analysis that all regulatory costs are passed forward to consumers as
price increases. If the per-vehicle cost/price increases seem
consistent with those previously found to be economically practicable,
given what we estimate about conditions during the rulemaking time
frame, NHTSA can more readily conclude that the standards causing those
increases are economically practicable.
---------------------------------------------------------------------------

    \582\ To be clear, this is not an assessment that manufacturers
will pay civil penalties, or will need to pay civil penalties, it is
simply an assumption for purposes of this analysis that some
manufacturers could choose to pay civil penalties rather than apply
additional technology if they deem the former approach more cost-
effective. Manufacturers are always free to choose their own
compliance path.
    \583\ These are average values, and the agency does not expect
that the prices of every vehicle would increase by the same amount;
rather, the agency's underlying analysis shows unit costs varying
widely between different vehicle models, as evident in the model
output available on NHTSA's website. While we recognize that
manufacturers will distribute regulatory costs throughout their
fleet to maximize profit, we have not attempted to estimate
strategic pricing, having insufficient data (which would likely be
CBI) on which to base such an attempt. Additionally, even
recognizing that manufacturers will distribute regulatory costs
throughout their fleets, NHTSA still believes that average per-
vehicle cost is useful for illustrating the possible broad
affordability implications of new standards.
---------------------------------------------------------------------------

    The tables below show additional technology costs estimated to be
incurred under each action alternative as compared to the No-Action
Alternative, given the statutory restrictions under which NHTSA
conducts its ``standard setting'' analysis:
BILLING CODE 4910-59-P

[GRAPHIC] [TIFF OMITTED] TP17AU23.099

[GRAPHIC] [TIFF OMITTED] TP17AU23.100

    It should be clear from the tables above that results vary by
manufacturer, by year, and by fleet. NHTSA typically considers average
results for a metric like per-vehicle cost, in part because NHTSA has
typically approached

economic practicability as a question for the industry as a whole, such
that standards can still be maximum feasible even if they are harder
for some manufacturers than others.\584\ The average passenger car cost
increase under PC6LT8 is $704 in MY 2027 but rises rapidly thereafter,
exceeding $2,000 by MY 2030 and exceeding $3,000 by MY 2032. In
contrast, the average passenger car cost increase under PC1LT3 reaches
only $419 by MY 2032. This is a fairly stark difference between the
least and most stringent action alternatives. The difference between
average passenger car costs under PC2LT4 and PC3LT5 is only about $200
in the earlier MYs, but it begins to diverge more in MY 2029, and by MY
2032 the average passenger car cost under PC3LT5 is nearly twice the
average passenger car cost under PC2LT4.
---------------------------------------------------------------------------

    \584\ See, e.g., 87 FR at 25969 (``If the overarching purpose of
EPCA is energy conservation, NHTSA believes that it is reasonable to
expect that maximum feasible standards may be harder for some
automakers than for others, and that they need not be keyed to the
capabilities of the least capable manufacturer. Indeed, keying
standards to the least capable manufacturer may disincentivize
innovation by rewarding laggard performance.'').
---------------------------------------------------------------------------

    For light trucks, the average light truck cost increase under
PC6LT8 is $647, and (similarly to cars) rises rapidly thereafter, also
exceeding $2,000 by MY 2030 and exceeding $3,000 by MY 2032. In
contrast, the average light truck cost increase under PC1LT3 reaches
only $687 by MY 2032. As for cars, this is a fairly stark difference
between these alternatives. Comparing average light truck cost
increases between PC2LT4 and PC3LT5, the divergence over time is
actually about the same as for passenger cars, although overall costs
are higher (over $1,000 for both alternatives) by MY 2032. As discussed
in Section V.A, while NHTSA has no bright-line rule regarding the point
at which per-vehicle cost becomes economically impracticable, when
considering the stringency increases (and attendant costs) which
manufacturers will be facing over the period immediately prior to these
proposed standards, in the form of the MYs 2024-2026 standards, the
over-$3,000 per vehicle estimated for PC6LT8 by MY 2032 may be too
much. Looking at average costs, with $1,205 for passenger cars and
$1,795 for light trucks by MY 2032, PC3LT5 may be more likely to be
economically feasible.
    However, average results may be increasingly somewhat misleading as
manufacturers transition their fleets to the BEVs whose fuel economy
NHTSA is prohibited from considering when setting the standards. This
is because fuel economy in the fleet has historically been more of a
normal distribution (i.e., a bell curve), and with more and more BEVs,
it becomes more of a bimodal distribution (i.e., a two-peak curve).
Attempting to average a bimodal distribution does not necessarily give
a clear picture of what non-BEV-specialized manufacturers are capable
of doing, and regardless, NHTSA is directed not to consider BEV fuel
economy. Thus, in this proposal, NHTSA believes it is appropriate to
examine individual manufacturer results more closely. This is not to
say that NHTSA wishes to return to a ``least capable manufacturer''
approach to economic practicability--rather to say that because statute
prohibits NHTSA from determining maximum feasible standards based on
the ``most capable'' manufacturer, we have to find a way to acknowledge
their existence without allowing them to drive the answer to what is
maximum feasible. If we were to do so, we would impose costs on non-
BEV-only manufacturers that we believe would likely be far too high.
    Looking at per-manufacturer results for passenger cars, under
PC6LT8, nearly every non-BEV-only manufacturer would exceed more than
$2,000 per passenger car in regulatory costs by MY 2032, with extremely
high costs (well over $4,500) for Ford, GM, Hyundai-Kia, and Mazda. In
the standard-setting analysis which NHTSA must consider here,
significant levels of advanced MR and advanced engine technologies tend
to be driving many of these cost increases. In many MYs, for many
manufacturers, the inflection point in cost increases for passenger
cars appears to be between PC2LT4 and PC3LT5, with many companies'
passenger car costs jumping anywhere from roughly $200 to roughly $500
from PC2LT4 to PC3LT5. Again, these changes are best understood in
context--passenger car sales have been falling over recent years while
prices have been rising, and most of the new vehicles sold in the last
couple of years have been more expensive models.\585\ NHTSA does not
want to inadvertently burden passenger car sales by requiring too much
additional cost for new vehicles, particularly given the performance of
the passenger car fleet in comparison to the light truck fleet in terms
of mileage gains; every mile driven in passenger cars is, on average,
more fuel-efficient than miles driven in light trucks. While the costs
of PC2LT4 may challenge some manufacturers of passenger cars, they will
do so by much less than PC3LT5.
---------------------------------------------------------------------------

    \585\ Tucker, S. KBB. 2021. Automakers Carry Tight Inventories:
What Does It Mean to Car Buyers? Available at: https://www.kbb.com/car-advice/automakers-carry-tight-inventories-what-does-it-mean-to-car-buyers/. (Accessed May 31, 2023).
---------------------------------------------------------------------------

    Looking at per-manufacturer results for light trucks, under PC6LT8,
every non-BEV-only manufacturer but Subaru would exceed $2,000 in per-
vehicle costs by MY 2032, with nearly all of those exceeding $3,000.
This is likely due to a combination of MR4, AERO20, SHEV, and (for
PC6LT8, particularly) PHEV technologies being applied to trucks in
order to meet PC6LT8. Again, there appears to be a possible inflection
point in costs between PC2LT4 and PC3LT5--in MY 2032 light trucks, for
example, only one manufacturer exceeds $2,000 per vehicle under PC2LT4,
while 5 exceed $2,000 under PC3LT5. Additionally, closer examination of
the cost incurred under PC3LT5 versus PC2LT4 shows that under PC3LT5
about one-third of per-vehicle costs originates from civil penalties
paid for `shortfalls,' as discussed below, rather than actual increase
in technology (and thus, increased fuel savings). Under PC2LT4, civil
penalties represent only a slightly smaller share of costs, however,
their magnitude is much smaller, about half the value we find in
PC3LT5. Civil penalties only represent a small share of costs in all
scenarios except for PC6LT8, the most stringent alternative.
    With regard to lead time and timing of technology application,
NHTSA acknowledges that there is more lead time for these proposed
standards than manufacturers had for the MYs 2024-2026 standards. That
said, NHTSA also recognizes that we have previously stated that if the
standards in the years immediately preceding the rulemaking time frame
do not require significant additional technology application, then more
technology should theoretically be available for meeting the standards
during the rulemaking time frame--but this is not necessarily the case
here. The technology penetration rates shown in Table V-2 and Table V-3
suggest that, at least for purposes of what NHTSA may consider by
statute, industry would be running up against the limits of available
technology for the more stringent regulatory alternatives, in a way
that has not occurred in prior rulemakings. The analysis suggests that
in many cases, manufacturers will need to abandon smaller steps in
advanced engine technology development and instead begin converting the
remaining fleet of ICE vehicles to SHEV with advanced MR, at a high
cost for several major manufacturers. Lead time may not be able to
overcome the costs of

applying additional technology at a high rate, beyond what is already
being applied to the fleet for other reasons during the rule making
time frame and, in the years immediately preceding it, when considered
in the context of NHTSA's statutory restrictions.
    When manufacturers do not achieve required fuel economy levels,
NHTSA describes them as ``in shortfall.'' NHTSA's analysis reflects
several possible ways that manufacturers could fail to meet required
fuel economy levels. For some companies that NHTSA judges willing to
pay civil penalties in lieu of compliance, usually based on past
history of penalty payment, NHTSA assumes that they will do so as soon
as it becomes more cost-effective to pay penalties rather than add
technology. For other companies whom NHTSA judges unwilling to pay
civil penalties, if they have converted all vehicles available to be
redesigned in a given MY to SHEV or PHEV and still cannot meet the
required standard, then NHTSA does not assume that these companies will
break redesign or refresh cycles to convert even more (of the remaining
ICE) vehicles to SHEV or PHEV.\586\ In these instances, a manufacturer
would be ``in shortfall'' in NHTSA's analysis. Shortfall rates can also
be informative for determining economic practicability, because if
manufacturers simply are not achieving the required levels, then that
suggests that manufacturers have generally judged it more cost-
effective not to comply by adding technology. Moreover, the standards
would not be accomplishing what they set out to accomplish, which would
mean that the standards are not meeting the need of the U.S. to
conserve energy as originally expected.
---------------------------------------------------------------------------

    \586\ Ensuring that technology application occurs consistent
with refresh/redesign schedules is part of how NHTSA accounts for
economic practicability. Forcing technology application outside of
those schedules would be neither realistic from a manufacturing
perspective nor cost-effective. See Chapter <IP_ADDRESS> of the Draft TSD
for more information about product timing cycles.
---------------------------------------------------------------------------

    The following figures illustrate shortfalls by fleet, MY,
manufacturer, and regulatory alternative:

[GRAPHIC] [TIFF OMITTED] TP17AU23.101

[GRAPHIC] [TIFF OMITTED] TP17AU23.102

BILLING CODE 4910-59-C
    For passenger cars, the industry average again obscures more
serious shortfall trends among individual manufacturers. Many
manufacturers' passenger car fleets are estimated to fall significantly
short of required levels under PC6LT8. Even for PC3LT5, several non-
BEV-only manufacturers still appear to be falling short in most MYs.
Passenger car shortfalls are much less widespread under PC2LT4. For
light trucks, the shortfalls are extensive under PC6LT8, and about half
of non-BEV-only manufacturers fall short in

most if not all MYs under PC3LT5. Even PC2LT4 appears challenging under
the standard-setting runs for several light truck non-BEV-only
manufacturers. Given all of the data examined, NHTSA believes that
PC2LT4 may represent the upper limit of economic practicability during
the rulemaking time frame.
    Of course, CAFE standards are performance-based, and NHTSA does not
dictate specific technology paths for meeting them, so it is entirely
possible that individual manufacturers and industry as a whole will
take a different path from the one that NHTSA presents here.\587\
Nonetheless, this is a path toward compliance, relying on known,
existing technology, and NHTSA believes that our analysis suggests that
the levels of technology and cost required by PC2LT4 are reasonable and
economically practicable in the rulemaking time frame.
---------------------------------------------------------------------------

    \587\ NHTSA acknowledges that compliance looks easier and more
cost-effective for many manufacturers under the ``unconstrained''
analysis as compared to the ``standard-setting'' analysis discussed
here, but emphasizes that NHTSA's decision on maximum feasible
standards must be based on the standard-setting analysis reflecting
the 32902(h) restrictions.
---------------------------------------------------------------------------

    As in past analyses, NHTSA assumes that the cost increases
associated with applying technology (or paying civil penalties) in
response to more stringent standards would be passed on to consumers as
higher retail prices. Higher retail prices are assumed to result in
slight decreases in new vehicle sales, with larger price increases (as
for more stringent alternatives) resulting in larger (but still
relatively minor) sales decreases. While we estimate that the per-
vehicle costs and technology penetration rates of Alternative PC2LT4
are reasonable, and while our analysis suggests that it maximizes net
benefits in the rulemaking time frame given our statutory restrictions,
we note that it produces a slight decline in new vehicle sales (less
than 1 percent through MY 2032) as compared to the No-Action
Alternative, as a consequence of the higher retail prices that result
from additional technology application. NHTSA does not believe that
this very minor estimated change in new vehicle sales over the period
covered by the rule is a persuasive reason to choose another regulatory
alternative, particularly as macroeconomic factors have historically
had a far greater impact on sales than CAFE standards. Similarly, the
estimated labor impacts within the automotive industry provide no
evidence that another alternative should be preferred. On the one hand,
when fewer vehicles are sold, manufacturers require fewer labor hours
to satisfy demand, but on the other hand, development and deployment of
new fuel-economy-improving technologies increase demand for labor. The
analysis suggests that technology effects outweigh sales effects, at
least for PC1LT3, PC2LT4, and PC3LT5, resulting in slightly higher
labor utilization than under the No-Action Alternative. That said, the
actual values are quite small in comparison to total auto industry
employment, and as with sales, NHTSA does not believe that employment
effects provide clear evidence that another alternative should be
preferred. Chapter <IP_ADDRESS> of the PRIA contains more information.
    The tables and discussion also illustrate that, in some respects,
economic practicability points in the opposite direction of the need of
the U.S. to conserve energy. It is within NHTSA's discretion to forgo
the potential prospect of additional energy conservation benefits if
NHTSA believes that more stringent standards would be economically
impracticable, and thus, beyond maximum feasible.
    Changes in costs for new vehicles are not the only costs that NHTSA
considers in balancing the statutory factors. Fuel costs for consumers
are relevant to the need of the U.S. to conserve energy, and NHTSA
believes that consumers themselves weigh expected fuel savings against
increases in purchase price for vehicles with higher fuel economy,
although the extent to which consumers value fuel economy improvements
is hotly debated, as discussed in Chapter 4.2 of the Draft TSD. Fuel
costs (or savings) continue, for now, to be the largest source of
benefits for CAFE standards. Comparing private costs to private
benefits, the estimated results for American consumers are as follows:

   Table V-6--Incremental Private Benefits and Private Costs Over the
 Lifetimes of Total Passenger Car Fleet Produced Through MY 2032 (2021$
                 Billions), 3 Percent DR, by Alternative
------------------------------------------------------------------------
         Alternative            PC1LT3     PC2LT4     PC3LT5     PC6LT8
------------------------------------------------------------------------
Private Costs:
    Technology Costs to             8.3       10.9       15.7       23.9
     Increase Fuel Economy..
    Increased Maintenance           0.0        0.0        0.0        0.0
     and Repair Costs.......
    Opportunity Cost in             0.0        0.0        0.0        0.0
     Other Vehicle
     Attributes.............
    Consumer Surplus Loss           0.0        0.0        0.1        0.4
     from Reduced New
     Vehicle Sales..........
    Safety Costs                    0.3        0.6        1.0        2.3
     Internalized by Drivers
                             -------------------------------------------
        Subtotal--Incrementa        8.6       11.5       16.7       26.6
         l Private Costs....
Private Benefits:
    Reduced Fuel Costs......        2.3        4.4        6.0       14.4
    Benefits from Additional        0.4        0.9        1.5        3.5
     Driving................
    Less Frequent Refueling.        0.2        0.4        0.5        1.2
                             -------------------------------------------
        Subtotal--Incrementa        2.9        5.7        8.0       19.0
         l Private Benefits.
    Net Incremental Private        -5.7       -5.8       -8.7       -7.6
     Benefits...............
------------------------------------------------------------------------

   Table V-7--Incremental Private Benefits and Private Costs Over the
  Lifetimes of Total Light Truck Fleet Produced Through MY 2032 (2021$
                 Billions), 3 Percent DR, by Alternative
------------------------------------------------------------------------
         Alternative            PC1LT3     PC2LT4     PC3LT5     PC6LT8
------------------------------------------------------------------------
Private Costs:
    Technology Costs to            21.6       26.9       35.0       44.9
     Increase Fuel Economy..
    Increased Maintenance           0.0        0.0        0.0        0.0
     and Repair Costs.......
    Opportunity Cost in             0.0        0.0        0.0        0.0
     Other Vehicle
     Attributes.............

    Consumer Surplus Loss           0.0        0.1        0.2        0.8
     from Reduced New
     Vehicle Sales..........
    Safety Costs                    4.0        4.8        5.6        6.3
     Internalized by Drivers
                             -------------------------------------------
        Subtotal--Incrementa       25.6       31.8       40.7       52.0
         l Private Costs....
Private Benefits:
    Reduced Fuel Costs......       35.3       43.3       49.1       61.5
    Benefits from Additional        6.9        8.1        9.4       10.6
     Driving................
    Less Frequent Refueling.        1.8        2.3        2.6        3.5
                             -------------------------------------------
        Subtotal--Incrementa       43.9       53.7       61.1       75.6
         l Private Benefits.
    Net Incremental Private        18.3       21.9       20.4       23.6
     Benefits...............
------------------------------------------------------------------------

    Looking simply at the effects for consumers, our analysis suggests
that there is no action alternative (again, in the context of the
standard-setting analysis) in which private benefits will outweigh
private costs for passenger cars, although PC1LT3 and PC2LT4 are the
most beneficial, relatively speaking. For light trucks, all of the
action alternatives appear net beneficial for consumers, with PC2LT4
and PC6LT8 being the most beneficial. Broadening the scope to consider
external/governmental benefits as well, we see the following:

  Table V-8--Incremental Benefits and Costs Over the Lifetimes of Total Passenger Car Fleet Produced Through MY
                    2032 (2021$ Billions), 3 Percent Social DR, by Alternative, 3% SC-GHG DR
----------------------------------------------------------------------------------------------------------------
                         Alternative                              PC1          PC2          PC3          PC6
----------------------------------------------------------------------------------------------------------------
Private Costs (see Table V-6 above):
                                                             ---------------------------------------------------
        Subtotal--Incremental Private Costs.................          8.6         11.5         16.7         26.6
External Costs:
    Congestion and Noise Costs from Rebound-Effect Driving..         -0.3          0.0          1.4          2.2
    Safety Costs Not Internalized by Drivers................         -0.3         -0.1          2.4          3.1
    Loss in Fuel Tax Revenue................................          0.4          0.8          1.0          2.5
                                                             ---------------------------------------------------
        Subtotal--Incremental External Costs................         -0.2          0.6          4.9          7.9
            Total Incremental Social Costs..................          8.4         12.1         21.6         34.5
Private Benefits (see Table V-6 above):
                                                             ---------------------------------------------------
        Subtotal--Incremental Private Benefits..............          2.9          5.7          8.0         19.0
External Benefits:
    Reduction in Petroleum Market Externality...............          0.1          0.1          0.2          0.5
    Reduced Climate Damages, 3% SC-GHG DR...................          0.6          1.3          1.7          4.1
    Reduced Health Damages..................................          0.0          0.0         -0.1         -0.1
                                                             ---------------------------------------------------
        Subtotal--Incremental External Benefits.............          0.7          1.4          1.8          4.5
            Total Incremental Social Benefits, 3% SC-GHG DR.          3.6          7.1          9.8         23.5
    Net Incremental Social Benefits, 3% SC-GHG DR...........         -4.7         -5.1        -11.7        -10.9
----------------------------------------------------------------------------------------------------------------

Table V-9--Incremental Benefits and Costs Over the Lifetimes of Total Light Truck Fleet Produced Through MY 2032
                       (2021$ Billions), 3 Percent Social DR, by Alternative, 3% SC-GHG DR
----------------------------------------------------------------------------------------------------------------
                         Alternative                              LT3          LT4          LT5          LT8
----------------------------------------------------------------------------------------------------------------
Private Costs (see Table V-7 above):
                                                             ---------------------------------------------------
        Subtotal--Incremental Private Costs.................         25.6         31.8         40.7         52.0
External Costs:
    Congestion and Noise Costs from Rebound-Effect Driving..          3.3          3.6          3.9          3.2
    Safety Costs Not Internalized by Drivers................          2.0          1.8          2.2          1.8
    Loss in Fuel Tax Revenue................................          7.5          9.3         10.3         13.1
                                                             ---------------------------------------------------
        Subtotal--Incremental External Costs................         12.8         14.7         16.4         18.1
            Total Incremental Social Costs..................         38.5         46.5         57.1         70.1
Private Benefits (see Table V-7 above):
        Subtotal--Incremental Private Benefits..............         43.9         53.7         61.1         75.6
External Benefits:
    Reduction in Petroleum Market Externality...............          1.4          1.7          1.9          2.4
    Reduced Climate Damages, 3% SC-GHG DR...................         10.3         12.7         14.3         18.1
    Reduced Health Damages..................................          0.2          0.3          0.3          0.5
                                                             ---------------------------------------------------
        Subtotal--Incremental External Benefits.............         11.9         14.7         16.6         21.0

            Total Incremental Social Benefits, 3% SC-GHG DR.         55.8         68.4         77.7         96.6
    Net Incremental Social Benefits, 3% SC-GHG DR...........         17.4         21.9         20.6         26.5
----------------------------------------------------------------------------------------------------------------

    Adding external/SCs and benefits does not change the direction of
NHTSA's analytical findings. Net benefits for passenger cars remain
negative across alternatives, with a trough at PC3LT5. Net benefits for
light trucks remain positive across alternatives, with a peak at PC6LT8
but with PC2LT4 not so far behind.
    Because NHTSA considers multiple DRs in its analysis, and because
analysis also includes multiple values for the SC-GHG, we also estimate
the following cumulative values for each regulatory alternative:

    Table V-10--Summary of Cumulative Benefits and Costs for Model Years through MY 2032 (2021$ Billions), by
                                        Alternative, SC-GHG Value, and DR
----------------------------------------------------------------------------------------------------------------
                                               3% Discount rate                       7% Discount rate
                                   -----------------------------------------------------------------------------
            Alternative                                           Net                                    Net
                                       Costs       Benefits     benefits      Costs       Benefits     benefits
----------------------------------------------------------------------------------------------------------------
SC-GHG discounted at 5 percent:
    PC1LT3........................         46.8         51.2          4.4         31.2         29.2         -2.0
    PC2LT4........................         58.6         65.0          6.3         39.1         37.0         -2.1
    PC3LT5........................         78.7         75.5         -3.2         52.2         42.8         -9.4
    PC6LT8........................        104.5        103.4         -1.2         70.3         58.1        -12.2
SC-GHG discounted at 3 percent:
    PC1LT3........................         46.8         59.5         12.7         31.2         37.5          6.3
    PC2LT4........................         58.6         75.5         16.8         39.1         47.5          8.4
    PC3LT5........................         78.7         87.5          8.8         52.2         54.9          2.7
    PC6LT8........................        104.5        120.1         15.6         70.3         74.8          4.5
SC-GHG discounted at 2.5 percent:
    PC1LT3........................         46.8         65.3         18.5         31.2         43.3         12.1
    PC2LT4........................         58.6         82.9         24.3         39.1         54.9         15.8
    PC3LT5........................         78.7         96.1         17.4         52.2         63.5         11.3
    PC6LT8........................        104.5        132.0         27.5         70.3         86.7         16.4
SC-GHG discounted at 3 percent,
 95th percentile:
    PC1LT3........................         46.8         81.8         35.0         31.2         59.8         28.7
    PC2LT4........................         58.6        103.9         45.2         39.1         75.9         36.8
    PC3LT5........................         78.7        120.2         41.5         52.2         87.6         35.4
    PC6LT8........................        104.5        165.4         60.9         70.3        120.1         49.8
----------------------------------------------------------------------------------------------------------------

 Table V-11--Summary of Cumulative Benefits and Costs for CY 2022-2050 (2021$ Billions), by Alternative, SC-GHG
                                                  Value, and DR
----------------------------------------------------------------------------------------------------------------
                                               3% Discount rate                       7% Discount rate
                                   -----------------------------------------------------------------------------
            Alternative                                           Net                                    Net
                                       Costs       Benefits     benefits      Costs       Benefits     benefits
----------------------------------------------------------------------------------------------------------------
SC-GHG discounted at 5 percent:
    PC1LT3........................        116.3        128.2         11.9         64.9         66.0          1.2
    PC2LT4........................        156.8        173.2         16.3         86.7         88.6          1.9
    PC3LT5........................        239.9        221.6        -18.2        130.2        112.5        -17.8
    PC6LT8........................        385.9        369.0        -16.9        206.0        184.4        -21.6
SC-GHG discounted at 3 percent:
    PC1LT3........................        116.3        150.5         34.2         64.9         88.3         23.4
    PC2LT4........................        156.8        203.3         46.5         86.7        118.8         32.1
    PC3LT5........................        239.9        260.8         21.0        130.2        151.6         21.4
    PC6LT8........................        385.9        436.9         51.0        206.0        252.3         46.4
SC-GHG discounted at 2.5 percent:
    PC1LT3........................        116.3        166.4         50.1         64.9        104.2         39.3
    PC2LT4........................        156.8        224.8         68.0         86.7        140.3         53.6
    PC3LT5........................        239.9        288.8         49.0        130.2        179.6         49.4
    PC6LT8........................        385.9        485.5         99.7        206.0        301.0         95.0
SC-GHG discounted at 3 percent,
 95th percentile:
    PC1LT3........................        116.3        210.4         94.1         64.9        148.2         83.3
    PC2LT4........................        156.8        284.3        127.5         86.7        199.8        113.1
    PC3LT5........................        239.9        366.1        126.3        130.2        257.0        126.7
    PC6LT8........................        385.9        619.3        233.5        206.0        434.8        228.8
----------------------------------------------------------------------------------------------------------------

    While the results shown in the tables above range widely--
underscoring that DR assumptions significantly affect benefits
estimates--the ordering of alternatives generally remains the same
under most discounting scenarios. In some cases, PC6LT8 appears to have
greater net benefits, but in nearly all of those cases, PC2LT4 is the
next most net beneficial.
    E.O. 12866 and Circular A-4 direct agencies to consider maximizing
net benefits in rulemakings whenever possible and consistent with
applicable law. Because it can be relevant to balancing the statutory
factors and because it is directed by E.O. 12866 and OMB guidance,
NHTSA does evaluate and consider net benefits associated with different
potential future CAFE standards. As the tables above show, our analysis
suggests that for passenger cars, net benefits are higher when
standards are less stringent, and for light trucks, net benefits are
higher when standards are more stringent, although not consistently.
Looking solely at net benefits, PC6LT8 looks best overall and across
all DRs, as well as for light truck specifically, although PC1LT3 looks
least bad for passenger cars.
    That said, while maximizing net benefits is a valid decision
criterion for choosing among alternatives, provided that appropriate
consideration is given to impacts that cannot be monetized, it is not
the only reasonable decision perspective, and we recognize that what we
include in our cost-benefit analysis affects our estimates of net
benefits. We also note that important benefits cannot be monetized--
including the full health and welfare benefits of reducing climate
emissions and other pollution, which means that the benefits estimates
are underestimates. Thus, given the uncertainties associated with many
aspects of this analysis, NHTSA does not rely solely on net benefit
maximization, and instead considers it as one piece of information that
contributes to how we balance the statutory factors, in our
discretionary judgment. NHTSA recognizes that the need of the U.S. to
conserve energy weighs importantly in the overall balancing of factors,
and thus believes that it is reasonable to at least consider choosing
the regulatory alternative that produces the largest reduction in fuel
consumption, while still remaining net beneficial. Of course, the
benefit-cost analysis is not the sole factor that NHTSA considers in
determining the maximum feasible stringency, though it informs NHTSA's
tentative conclusion that Alternative PC2LT4 is the maximum feasible
stringency. Importantly, the shortfalls discussion above suggests that
even if PC6LT8 appears net beneficial, under the constraints of our
standard-setting analysis which is the analysis that NHTSA is
statutorily required to consider, the majority of manufacturers may
simply be unable to achieve the fuel economy levels required by that
alternative, which would mean that it would not be accomplishing its
goal and thus almost certainly beyond maximum feasible.
    As with any analysis of sufficient complexity, there are a number
of critical assumptions here that introduce uncertainty about
manufacturer compliance pathways, consumer responses to fuel economy
improvements and higher vehicle prices, and future valuations of the
consequences from higher CAFE standards. Recognizing that uncertainty,
NHTSA also conducted more than 70 sensitivity analysis runs for the
passenger car and light truck fleet analysis. The entire sensitivity
analysis is presented in the PRIA, demonstrating the effect that
different assumptions would have on the costs and benefits associated
with the different regulatory alternatives. While NHTSA considers
dozens of sensitivity cases to measure the influence of specific
parametric assumptions and model relationships, only a small number of
them demonstrate meaningful impacts to net benefits under the different
alternatives.
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    The results of the sensitivity analysis runs suggest that
relatively few metrics make a major difference to cost and benefit
outcomes, and the ones that do, act in relatively predictable ways.
Some changes in values (fuel prices, removing ZEV, IRA tax credits) act
on the baseline, increasing or reducing the amount of fuel economy
improvements available for CAFE standards. Other changes in values (for
example, fuel prices) affect benefits, and thus net benefits.
Generally, even when costs and benefits change significantly in a
sensitivity case, the basic ranking of alternatives in terms of net
benefits does not change, and if it does change, it does not change by
enough to change NHTSA's tentative conclusion that PC2LT4 is the
maximum feasible alternative. The three cases extending the standard-
setting conditions to additional MYs do reduce net benefits, but again,
to the extent that rankings appear to change between alternatives, the
magnitude of the relative difference is not significant enough to
change our tentative conclusion. NHTSA is statutorily prohibited from
considering the fuel economy of BEVs in determining maximum feasible
stringency but notes in passing that the case changing the value of
DOE's PEF reduces net benefits somewhat, although not significantly,
and that changing assumptions about the value of electrification tax
credits that reach consumers reduces net benefits significantly.
However, because NHTSA cannot consider the fuel economy of BEVs in
determining maximum feasible fuel economy standards, these are effects
that happen only in the baseline of our analysis and are not considered
in our determination. Moreover, regardless of net benefits, NHTSA
believes that its tentative conclusion would be the same that
Alternative PC2LT4 is economically practicable, based on per-vehicle
costs, technology levels estimated to be required to meet the
standards, and manufacturers' apparent ability to even reach compliance
in most MYs, as compared to Alternative PC3LT5.
    Finally, as discussed in Section IV.A, NHTSA accounts for the
effects of other motor vehicle standards of the Government in its
balancing, often through their incorporation into our regulatory
baseline.\588\ NHTSA believes that this approach accounts for these
effects reasonably and appropriately. NHTSA recognizes prior arguments
from industry stakeholders that any additional investment required to
meet CAFE standards beyond what they intended to make to meet EPA's GHG
standards would make such CAFE standards ``too stringent.'' \589\ As
discussed above, even when the standards of the two programs are
coordinated closely, it is still foreseeable that there could be
situations in which different agencies' programs could be binding for
different manufacturers in different MYs. This has been true across
multiple CAFE rulemakings over the past decade. Regardless of which
agency's standards are binding given a manufacturer's chosen compliance
path, manufacturers will choose a path that complies with both
standards, and in doing so, will still be able to build a single fleet
of vehicles--even if it is not exactly the fleet that the manufacturer
might have preferred to build. This remains the case with this
proposal.
---------------------------------------------------------------------------

    \588\ NHTSA has carefully considered EPA's standards by
including the baseline (i.e., MYs 2024-2026) CO2
standards in our analytical baseline. Because the EPA and NHTSA
proposals were developed in coordination jointly, and stringency
decisions were made in coordination, NHTSA did not include EPA's
proposal for MYs 2027 and beyond CO2 standards in our
analytical baseline for this proposal. The fact that EPA issued its
proposal before NHTSA is an artifact of circumstance only.
    \589\ See, e.g., 87 FR at 26024 (May 2. 2022).
---------------------------------------------------------------------------

    NHTSA does not believe that it is a reasonable interpretation of
Congress' direction to set ``maximum feasible'' standards, as some
commenters might prefer, at the fuel economy level at which no
manufacturer need ever apply any additional technology or spend any
additional dollar beyond what EPA's standards, with their many
flexibilities,

would require. NHTSA believes that CAFE standards can still be
consistent with EPA's GHG standards even if they impose additional
costs for certain manufacturers, although NHTSA is, of course, mindful
of the magnitude of those costs and believes that the preferred
alternative would impose minimal additional costs, if any, above
compliance with EPA's standards.
    NHTSA has also carefully considered CARB's ACC2 program (which
includes the ZEV mandate) by including it in the No-Action Alternative.
NHTSA continues to believe that this approach is reasonable. Modeling
anticipated manufacturer compliance with these programs enables NHTSA
to make more realistic projections of how the U.S. vehicle fleet will
change in the coming years, which is foundational to our ability to set
CAFE standards that reflect the maximum feasible fuel economy level
achievable through improvements to internal combustion vehicles.
Likewise, by creating a more accurate projection of how manufacturers
might modify their fleets even in the absence of new CAFE standards, we
are better able to identify the effects of new CAFE standards, which is
the task properly before us. If NHTSA could not account for the ACC2
program, and could not be informed about the baseline effects, then
NHTSA could overestimate the availability of vehicles that can be
improved to meet potential new CAFE standards, and thus end up setting
a fuel economy standard that requires an infeasible level of
improvement. Moreover, as the ``No ZEV'' sensitivity case shows, the
effect of including the ACC2 program in the baseline is simply to
decrease costs and benefits attributable to potential future CAFE
standards. Removing anticipated manufacturer compliance with ZEV from
the baseline increases costs and benefits for every alternative, but
even so, we note that net benefits change relatively little for that
sensitivity case, as shown in more detail in Chapter 9 of the PRIA.
While PC1LT3 looks slightly more net beneficial than PC2LT4 under that
case, it is only very slightly, and it is not so great an effect as to
change NHTSA's balancing of the statutory factors in this proposal.
NHTSA continues to believe, even under this scenario, that PC2LT4 is
maximum feasible for the rulemaking time frame.
    Even though NHTSA is statutorily prohibited from considering the
possibility that manufacturers would produce additional BEVs to comply
with CAFE standards, and even though manufacturers have stated their
intention to rely more and more heavily on those BEVs for compliance,
CAFE standards still have an important role to play in meeting the
country's ongoing need to conserve energy. CAFE standards can also
ensure continued improvements in energy conservation by requiring
ongoing fuel economy improvements even if demand for more fuel economy
flags unexpectedly, or if other regulatory pushes change in unexpected
ways. Saving money on fuel and reducing CO2 and other
pollutant emissions by reducing fuel consumption are also important
equity goals. Fuel expenditures are a significant budget item for
consumers who are part of lower-income and historically disadvantaged
communities. Part of our goal in determining maximum feasible CAFE
standards is trying to improve fuel savings across the fleet as a
whole, rather than for a handful of new vehicle buyers. By maximizing
fuel savings to consumers (given estimated effects on new vehicle
costs), CAFE standards can help to improve equity.
    That said, NHTSA acknowledges the statute-driven cognitive
dissonance, and NHTSA's task in approaching the determination of
maximum feasible standards is the same as ever, to evaluate potential
future CAFE stringencies in light of statutory constraints. NHTSA
believes that we have identified a path to meeting the proposed
standards that is technologically feasible and economically practicable
and consistent with the statutory constraints. Manufacturers may object
that it is not the path they believe themselves to be on, but NHTSA's
analysis suggests that it is reasonable, and that it properly reflects
our constraints. The rate of increase in the standards may be slower
than in the last round of rulemaking, but NHTSA believes that is
reasonable and appropriate given the likely state of the fleet by MY
2027. Consider, for example, the non-linear relationship between fuel
economy and fuel consumption as illustrated below:
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BILLING CODE 4910-59-C
    As fleet fuel economy improves, there are simply fewer further
improvements to ICEs available to be made (in the absence of further
technological innovation), and the amount of fuel consumers actually
save is smaller, and the remaining available improvements are
increasingly expensive. This is even more true given the statutory
restrictions that NHTSA must observe. This is not a bad outcome--in
some ways, it is a testament to manufacturer efforts and the success of
this program, that we are beginning to reach the limits of fuel economy
improvements that can be considered. CAFE standards can still help
industry complete that journey, and as such, based on all of the
information contained in this record, NHTSA tentatively concludes that
PC2LT4 represents the maximum feasible standards for passenger cars and
light trucks in the MYs 2027 to 2032 time frame. We seek comment on
this tentative conclusion and all aspects of this discussion.
2. Heavy-Duty Pickups and Vans
    NHTSA has not set new HDPUV standards since 2016, and the
technology offerings on available models in that segment have changed
relatively little since then. The redesign cycles in this segment are
slightly longer than for passenger cars and light trucks, roughly 6-7
years for pickups and roughly 9 years for vans.\590\ To our knowledge,
technology for pickups in this segment has been relatively slow to
advance compared to in the light truck segment, and there are still no
hybrid HD pickups. That said, electrification is beginning to appear
among the vans in this segment, perhaps especially among vans typically
used for deliveries,\591\ and under NHTSA's distinct statutory
authority for setting HDPUV standards, expanding BEV technologies are
part of NHTSA's standard setting consideration. The Ford E-Transit, for
example, is based on the Mach-E platform and uses similar battery
architecture; \592\ other manufacturers have also shown a willingness
to transition to electric vans and away from conventional
powertrains.\593\

NHTSA is aware that some historic Light truck applications now being
offered as BEVs may be heavy enough to fall outside the Light Truck
segment and into the HDPUV segment,\594\ but NHTSA expects
manufacturers to find strategies to return them to the CAFE Light Truck
fleet in the coming years. This could include development in battery
design or electrified powertrain architecture that could reduce vehicle
weight. The vehicles in these segments are purpose-built for key
applications and we expect manufactures will cater electrified
offerings for businesses that maximize benefits in small volumes.
However, until these technologies materialize, NHTSA assumes in its
analysis there will continue to be `spill-over' of vehicles that exist
as edge cases.
---------------------------------------------------------------------------

    \590\ See Draft TSD Chapter <IP_ADDRESS>. HDPUVs have limited makes
and models. Assumptions about their refresh and redesign schedules
have an outsized impact on our modeling of HDPUVs, where a single
redesign can have a noticeable effect on technology penetration,
costs, and benefits. We seek comment on our approach, specifically
if there are additional opportunities for manufacturers to apply
technology in the HDPUV space to mitigate costs.
    \591\ NACFE. 2022. Electric Trucks Have Arrived: The Use Case
For Vans and Step Vans. Available at: https://nacfe.org/research/run-on-less-electric/#vans-step-vans. (Accessed May 31, 2023).
    \592\ Martinez, M. 2023. Ford to Sell EVs With 2 Types of
Batteries, Depending On Customer Needs. Last revised: Mar. 5, 2023.
Available at: https://www.autonews.com/technology/ford-will-offer-second-ev-battery-type-lower-cost-and-range. (Accessed: May 31,
2023).
    \593\ Hawkins, T. 2023. Mercedes-Benz eSprinter Unveiled As
BrightDrop Zevo Rival. GM Authority. Available at: https://gmauthority.com/blog/2023/02/mercedes-benz-esprinter-unveiled-as-brightdrop-zevo-rival/. (Accessed: May 31, 2023).
    \594\ Gilboy, J. 2023. The Drive. Massive Weight Could Push Past
EPA's Light-Duty Rules. Available at: https://www.thedrive.com/news/the-2025-ram-1500-revs-massive-weight-could-push-past-epas-light-duty-rules. (Accessed May 31, 2023). See also Arbelaez, R. 2023.
IIHS Insight. As heavy EVs proliferate, their weight may be a drag
on safety. Available at: https://www.iihs.org/news/detail/as-heavy-evs-proliferate-their-weight-may-be-a-drag-on-safety. (Accessed May
31, 2023).
---------------------------------------------------------------------------

    The following text will walk through the three statutory factors in
more detail and discuss NHTSA's decision-making process more
thoroughly. The tentative balancing of factors presented here
represents NHTSA's thinking at the present time, based on all of the
information presented in the record for this proposal. NHTSA
acknowledges that a different balancing may turn out to be appropriate
for the final rule depending on information that arrives between now
and then, both through the public comment process and otherwise.
    For the reader's reference, the regulatory alternatives under
consideration for HDPUVs are presented again below:

  Table V-13--Regulatory Alternatives Under Consideration for MYs 2030-
                               2035 HDPUVs
------------------------------------------------------------------------
                                                                HDPUV
                                                              Stringency
                    Name of alternative                       increases,
                                                              year-over-
                                                               year (%)
------------------------------------------------------------------------
No-Action Alternative......................................          n/a
Alternative HDPUV4.........................................            4
Alternative HDPUV10 (Preferred Alternative)................           10
Alternative HDPUV14........................................           14
------------------------------------------------------------------------

    As discussed in Section V.A, the three statutory factors for HDPUV
standards are similar to and yet somewhat different from the four
factors that NHTSA considers for passenger car and light truck
standards, but they still modify ``feasible'' in ``maximum feasible.''
NHTSA also interprets the HDPUV factors as giving us broad authority to
weigh potentially conflicting priorities to determine maximum feasible
standards. It is firmly within NHTSA's discretion to weigh and balance
the HDPUV factors in a way that is technology-forcing, although NHTSA
would find a balancing of the factors in a way that would require the
application of technology that will not be available in the lead time
provided by this proposal, or that is not cost-effective, to be beyond
maximum feasible.
    That said, because HDPUV standards are set in accordance with 49
U.S.C. 32902(k), NHTSA is not bound by the 32902(h) factors when it
determines maximum feasible HDPUV standards.\595\ That means that NHTSA
may, and does, consider the full fuel efficiency of BEVs and PHEVs, and
that NHTSA may consider the availability and use of overcompliance
credits, in this proposal. These considerations thus play a role in
NHTSA's balancing of the HDPUV factors, as described below.
---------------------------------------------------------------------------

    \595\ 49 U.S.C. 32902(h) clearly states that it applies only to
actions taken under subsections (c), (f), and (g) of 49 U.S.C.
32902.
---------------------------------------------------------------------------

    In evaluating whether HDPUV standards are appropriate, NHTSA could
begin by seeking to isolate the effects of new HDPUV standards from
NHTSA, by understanding effects in the industry that appear to be
happening for reasons other than potential new NHTSA regulations. NHTSA
explained in Chapter 1.4.1 of the Draft TSD that the No-Action
Alternative for HDPUV accounts for existing technology on HDPUVs,
technology sharing across platforms, manufacturer compliance with
existing HDPUV standards from NHTSA and EPA (i.e., those standards set
in the Phase 2 final rule in 2016 for MY 2021 to MY 2029), manufacturer
compliance with California's ACT and ZEV programs, and foreseeable
voluntary manufacturer application of fuel-efficiency-improving
technologies (whether because of tax credits or simply because the
technologies are estimated to pay for themselves within 30 months). One
consequence of accounting for these effects in the No-Action
Alternative is that the effects of the different regulatory
alternatives under consideration appear less cost-beneficial than they
would otherwise. Nonetheless, NHTSA believes that this is reasonable
and appropriate to better ensure that NHTSA has the clearest possible
understanding of the effects of the decision being made, as opposed to
the effects of many things that will be occurring simultaneously. All
estimates of effects of the different regulatory alternatives presented
in this section are thus relative to the No-Action Alternative.
    Other information that are relevant to whether HDPUV standards are
appropriate could include how much energy we estimate they would
conserve; the magnitude of emissions reductions; possible safety
effects, if any; and estimated effects on sales and employment. In
terms of energy conservation, Alternative HDPUV14 would conserve the
most energy and produce the greatest reduction in fuel expenditure, as
shown below:

  Table V-14--Fuel Consumption Under HDPUV Regulatory Alternatives, as
                    Compared to No-Action Alternative
                         [quads, CYs 2022-2050]
------------------------------------------------------------------------
               Fuel type                   HDPUV4    HDPUV10    HDPUV14
------------------------------------------------------------------------
Diesel.................................          0      0.001      0.003
E85....................................          0     -0.002     -0.009
Gasoline...............................     -0.013     -0.305     -1.357
Electricity............................      0.004      0.083      0.345

Total..................................     -0.009     -0.223     -1.019
------------------------------------------------------------------------

             Table V-15--Lifetime Fuel Expenditure Under HDPUV Regulatory Alternatives, as Compared to No-Action Alternative, MYs 2030-2038
                                                                 [$ In millions, 3% DR]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                Model year                     2030       2031       2032       2033       2034       2035       2036       2037       2038      Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
HDPUV4....................................       -4.4       -5.0       -4.8       -9.1       -8.8       -8.3       -8.1       -7.6       -7.6      -63.7
HDPUV10...................................      -15.5      -27.4      -26.9     -303.8     -320.9     -313.0     -306.2     -301.5     -295.5   -1,910.7
HDPUV14...................................      -38.4     -622.8     -611.1   -1,146.8   -1,139.8   -1,511.0   -1,478.6   -1,451.6   -1,422.7   -9,422.8
--------------------------------------------------------------------------------------------------------------------------------------------------------

               Table V-16--Per-Vehicle Lifetime Fuel Expenditure Under HDPUV Regulatory Alternatives, as Compared to No-Action Alternative
                                                                       [$, 3% DR]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                      Model Year                          2030       2031       2032       2033       2034       2035       2036       2037       2038
--------------------------------------------------------------------------------------------------------------------------------------------------------
HDPUV4...............................................         -6         -6         -6        -12        -12        -12        -12        -12        -12
HDPUV10..............................................        -19        -34        -35       -400       -427       -430       -433       -437       -439
HDPUV14..............................................        -39       -764       -772     -1,505     -1,516     -2,077     -2,092     -2,106     -2,117
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Assuming that benefits to energy security correlate directly with
fuel consumption avoided, Alternative HDPUV14 would likely also
contribute the most to improving U.S. energy security. The discussion
about energy security effects of passenger car and light truck
standards applies for HDPUVs as well.
    In terms of environmental benefits, Alternative HDPUV14 is also
estimated to be the most beneficial for most metrics:

  Table V-17--Emissions Effects Under HDPUV Regulatory Alternatives, as
                    Compared to No-Action Alternative
------------------------------------------------------------------------
                                           HDPUV4    HDPUV10    HDPUV14
------------------------------------------------------------------------
Estimated CO2 emissions avoided (mmt)..      -0.91     -22.28    -101.28
Maximum observed change in criteria
 pollutant emissions compared to No-
 Action Alternative:
    NOX total..........................       0.0%       0.3%       0.8%
    NOX upstream.......................       0.1%       0.9%       3.6%
    NOX downstream.....................      -0.1%      -1.3%      -4.3%
    PM2.5 total........................       0.0%      -0.1%      -0.7%
    PM2.5 upstream.....................       0.1%       1.1%       4.4%
    PM2.5 downstream...................      -0.1%      -2.0%      -6.8%
    SOX total..........................       0.1%       1.4%       6.0%
    SOX upstream.......................       0.1%       1.6%       6.6%
    SOX downstream.....................      -0.1%      -2.6%      -9.5%
------------------------------------------------------------------------

    The criteria pollutant effects demonstrate that increased
electrification (which increases faster under more stringent
alternatives) reduces vehicle-based emissions while increasing upstream
emissions due to increased demand for electricity.
    Some other effects are fairly muted, possibly due to the relatively
small size of the HDPUV fleet. The safety effects associated with the
HDPUV alternatives are extremely small, too small to affect our
decision-making in this proposal. Readers may refer to Chapter <IP_ADDRESS>
of the PRIA for specific information. For sales and employment, readers
may refer to Chapter <IP_ADDRESS> of the PRIA for more specific information,
but there is very little difference in sales between HDPUV
alternatives, less than one percent relative to the No-Action
Alternatives. Employment effects are of similar relative magnitude;
HDPUV10 and HDPUV14 both subtract slightly from the baseline employment
utilization, as sales declines produce a small decrease in labor
utilization that are not offset by technology effects (i.e., that
development and deployment of new fuel-efficient technologies increases
demand for labor). Estimated safety, sales, and employment effects are
thus all too small to be dispositive.
    In evaluating whether HDPUV standards are cost-effective, NHTSA
could consider different ratios of cost versus the primary benefits of
the standards, such as fuel saved and GHG emissions avoided. Table V-18
and Table V-19 include a number of informative metrics of the proposed
HDPUV alternatives relative to the No-Action Alternative. None of the
proposed action alternatives emerges as a clearly superior option when
evaluated along this dimension. When considering aggregate societal
effects, as well as when narrowing the focus to private benefits and
costs, HDPUV10 produces the highest benefit-cost ratios.

      Table V-18--Cost-Effectiveness Metrics Under HDPUV Regulatory
           Alternatives, as Compared to No-Action Alternative
                             [$2021, 3% DR]
------------------------------------------------------------------------
                 Ratio                     HDPUV4    HDPUV10    HDPUV14
------------------------------------------------------------------------
Total societal benefits to total              1.29       2.08       1.85
 societal costs (CYs 2022-2050, 3% SC-
 GHG discount rate)....................
Total private benefits to total private       1.40       2.23       1.87
 costs (CYs 2022-2050).................
Fuel savings to regulatory cost (CYs          2.57       2.32       2.37
 2022-2050)............................
Sales-weighted per-vehicle fuel savings       2.81       2.83       2.65
 to regulatory cost (MYs 2030-2035)....
Sales-weighted per-vehicle fuel savings       3.11       3.01       2.90
 to regulatory cost (MYs 1983-2038)....
Total societal benefits to total              2.46       3.36       3.00
 regulatory cost (CYs 2022-2050, 3% SC-
 GHG discount rate)....................
------------------------------------------------------------------------

      Table V-19--Cost-Effectiveness Metrics Under HDPUV Regulatory
           Alternatives, as Compared to No-Action Alternative
                             [$2021, 7% DR]
------------------------------------------------------------------------
                 Ratio                     HDPUV4    HDPUV10    HDPUV14
------------------------------------------------------------------------
Total societal benefits to total              1.68       2.45       2.17
 societal costs (CYs 2022-2050, 3% SC-
 GHG discount rate)....................
Total private benefits to total private       1.00       2.00       1.61
 costs (CYs 2022-2050).................
Fuel savings to regulatory cost (CYs          2.19       2.03       2.03
 2022-2050)............................
Sales-weighted per-vehicle fuel savings       2.16       2.18       2.04
 to regulatory cost (MYs 2030-2035)....
Sales-weighted per-vehicle fuel savings       2.39       2.32       2.23
 to regulatory cost (MYs 1983-2038)....
Total societal benefits to total              3.01       3.79       3.35
 regulatory cost (CYs 2022-2050, 3% SC-
 GHG discount rate)....................
------------------------------------------------------------------------

    Because NHTSA considers multiple DRs in its analysis, and because
analysis also includes multiple values for the SC-GHG, we also estimate
the following cumulative values for each regulatory alternative:

 Table V-20--Summary of Cumulative Benefits and Costs for CY 2022-2050 (2021$ Billions), by Alternative, SC-GHG
                                                  Value, and DR
----------------------------------------------------------------------------------------------------------------
                                                        3% Discount rate                 7% Discount rate
                                               -----------------------------------------------------------------
                  Alternative                                            Net                              Net
                                                  Costs     Benefits   benefits    Costs     Benefits   benefits
----------------------------------------------------------------------------------------------------------------
SC-GHG discounted at 5 percent:
    HDPUV4....................................       0.09       0.08     -0.005       0.04       0.04     -0.001
    HDPUV10...................................       2.07       3.58       1.50       0.99       1.69       0.69
    HDPUV14...................................       9.43      14.03       4.61       4.67       6.73       2.05
SC-GHG discounted at 3 percent:
    HDPUV4....................................       0.09       0.11       0.03       0.04       0.07       0.03
    HDPUV10...................................       2.07       4.32       2.25       0.99       2.43       1.44
    HDPUV14...................................       9.43      17.43       8.00       4.67      10.12       5.45
SC-GHG discounted at 2.5 percent:
    HDPUV4....................................       0.09       0.14       0.05       0.04       0.09       0.05
    HDPUV10...................................       2.07       4.85       2.78       0.99       2.97       1.97
    HDPUV14...................................       9.43      19.87      10.44       4.67      12.56       7.89
SC-GHG discounted at 3 percent, 95th
 percentile:
    HDPUV4....................................       0.09       0.19       0.11       0.04       0.15       0.11
    HDPUV10...................................       2.07       6.31       4.24       0.99       4.42       3.43
    HDPUV14...................................       9.43      26.53      17.10       4.67      19.23      14.55
----------------------------------------------------------------------------------------------------------------

    E.O. 12866 and Circular A-4 direct agencies to consider maximizing
net benefits in rulemakings whenever possible and consistent with
applicable law. Because it can inform NHTSA's consideration of the
statutory factors and because it is directed by E.O. 12866 and OMB
guidance, NHTSA does evaluate and consider net benefits associated with
different potential future HDPUV standards. As Table V-20 shows, our
analysis suggests that HDPUV14 produces the largest net benefits,
although we note that the step from HDPUV10 to HDPUV14 results in a
substantial jump in total costs.
    Our analysis also suggests that all alternatives will result in
fuel savings for consumers, and that all alternatives will be cost-
effective under nearly every listed metric of comparison and at either
DR. Overall, avoided climate damages are lower and with each
alternative the ratio of cost to benefits for this metric decreases due
to increased cost and diminishing climate benefits. As discussed
earlier, the HDPUV fleet is a smaller fleet compared to passenger cars
and light trucks, and so for a manufacturer to meet standards that are
more or less stringent, they must transition a relatively larger
portion of that smaller fleet to new technologies. Thus, under many
comparisons, HDPUV10 appears the most cost-effective; under others,
HDPUV4 appears the most cost-effective.
    As discussed above for passenger car and light truck standards,
while maximizing net benefits is a valid decision criterion for
choosing among alternatives, provided that appropriate

consideration is given to impacts that cannot be monetized, it is not
the only reasonable decision perspective. We recognize that what we
include in our cost-benefit analysis affects our estimates of net
benefits. We also note that important benefits cannot be monetized--
including the full health and welfare benefits of reducing climate and
other pollution, which means that the benefits estimates are
underestimates. Thus, given the uncertainties associated with many
aspects of this analysis, NHTSA does not rely solely on net benefit
maximization, and instead considers it as one piece of information that
contributes to how we balance the statutory factors, in our
discretionary judgment.
    In evaluating whether HDPUV standards are technologically feasible,
NHTSA could consider whether the standards represented by the different
regulatory alternatives could be met using technology expected to be
available in the rulemaking time frame. On the one hand, the HDPUV
analysis only employs existing technologies, and our analysis suggests
fairly widespread compliance with all regulatory alternatives, which
might initially suggest that technological feasibility is not at issue
for this proposal. At the industry level, technology penetration rates
estimated to meet the different regulatory alternatives in the
different MYs would be as follows:
BILLING CODE 4910-59-P

[GRAPHIC] [TIFF OMITTED] TP17AU23.110

BILLING CODE 4910-59-C
    As Table V-21 shows, it is immediately clear that most technology
application between now and MY 2038 would be occurring as a result of
baseline efforts and would not be an effect of new NHTSA standards.
Under

the baseline, as early as MY 2033, fully 80 percent of the fleet would
be electrified (including SHEV, PHEV, and BEV), with slight shifts over
time in the relative percentages of those technologies' representation
in the fleet (BEVs taking away some market share from PHEVs by MY
2038). NHTSA believes that these baseline technology penetration rates,
while high, may potentially be feasible in this time frame, given
projected trends for HD vans in particular. Due to the relatively small
number of models in the HDPUV fleet as compared to the passenger car
and light truck fleets, just a few models becoming electrified can have
large effects in terms of the overall fleet. NHTSA also recognizes that
these baseline technology penetration rates result from our assumptions
about battery costs and available tax credits, among other things.\597\
---------------------------------------------------------------------------

    \596\ The list of these engines is discussed in Draft TSD
Chapter 3.1.
    \597\ All EVs have zero emissions and are asisgned the fuel
consumption test group result to a value of zero gallons per 100
miles per 49 CFR 535.6(a)(3)(iii).
---------------------------------------------------------------------------

    Against the backdrop of this baseline, HDPUV4 would require no
additional technology at all, on average, which explains why the per-
vehicle fuel cost savings associated with it is nearly zero. HDPUV10
could be met with an additional 1 percent increase in PHEVs starting in
MY 2033, and a 1 to 2 percent increase in advanced engines in the later
years of the rulemaking time frame. HDPUV14 could be met with an
additional 4 percent increase in PHEVs, an additional 3 percent
increase in BEVs, and an additional 10 percent increase in advanced
engines by MY 2038.
    As in the analysis for passenger cars and light trucks, however,
NHTSA finds manufacturer-level results to be particularly informative
for this analysis. Of the six manufacturers modeled for HDPUV,
Mercedes-Benz, Nissan, Rivian, and Stellantis would be able to meet all
regulatory alternatives with baseline technologies--only Ford and GM
show any activity in response to any of the regulatory alternatives.
HDPUV14 pushes both Ford and GM to increase their volumes of advanced
gasoline engines and PHEVs, and GM to increase its volume of BEVs.

                  Table V-22--Technology Availability by Manufacturer for Selected Model Years
----------------------------------------------------------------------------------------------------------------
                                           HDPUV4          HDPUV10         HDPUV14     MY 2030 to MY 2038 Change
                                      --------------------------------------------------------------------------
                                        2030    2038    2030    2038    2030    2038
                                         (%)     (%)     (%)     (%)     (%)     (%)    HDPUV4  HDPUV10  HDPUV14
----------------------------------------------------------------------------------------------------------------
Ford:
    Strong Hybrid (all types)........      28      28      28      28      28      28        0        0        0
    PHEV (all types).................       0       0       0       0       0       4        0        0       +4
    BEV (all types)..................      40      51      40      51      40      51      +11      +11      +11
    Advanced Engines.................      11       2      11       2      12      17      -10      -10       +6
    Advanced AERO....................     100     100     100     100     100     100        0        0        0
    Advanced MR......................       0       0       0       0       0       0        0        0        0
GM:
    Strong Hybrid (all types)........      45      16      45      16      45      16      -29      -29      -28
    PHEV (all types).................       0      29       0      34       0      37      +29      +34      +37
    BEV (all types)..................       5      18       5      18       5      27      +13      +13      +21
    Advanced Engines.................       7       6       7      11       7      20        0       +5      +14
    Advanced AERO....................     100     100     100     100     100     100        0        0        0
    Advanced MR......................       0       0       0       0       0       0        0        0        0
Mercedes-Benz:
    Strong Hybrid (all types)........      60      21      60      21      60      21      -40      -40      -40
    PHEV (all types).................       0       0       0       0       0       0        0        0        0
    BEV (all types)..................      40      79      40      79      40      79      +40      +40      +40
    Advanced Engines.................       0       0       0       0       0       0        0        0        0
    Advanced AERO....................     100     100     100     100     100     100        0        0        0
    Advanced MR......................       0       0       0       0       0       0        0        0        0
Nissan:
    Strong Hybrid (all types)........       1       0       1       0       1       0       -1       -1       -1
    PHEV (all types).................       0       0       0       0       0       0        0        0        0
    BEV (all types)..................      64      70      64      70      64      70       +6       +6       +6
    Advanced Engines.................       5      30       5      30       5      30      +25      +25      +25
    Advanced AERO....................     100     100     100     100     100     100        0        0        0
    Advanced MR......................       0       0       0       0       0       0        0        0        0
Rivian:
    Strong Hybrid (all types)........       0       0       0       0       0       0        0        0        0
    PHEV (all types).................       0       0       0       0       0       0        0        0        0
    BEV (all types)..................     100     100     100     100     100     100        0        0        0
    Advanced Engines.................       0       0       0       0       0       0        0        0        0
    Advanced AERO....................       0       0       0       0       0       0        0        0        0
    Advanced MR......................       0       0       0       0       0       0        0        0        0
Stellantis:
    Strong Hybrid (all types)........       0      47       0      47       0      47      +47      +47      +47
    PHEV (all types).................       0       1       0       1       0       1       +1       +1       +1
    BEV (all types)..................      31      50      31      50      31      50      +19      +19      +19
    Advanced Engines.................      69       1      69       1      69       1      -67      -67      -67
    Advanced AERO....................     100     100     100     100     100     100        0        0        0
    Advanced MR......................       0       0       0       0       0       0        0        0        0
----------------------------------------------------------------------------------------------------------------

    Again, it is clear that a great deal of technology application is
expected in response to the baseline, as evidenced by the fact that
technology penetration rates for most manufacturers do not change
between alternatives. For example, Stellantis is assumed to go from 0
percent strong hybrids in its HDPUV fleet in MY 2030 to 47 percent
strong hybrids by MY 2038 under each regulatory alternative, which
means that the regulatory alternatives are not influencing that
decision--because if they were, we would see technology differences
between the alternatives. Of

the two manufacturers who appear to need to change technology
application to meet HDPUV10 and HDPUV14, Ford and GM, we note that the
changes for Ford are relatively minor: replacing 4 percent of its
``advanced engine'' vehicles with PHEVs between MYs 2030 and 2038. GM
shows more movement, but NHTSA suspects this may be an artifact of our
relatively-meager data for the HDPUV fleet. It is very possible that
the apparent increase in BEV and advanced engine rates could be due to
the fact that technologies in the baseline fleet are based on Phase 1
standards and manufacturers have not started adopting technologies to
meet Phase 2 standards. Additionally, NHTSA is allowed to consider
banked overcompliance credits for the HDPUV fleet,\598\ as well as the
full fuel efficiency of AFVs like BEVs and PHEVs.\599\ Combined with
the fact that BEVs and the electric operation of PHEVs are granted 0
gal/100 miles fuel consumption for compliance purposes, our analysis
shows that even with one redesign we see large improvements in the
fleet even at low volumes. Based on the information before us, NHTSA
cannot conclude that technological feasibility is necessarily a barrier
to choosing any of regulatory alternatives considered in this proposal.
---------------------------------------------------------------------------

    \598\ See Manufacturers tab in the CAFE Model Input file
market_data_HDPUV_ref.xlsx for HDPUV banked credits.
    \599\ 49 CFR 535.6(a)(3)(iii).
---------------------------------------------------------------------------

    The information presented thus far suggests that HDPUV14 would
result in the best outcomes for energy conservation, including fuel
consumption and fuel expenditure reduced, energy security, climate
effects, and most criteria pollutant effects; that it would produce the
largest net benefits, and that it is likely achievable with not much
more technology than would be applied in the baseline regardless of new
HDPUV standards from NHTSA; even if it would not necessarily be the
most cost-effective, would result in the highest overall costs, and
does not provide the largest consumer net benefits. There is likely a
credible case to be made for choosing HDPUV14. For purposes of this
proposal, however, NHTSA tentatively concludes that some conservatism
may still be appropriate.
    There are several reasons for this conservatism. First, NHTSA
recognizes that standards have remained stable for this segment for
many years, since 2016. While on the one hand, that may mean that the
segment has room for improvement, or at least for standards to catch up
to where the fleet is, NHTSA is also mindful that the sudden imposition
of stringency where there was previously little may require some
adjustment time especially with technologies like BEVs and PHEVs that
have not been in mass production in the HDPUV space. Second, NHTSA
acknowledges that our available data in this segment may be less
complete than our data for passenger cars and light trucks. Compared to
the CAFE program's robust data submission requirements, manufacturers
submit many fewer data elements in the HD program, and the program is
newer, so we have many fewer years of historical data. If NHTSA's
technology or vehicle make/model assumptions in the baseline lags on
road production, then our estimated manufacturer responses to potential
new HDPUV standards could lack realism in important ways, particularly
given the relatively smaller fleet and fewer numbers of make/models
across which manufacturers can spread technology improvements in
response to standards. Although NHTSA also relies on manufacturer media
publications for announcements of new vehicles and technologies, we are
considerate of how those will be produced in large quantities and if
they can be considered by other competitors due to intellectual
property issues and availability.
    Third, again perhaps because of the relatively smaller fleet and
fewer numbers of make/models, the sensitivity analysis for HDPUVs
strongly suggests that uncertainty in the input assumptions can have
significant effects on outcomes. As with any analysis of sufficient
complexity, there are a number of critical assumptions here that
introduce uncertainty about manufacturer compliance pathways, consumer
responses to fuel efficiency improvements and higher vehicle prices,
and future valuations of the consequences from higher HDPUV standards.
Recognizing that uncertainty, NHTSA also conducted nearly 40
sensitivity analysis runs for the HDPUV fleet analysis. The entire
sensitivity analysis is presented in Chapter 9 of the PRIA,
demonstrating the effect that different assumptions would have on the
costs and benefits associated with the different regulatory
alternatives. While NHTSA considers dozens of sensitivity cases to
measure the influence of specific parametric assumptions and model
relationships, only a small number of them demonstrate meaningful
impacts to net benefits under the different alternatives.
    The results of the sensitivity analyses for HDPUVs are different
from the sensitivity analysis results for passenger cars and light
trucks. Generally speaking, for HDPUVs, varying the inputs seems either
to make no difference at all, or to make a fairly major difference. As
suggested above, NHTSA interprets this as likely resulting from the
relatively smaller size and ``blockiness'' of the HDPUV fleet: there
are simply fewer vehicles, and fewer models, so variation in input
parameters may cause notable moves in tranches of the fleet that are
large enough (as a portion of the total HDPUV fleet) to produce
meaningful effects on the modeling results. For example, Table V-23
shows estimated per-vehicle costs by HDPUV manufacturer, by regulatory
alternative, for the RC (the central analysis) and several selected
sensitivity runs with the following effects:

      Table V-23--Effects of Selected Sensitivity Runs on Per-Vehicle Costs in MY 2038 (2021$), HDPUV Fleet
----------------------------------------------------------------------------------------------------------------
                                                                                Sensitivity runs
                                                                          --------------------------------------
            Manufacturer                    Regulatory         Reference                 Tax credit    AEO 2022
                                            alternative           case       Battery    passthrough    low oil
                                                                            costs +20%      75%         price
----------------------------------------------------------------------------------------------------------------
Ford................................  No-Action.............        2,519          257         -102         -285
                                      HDPUV4................            8          327          261          388
                                      HDPUV10...............           17        2,821        2,126        2,322
                                      HDPUV14...............          451        4,144        3,084        3,263
GM..................................  No-Action.............          645         -990       -1,358       -1,395
                                      HDPUV4................            0            0            0           13

                                      HDPUV10...............          405        2,810        2,382        2,425
                                      HDPUV14...............        1,517        4,343        3,570        3,606
Mercedes-Benz.......................  No-Action.............        2,080          437          854         -381
                                      HDPUV4................            3           -3           -1           -1
                                      HDPUV10...............            3        1,303           68          851
                                      HDPUV14...............            2        2,474          418        1,652
Nissan..............................  No-Action.............        5,562        2,229        1,863        1,492
                                      HDPUV4................           -3        1,037          751        1,147
                                      HDPUV10...............           -4        3,575        2,725        2,927
                                      HDPUV14...............           -3        4,534        3,835        4,207
Rivian..............................  No-Action.............            0            0            0            0
                                      HDPUV4................            0            0            0            0
                                      HDPUV10...............            0            0            0            0
                                      HDPUV14...............            0            0            0            0
Stellantis..........................  No-Action.............        1.095       -1,446       -1,742       -2,055
                                      HDPUV4................            0            0            0            0
                                      HDPUV10...............            2        2,200        1,658        1,902
                                      HDPUV14...............            2        3,699        2,688        2,891
Industry Average....................  No-Action.............        1,520         -477         -781         -970
                                      HDPUV4................            3          138          111          166
                                      HDPUV10...............          131        2,483        2,033        2,092
                                      HDPUV14...............          633        3,820        3,065        3,062
----------------------------------------------------------------------------------------------------------------

    In this table, ``Battery Costs +20%'' means that direct
manufacturing costs for batteries would be 20 percent higher than
estimated for the central analysis; ``Tax Credit Passthrough 75%''
means that 75 percent of the value of modeled tax credits would be
captured by consumers (meaning that less of the value of modeled tax
credits would be available to manufacturers to offset vehicle costs, as
compared to the central analysis); and ``AEO 2022 Low Oil Price'' means
that the forecasted future price of gasoline would be lower than
estimated for the central analysis. Dollar values are incremental to
the No-Action alternative and to the RC, and if they are negative, that
means that the change in the input assumption causes the model to
estimate that costs would decrease with the alternate input. These
cases were not chosen for illustration because NHTSA lacks confidence
in our assumptions for the central analysis, but simply to show the
magnitude of the effect of relatively routine alternate assumptions for
important inputs. The proposed standards for HDPUVs will result in a
total of 60 percent FE improvement in the rulemaking time frame of only
6 years. With the vehicles in this segment having the same if not
longer redesign cycle time, our analysis shows that any change to these
inputs could have a dramatic impact on the manufacturers. As shown in
Table V-23 above, the industry average incremental cost for HDPUV10 is
$131, but that increases to over $2,033 to $2,483 with the change to an
input that could be due to any number of global circumstances. These
considerations help give NHTSA confidence that HDPUV10 is maximum
feasible for the rulemaking time frame.
    Specifically, each of these sensitivity runs illustrate that per-
vehicle costs for nearly every manufacturer to comply with HDPUV10 and
HDPUV14 could be significantly higher under any of these cases. Looking
at the industry average results, each of the three sensitivity runs
presented here could bring per-vehicle costs over $3,000 per vehicle in
MY 2038. Battery costs only 20 percent higher could bring half the
manufacturers over $4,000 higher per vehicle. When costs appear to be
negative in response to the No-Action alternative, that means that it
is more cost-effective to apply technology in the baseline, which means
that less technology is available to meet new NHTSA standards (because
it has already been applied in the baseline), which means that
relatively more expensive technology is what is left to meet more
stringent alternatives like HDPUV10 and HDPUV14. For each manufacturer
(besides Rivian, a small BEV manufacturer), the jump in cost from
HDPUV4 to HDPUV10 is quite large under each sensitivity run shown; the
costs for HDPUV14 under each of the sensitivity runs shown would be
greater than NHTSA would likely conclude was appropriate for this
segment.
    Again, that is not to say that NHTSA lacks confidence in its
assumptions, but simply that to the extent uncertainty exists, it
matters for this segment and the effects that new HDPUV standards would
have on the affordability of these vehicles. The nature of this fleet--
smaller, with fewer models--and the nature of the technologies that
this fleet will be applying leading up to and during the rulemaking
time frame, means that the analysis is very sensitive to changes in
inputs, and the inputs are admittedly uncertain. If the uncertainty
causes NHTSA to set standards higher than they would otherwise have
been, and industry is unable to meet the standards, the resources they
would have to expend on civil penalties (which can potentially be much
higher for HDPUVs than for passenger cars and light truck) would be
diverted from their investments in the technological transition, and
the estimated benefits would not come to pass anyway. To provide some
margin for that uncertainty given the technological transition that
this segment is trying to make, NHTSA believes that some conservatism
is reasonable and appropriate for this round of standards.
    We also note, that because NHTSA does consider BEV technologies in
the HDPUV analysis, and because our current regulations assign BEVs a
fuel consumption value for compliance

purposes of 0 gal/100 miles, this significantly influences our modeling
results. This is an artifact of the mathematics of averaging, where
including a ``0'' value in the calculation effectively reduces other
values by as much as 50 percent (depending on sample size) and is
exaggerated when BEV-only manufacturers are considered in industry-
average calculations. This effect creates the appearance of
overcompliance at the industry level. As for the analysis for passenger
cars and light trucks, examining individual manufacturer results can be
more informative, and Chapter 8.3 of the PRIA shows that non-BEV-only
manufacturers are more challenged by, for example, HDPUV14, although
overcompliance is still evident in many MYs. This underscores the
effect of BEVs on compliance, particularly when their fuel consumption
is counted as 0 even though their energy consumption is non-zero. It
also indirectly underscores the effect of the 32902(h) restrictions on
NHTSA's decision-making for passenger car and light truck standard
stringency, which does not apply in the HDPUV context. We are seeking
comment on the assignment of 0 gal/100 miles value for HDPUV BEV
compliance. Any change to this value would change the appearance of
overcompliance in NHTSA's analysis, and this is another potential
reason to be conservative in our proposal.
    Based on the information in the record, NHTSA tentatively concludes
that HDPUV10 represents the maximum feasible standards for HDPUVs in
the MYs 2030 to 2035 time frame. While HDPUV14 could potentially save
more fuel and reduce emissions further, it is less cost-effective than
HDPUV10 by every metric that NHTSA considered, and the longer redesign
cycles in this segment make NHTSA cautious of proposing HDPUV14, even
though this segment has plenty of opportunity to improve. Moreover, the
effects of uncertainty for our analytical inputs are significant in
this analysis, as discussed, and NHTSA believes some conservatism is
appropriate for this rulemaking time frame. HDPUV10 will still
encourage technology application for some manufacturers while
functioning as a backstop for the others, and it remains net beneficial
for consumers. For these reasons, NHTSA is proposing HDPUV10 for MYs
2030-2035 HDPUVs. We seek comment on this tentative conclusion, on the
feasibility of HDPUV10 in light of the regulatory analysis, and on all
aspects of this discussion, including whether and how standards more
closely aligned with EPA's standards for these vehicles would be
appropriate and maximum feasible for NHTSA to adopt for the model years
subject to this rulemaking.
3. Severability
    For the reasons described above, NHTSA believes that its authority
to propose and implement CAFE and HDPUV standards for the various
fleets described is well-supported in law and practice and should be
upheld in any legal challenge. NHTSA also believes that its exercise of
its authority reflects sound policy.
    However, in the event that any portion of the proposed rule is
declared invalid, NHTSA intends that the various aspects of the
proposal be severable, and specifically, that each proposed standard
and each year of each proposed standard is severable, as well as the
various compliance proposals discussed in the following section of this
preamble. Any of the proposed standards could be implemented
independently if any of the other proposed standards were struck down,
and NHTSA firmly believes that it would be in the best interests of the
nation as a whole for the standards to be applicable in order to
support EPCA's overarching purpose of energy conservation. Each
proposed standard is justified independently on both legal and policy
grounds and could be implemented effectively by NHTSA.

VI. Compliance and Enforcement

    NHTSA is proposing changes to its enforcement programs for LDVs in
the CAFE program as well for HDPUVs in the Heavy-Duty National Program.
These changes include: (1) eliminating AC and off-cycle (OC) fuel
consumption improvement values (FCIVs) for BEVs in the LD program, (2)
eliminating the 5-cycle and alternative approval pathways for OC FCIVs
in the LD program, (3) adding additional deadlines for the alternative
approval process for MYs 2025-2026 for the LD program, (4) eliminating
OC FCIVs for HDPUVs, (5) making technical amendments to the regulations
pertaining to advanced technology credits, and (6) making an assortment
of minor technical amendments. To provide context for these proposed
changes, this section first provides an overview of NHTSA's enforcement
programs. The section then discusses and requests comment on each of
the proposed changes. NHTSA is also requesting comment on phasing out
FCIVs for CAFE program. Finally, this section concludes with a
discussion of one requested change, to create a new program for EJ
credits, that NHTSA has decided is not practical to implement at this
time.

A. Background

    NHTSA has separate enforcement programs for LDVs in the CAFE
program and HD vehicles in the Heavy-Duty National program. NHTSA's
CAFE enforcement program is largely established by EPCA, as amended by
EISA, and is very prescriptive regarding enforcement. EPCA and EISA
also clearly specify a number of flexibilities and incentives that are
available to manufacturers to help them comply with the CAFE standards.
EISA also provides DOT and NHTSA with the authority to regulate HD
vehicles, and NHTSA structured the enforcement program for HDPUVs to be
similar to its LD enforcement program.
    The LD CAFE program includes all vehicles with a Gross Vehicle
Weight Rating (GVWR) of 8,500 pounds or less as well as vehicles
between 8,501 and 10,000 pounds that are classified as medium-duty
passenger vehicles (MDPVs). As prescribed by 49 U.S.C. 32901(a)(19)(B)
\600\ and defined in 40 CFR 86.1803-01, an MDPV means any HD vehicle
with a GVWR of less than 10,000 pounds that is designed primarily for
the transportation of persons \601\ and subject to requirements that
apply for LD trucks.\602\ The MDHD Program includes all vehicles 8,501
pounds and up, and the engines that power them, except for MDPVs, that
are covered under the LD fuel economy program.
---------------------------------------------------------------------------

    \600\ As prescribed in 49 U.S.C. 32901(a)(19)(B), an MDPV is
``defined in section 86.1803-01 of title 40, Code of Federal
Regulations, as in effect on the date of the enactment of the Ten-
in-Ten Fuel Economy Act.''
    \601\ 40 CFR 86.1803 defines an MDPV as ``any vehicle which: (1)
Is an ``incomplete truck'' as defined in this subpart; or (2) Has a
seating capacity of more than 12 persons; or (3) Is designed for
more than 9 persons in seating rearward of the driver's seat; or (4)
Is equipped with an open cargo area (for example, a pick-up truck
box or bed) of 72.0 inches in interior length or more. A covered box
not readily accessible from the passenger compartment will be
considered an open cargo area for purposes of this definition.''
    \602\ See Heavy-duty vehicle definition in 40 CFR 86.1803.
---------------------------------------------------------------------------

    NHTSA's authority to regulate HD vehicles under EISA directs NHTSA
to establish fuel efficiency standards for commercial medium- and
heavy-duty on-highway vehicles \603\ and work trucks.\604\ Under this
authority, NHTSA

has developed standards for three regulatory categories of HD vehicles:
combination tractors; HDPUVs; and vocational vehicles. HDPUVs include
HD vehicles with a GVWR between 8,501 pounds and 14,000 pounds (known
as Class 2b through 3 vehicles) manufactured as complete vehicles by a
single or final stage manufacturer or manufactured as incomplete
vehicles as designated by a manufacturer.\605\ The majority of these
HDPUVs are 3/4-ton and 1-ton pickup trucks, 12-and 15-passenger vans,
and large work vans that are sold by vehicle manufacturers as complete
vehicles, with no secondary manufacturer making substantial
modifications prior to registration and use. These vehicles can also be
sold as cab-complete vehicles (i.e., incomplete vehicles that include
complete or nearly complete cabs that are sold to secondary
manufacturers).
---------------------------------------------------------------------------

    \603\ EISA added the following definition to the automobile fuel
economy chapter of the U.S. Code: ``commercial medium- and heavy-
duty on-highway vehicle'' means an on-highway vehicle with a gross
vehicle weight rating of 10,000 pounds or more. 49 U.S.C.
32901(a)(7).
    \604\ EISA added the following definition to the automobile fuel
economy chapter of the U.S. Code: ``work truck'' means a vehicle
that--(A) is rated at between 8,500 and 10,000 pounds gross vehicle
weight; and (B) is not a medium-duty passenger vehicle (as defined
in section 86.1803-01 of title 40, Code of Federal Regulations, as
in effect on the date of the enactment of [EISA]). 49 U.S.C.
32901(a)(19).
    \605\ See 49 CFR 523.7, 40 CFR 86.1801-12, 40 CFR 86.1819-17, 40
CFR 1037.150.
---------------------------------------------------------------------------

B. Overview of Enforcement

    This subsection is intended to provide a general overview of
NHTSA's enforcement of its fuel economy and fuel efficiency standards
in order to provide context for the discussion of the proposed changes
to these enforcement programs. At a high-level, NHTSA's fuel efficiency
and fuel economy enforcement programs encompass how NHTSA determines
whether manufacturers comply with standards for each MY, and how
manufacturers may use compliance flexibilities and incentives, or
alternatively address noncompliance through paying civil penalties.
NHTSA's goal in administering these programs is to balance the energy-
saving purposes of the authorizing statutes against the benefits of
certain flexibilities and incentives. More detailed explanations of
NHTSA's enforcement programs have also been included in recent
rulemaking documents.606 607
---------------------------------------------------------------------------

    \606\ For more detailed explanations of CAFE enforcement, see 77
FR 62649 (October 15, 2012) and 87 FR 26025 (May 2, 2022).
    \607\ For more detailed explantions of heavy-duty pickup trucks
and vans fuel efficiency standards and enforcement, see 76 FR 57256
(September 15, 2011) and 81 FR 73478 (October 25, 2016).
---------------------------------------------------------------------------

1. Light Duty CAFE Program
    As mentioned above, there are three primary components to NHTSA's
compliance program: (1) determining compliance; (2) using flexibilities
and incentives; and (3) paying civil penalties for shortfalls. The
following table provides an overview of the CAFE program for LDVs and
MDPVs.

                  Table V-24--Overview of Compliance for Corporate Average Fuel Economy Program
        [Vehicles with a GVWR of 8,500 lbs. or less and MDPVs with a GVWR between 8,501 and 10,000 lbs.]
----------------------------------------------------------------------------------------------------------------
                                         Fleet performance requirements
-----------------------------------------------------------------------------------------------------------------
                                      Applicable  regulation                                Proposed changes in
             Component                (statutory  authority)       General description             NPRM?
----------------------------------------------------------------------------------------------------------------
Fuel Economy Standards.............  49 CFR 531.5 and 49 CFR   Standards are footprint-    Yes: Proposed
                                      533.5 (49 U.S.C. 32902).  based fleet average         amendments to 49 CFR
                                                                standards for each of a     531.5(c)(2) and 49
                                                                manufacturer's fleets       CFR 533.5(a) to set
                                                                (i.e., domestic passenger   standards for MY
                                                                vehicle, import passenger   2027-2032.
                                                                vehicle, and light truck)
                                                                and expressed in miles
                                                                per gallon (mpg). NHTSA
                                                                sets average fuel economy
                                                                standards that are the
                                                                maximum feasible for each
                                                                fleet for each model
                                                                year. In setting these
                                                                standards, NHTSA
                                                                considers technological
                                                                feasibility, economic
                                                                practicability, the
                                                                effect of other motor
                                                                vehicle standards of the
                                                                Government on fuel
                                                                economy, and the need of
                                                                the U.S. to conserve
                                                                energy. NHTSA is
                                                                precluded from
                                                                considering the fuel
                                                                economy of vehicles that
                                                                operate only on
                                                                alternative fuels, the
                                                                portion of operation of a
                                                                dual fueled vehicle
                                                                powered by alternative
                                                                fuel, and the trading,
                                                                transferring, or
                                                                availability of credits.
Minimum Domestic Passenger Car       49 CFR 531.5 (49 U.S.C.   Minimum fleet standards     Yes: Proposed
 Standards.                           32902(b)(4)).             for domestically            amendments to 49 CFR
                                                                manufactured passenger      531.5(d) to set
                                                                vehicles.                   standards for MY
                                                                                2027-2032.
----------------------------------------------------------------------------------------------------------------
                                      Determining Average Fleet Performance
----------------------------------------------------------------------------------------------------------------
2-Cycle Testing....................  49 CFR 531.6(a) citing    Vehicle testing is          No proposed changes.
                                      40 CFR part 600 and 49    conducted by EPA using
                                      CFR 533.6 citing 40 CFR   the Federal Test
                                      part 600 (49 U.S.C.       Procedure (Light-duty FTP
                                      32904).                   or ``city'' test) and
                                                                Highway Fuel Economy Test
                                                                (HFET or ``highway''
                                                                test).

AC efficiency FCIV.................  49 CFR 531.6(b)(1) and    This adjustment to the      Yes: Proposed changes
                                      49 CFR 533.6(c)(1) (49    results from the 2-cycle    to 49 CFR 531.6 and
                                      U.S.C. 32904) citing 40   testing accounts for fuel   533.6 to eliminate
                                      CFR 86.1868-12.           consumption improvement     AC efficiency FCIVs
                                                                from technologies that      for BEVs starting in
                                                                improve AC efficiency       MY 2027.
                                                                that are not accounted
                                                                for in the 2-cycle
                                                                testing. The AC
                                                                efficiency FCIV program
                                                                began in MY 2017.
Off-cycle FCIV.....................  49 CFR 531.6(b)(2) and    This adjustment to the      Yes: Proposing
                                      (3) and 49 CFR            results from the 2-cycle    changes to 49 CFR
                                      533.6(c)(3) and (4) (49   testing accounts for fuel   531.6 and 533.6 to
                                      U.S.C. 32904) citing 40   consumption improvement     eliminate off-cycle
                                      CFR 86.1869-12.           from technologies that      menu FCIVs for BEVs
                                                                are not accounted for or    and to eliminate the
                                                                not fully accounted for     5-cycle and
                                                                in the 2-cycle testing.     alternative
                                                                The off-cycle FCIV          approvals starting
                                                                program began in MY 2017.   in MY 2027. PHEVs
                                                                                retain benefits.
                                                                                Proposing a 60-day
                                                                                response deadline
                                                                                for requests for
                                                                                information
                                                                                regarding off-cycle
                                                                                requests for MY 2025-
                                                                                2026.
Advanced full-size pickup trucks     49 CFR 533.6(c)(2)        This adjustment increases   No proposed changes.
 FCIV.                                citing 40 CFR 86.1870-    a manufacturer's average    The program is set
                                      12 (49 U.S.C. 32904).     fuel economy for            to sunset in MY 2024
                                                                hybridized and other        and NHTSA is not
                                                                performance-based           proposing to extend
                                                                technologies for MY 2017    it.
                                                                and 2024.
Dedicated alternative fueled         49 CFR 536.10 citing 40   EPA calculates the fuel     No proposed changes.
 vehicles.                            CFR 600.510-12(c) (49     economy of dedicated
                                      U.S.C. 32905(a) and       alternative fueled
                                      (c)).                     vehicles assuming that a
                                                                gallon of liquid/gaseous
                                                                alternative fuel is
                                                                equivalent to 0.15
                                                                gallons of gasoline per
                                                                49 U.S.C. 32905(a). For
                                                                BEVs, EPA uses the
                                                                petroleum equivalency
                                                                factor as defined by the
                                                                Department of Energy (see
                                                                10 CFR 474.3) (per 49
                                                                U.S.C. 32904(a)(2).
Dual-fueled vehicles...............  49 CFR 536.10 citing 40   EPA calculates the fuel     No proposed changes.
                                      CFR 600.510-12(c) (49     economy of dual-fueled
                                      U.S.C. 32905(b), (d),     vehicles using a utility
                                      and (e) and 49 U.S.C.     factor to account the
                                      32906(a)).                portion of power energy
                                                                consumption from the
                                                                different energy sources.
                                                                Starting in MY 2019,
                                                                there is no adjustment to
                                                                the fuel economy of dual-
                                                                fueled vehicles other
                                                                than electric hybrids.
                                                                For electric hybrids, EPA
                                                                uses the petroleum
                                                                equivalency factor for
                                                                the electric portion of
                                                                the vehicle's expected
                                                                energy use (per 49 U.S.C.
                                                                32904(a)(2).
----------------------------------------------------------------------------------------------------------------
                     Earning and Using Credits for Overcompliance and Addressing Shortfalls
----------------------------------------------------------------------------------------------------------------
Earning Credits....................  49 CFR 536.4 (49 U.S.C.   Manufacturers earn credits  No proposed changes.
                                      32903(a)).                for each one tenth of
                                                                mile by which the average
                                                                fuel economy vehicles in
                                                                a particular compliance
                                                                category in a model year
                                                                exceeds the applicable
                                                                fuel economy standard,
                                                                multiplied by the number
                                                                of vehicles sold in that
                                                                compliance category
                                                                (i.e., fleet).
Carry-forward Credits..............  49 U.S.C. 32903(a)(2)...  Manufacturers may carry-    No proposed changes.
                                                                forward credits up to 5
                                                                model years into the
                                                                future.
Carry-back Credits.................  49 CFR part 536 (49       Manufacturers may carry-    No proposed changes.
                                      U.S.C. 32903(a)(1)).      back credits up to 3
                                                                model years into the past.
Credit Transfers...................  49 CFR part 536 (49       Manufacturers may transfer  No proposed changes.
                                      U.S.C. 32903(g)).         credits between their
                                                                fleets to increase a
                                                                fleet's average fuel
                                                                economy by up to 2 mpg.
                                                                Manufacturers may not use
                                                                transferred credits to
                                                                meet the minimum domestic
                                                                passenger car standards
                                                                (see 49 U.S.C.
                                                                32903(g)(4) and 49 CFR
                                                                536.9).

Credit Trading.....................  49 CFR 536.8 (49 U.S.C.   Manufacturers may trade an  No proposed changes.
                                      32903(f)).                unlimited quantity of
                                                                credits into fleets of
                                                                the same compliance
                                                                category. A manufacturer
                                                                may then transfer those
                                                                credits to a different
                                                                compliance category, but
                                                                only up to the 2 mpg
                                                                limit for transfers.
                                                                Manufacturers may not use
                                                                traded credits to meet
                                                                the minimum domestic
                                                                passenger car standards
                                                                (see 49 U.S.C.
                                                                32903(f)(2) and 49 CFR
                                                                536.9).
Civil Penalties....................  49 CFR 578.6(h) (49       Starting in 2023, the       No proposed changes.
                                      U.S.C. 3912.).            civil penalty for CAFE
                                                                shortfalls is $16 for
                                                                each tenth of a mpg that
                                                                a manufacturer's average
                                                                fuel economy falls short
                                                                of the standard
                                                                multiplied by the total
                                                                number of vehicles in the
                                                                affected fleet. The civil
                                                                penalty is adjusted
                                                                periodically for
                                                                inflation.
----------------------------------------------------------------------------------------------------------------

a. Determining Compliance
    This first component of NHTSA's enforcement program pertains to how
NHTSA determines compliance with its fuel economy standards. In
general, as prescribed by Congress, NHTSA finalizes footprint-based
fleet average standards for LDVs for fuel economy on a mpg basis. In
that way, the standard applies to the fleet as a whole and not to a
specific vehicle, and manufacturers can balance the performance of
their vehicles and technologies in complying with standards. Also, as
specified by Congress, LDVs must be is broken down into 3 fleets for
compliance purposes: domestic passenger vehicles, import passenger
vehicles, and light trucks. Each manufacturer must comply with the
fleet average standard derived from the model type target standards.
These target standards are taken from a set of curves (mathematical
functions) for each fleet. Vehicle testing for the LDV programs is
conducted by EPA using the FTP (or ``city'' test) and HFET (or
``highway'' test).\608\
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    \608\ 40 CFR part 600.
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    At the end of each MY NHTSA confirms whether a manufacturer's fleet
average performance for each of its fleets of LDVs exceeds the
applicable target-based fleet standard. NHTSA makes its ultimate
determination of a manufacturer's CAFE compliance obligation based on
official reported and verified CAFE data received from EPA. Pursuant to
49 U.S.C. 32904(e), EPA is responsible for calculating manufacturers'
CAFE values so that NHTSA can determine compliance with its CAFE
standards. The EPA-verified data is based on information from NHTSA's
testing,\609\ its own vehicle testing, and FMY data submitted by
manufacturers to EPA pursuant to 40 CFR 600.512-12. A manufacturer's
FMY report must be submitted to EPA no later than 90 days after
December 31st of the MY including any adjustment for off-cycle credits
for the addition of technologies that result in real-world fuel
improvements that are not accounted for in the 2-cycle testing as
specified in 40 CFR part 600 and 40 CFR part 86. EPA verifies the data
submitted by manufacturers and issues final CAFE reports that are sent
to manufacturers and to NHTSA electronically between April and October
of each year. NHTSA's database system identifies which fleets do not
meet the applicable CAFE fleet standards and calculates each
manufacturer's credit amounts (credits for vehicles exceeding the
standards), credit excesses (credits accrued for a fleet exceeding the
standards), and shortfalls (amount by which a fleet fails to meet the
standards). A manufacturer meets NHTSA's fuel economy standard if its
fleet average performance is greater than or equal to its required
standard or its MDPCS (whichever is greater). Congress enacted MDPCSs
per 49 U.S.C. 32902. These standards require that domestic passenger
car fleets meet a minimum level directed by statute and then projected
by the Secretary at the time a standard is promulgated in a rulemaking.
In addition, manufacturers are not allowed to use traded or transferred
credits to resolve credit shortfalls resulting from failing to exceed
the MDPCS.
---------------------------------------------------------------------------

    \609\ NHTSA conducts vehicle testing under its ``Footprint''
attribute conformity testing to verify track width and wheelbase
measurements used by manufactures to derive model type target
standards. If NHTSA finds a discrepancy in its testing,
manufacturers will need to make changes in their final reports to
EPA.
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    If a manufacturer's fleet fails to meet a fuel economy standard,
NHTSA will provide written notification to the manufacturer that it has
not met the standard. The manufacturer will be required to confirm the
shortfall and must either submit a plan indicating how to allocate
existing credits, or if it does not have sufficient credits available
in that fleet, how it will address the shortfall either by earning,
transferring and/or acquiring credits or by paying the appropriate
civil penalty. The manufacturer must submit a plan or payment within 60
days of receiving agency notification. Credit allocation plans received
from the manufacturer will be reviewed and approved by NHTSA. NHTSA
will approve a credit allocation plan unless it finds the proposed