of your comments, please
enclose a self-addressed, stamped postcard in the envelope containing
your comments. Upon receiving your comments, Docket Management will
return the postcard by mail.

How do I submit confidential business information?

    If you wish to submit any information under a claim of
confidentiality, you should submit your complete submission, including
the information you claim to be CBI, to NHTSA's Office of the Chief
Counsel. When you send a comment containing CBI, you should include a
cover letter setting forth the information specified in our CBI
regulation.\667\ In addition, you should submit a copy from which you
have deleted the claimed CBI to the docket by one of the methods set
forth above.
---------------------------------------------------------------------------

    \667\ See 49 CFR part 512.
---------------------------------------------------------------------------

    NHTSA is currently treating electronic submission as an acceptable
method for submitting CBI to NHTSA under 49 CFR part 512. Any CBI
submissions sent via email should be sent to an attorney in the Office
of the Chief Counsel at the address given above under FOR FURTHER
INFORMATION CONTACT. Likewise, for CBI submissions via a secure file
transfer application, an attorney in the Office of the Chief Counsel
must be set to receive a notification when files are submitted and have
access to retrieve the submitted files. At this time, regulated
entities should not send a duplicate hardcopy of their electronic CBI
submissions to DOT headquarters. If you have any questions about CBI or
the procedures for claiming CBI, please consult the person identified
in the FOR FURTHER INFORMATION CONTACT section.

Will NHTSA consider late comments?

    NHTSA will consider all comments received before the close of
business on the comment closing date indicated above under DATES. To
the extent practicable, we will also consider comments received after
that date. If interested persons believe that any information that
NHTSA places in the docket after the issuance of the NPRM affects their
comments, they may submit comments after the closing date concerning
how NHTSA should consider that information for the final rule. However,
NHTSA's ability to consider any such late comments in this rulemaking
will be limited due to the time frame for issuing a final rule.
    If a comment is received too late for us to practicably consider in
developing a final rule, we will consider that comment as an informal
suggestion for future rulemaking action.

How can I read the comments submitted by other people?

    You may read the materials placed in the dockets for this document
(e.g., the comments submitted in response to this document by other
interested persons) at any time by going to https://www.regulations.gov. Follow the online instructions for accessing the
dockets. You may also read the materials at the DOT Docket Management
Facility by going to the street address given above under ADDRESSES.

How do I participate in the public hearings?

    NHTSA will hold one virtual public hearing during the public
comment period. NHTSA will announce the specific date and web address
for the hearing in a supplemental Federal Register notification. NHTSA
will accept oral and written comments to the rulemaking documents and
will also accept comments to the Draft EIS at this hearing. The hearing
will start at 9 a.m. Eastern time and will continue until everyone has
had a chance to speak.
    NHTSA will conduct the hearing informally, and technical rules of
evidence will not apply. We will arrange for a written transcript of
each hearing to be posted in the dockets as soon as it is available and
keep the official record of the hearing open for 30 days following the
hearing to allow you to submit supplementary information.

How do I comment on the Draft Environmental Impact Statement?

    The Draft EIS associated with this proposal has a unique public
docket number and is available Docket No. NHTSA-2022-0075. Comments on
the Draft EIS can be submitted electronically at https://www.regulations.gov, at this docket number. You may also mail or hand
deliver comments to Docket Management, U.S. Department of
Transportation, 1200 New Jersey Avenue SE, Room W12-140, Washington, DC
20590 (referencing Docket No. NHTSA-2022-0075), between 9 a.m. and 5
p.m., Monday through Friday, except on Federal holidays. To be sure
that someone is there to help you, please call<PHONE_NUMBER> before
coming. All comments and materials received, including the names and
addresses of the commenters who submit them, will become part of the
administrative record and will be posted on the internet without change
at https://www.regulations.gov.

VIII. Regulatory Notices and Analyses

A. Executive Order 12866, Executive Order 13563

    E.O. 12866, ``Regulatory Planning and Review'' (58 FR 51735, Oct.
4, 1993), as amended by E.O. 13563, ``Improving Regulation and
Regulatory Review'' (76 FR 3821, Jan. 21, 2011) and E.O. 14094,
``Modernizing Regulatory Review'' (88 FR 21879), provide for making
determinations whether a regulatory action is ``significant'' and
therefore subject to the Office of Management and Budget (OMB) review
process and to the requirements of the E.O. Under these E.O.s, this
action is an ``significant regulatory action'' under section 3(f)(1) of
Executive Order 12866 because it is likely to have an annual effect on
the economy of $200 million or more. Accordingly, NHTSA submitted this
action to OMB for review and any changes made in response to
interagency feedback submitted via the OMB review process have been
documented in the docket for this action. The estimated benefits and
costs of this proposal are described above and in the PRIA, which is
located in the docket and on NHTSA's website.

B. DOT Regulatory Policies and Procedures

    This proposal is also significant within the meaning of the DOT's
Regulatory Policies and Procedures. The estimated benefits and costs of
the proposal are described above and in the PRIA, which is located in
the docket and on NHTSA's website.

C. Executive Order 13990

    E.O. 14037, ``Strengthening American Leadership in Clean Cars and
Trucks'' (86 FR 43583, Aug. 10, 2021), directs the Secretary of
Transportation (by delegation, NHTSA) to consider beginning work on a
rulemaking under EISA to establish new fuel economy standards for
passenger cars and LD trucks beginning with MY 2027 and extending
through and including at least MY 2030, and to consider beginning work
on a rulemaking under EISA to establish new fuel efficiency standards
for HDPUVs beginning with MY 2028

and extending through and including at least MY 2030.\668\ The E.O.
directs the Secretary to consider issuing any final rule no later than
July 2024; \669\ to coordinate with the EPA and the Secretaries of
Commerce, Labor, and Energy; \670\ and to coordinate this work, ``as
appropriate and consistent with applicable law, with the State of
California as well as other States that are leading the way in reducing
vehicle emissions, including by adopting California's standards.''
\671\ The Secretary is also directed to ``seek input from a diverse
range of stakeholders, including representatives from labor unions,
States, industry, EJ organizations, and public health experts.'' \672\
---------------------------------------------------------------------------

    \668\ 86 FR 43583 (Aug. 10, 2021), Sec. 2(b) and (c).
    \669\ Id., Sec. 5(b).
    \670\ Id., Sec. 6(a) and (b).
    \671\ (copyright)., Sec. 6(c).
    \672\ Id., Sec. 6(d).
---------------------------------------------------------------------------

    This proposal seeks to follow the directions of this E.O. It is
proposed under NHTSA's statutory authorities as set forth in EISA. It
proposes new CAFE standards for passenger cars and light trucks
beginning in MY 2027, and new fuel efficiency standards for HDPUVs
beginning in MY 2030 due to statutory lead time and stability
requirements. NHTSA coordinated with both EPA and with the State of
California in developing this proposal, and the proposal also accounts
for the views provided by labor unions, States, industry, and EJ
organizations.

D. Environmental Considerations

1. National Environmental Policy Act (NEPA)
    Concurrently with this NPRM, NHTSA is releasing a Draft EIS,
pursuant to the National Environmental Policy Act, 42 U.S.C. 4321
through 4347, and implementing regulations issued by the Council on
Environmental Quality (CEQ), 40 CFR part 1500, and NHTSA, 49 CFR part
520. NHTSA prepared the Draft EIS to analyze and disclose the potential
environmental impacts of the proposed CAFE and HDPUV FE standards and a
range of alternatives. The Draft EIS analyzes direct, indirect, and
cumulative impacts and analyzes impacts in proportion to their
significance. It describes potential environmental impacts to a variety
of resources, including fuel and energy use, air quality, climate, land
use and development, hazardous materials and regulated wastes,
historical and cultural resources, and EJ. The Draft EIS also describes
how climate change resulting from global carbon dioxide emissions
(including CO2 emissions attributable to the U.S. LD and
HDPUV transportation sectors under the alternatives considered) could
affect certain key natural and human resources. Resource areas are
assessed qualitatively and quantitatively, as appropriate, in the Draft
EIS.
    NHTSA has considered the information contained in the Draft EIS as
part of developing this proposal. The Draft EIS is available for public
comment; instructions for the submission of comments are included
inside the document. NHTSA will simultaneously issue the Final
Environmental Impact Statement and Record of Decision, pursuant to 49
U.S.C. 304a(b), unless it is determined that statutory criteria or
practicability considerations preclude simultaneous issuance. For
additional information on NHTSA's NEPA analysis, please see the Draft
EIS.
2. Clean Air Act (CAA) as Applied to NHTSA's Proposal
    The CAA (42 U.S.C. 7401 et seq.) is the primary Federal legislation
that addresses air quality. Under the authority of the CAA and
subsequent amendments, EPA has established National Ambient Air Quality
Standards (NAAQS) for six criteria pollutants, which are relatively
commonplace pollutants that can accumulate in the atmosphere as a
result of human activity. EPA is required to review NAAQS every five
years and to revise those standards as may be appropriate considering
new scientific information.
    The air quality of a geographic region is usually assessed by
comparing the levels of criteria air pollutants found in the ambient
air to the levels established by the NAAQS (taking into account, as
well, the other elements of a NAAQS: averaging time, form, and
indicator). Concentrations of criteria pollutants within the air mass
of a region are measured in parts of a pollutant per million parts
(ppm) of air or in micrograms of a pollutant per cubic meter ([mu]g/m3)
of air present in repeated air samples taken at designated monitoring
locations using specified types of monitors. These ambient
concentrations of each criteria pollutant are compared to the levels,
averaging time, and form specified by the NAAQS in order to assess
whether the region's air quality is in attainment with the NAAQS.
    When the measured concentrations of a criteria pollutant within a
geographic region are below those permitted by the NAAQS, EPA
designates the region as an attainment area for that pollutant, while
regions where concentrations of criteria pollutants exceed Federal
standards are called nonattainment areas. Former nonattainment areas
that are now in compliance with the NAAQS are designated as maintenance
areas. Each State with a nonattainment area is required to develop and
implement a State Implementation Plan (SIP) documenting how the region
will reach attainment levels within time periods specified in the CAA.
For maintenance areas, the SIP must document how the State intends to
maintain compliance with the NAAQS. EPA develops a Federal
Implementation Plan (FIP) if a State fails to submit an approvable plan
for attaining and maintaining the NAAQS. When EPA revises a NAAQS, each
State must revise its SIP to address how it plans to attain the new
standard.
    No Federal agency may ``engage in, support in any way or provide
financial assistance for, license or permit, or approve'' any activity
that does not ``conform'' to a SIP or FIP after EPA has approved or
promulgated it.\673\ Further, no Federal agency may ``approve, accept
or fund'' any transportation plan, program, or project developed
pursuant to Title 23 or Chapter 53 of Title 49, U.S.C., unless the
plan, program, or project has been found to ``conform'' to any
applicable implementation plan in effect.\674\ The purpose of these
conformity requirements is to ensure that Federally sponsored or
conducted activities do not interfere with meeting the emissions
targets in SIPs or FIPs, do not cause or contribute to new violations
of the NAAQS, and do not impede the ability of a State to attain or
maintain the NAAQS or delay any interim milestones. EPA has issued two
sets of regulations to implement the conformity requirements:
---------------------------------------------------------------------------

    \673\ 42 U.S.C. 7506(c)(1).
    \674\ 42 U.S.C. 7506(c)(2).
---------------------------------------------------------------------------

    (1) The Transportation Conformity Rule \675\ applies to
transportation plans, programs, and projects that are developed,
funded, or approved under 23 U.S.C. (Highways) or 49 U.S.C. Chapter 53
(Public Transportation)
---------------------------------------------------------------------------

    \675\ 40 CFR part 51, subpart T, and part 93, subpart A.
---------------------------------------------------------------------------

    (2) The General Conformity Rule \676\ applies to all other Federal
actions not covered under transportation conformity. The General
Conformity Rule establishes emissions thresholds, or de minimis levels,
for use in evaluating the conformity of an action that results in
emissions increases.\677\ If the net increases of direct and indirect
emissions exceed any of these thresholds, and the action is not
otherwise exempt, then a conformity

determination is required. The conformity determination can entail air
quality modeling studies, consultation with EPA and state air quality
agencies, and commitments to revise the SIP or to implement measures to
mitigate air quality impacts.
---------------------------------------------------------------------------

    \676\ 40 CFR part 51, subpart W, and part 93, subpart B.
    \677\ 40 CFR 93.153(b).
---------------------------------------------------------------------------

    The proposed CAFE and HDPUV FE standards and associated program
activities are not developed, funded, or approved under 23 U.S.C. or 49
U.S.C. Chapter 53. Accordingly, this proposed action and associated
program activities would not be subject to transportation conformity.
Under the General Conformity Rule, a conformity determination is
required where a Federal action would result in total direct and
indirect emissions of a criteria pollutant or precursor originating in
nonattainment or maintenance areas equaling or exceeding the rates
specified in 40 CFR 93.153(b)(1) and (2). As explained below, NHTSA's
action would result in neither direct nor indirect emissions as defined
in 40 CFR 93.152.
    The General Conformity Rule defines direct emissions as ``those
emissions of a criteria pollutant or its precursors that are caused or
initiated by the Federal action and originate in a nonattainment or
maintenance area and occur at the same time and place as the action and
are reasonably foreseeable.'' \678\ NHTSA's action would set fuel
economy standards for passenger cars and light trucks and fuel
efficiency standards for HDPUVs. It therefore would not cause or
initiate direct emissions consistent with the meaning of the General
Conformity Rule.\679\ Indeed, the proposal in aggregate reduces
emissions, and to the degree the model predicts small (and time-
limited) increases, these increases are based on a theoretical response
by individuals to fuel prices and savings, which are at best indirect.
---------------------------------------------------------------------------

    \678\ 40 CFR 93.152.
    \679\ Dep't of Transp. v. Pub. Citizen, 541 U.S.752 at 772
(``[T]he emissions from the Mexican trucks are not `direct' because
they will not occur at the same time or at the same place as the
promulgation of the regulations.''). NHTSA's action is to establish
fuel economy standards for MY 2021-2026 passenger car and light
trucks; any emissions increases would occur in a different place and
well after promulgation of the final rule.
---------------------------------------------------------------------------

    Indirect emissions under the General Conformity Rule are ``those
emissions of a criteria pollutant or its precursors (1) that are caused
or initiated by the federal action and originate in the same
nonattainment or maintenance area but occur at a different time or
place as the action; (2) that are reasonably foreseeable; (3) that the
agency can practically control; and (4) for which the agency has
continuing program responsibility.'' \680\ Each element of the
definition must be met to qualify as indirect emissions. NHTSA has
determined that, for purposes of general conformity, emissions (if any)
that may result from the proposed fuel economy and fuel efficiency
standards would not be caused by the agency's action, but rather would
occur because of subsequent activities the agency cannot practically
control. ``[E]ven if a Federal licensing, rulemaking or other approving
action is a required initial step for a subsequent activity that causes
emissions, such initial steps do not mean that a Federal agency can
practically control any resulting emissions.'' \681\
---------------------------------------------------------------------------

    \680\ 40 CFR 93.152.
    \681\ 40 CFR 93.152.
---------------------------------------------------------------------------

    As the CAFE and HDPUV FE programs use performance-based standards,
NHTSA cannot control the technologies vehicle manufacturers use to
improve the fuel economy of passenger cars and light trucks and fuel
efficiency of HDPUVs. Furthermore, NHTSA cannot control consumer
purchasing (which affects average achieved fleetwide fuel economy and
fuel efficiency) and driving behavior (i.e., operation of motor
vehicles, as measured by VMT). It is the combination of fuel economy
and fuel efficiency technologies, consumer purchasing, and driving
behavior that results in criteria pollutant or precursor emissions. For
purposes of analyzing the environmental impacts of the alternatives
considered under NEPA, NHTSA has made assumptions regarding all of
these factors. NHTSA's Draft EIS projects that increases in air toxics
and criteria pollutants would occur in some nonattainment areas under
certain alternatives in the near term, although over the longer term,
all action alternatives see improvements. However, the proposed
standards and alternatives do not mandate specific manufacturer
decisions, consumer purchasing, or driver behavior, and NHTSA cannot
practically control any of them.\682\
---------------------------------------------------------------------------

    \682\ See, e.g., Dep't of Transp. v. Pub. Citizen, 541 U.S. 752,
772-73 (2004); S. Coast Air Quality Mgmt. Dist. v. Fed. Energy
Regulatory Comm'n, 621 F.3\d\ 1085, 1101 (9th Cir. 2010).
---------------------------------------------------------------------------

    In addition, NHTSA does not have the statutory authority or
practical ability to control the actual VMT by drivers. As the extent
of emissions is directly dependent on the operation of motor vehicles,
changes in any emissions that would result from NHTSA's proposed CAFE
and HDPUV FE standards are not changes NHTSA can practically control or
for which NHTSA has continuing program responsibility. Therefore, the
proposed CAFE and HDPUV FE standards and alternative standards
considered by NHTSA would not cause indirect emissions under the
General Conformity Rule, and a general conformity determination is not
required.
3. National Historic Preservation Act (NHPA)
    The NHPA (54 U.S.C. 300101 et seq.) sets forth government policy
and procedures regarding ``historic properties''--that is, districts,
sites, buildings, structures, and objects included on or eligible for
the National Register of Historic Places. Section 106 of the NHPA
requires Federal agencies to ``take into account'' the effects of their
actions on historic properties.\683\ NHTSA concludes that the NHPA is
not applicable to this proposal because the promulgation of CAFE
standards for passenger cars and light trucks and HDPUV FE standards
for HDPUVs is not the type of activity that has the potential to cause
effects on historic properties. However, NHTSA includes a brief,
qualitative discussion of the impacts of the action alternatives on
historical and cultural resources in the Draft EIS.
---------------------------------------------------------------------------

    \683\ Section 106 is now codified at 54 U.S.C. 306108.
Implementing regulations for the section 106 process are located at
36 CFR part 800.
---------------------------------------------------------------------------

4. Fish and Wildlife Conservation Act (FWCA)
    The FWCA (16 U.S.C. 2901 et seq.) provides financial and technical
assistance to States for the development, revision, and implementation
of conservation plans and programs for nongame fish and wildlife. In
addition, FWCA encourages all Federal departments and agencies to
utilize their statutory and administrative authorities to conserve and
to promote conservation of nongame fish and wildlife and their
habitats. NHTSA concludes that the FWCA does not apply to this proposal
because it does not involve the conservation of nongame fish and
wildlife and their habitats. However, NHTSA conducted a qualitative
review in its Draft EIS of the related direct, indirect, and cumulative
impacts, positive or negative, of the Proposed Action and alternatives
on potentially affected resources, including nongame fish and wildlife
and their habitats.
5. Coastal Zone Management Act (CZMA)
    The CZMA (16 U.S.C. 1451 et seq.) provides for the preservation,
protection, development, and (where

possible) restoration and enhancement of the Nation's coastal zone
resources. Under the statute, States are provided with funds and
technical assistance in developing coastal zone management programs.
Each participating State must submit its program to the Secretary of
Commerce for approval. Once the program has been approved, any activity
of a Federal agency, either within or outside of the coastal zone, that
affects any land or water use or natural resource of the coastal zone
must be carried out in a manner that is consistent, to the maximum
extent practicable, with the enforceable policies of the State's
program.\684\
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    \684\ 16 U.S.C. 1456(c)(1)(A).
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    NHTSA concludes that the CZMA does not apply to this proposal
because it does not involve an activity within, or outside of, the
nation's coastal zones that affects any land or water use or natural
resource of the coastal zone. NHTSA has, however, conducted a
qualitative review in the Draft EIS of the related direct, indirect,
and cumulative impacts, positive or negative, of the action
alternatives on potentially affected resources, including coastal
zones.
6. Endangered Species Act (ESA)
    Under section 7(a)(2) of the ESA, Federal agencies must ensure that
actions they authorize, fund, or carry out are ``not likely to
jeopardize the continued existence'' of any Federally listed threatened
or endangered species (collectively, ``listed species'') or result in
the destruction or adverse modification of the designated critical
habitat of these species.\685\ If a Federal agency determines that an
agency action may affect a listed species or designated critical
habitat, it must initiate consultation with the appropriate Service--
the U.S. Fish and Wildlife Service (FWS) of the Department of the
Interior (DOI) or the National Oceanic and Atmospheric Administration's
National Marine Fisheries Service of the Department of Commerce
(together, ``the Services'') or both, depending on the species
involved--in order to ensure that the action is not likely to
jeopardize the species or destroy or adversely modify designated
critical habitat.\686\ Under this standard, the Federal agency taking
action evaluates the possible effects of its action and determines
whether to initiate consultation.\687\
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    \685\ 16 U.S.C. 1536(a)(2).
    \686\ See 50 CFR 402.14.
    \687\ See 50 CFR 402.14(a) (``Each Federal agency shall review
its actions at the earliest possible time to determine whether any
action may affect listed species or critical habitat.'').
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    The section 7(a)(2) implementing regulations require consultation
if a Federal agency determines its action ``may affect'' listed species
or critical habitat.\688\ The regulations define ``effects of the
action'' as ``all consequences to listed species or critical habitat
that are caused by the proposed action, including the consequences of
other activities that are caused by the proposed action. A consequence
is caused by the proposed action if it would not occur but for the
proposed action and it is reasonably certain to occur.'' \689\ The
definition makes explicit a ``but for'' test and the concept of
``reasonably certain to occur'' for all effects.\690\ The Services have
defined ``but for'' causation to mean ``that the consequence in
question would not occur if the proposed action did not go forward. In
other words, if the agency fails to take the proposed action and the
activity would still occur, there is no `but for' causation. In that
event, the activity would not be considered an effect of the action
under consultation.'' \691\
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    \688\ 50 CFR 402.14(a). The recently issued final rule revising
the regulations governing the ESA section 7 consultation process was
published at 84 FR 44976 (Aug. 27, 2019). The effective date of the
new regulations was subsequently delayed to October 28, 2019. 84 FR
50333 (Sept. 25, 2019). As discussed in the text that follows, NHTSA
believes that the conclusion would be the same under both the
current and prior regulations.
    \689\ 50 CFR 402.02 (emphasis added), as amended by 84 FR 44976,
45016 (Aug. 27, 2019).
    \690\ The Services' prior regulations defined ``effects of the
action'' in relevant part as ``the direct and indirect effects of an
action on the species or critical habitat, together with the effects
of other activities that are interrelated or interdependent with
that action, that will be added to the environmental baseline.'' 50
CFR 402.02 (as in effect prior to Oct. 28, 2019). Indirect effects
were defined as ``those that are caused by the proposed action and
are later in time, but still are reasonably certain to occur.'' Id.
    \691\ 84 FR 44977 (Aug. 27, 2019) (``As discussed in the
proposed rule, the Services have applied the `but for' test to
determine causation for decades. That is, we have looked at the
consequences of an action and used the causation standard of `but
for' plus an element of foreseeability (i.e., reasonably certain to
occur) to determine whether the consequence was caused by the action
under consultation.''). We note that as the Services do not consider
this to be a change in their longstanding application of the ESA,
this interpretation applies equally under the prior regulations
(which were effective through October 28, 2019), and the current
regulations.
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    The ESA regulations also provide a framework for determining
whether consequences are caused by a proposed action and are therefore
``effects'' that may trigger consultation. The regulations provide in
part:
    To be considered an effect of a proposed action, a consequence must
be caused by the proposed action (i.e., the consequence would not occur
but for the proposed action and is reasonably certain to occur). A
conclusion of reasonably certain to occur must be based on clear and
substantial information, using the best scientific and commercial data
available. Considerations for determining that a consequence to the
species or critical habitat is not caused by the proposed action
include, but are not limited to:
    (1) The consequence is so remote in time from the action under
consultation that it is not reasonably certain to occur; or
    (2) The consequence is so geographically remote from the immediate
area involved in the action that it is not reasonably certain to occur;
or
    (3) The consequence is only reached through a lengthy causal chain
that involves so many steps as to make the consequence not reasonably
certain to occur.\692\
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    \692\ 50 CFR 402.17(b).
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    The regulations go on to make clear that the action agency must
factor these considerations into its assessments of potential
effects.\693\
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    \693\ 50 CFR 402.17(c) (``Required consideration. The provisions
in paragraphs (a) and (b) of this section must be considered by the
action agency and the Services.'').
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    The Services have previously provided legal and technical guidance
about whether CO2 emissions associated with a specific
proposed Federal action trigger ESA section 7(a)(2) consultation. NHTSA
analyzed the Services' history of actions, analysis, and guidance in
Appendix G of the MY 2012-2016 CAFE standards EIS and now incorporate
by reference that appendix here.\694\ In that appendix, NHTSA looked at
the history of the Polar Bear Special Rule and several guidance
memoranda provided by FWS and the U.S. Geological Survey. Ultimately,
DOI concluded that a causal link could not be made between
CO2 emissions associated with a proposed Federal action and
specific effects on listed species; therefore, no section 7(a)(2)
consultation would be required.
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    \694\ Available on NHTSA's Corporate Average Fuel Economy
website at https://static.nhtsa.gov/nhtsa/downloads/CAFE/2012-2016%20Docs-PCLT/2012-2016%20Final%20Environmental%20Impact%20Statement/Appendix_G_Endangered_Species_Act_Consideration.pdf.
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    Subsequent to the publication of that appendix, a court vacated the
Polar Bear Special Rule on NEPA grounds, though it upheld the ESA
analysis as having a rational basis.\695\ FWS then issued a revised
Final Special Rule for the Polar Bear.\696\ In that final rule, FWS
provided

that for ESA section 7, the determination of whether consultation is
triggered is narrow and focused on the discrete effect of the proposed
agency action. FWS wrote, ``[T]he consultation requirement is triggered
only if there is a causal connection between the proposed action and a
discernible effect to the species or critical habitat that is
reasonably certain to occur. One must be able to `connect the dots'
between an effect of a proposed action and an impact to the species and
there must be a reasonable certainty that the effect will occur.''
\697\ The statement in the revised Final Special Rule is consistent
with the prior guidance published by FWS and remains valid today.\698\
Likewise, the current regulations identify remoteness in time,
geography, and the causal chain as factors to be considered in
assessing whether a consequence is ``reasonably certain to occur.'' If
the consequence is not reasonably certain to occur, it is not an
``effect of a proposed action'' and does not trigger the consultation
requirement.
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    \695\ In re: Polar Bear Endangered Species Act Listing and
Section 4(D) Rule Litigation, 818 F.Supp.2d 214 (DDC Oct. 17, 2011).
    \696\ 78 FR 11766 (Feb. 20, 2013).
    \697\ 78 FR 11784-11785 (Feb. 20, 2013).
    \698\ See DOI Solicitor's Opinion No. M-37017, ``Guidance on the
Applicability of the Endangered Species Act Consultation
Requirements to Proposed Actions Involving the Emissions of
Greenhouse Gases'' (Oct. 3, 2008).
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    In this NPRM, NHTSA states that pursuant to section 7(a)(2) of the
ESA, NHTSA considered the effects of the proposed standards and
reviewed applicable ESA regulations, case law, and guidance to
determine what, if any, impact there might be to listed species or
designated critical habitat. NHTSA has considered issues related to
emissions of CO2 and other GHGs, and issues related to non-
GHG emissions. Based on this assessment, NHTSA determines that the
action of setting CAFE and HDPUV FE standards does not require
consultation under section 7(a)(2) of the ESA. Accordingly, NHTSA has
concluded its review of this action under section 7 of the ESA.
7. Floodplain Management (Executive Order 11988 and DOT Order 5650.2)
    These Orders require Federal agencies to avoid the long- and short-
term adverse impacts associated with the occupancy and modification of
floodplains, and to restore and preserve the natural and beneficial
values served by floodplains. E.O. 11988, ``Floodplain management''
(May 24, 1977), also directs agencies to minimize the impacts of floods
on human safety, health and welfare, and to restore and preserve the
natural and beneficial values served by floodplains through evaluating
the potential effects of any actions the agency may take in a
floodplain and ensuring that its program planning and budget requests
reflect consideration of flood hazards and floodplain management. DOT
Order 5650.2, ``Floodplain Management and Protection'' (April 23,
1979), sets forth DOT policies and procedures for implementing E.O.
11988. The DOT Order requires that the agency determine if a proposed
action is within the limits of a base floodplain, meaning it is
encroaching on the floodplain, and whether this encroachment is
significant. If significant, the agency is required to conduct further
analysis of the proposed action and any practicable alternatives. If a
practicable alternative avoids floodplain encroachment, then the agency
is required to implement it.
    In this proposal, NHTSA is not occupying, modifying, and/or
encroaching on floodplains. NHTSA therefore concludes that the Orders
do not apply to this proposal. NHTSA has, however, conducted a review
of the alternatives on potentially affected resources, including
floodplains, in its Draft EIS.
8. Preservation of the Nation's Wetlands (Executive Order 11990 and DOT
Order 5660.1a)
    These Orders require Federal agencies to avoid, to the extent
possible, undertaking or providing assistance for new construction
located in wetlands unless the agency head finds that there is no
practicable alternative to such construction and that the proposed
action includes all practicable measures to minimize harms to wetlands
that may result from such use. E.O. 11990, ``Protection of Wetlands''
(May 24, 1977), also directs agencies to take action to minimize the
destruction, loss, or degradation of wetlands in ``conducting Federal
activities and programs affecting land use, including but not limited
to water and related land resources planning, regulating, and licensing
activities.'' DOT Order 5660.1a, ``Preservation of the Nation's
Wetlands'' (August 24, 1978), sets forth DOT policy for interpreting