The emission-related warranty period for heavy duty engines and
vehicles under CAA section 207(i) is ``the period established by the
Administrator by regulation (promulgated prior to November 15, 1990)
for such purposes unless the Administrator subsequently modifies such
regulation.'' The regulations specify that the warranty period for
light heavy-duty vehicles under 40 CFR 1037.120 is 5 years or 50,000
miles of use (whichever first occurs). EPA is proposing to clarify that
this same warranty period applies for medium-duty vehicles certified
under 40 CFR part 86, subpart S, except that a longer warranty period
of 8 years or

80,000 miles would apply for engine-related components described in
this section as specified major emission control components.
    The warranty provisions in CAA section 207 do not explicitly apply
to medium-duty passenger vehicles. However, as with the new standards
in this proposed rule, we are proposing to apply warranty requirements
to medium-duty passenger vehicles in the same way that they apply to
light-duty vehicles.
7. Definition of Light-Duty Truck
    EPA currently has separate regulatory definitions for light truck
for GHG standards and light-duty truck for criteria pollutant
standards. Historically this was not an issue because the car versus
truck definition was clear. Nearly all vehicles were passenger cars or
pickup trucks with open cargo beds. The earliest sport utility vehicles
(SUVs) were primarily derived from pickup truck platforms and were
therefore considered light trucks. However, current versions of some of
these SUVs are now built off of car-based platforms and have carlike
features. Current differences between the two light truck definitions
leads to some SUVs being certified to GHG standards as a truck and to
criteria pollutant standards as a car. To address this concern, we are
proposing to transition to a single definition of light-duty truck with
the implementation of the Tier 4 criteria pollutant emission standards.
    Currently, the first ``light truck'' definition is used for
determining compliance with the light-duty GHG emission standards (40
CFR 600.002). This definition matches the definition that NHTSA uses in
determining compliance with their fuel economy standards (49 CFR
523.5). This definition contains specific vehicle design
characteristics that must be met to qualify a vehicle as a truck.
    The second ``light-duty truck'' definition is used for certifying
vehicles to the criteria pollutant standards (40 CFR 86.1803-01). This
broader definition allows for some SUVs to qualify as trucks even if
the specific vehicle does not contain the truck-like design attributes.
The definition also includes some ambiguity that requires the
manufacturers and EPA to apply judgment to determine the appropriate
classification.
    To address this concern, we are proposing to revise the definition
of light-duty truck used in the criteria pollutant standards to simply
refer to the definition of light-truck used in the GHG standards. This
proposed change would eliminate any confusion and simplify reporting
for manufacturers because each vehicle would be treated consistently as
either a car or a truck for all standards and reporting requirements.
We request comment on this proposed revision.

G. Proposed On-Board Diagnostics Program Updates

    EPA regulations state that onboard diagnostics (OBD) systems must
generally detect malfunctions in the emission control system, store
trouble codes corresponding to detected malfunctions, and alert
operators appropriately. EPA adopted at 40 CFR 86.1806-17 a requirement
for manufacturers to meet the 2013 California Air Resources Board
(CARB) OBD regulation as a requirement for an EPA certificate, with
certain additional provisions, clarifications and exceptions, in the
Tier 3 Motor Vehicle Emission and Fuel Standards final rulemaking (79
FR 23414, April 28, 2014). Since that time, CARB has made several
updates to their OBD regulations and continues to consider changes
periodically. In this NPRM, EPA is proposing to update to the latest
version of the CARB OBD regulation (California's 2022 OBD-II
requirements that are part of title 13, section 1968.2 of the
California Code of Regulations, approved on November 22, 2022). This is
accomplished by adding a new section for model year 2027 and later
vehicles and only putting in requirements in that section that are not
in the new CARB regulation. For example, EPA is adding a new monitoring
requirement for gasoline particulate filters (GPFs) since the CARB
regulation does not specifically have a requirement for a particulate
filter diagnostic for gasoline vehicles and EPA is projecting that
manufacturers will utilize GPFs as a control strategy in meeting the
proposed PM standards. Details are available in DRIA Chapter 3.3.

H. Coordination With Federal and State Partners

    Executive Order 14037 directs EPA and DOT to coordinate, as
appropriate and consistent with applicable law, during consideration of
this rulemaking. EPA has coordinated and consulted with DOT/NHTSA, both
on a bilateral level during the development of the proposed program as
well as through the interagency review of the EPA proposal led by the
Office of Management and Budget. EPA has set some previous light-duty
vehicle GHG emission standards in joint rulemakings where NHTSA also
established CAFE standards. Most recently, in establishing standards
for model year 2023-2026, EPA and NHTSA concluded that it was
appropriate to coordinate and consult but not to engage in joint
rulemaking. EPA has similarly concluded that it is not necessary for
this EPA proposal to be issued in a joint action with NHTSA. In
reaching this conclusion, EPA notes there is no statutory requirement
for joint rulemaking and that the agencies have different statutory
mandates and their respective programs have always reflected those
differences. As the Supreme Court has noted ``EPA has been charged with
protecting the public's `health' and `welfare,' a statutory obligation
wholly independent of DOT's mandate to promote energy efficiency.''
\547\ Although there is no statutory requirement for EPA to consult
with NHTSA, EPA has consulted significantly with NHTSA in the
development of this rule. For example, staff of the two agencies met
frequently to discuss various technical issues including modeling
inputs and assumptions, shared technical information, and shared views
related to the assessments conducted for each rule.
---------------------------------------------------------------------------

    \547\ Massachusetts v. EPA, 549 U.S. at 532.
---------------------------------------------------------------------------

    EPA also has consulted with analysts from other Federal agencies in
developing this proposal, including the Federal Energy Regulatory
Commission, the Department of Energy and several national labs. EPA
collaborates with DOE and Argonne National Laboratory on battery cost
analyses and critical materials forecasting. EPA, National Renewable
Energy Laboratory (NREL) and DOE collaborate on forecasting the
development of a national charging infrastructure and projecting
regional charging demand for input into EPA's power sector modeling.
EPA also coordinates with the Joint Office of Energy and Transportation
on charging infrastructure. EPA and the Lawrence Berkeley National
Laboratory collaborate on issues of consumer acceptance of plug-in
electric vehicles. EPA and the Oak Ridge National Laboratory
collaborate on energy security issues. EPA also participates in the
Federal Consortium for Advanced Batteries led by DOE and the Joint
Office of Energy and Transportation. EPA and DOE also have entered into
a Joint Memorandum of Understanding to provide a framework for
interagency cooperation and consultation on electric sector resource
adequacy and operational reliability.\548\
---------------------------------------------------------------------------

    \548\ Joint Memorandum on Interagency Communication and
Consultation on Electric Reliability, U.S. Department of Energy and
U.S. Environmental Protection Agency, March 8, 2023.

---------------------------------------------------------------------------

    E.O. 14037 also directs EPA to coordinate with California and other
states that are leading the way in reducing vehicle emissions. EPA has
engaged with the California Air Resources Board on technical issues in
developing this proposal. EPA has considered certain aspects of the
CARB Advanced Clean Cars II program, adopted in August 2022, as
discussed elsewhere in this notice. We also have engaged with other
states, including members of the National Association of Clean Air
Agencies, Northeast States for Coordinated Air Use Management, and the
Ozone Transport Commission.

I. Stakeholder Engagement

    EPA has conducted extensive engagement with a diverse range of
interested stakeholders in developing this proposal. We have engaged
with those groups with whom E.O. 14037 specifically directs EPA to
engage, including labor unions, states, industry, environmental justice
organizations and public health experts. In addition, we have engaged
with NGOs representing environmental, public health and consumer
interests, automotive manufacturers, suppliers, dealers, utilities,
charging providers, local governments, Tribal governments, alternative
fuels industries, and other organizations. For example, in April-May
2022, EPA held a series of engagement sessions with various interested
stakeholder groups so that EPA could hear early input in developing its
proposal. These engagement sessions included all of the identified
stakeholder groups. EPA has continued engagement with many of these
stakeholders throughout the development of this proposal. EPA looks
forward to hearing from all stakeholders through comments on this
proposal and during the public hearing.

IV. Technical Assessment of the Proposed Standards

A. What approach did EPA use in analyzing potential standards?

    For this proposal, EPA has conducted a new technical assessment of
the proposed standards, along with an assessment of alternative
standards and sensitivity cases. The overall approach used here is
consistent with our prior rulemakings for GHG and criteria pollutants
for light- and medium-duty vehicles. We continue to refer to the
extensive body of prior technical work that has underpinned those
rules, and where appropriate we have incorporated both updated and new
tools, models and data in conducting this assessment. Some of the areas
of particular focus are related to the significant developments in
vehicle electrification that have continued to occur since our most
recent previous technical assessment published with the 2021 rule.
Battery costs continue to decline, and vehicle manufacturers have
continued to introduce PEV products in increased volumes and new market
segments, improving the ability to characterize the cost and
performance of best-practice designs. New legislation also has provided
significant incentives for both the manufacture and purchase of PEVs,
and the expansion of charging infrastructure. Additionally, in light of
the projected levels of electrification anticipated under the proposed
standards, EPA's new technical assessment contains significantly
increased focus on the availability of critical minerals, supply chain
development, battery manufacturing capacity, and mineral security.
    Our modeling can be broadly divided into two categories. The first
category is compliance modeling for the vehicle manufacturers, which
includes the potential design and technology application decisions to
achieve compliance under the modeled standard. The second category is
`effects' modeling, which is intended to capture how changes in vehicle
design and use will impact human health, the environment, and other
factors that are relevant to a societal benefits-costs analysis.
    As in the 2010 and 2012 rules, EPA is again using the Optimization
Model for reducing Emissions of Greenhouse gases from Automobiles
(OMEGA) to model vehicle manufacturer compliance with GHG standards. In
the 2021 GHG rule EPA used DOT's CAFE Compliance and Effects Modeling
System (CCEMS). This approach helped to maintain consistency with the
CCEMS modeling used for the 2020 rule allowing for a more direct
comparison of results given a single modeling tool having been used for
both analyses. For this proposal, EPA is returning to the use of the
OMEGA model, and we do so for a few important reasons. For one, the
updated version of OMEGA extends the prior version's projections of
cost-effective manufacturer compliance decisions by also accounting for
the relationship between manufacturer compliance decisions and consumer
demand and including important constraints on technology adoption.
Also, the updated OMEGA allows for evaluation of the influence of other
policies beyond the GHG standards being evaluated, such as state-level
ZEV policies. These features make this updated version of OMEGA well-
suited for analyzing standards in a market where BEVs are expected to
account for a steadily increasing share of new vehicle sales. EPA has
utilized the OMEGA model in evaluating the effects of not only the GHG
program but the criteria pollutant emissions program as well. Finally,
despite the strengths of the CCEMS and its modeling approach, it is
designed around the CAFE program and the statute behind that program,
while OMEGA is designed around EPA's GHG program and the Clean Air Act.
    This model takes as inputs detailed information about existing
vehicles, technologies, costs, and definitions of the policies under
consideration. From these inputs, the model projects the stock of
vehicles and vehicle attributes, and their use over the analysis
period. For the analysis supporting this proposal, EPA has developed an
updated and peer-reviewed version of the OMEGA model to better account
for the significant evolution over the past decade in vehicle markets,
technologies, and mobility services. In particular, recent advancements
in BEVs and their introduction into the full range of market segments
provides strong evidence that increased vehicle electrification can
play a central role in achieving greater levels of emissions reduction
in the future. Among the key new features of OMEGA is the
representation of consumer-producer interactions when modeling
compliance pathways and the associated technology penetration into the
vehicle fleet. This capability allows us to project the impacts of the
producer and consumer incentives contained in the IRA and BIL
legislation. Compared to the previous model version, the updated
version of OMEGA has extended capability to model a wider range of GHG
program provisions, and it has been critical in the assessment of
various policy alternatives that were considered for this proposal.
OMEGA is described in detail in DRIA Chapter 2.2.
    The ALPHA vehicle simulation model is used to estimate emissions,
energy rates, and other relevant vehicle performance estimates. These
ALPHA simulation results create the inputs to the OMEGA model for the
range of technologies considered in this rulemaking. We have built upon
our existing library of benchmarked engines and transmissions used in
previous rulemakings by adding several new technologies for non-hybrid
and hybrid ICE vehicles, and newly refined models of BEV powertrains.
For this proposal, we have also adopted an updated approach for
representing the ALPHA simulation results in OMEGA, using `response
surfaces' of emissions and

energy rates. These continuous technology representations can be
applied across vehicles of different size, weight, and performance
characteristics without requiring that vehicles be binned into discrete
vehicle classes. The response surface approach also simplifies the
model validation process, since the absolute values of absolute
emissions and energy rates that are produced can be readily checked
against actual vehicle test data. This is in contrast to the validation
process needed for the incremental effectiveness values that were
estimated in previous rulemakings using either a `lumped parameter
model' or direct table lookup of effectiveness. The modeling in ALPHA
and generation of response surfaces is described in DRIA Chapter 2.4.
    The technology cost estimates used in this assessment are from both
new and previously referenced sources, including some values used in
recent rulemakings where those remain the best available estimates.
Vehicle teardown studies remain an important source of detailed cost
estimates, and for this rulemaking EPA has contracted a new teardown
study that compares ICE and BEV manufacturing costs for a high-volume
crossover utility vehicle. Battery costs are an especially important
element for this rulemaking. Consistent with prior rulemakings, we have
used DOE's BatPaC model to estimate current battery pack costs which,
similar to other technology costs, are assumed to decline over time as
production volumes grow and manufacturing efficiencies improve. The
costing approaches and assumptions are described in more detail in DRIA
Chapter 2.5.
    The main function of the OMEGA compliance modeling is to simulate
how a manufacturer can meet future GHG standards through the
application of technologies. Among multiple pathways that typically
exist for achieving compliance, OMEGA aims to find the pathway that
minimizes costs for the manufacturer given a set of inputs that
includes technology costs and emissions rates. The compliance modeling
for this rulemaking also includes constraints on new vehicle production
and sales that are informed by our assessment of manufacturer and
consumer decisions, and in some cases account for factors that were not
included in the technical assessments in our prior rulemakings.
    EPA also consulted and considered data and forecasts from
government agencies, analyst firms, and industry in order to assess
capacity for battery production and to thereby establish appropriate
constraints on PEV battery production (in terms of gigawatt-hours (GWh)
in a given year) during the time frame of the proposal.\549\ This
effectively acts as an upper limit on BEV production, particularly
during the earlier years of the analysis, and represents, for example,
considerations such as availability of critical minerals and the lead
time required to construct battery production facilities. The
development of the battery GWh constraint and the sources considered
are described in detail in DRIA Chapter <IP_ADDRESS>.
---------------------------------------------------------------------------

    \549\ Sources included, among others, Wood Mackenzie proprietary
forecasts of battery manufacturing capacity, battery costs, and
critical mineral availability; Department of Energy analyses and
forecasts of critical mineral availability and battery manufacturing
capacity; and other public sources. See DRIA Chapter <IP_ADDRESS> for a
description of these sources and how they were used.
---------------------------------------------------------------------------

    Consistent with compliance modeling for past rulemakings, the OMEGA
model also limits the rate at which new vehicle designs can be
introduced by applying redesign cycle constraints (DRIA Chapter 2.6).
EPA has evaluated historic vehicle data (e.g., the rate of product
redesigns) to ensure that the technology production pace in the
modeling is feasible. In addition to vehicle production constraints,
market assumptions and limits on manufacturer pricing cross-
subsidization have been implemented to constrain the number of BEVs
that can enter the fleet. EPA has evaluated market projections from
both public and proprietary sources to calibrate the OMEGA model's
representation of the consumer market's ICE-BEV share response. A
detailed discussion of the constraints used in EPA's compliance
modeling is provided in DRIA Chapter 2.7.
    As in prior rulemakings, this assessment is a projection of the
future, and is subject to a range of uncertainties. We have assessed a
number of sensitivity cases for key assumptions in order to evaluate
how they would impact the results.

B. EPA's Approach To Considering the No Action Case and Sensitivities

    EPA has assessed the effects of this proposal with respect to a No
Action case, for all stringency alternatives and several sensitivities.
The Office of Management and Budget (OMB) provides guidance for
regulatory analysis through Circular A4. Circular A4 describes, in
general, how a regulatory agency should conduct an analysis in support
of a future regulation and includes a requirement for assessing the
baseline, or ``no action'', condition: ``what the world will be like if
the proposed rule is not adopted''. In addition, Circular A4 provides
that the regulating agency may also consider ``alternative baselines,''
which EPA has considered via several sensitivities in this proposal. In
the development of a No Action case, EPA also considers existing
finalized rulemakings. For this proposal, these finalized rules include
the 2014 Tier 3 criteria pollutant regulation, the 2016 Phase 2 GHG
standards for medium-duty vehicles, and the recently finalized MY 2023-
2026 light-duty GHG standards.
    EPA recognizes that during the timeframe of our existing standards
the industry and market has already developed considerable momentum
toward continuing increases in BEV uptake (as discussed at length
throughout this preamble). This dynamic raises an important question
about what the projected market penetration for BEVs in the absence of
the proposed standards will be. EPA also recognizes there are many
projections from third parties and various stakeholders for increased
BEV penetration into the future. There are a range of assumptions that
vary across such projections such as consumer adoption, financial
incentives, manufacturing capacity and vehicle price. Vehicle price is
also impacted by range and efficiency assumptions (more efficient EVs
require smaller batteries to travel the same distance and smaller
batteries cost less). Depending on what specific assumptions regarding
the future are made, there can be significant variation in future BEV
projections. Increasingly favorable consumer sentiment towards BEVs,
decreasing costs (either through a reduction in manufacturing costs or
through financial incentives), and a broadening number of BEV product
offerings all support a projected higher number of new vehicle BEV
sales in the future, independent of additional regulatory action. As
described in preamble Section I.A.2.ii, EPA reviewed several recent
reports and studies containing BEV projections which altogether span a
range from 32 to 50 percent of new vehicle sales in 2030 and as high as
67 percent by 2032.
    EPA has considered a similar set of factors as those studies
conducted by other stakeholders to develop the No Action case for this
proposal. EPA's No Action case has been primarily informed by the
technical assessment conducted by the agency in support of this
proposal. This includes detailed vehicle and battery cost analyses,
impacts of consumer and manufacturing financial incentives (such as
those provided by the Inflation Reduction

Act), consumer acceptance studies, vehicle performance modeling and
technology applications, and battery manufacturing assessments.
    The No Action case in our central analysis reaches 39 percent BEVs
in 2032, shown in Table 81, compared to an actual 3 percent BEV share
of new vehicles in MY 2021. This projected BEV increase is driven by
EPA's projections of an increase in consumer interest and acceptance
over that period, the availability of economic incentives for electric
vehicles for both manufacturers and consumers provided by the IRA, cost
learning for BEV technology over time, and the ongoing effect of the
2021 rulemaking and the associated stringency increases in MYs 2022
through 2026. In the absence of this proposed rulemaking, the MY 2026
standards carry forward indefinitely into future years and define the
No Action policy case for the analysis in this proposal. Notably, this
projection does not include announcements made by manufacturers about
their future plans and corporate goals, or state laws that have
recently been adopted or are likely to be adopted in the next decade.
While our projected BEV penetrations in the No Action case show a
substantial increase over time, the 39 percent value in MY 2032 is
lower than some third-party projections and manufacturer
announcements.\550\ For example, the International Energy Agency (IEA)
synthesized industry announcements to date and concluded that if
industry follows its announced plans, 50 percent of new vehicle sales
in the U.S. would be zero-emission by 2030.\551\ The same IEA analysis
found that the combined effect of all current policies without
consideration of these announcements would result in more than 20
percent BEV sales in 2030. Our own projection of the No Action BEV
share of new vehicles falls between these two IEA cases, and well below
the higher case of what the industry has announced it will do. While we
consider manufacturer announcements as additional evidence that high
levels of BEV penetration are feasible, for purposes of this proposal
we have not integrated manufacturer announcements directly into our
modeling of the No Action baseline. We note here that there are two key
reasons why our central No-Action case projections of BEV penetration
for this rulemaking are lower than announcements from some manufacturer
and some third-party projections. First, our analysis does not include
the effect of state-level policies whereas projections from other
sources may include those policies. We did not include these policies
because many are still not in effect; however, we do anticipate that in
the next decade, state-level policies may play an important role in
driving BEV penetration. For this reason, we have included a
sensitivity No Action case, which includes the ZEV requirements of the
California Advanced Clean Car (ACC) II program for California and other
participating states. Second, our analysis is based on the assumption
that manufacturers follow a purely cost-minimizing compliance strategy.
We do not account for strategic business decisions or corporate
policies that might cause a manufacturer to pursue a higher-BEV
strategy such as the numerous manufacturer announcements and published
corporate goals that suggest this approach may underestimate the rate
of BEV adoption in a No Action scenario.
---------------------------------------------------------------------------

    \550\ A summary of industry announcements and third-party
projections of BEV penetrations is provided in Section I.A.2.
    \551\ International Energy Agency, ``Global EV Outlook 2022,''
p. 107, May 2022. Accessed on November 18, 2022 at https://iea.blob.core.windows.net/assets/e0d2081d-487d-4818-8c59-69b638969f9e/GlobalElectricVehicleOutlook2022.pdf.
---------------------------------------------------------------------------

    As a way to explore the impact that alternative assumptions would
have on the future BEV penetrations under the No Action case, the
agency has also conducted a range of sensitivities in addition to a
central No Action case. Specifically, EPA conducted three categories of
sensitivity cases to explore how various input assumptions affected the
No Action case as well as the Proposal and the Alternatives. First, EPA
explored a sensitivity reflecting state adoption of the California
Advanced Clean Cars II (ACC II) program. Second, EPA conducted
sensitivities of both higher and lower battery costs. Third, EPA made
assumptions about a faster or slower pace of consumer acceptance of
BEVs. Our central No Action case projects 39 percent BEVs in MY2032.
Across the sensitivity analyses, MY2032 BEV projections ranged from 29
to 66 percent in their respective No Action cases. Each of the
sensitivity cases is discussed in more detail in Section IV.E. Our
projections through MY 2032 for BEV penetrations in the No Action case
are shown in Figure 20.

[GRAPHIC] [TIFF OMITTED] TP05MY23.023

    We acknowledge the range of possible assumptions, and on balance,
we believe that EPA's approach to assessing potential No Action cases
provides a technically robust method of determining the feasibility and
costs associated with the emissions reductions required by the proposed
standards.
    EPA requests comment on our approach to the No Action case, both
the methodologies and detailed technical inputs used by EPA to develop
the No Action case for this proposal, and also on other approaches EPA
may consider as an alternative to the approach used in this proposal.
EPA will assess the comments and other information gathered in response
to this proposal in determining an appropriate approach to the No
Action case for the final rule.

C. How did EPA consider technology feasibility and related issues?

1. Light- and Medium-Duty Technology Feasibility
    The levels of stringency considered in this proposal continue a
trend of more stringent emission standards established by EPA in prior
rulemakings based on EPA's consideration of available and projected
technologies consistent with the factors EPA must consider when
establishing standards under the Clean Air Act. As with prior rules, as
part of the development of this proposed rulemaking, EPA has assessed
the feasibility of the proposed standards in light of current and
anticipated progress by automakers in developing and deploying new
emissions-reducing technologies.
    Compliance with the EPA GHG and criteria pollutant standards over
the past decade has been achieved predominantly through the application
of advanced technologies and improved aftertreatment systems to
internal combustion engine (ICE) vehicles. For example, in the analyses
performed for the 2012 GHG rule, a significant portion of EPA's
analysis included an assessment of technologies available to
manufacturers for achieving compliance with the standards. Advanced ICE
technologies were identified as playing a major role in manufacturer
compliance with the emission reductions required by those rules.
    In that same time frame, as the EPA standards have increased in
stringency, automakers have relied to an increasing degree on a range
of electrification technologies, including hybrid electric vehicles
(HEVs) and, in recent years, plug-in hybrid electric vehicles (PHEVs)
and battery-electric vehicles (BEVs). As these technologies have been
advancing rapidly over the past decade, and as battery costs have
continued to decline, automakers have begun to include BEVs and PHEVs
(together referred to as PEVs or plug-in electric vehicles) as an
integral and growing part of their current and future product lines,
leading to an increasing diversity of these clean vehicles planned for
high-volume production. HEV and PHEV vehicle architectures not only
decrease GHG emissions but provide the vehicle manufacturers with
additional technology options for reducing criteria pollutant
emissions. Blended ICE and electric operation allow the vehicle
manufacturers to control the engine for optimal operating conditions to
reduce criteria pollutants. In addition, the inclusion of a higher
voltage battery provides the opportunity to preheat the catalyst to
reduce cold start emissions. In EPA's 2021 rule that set GHG emission
standards for MYs 2023 through 2026, we projected that manufacturers
would comply with the 2026 standards with about 17 percent PEVs at the
industry-wide level, reflecting the increased cost-effectiveness of PEV
technologies in achieving compliance with increasingly stringent
emissions standards.
    This trend in technology application for light-duty vehicles is
evidence of a continuing shift toward electrification as an important
technology for both criteria pollutant and GHG compliance. As many
advanced ICE technologies have now reached high penetrations across the
breadth of manufacturers' product lines, electrification technology
becomes increasingly attractive as a cost-effective pathway to further
emission reductions. As described in detail in the Executive Summary,
manufacturers have increasingly begun to shift research and development
investment away from ICE technologies and are allocating large amounts
of new investment to electrification technologies. For more discussion
of this rapidly increasing trend, see preamble Section I.A.2.
    In addition to the light-duty vehicle sector, the medium-duty
sector is also experiencing a shift toward

electrification in several important market segments. As described in
Section I.A.2 of this preamble, numerous commitments to produce all-
electric medium-duty delivery vans have been announced by large fleet
companies in partnerships with various OEMs. This rapid shift to BEVs
in a fleet that is currently predominantly gasoline- and diesel-fueled
suggests that the operators of these fleets consider BEV delivery vans
the best available and most cost-effective technology for meeting their
needs. Owing to the large size of these vehicle fleets, this segment
alone is likely to represent a significant portion of the future
electrification of the medium-duty vehicle fleet.
    These trends in light- and medium-duty vehicle technology suggest
that electrification is already poised to play a rapidly increasing
role in the onroad fleet and provides further evidence that BEV and
PHEV technologies are increasingly seen as an effective and feasible
set of vehicle technologies that are available to manufacturers to help
comply with increasing levels of emission reductions.
    EPA has assessed the feasibility of the proposed standards in light
of current and anticipated progress by automakers in developing and
deploying new emissions-reducing technologies and has presented the
bulk of this analysis in Chapter 3 of the DRIA. DRIA 3.1.1 provides
further discussion of recent trends and feasibility of light-duty
vehicle technologies that manufacturers have available to meet the
proposed standards. DRIA 3.1.2 discusses recent trends in
electrification of medium-duty vehicles. The following paragraphs
summarize other aspects of PEV feasibility, such as technology costs,
consumer acceptance, charging infrastructure, supply chain,
manufacturing capacity, critical minerals, and effects of BEV
penetration on upstream emissions; the respective chapters of the DRIA
provide additional detail.
    While EPA has not specifically modeled the adoption of plug-in
hybrid electric vehicle (PHEV) architectures in the analysis for this
proposal, the agency recognizes that PHEVs can provide significant
reductions in GHG emissions and that some vehicle manufacturers may
choose to utilize this technology as part of their technology offering
portfolio in response to customer demands/needs and in response to EPA
emission standards (as some firms are already doing today). PHEVs have
been available in the light-duty vehicle market in the U.S. for more
than a decade and a number of models are available now across a larger
breadth of vehicle types, including sedans, such as the Toyota Prius
Prime, and crossover SUVs, such as the Subaru Crosstrek, Ford Escape
PHEV, Kia Niro Plug-in Hybrid, Kia Sportage Plug-In Hybrid, Hyundai
Tucson Plug-In Hybrid, Mitsubishi Outlander PHEV and Toyota RAV4 Prime.
Stellantis currently offers a minivan PHEV in its Chrysler Pacifica
Hybrid. Large PHEV SUVs are also currently available, including the
Jeep Grand Cherokee and Jeep Wrangler 4xe, the Kia Sorento Plug in
Hybrid, the Lincoln Corsair Grand Touring, the Lincoln Aviator, and the
Volvo XC90 Recharge.
    Although no PHEV pickup truck applications currently exist, EPA
believes the PHEV architecture may lend itself well to future pickup
truck applications, including some MDV pickup truck applications. One
major manufacturer, Stellantis, recently announced at the 2023 Consumer
Electronics Show that a range-extender will be an option on their new
full-size Ram 1500 REV electric pickup.\552\ A PHEV pickup architecture
would provide several benefits: Some amount of zero-emission electric
range (depending on battery size); increased total vehicle range during
heavy towing and hauling operations using both charge depleting and
charge sustaining modes (depending on ICE-powertrain sizing); job-site
utility with auxiliary power capabilities similar to portable worksite
generators, and the efficiency improvements normally associated with
strong hybrids that provide regenerative braking, extended engine idle-
off, and launch assist for high torque demand applications. Depending
on the vehicle architecture, PHEVs used in pickup truck applications
may also offer additional capabilities, similar to BEV pickups, with
respect to torque control and/or torque vectoring to reduce wheel slip
during launch in trailer towing applications. In addition, PHEVs may
help provide a bridge for consumers that may not be ready to adopt a
fully electric vehicle.
---------------------------------------------------------------------------

    \552\ Kiley, D. Ram 1500 BEV Expected To Hit Market With 500
Miles of Range. ``Wards Auto'', January 5, 2023. https://www.wardsauto.com/print/389039.
---------------------------------------------------------------------------

    The MY 2023 Jeep Grand Cherokee 4xe with the ``Trailhawk'' package
is an example of a large SUV with significant tow capability and
similar packages may eventually be used in pickup truck applications.
The vehicle has a 6,125 pound GVWR and a 12,125-pound GCWR using a
combination of a 270 bhp turbocharged GDI engine with P2 and P0
electric machines of 100kW and 33kW, respectively. The vehicle also
uses a 17.3 kWh (nominal size) battery pack that provides 25 miles of
all-electric range. The MY 2023 Jeep Wrangler 4xe uses a similar
powertrain and battery pack. The Wrangler 4xe equipped with the
``Rubicon'' package has a 6,400-pound GVWR and a 9,200-pound GCWR.
    EPA requests comment on the types of PHEVs EPA could consider in
our analysis for the final rulemaking, including whether or not EPA
should explicitly model PHEVs in light-duty and MDV pickup
applications. EPA also requests comment on recommendations for likely
PHEV architectures that should be investigated, and any relevant
performance or utility data that may help inform our modeling and
analyses. EPA has initiated contract work with Southwest Research
Institute to investigate likely technology architectures of both PHEV
and internal combustion engine range-extended electric light-duty and
MDV pickup trucks that we anticipate will provide data in time for the
final rule. In addition, within DRIA Chapter <IP_ADDRESS> ``PHEV Powertrain
Costs,'' EPA provides component technology descriptions and cost
estimates that include the major components needed to manufacture a
PHEV, including batteries, e-motors, power electronics and other
ancillary systems. EPA requests comment on our PHEV cost estimates
contained in the DRIA. EPA may rely upon those estimates and other
information gathered in response to this proposal and EPA's on-going
technical work for estimating the costs for PHEVs for the final rule.
    Many light-duty and medium-duty PHEVs purchased for commercial use
would be eligible for the Commercial Clean Vehicle Credit (45W) under
the IRA, which provides a credit of up to $7,500 for qualified vehicles
with gross vehicle weight ratings (GVWRs) of under 14,000 pounds and up
to $40,000 for qualified vehicles above 14,000 pounds GVWR. As the
amount of the credit depends on the GVWR and the incremental cost of
the vehicle relative a comparable ICE vehicle, EPA also requests
comment on estimating the amount of the credit that will on average
apply to commercial MDV PHEVs, such as PHEV pickups, and other
commercial PHEVs and BEVs.
2. Approach To Estimating Electrification Technology Costs
    Among the various technology costs that are relevant to technology
feasibility, costs for electrification technology are of particular
interest due to the increased penetrations of

electrified vehicles that are projected in the compliance analysis.
    This section provides a general review of how battery and other
electrification component costs were developed for this analysis. A
more detailed discussion of the development of the electrification cost
estimates used in the proposal, and the sources we considered, may be
found in DRIA Chapter 2.
    To develop battery cost estimates for PEVs, EPA relied on a number
of resources. First, as part of our ongoing research activities, we
followed recent and anticipated trends in PEV battery design and
configuration in order to understand the general design parameters of
batteries that are appearing in high-production PEV models and whose
cost therefore should be modeled in the analysis. To identify
appropriate pack designs, we sought to model batteries with pack
topologies, cell sizes, and chemistry that are similar to those seen in
emerging high-production battery platforms, such as for example the GM
Ultium battery platform, the VW MEB vehicle platform, and the Hyundai
E-GMP vehicle platform. EPA considers these platforms to exemplify the
trend toward BEV-specific vehicle platforms with battery packs of
several capacities that are constructed from various numbers of modules
that utilize one or two standard cell sizes of relatively large
capacity, generally forming a flat battery pack assembly suitable for
residing in the vehicle floor.
    EPA then used Argonne National Laboratory's BatPaC model version
5.0 as a key tool to generate base year (2022) direct manufacturing
cost estimates for battery packs of such a design, as they are likely
to be experienced today in a well optimized, high-volume battery
production facility. As described in more detail in DRIA Chapter
<IP_ADDRESS>.2, we generated a population of pack costs for various pack
energy capacities (kWh) and developed curve fits to express base year
cost per kWh as a function of gross kWh,\553\ for a number of annual
production volumes.
---------------------------------------------------------------------------

    \553\ As described in DRIA Chapter 2, larger packs tend to
achieve a lower cost per kWh, and this tendency is evident in BatPaC
results.
---------------------------------------------------------------------------

    To determine battery manufacturing costs in future years of the
analysis, we first looked to industry forecasts and other literature
regarding expected cost reductions for typical BEV battery packs in
future years, expected to result from factors commonly cited in these
forecasts, such as improved manufacturing efficiency and increasing
production volumes. We then used this information to derive a nominal
reference trajectory for future battery pack cost per kWh for an
average BEV battery pack. The development of the reference trajectory
is described in DRIA <IP_ADDRESS>.3.
    This generic reference trajectory was used as a reference point
with which to qualitatively compare BEV battery costs per kWh that are
output by the OMEGA model. When the OMEGA model generates a compliant
fleet in a given future year of the analysis, battery costs for BEVs in
that year are determined dynamically, by applying a learning cost
reduction to the base year cost. The learning factor is calculated
based on the cumulative GWh of battery production necessary to supply
the number of BEVs that OMEGA has thus far placed in the analysis
fleet, up to that analysis year. This is consistent with ``learning by
doing,'' a standard basis for representing cost reductions due to
learning in which a specific percentage cost reduction occurs with each
doubling of cumulative production over time. This dynamic method of
assigning a cost reduction due to learning means that OMEGA runs that
result in different cumulative battery production levels will result in
somewhat different battery costs.
    Because it is concerned with projecting a compliant U.S. fleet,
OMEGA estimates only the cumulative GWh of battery production needed to
supply the U.S. PEV fleet. On a global scale, and across other battery
applications such as stationary storage or other classes of vehicles,
cumulative GWh of battery production is likely to be much larger than
that for the U.S. fleet alone, and could potentially lead to a greater
potential for learning to occur over the same time frame. Therefore,
our use of cumulative U.S. production may be conservative with respect
to the potential for volume-based learning to occur. EPA invites
comment on whether and how EPA should consider the issue of global
battery production in the context of our application of learning for
the final rule analysis.
    As an example of the pack direct manufacturing costs used in the
analysis, Figure 21 shows the sales-weighted average battery pack
direct manufacturing cost per kWh generated by OMEGA for the central
case of the proposal, alongside the reference trajectory. The Proposal
costs compare quite favorably to the reference trajectory and vary
generally as expected. From 2022 to 2025 they are somewhat lower, due
to the substantially larger average pack size (96 to 103 kWh) compared
to the 75 kWh of the reference trajectory. Post-2027, the Proposal
costs are also lower than the reference trajectory, again due in part
to the larger pack size, and increasingly, to the growing cumulative
production volume due to the additional BEVs driven by the proposal.

[GRAPHIC] [TIFF OMITTED] TP05MY23.024

    The average pack size for BEVs generated by OMEGA is plotted on the
right axis. The 96 kWh to 103 kWh average pack capacity is due in part
to their use in relatively large vehicles, such as large SUVs and light
trucks, which form a significant part of the OMEGA modeled compliance
fleet and to which OMEGA directs a significant amount of
electrification in its identification of a least cost compliance
pathway. Another factor is the use of a 300-mile driving range for all
BEVs in the analysis, which is a longer average range than in some
other studies but which EPA believes is an appropriate modeling choice
to reflect currently prevailing range expectations by consumers.\554\
More discussion of the OMEGA model and the OMEGA results can be found
in Section IV.C and in the DRIA.
---------------------------------------------------------------------------

    \554\ For light-duty, OMEGA uses a 300 mile range for BEVs. For
medium-duty, OMEGA uses a 300 mile range for pickup BEVs and a 150
mile range for van BEVs.
---------------------------------------------------------------------------

    To reflect the anticipated effect of the Inflation Reduction Act
(IRA) on battery production costs to manufacturers, we applied a
further battery cost reduction based on the Section 45X Advanced
Manufacturing Production Tax Credit. This provision of the IRA provides
a $35 per kWh tax credit for manufacturers of battery cells, and an
additional $10 per kWh for manufacturers of battery modules, as well as
a credit equal to 10 percent of the manufacturing cost of electrode
active materials and another 10 percent for the manufacturing cost of
critical minerals (all applicable only to manufacture in the United
States). The credits, with the exception of the critical minerals
credit, are available immediately to manufacturers who meet the U.S.
production requirement and phase out from 2030 to 2032.
    We assumed that manufacturer ability to take advantage of the $35
cell credit and the $10 module credit would ramp up linearly from 60
percent of total cells and modules in 2023 (a conservative estimate of
the current percentage of U.S.-based battery and cell manufacturing
likely to be eligible today for the credit) \555\ \556\ \557\ to 100
percent in 2027, and then ramping down by 25 percent per year as the
law phases out the credit from 2030 (75 percent) through 2033 (zero
percent). Although a large percentage of 2023 U.S. BEV battery and cell
manufacturing is represented by the production of one OEM, we expect
that the many large U.S. battery production facilities that are being
actively developed by suppliers and other OEMs (as described in Section
IV.C.6 of this Preamble) will allow benefit of the credit to be
accessible to all manufacturers by 2027.
---------------------------------------------------------------------------

    \555\ U.S. Department of Energy, ``FOTW #1192, June 28, 2021:
Most U.S. Light-Duty Plug-In Electric Vehicle Battery Cells and
Packs Produced Domestically from 2018 to 2020,'' June 28, 2021.
https://www.energy.gov/eere/vehicles/articles/fotw-1192-june-28-2021-most-us-light-duty-plug-electric-vehicle-battery.
    \556\ Argonne National Laboratory, ``Lithium-Ion Battery Supply
Chain for E-Drive Vehicles in the United States: 2010-2020,'' ANL/
ESD-21/3, March 2021.
    \557\ U.S. Department of Energy, ``Vehicle Technologies Office
Transportation Analysis Fact of the Week #1278, Most Battery Cells
and Battery Packs in Plug-in Vehicles Sold in the United States From
2010 to 2021 Were Domestically Produced,'' February 20, 2023.
---------------------------------------------------------------------------

    Because RPE is meant to be a multiplier against the direct
manufacturing cost, and the 45X credit does not reduce the actual
direct manufacturing cost at the factory but only compensates the cost
after the fact, we felt that it was most appropriate to apply the 45X
credit to the marked-up cost. The 45X cell and module credits per kWh
were applied by first marking up the direct manufacturing cost by the
1.5 RPE factor to determine the indirect cost (i.e., 50 percent of the
manufacturing cost), then deducting the credit amount from the marked-
up cost to create a post-credit marked-up cost. The post-credit direct
manufacturing cost would then become the post-credit marked-up cost
minus the indirect cost. Details on the application of the 45X credit
in OMEGA can be found in DRIA <IP_ADDRESS>.
    EPA did not apply a further cost reduction to represent the 10
percent electrode active material or critical mineral production
credits under 45X,

which are also available to be utilized by manufacturers. Although not
explicitly modeled, these credits could have a substantial impact on
reducing battery costs for some manufacturers in the short term and
many in the long term, and so their exclusion from the currently
modeled cost estimates represents a conservative assumption. EPA
requests comment on how the effect of these specific credits might be
quantitatively represented in battery production cost for the final
rule analysis.
    The IRA also includes consumer purchase incentives, which do not
affect battery manufacturing cost, but reduce vehicle purchase cost to
consumers.
    A substantial Clean Vehicle Credit (CVC, or IRS 30D) of up to
$7,500 is available to eligible buyers of eligible PEVs, subject to a
number of requirements such as location of final assembly (in North
America), critical minerals and battery component origin, vehicle
retail price, and buyer income. Similarly, a Commercial Clean Vehicle
Credit (CCVC, or IRS 45W) of up to $7,500 is available for light-duty
vehicles purchased for commercial use. Guidance by the Internal Revenue
Service indicates that vehicles leased to consumers (rather than sold)
are commercial vehicles that will qualify for the full credit to be
paid to the lessor.\558\ EPA recognizes that this guidance could lead
to increased relevance of the CCVC for vehicles and buyers that would
not otherwise be eligible for the CVCC, and that this could constitute
an additional PEV cost reduction for certain consumers. Relevant
considerations in quantifying the extent to which the CVCC may
influence cost of PEVs to consumers would include factors such as the
degree to which the value of the CVCC credit (paid to lessor) would be
represented in reduced payments to the lessee, and the degree to which
manufacturers and dealers that currently sell vehicles outright choose
to switch to a leasing model.
---------------------------------------------------------------------------

    \558\ Internal Revenue Service, ``Topic G--Frequently Asked
Questions About Qualified Commercial Clean Vehicles Credit,''
February 3, 2023. https://www.irs.gov/newsroom/topic-g-frequently-asked-questions-about-qualified-commercial-clean-vehicles-credit.
---------------------------------------------------------------------------

    Because of the requirements of the 30D credit and the uncertainties
regarding utilization of the 45W credit, EPA is not assuming that all
BEV sales will qualify for the full $7,500 30D or 45W credit. A portion
of the market that is unable to capture the 30D credit may be capable
of utilizing the 45W credit. For these reasons, in the OMEGA model we
have applied a portion of the $7,500 maximum from either incentive. For
2023 we estimated that an average credit amount (across all PEV
purchases) of $3,750 per vehicle could reasonably be expected to be
realized through a combination of the 30D and 45W tax credits. For
later years, we recognized that the attractiveness of the credits to
manufacturers and consumers would likely increase eligibility over
time. To reflect this, we ramped the value linearly to $6,000 by 2032,
the last year of the credits. We did not ramp to the full theoretical
value of $7,500, in expectation that not all purchases will qualify for
30D due to MSRP or income limitations, and that not all PEVs are likely
to enter the market through leasing.
    The credit amount is modeled in OMEGA as a direct reduction to the
consumer purchase costs,\559\ and therefore has an influence on the
shares of BEVs demanded by consumers. The purchase incentive is assumed
to be realized entirely by the consumer and does not impact the vehicle
production costs for producer. For more discussion and the values used
by OMEGA, please see DRIA Chapter 2.6.8.
---------------------------------------------------------------------------

    \559\ As described in Chapter 4.1 of the DRIA, the modeling of
consumer demand for ICE and BEV vehicles considers purchase and
ownership costs as components of a ``consumer generalized cost'' for
the ICE and BEV options. The purchase cost reflects the vehicle
purchase price and any assumed purchase incentives under 30D of the
IRA.
---------------------------------------------------------------------------

    EPA also considered potential impacts on battery manufacturing cost
that might result from the proposed battery durability and warranty
requirements described in Sections III.F.2 and III.F.3. Because the
durability minimum performance requirement and the minimum battery
warranty are similar to currently observed industry practices regarding
durability performance and warranty terms, EPA does not expect that the
proposed requirements will result in an increase in battery
manufacturing costs.
    Forecasting of future battery costs is a very active research area,
particularly at this time of rapidly increasing demand in an actively
evolving industry. As new forecasts of battery cost become available,
EPA plans to consider this information for the final rule analysis. One
example of the potential for new information to emerge periodically on
this active topic is the recently released report (December 6, 2022)
from Bloomberg New Energy Finance (BNEF) describing the results of
their annual Battery Price Survey, which indicates that after years of
steady decline, the global average price for lithium-ion battery packs
(volume-weighted across the passenger, commercial, bus, and stationary
markets) climbed by about 7 percent in 2022, from $141 per kWh the year
before to $151 per kWh in 2022.560 561 For passenger BEV
batteries the average price paid was reported to be $138 per kWh.
Although the BNEF report is useful to understand trends in prices that
are reported as being paid across the industry, it is difficult to
compare the BNEF costs to the modeled costs in our analysis, which
apply to a specific class of pack design manufactured in large
quantities at a large manufacturing facility, to fulfill large orders
for a major OEM. In contrast, the survey respondents are likely to
include both large and small purchasers of diverse battery packs whose
designs and average gross capacities may differ from those modeled in
the analysis. Recognizing these and other uncertainties, EPA believes
that our proposed battery cost estimates are reasonable based on the
record at this time. To improve upon these estimates for the final rule
analysis, EPA plans to continue to monitor emerging studies and will
review the cost estimates based on available information and public
comment. We also plan to work with ANL to continue updating our
estimates of battery cost for current and future years, by adjusting
key inputs to the BatPaC model to represent expected improvements to
production processes, forecasts of future mineral costs, and design
improvements. This will allow refinement of the scaling factors based
on BatPaC modeling in addition to our consideration of industry
forecasts.
---------------------------------------------------------------------------

    \560\ Bloomberg New Energy Finance, ``Rising Battery Prices
Threaten to Derail the Arrival of Affordable EVs,'' December 6,
2022. Accessed on December 6, 2022 at: https://www.bloomberg.com/news/articles/2022-12-06/rising-battery-prices-threaten-to-derail-the-arrival-of-affordable-evs.
    \561\ Bloomberg New Energy Finance, ``Lithium-ion Battery Pack
Prices Rise for First Time to an Average of $151/kWh,'' December 6,
2022. Accessed on December 6, 2022 at: https://about.bnef.com/blog/lithium-ion-battery-pack-prices-rise-for-first-time-to-an-average-of-151-kwh/.
---------------------------------------------------------------------------

    In Figure 22 we compare the example battery costs of Figure 21 to
the high and low battery cost sensitivities that were examined in the
2021 rule. The dotted lines show the high- and low-cost sensitivities
in the 2021 rule, applicable to a 60-kWh pack as per the discussion
that was provided in the 2021 rule. For comparison to the current
proposal, the solid line shows the example OMEGA cost per kWh shown in
Figure 21. The average battery size generated for BEVs by OMEGA is
larger than the 60 kWh example from the 2021 rule, at about 100 kWh.

[GRAPHIC] [TIFF OMITTED] TP05MY23.025

    It can be seen that the average battery costs in the current
proposal remain with the band delineated by the high and low
sensitivities of the 2021 final rule analysis, out to MY 2028-2029. At
MY 2029, the cost begins to decline below the lower sensitivity in the
2021 rule. In general, part of the lower cost is due to the larger pack
capacity. Also, in the central case of the 2021 final rule analysis, we
had chosen to hold the battery cost learning rate constant after MY
2029, essentially subjecting it to a floor that was meant to represent
uncertainty about the potential for continued reductions due to rising
demand and prices for critical minerals that were beginning to become
apparent at the time of the rulemaking. We had noted that this was a
conservative assumption, reflecting uncertainty at the time about what
the appropriate level of learning would be in light of emerging cost
increases for critical minerals. We also noted that we would continue
to study the potential for cost reductions in batteries during and
after the time frame of the rule, noting that pending updates to the
ANL BatPaC model, as well as collection of emerging data on forecasts
for future mineral prices and production capacity, would make it
possible to more confidently characterize the rate of decline in
battery costs, and that we would incorporate this information in the
current proposal.
---------------------------------------------------------------------------

    \562\ For valid comparison to the example costs reported in the
2021 final rule, the costs depicted in the figure represent a 60-kWh
pack and thus are slightly higher than the cost trajectory shown in
DRIA Chapter <IP_ADDRESS>.3 (``Trajectory of future battery pack
manufacturing costs for a 75 kWh BEV pack'') which represents a 75-
kWh pack.
---------------------------------------------------------------------------

    Since then, these developments have improved our ability to
understand the potential for cost reductions past 2029, in place of the
lower limit we had assumed in the 2021 analysis. While predicting the
actual cost of batteries this far into the future is highly uncertain,
most analysts expect continued progress to occur as a result of
continued improvement in battery manufacturing and battery chemistry
during this extended future timeframe.
    Forecasting of future battery costs is subject to a great deal of
uncertainty due to factors such as the ongoing and active development
of the technology and rapidly increasing demand. EPA welcomes comment
on the battery costs used in this analysis and how to best represent
future expectations of trends in battery costs, as well as additional
data and information that EPA should consider in assessing battery
costs for the final rule analysis.
    Detailed discussion of the development of the battery cost
estimates used in the proposal and the sources we considered may be
found in DRIA Chapter 2.
    EPA has also updated the non-battery powertrain costs that were
used to determine the direct manufacturing cost of electrified
powertrains. We referred to a variety of industry and academic sources,
focusing primarily on teardowns of components and vehicles conducted by
leading engineering firms. These included the 2017 teardown of the
Chevy Bolt conducted by Munro and Associates for UBS; \563\ a 2018
teardown of several electrified vehicle components conducted by Ricardo
for the California Air Resources Board; \564\ a set of commercial
teardown reports published in 2019 and 2020 by Munro & Associates;
565 566 567 568 569 570 and the

2021 NAS Phase 3 report.\571\ Throughout the process of compiling the
results of these studies, we collaborated with technical experts from
the California Air Resources Board and NHTSA. More discussion of the
technical basis for the non-battery electrified vehicle cost estimates
used in the proposal may be found in DRIA Chapter 2.
---------------------------------------------------------------------------

    \563\ UBS AG, ``Q-Series: UBS Evidence Lab Electric Car
Teardown--Disruption Ahead?'' UBS Evidence Lab, May 18, 2017.
    \564\ California Air Resources Board, ``Advanced Strong Hybrid
and Plug-In Hybrid Engineering Evaluation and Cost Analysis,'' CARB
Agreement 15CAR018, prepared for CARB and California EPA by Munro &
Associates, Inc. and Ricardo Strategic Consulting, April 21, 2017.
    \565\ Munro and Associates, ``Twelve Motor Side-by-Side
Analysis,'' provided November 2020.
    \566\ Munro and Associates, ``6 Inverter Side-by-Side
Analysis,'' provided January 2021.
    \567\ Munro and Associates, ``3 Inverter Side-by-Side
Analysis,'' provided November 2020.
    \568\ Munro and Associates, ``BMW i3 Cost Analysis,'' dated
January 2016, provided November 2020.
    \569\ Munro and Associates, ``2020 Tesla Model Y Cost
Analysis,'' provided November 2020.
    \570\ Munro and Associates, ``2017 Tesla Model 3 Cost
Analysis,'' dated 2018, provided November 12, 2020.
    \571\ National Academies of Sciences, Engineering, and Medicine
2021. ``Assessment of Technologies for Improving Light-Duty Vehicle
Fuel Economy 2025-2035''. Washington, DC: The National Academies
Press. https://doi.org/10.17226/26092.
---------------------------------------------------------------------------

    We also commissioned a new full-vehicle teardown study comparing a
gasoline-fueled VW Tiguan to the battery-electric VW ID.4, conducted
for EPA by FEV of America.\572\ The study was designed to compare the
manufacturing cost and assembly labor requirements for two comparable
vehicles, one an ICE vehicle and one a BEV, both of which were built on
respective dedicated-ICE \573\ and dedicated-BEV \574\ platforms by the
same manufacturer. The teardown applies a bill-of-materials approach to
both vehicles and derives cost and assembly labor estimates for each
component. The report was delivered to EPA in February 2023 and will
undergo a contractor-managed peer review process to be completed by
mid-2023. The results of this study will be used to inform the analysis
for the final rulemaking where appropriate. For example, component
costs for the BEV and ICE vehicle may be used to support or update our
battery or non-battery costs for electrified vehicles, or our costs for
ICE vehicles; assembly labor data may be used to further inform the
employment analysis; and any other qualitative or quantitative
information that may be drawn from the report may be used in the
analysis. An additional task under this work assignment was for FEV to
review the non-battery electric powertrain costs EPA has described in
Chapter 2.6.1 of the DRIA, with respect to the cost values used and the
method of scaling these costs across different vehicle performance
characteristics and vehicle classes, and to suggest alternative values
or scalings where applicable. More details about the goals of the
teardown study can be found in DRIA <IP_ADDRESS>.3. The complete teardown
report, the associated bill-of-materials data worksheets, and the FEV
review of non-battery costs and scaling are available in the
Docket.\575\ \576\ EPA may rely on this information and other
information gathered in response to this proposal and EPA's ongoing
technical work for estimating the costs for ICE vehicles and PEVs for
the final rule.
---------------------------------------------------------------------------

    \572\ FEV Consulting Inc., ``Cost and Technology Evaluation,
Conventional Powertrain Vehicle Compared to an Electrified
Powertrain Vehicle, Same Vehicle Class and OEM,'' prepared for
Environmental Protection Agency, EPA Contract No. 68HERC19D00008,
February 2023.
    \573\ VW MQB A2 (``Modularer Querbaukasten'' or ``Modular
Transversal Toolkit'', version A2) global vehicle platform.
    \574\ VW MEB (``Modularer E-Antriebs Baukasten'' or ``modular
electric-drive toolkit) global vehicle platform.
    \575\ Memo to Docket ID No. EPA-HQ-OAR-2022-0829, titled ``Cost
and Technology Evaluation, Conventional Powertrain Vehicle Compared
to an Electrified Powertrain Vehicle, Same Vehicle Class and OEM.''
    \576\ Memo to Docket ID No. EPA-HQ-OAR-2022-0829, titled ``EV
Non-Battery Cost Review by FEV.''
---------------------------------------------------------------------------

    EPA requests comment on all aspects of the battery and non-battery
costs used in this analysis, including the base year costs, the
forecast and estimation of future battery costs, assumptions relating
to driving range, and similar issues that would affect modeling of
battery and non-battery costs. EPA also requests comment on alternative
ways to account for the effect of the IRA provisions, including the
45X, 30D, 45W, and other relevant provisions, in the estimation of
battery or vehicle production cost to manufacturers or other impacts on
the cost of PEVs to consumers, and will consider such comments for the
analysis for the final rulemaking. We also request comment on our
application of learning to battery cost reduction, and evidence and
data related to the potential use of global battery production volumes
instead of domestic volumes in that context, and/or the use of battery
production volumes in related sectors.
3. Analysis of Power Sector Emissions
    As PEVs are anticipated to represent a significant share of the
future U.S. light- and medium-duty vehicle fleet, EPA has developed new
approaches to estimate the upstream emissions (i.e., from electricity
generation and transmission) of increased PEV charging demand as part
of the assessment of the proposed standards. Electric generation was
modeled using EPA's Power Sector Modeling Platform, which in turn uses
the Integrated Planning Model (IPM).\577\ IPM provides projections of
least-cost capacity expansion, electricity dispatch, and emission
control strategies for meeting energy demand and environmental,
transmission, dispatch, and reliability constraints represented within
74 regions of the 48 contiguous United States. The power sector
modeling used for determining the PEV upstream emissions inventory and
costs for the proposal and alternatives included changes to the
platform to better represent the impacts of both the Bipartisan
Infrastructure Law (BIL) and the Inflation Reduction Act (IRA) on
electric power generation.
---------------------------------------------------------------------------

    \577\ https://www.epa.gov/power-sector-modeling.
---------------------------------------------------------------------------

    The regionalization of IPM and the anticipation of a highly
regionalized initial rollout of electric vehicles under the California
ZEV program necessitated modeling of the regionalization of PEV charge
demand in order to fully capture emissions and other impacts on the
electric power sector. National-level VMT and charge demand from
scenarios modeled within the OMEGA compliance model were regionalized
into the 74 IPM regions using the EVI-X modeling suite of electric
vehicle charging infrastructure analysis tools developed by the
National Renewable Energy Laboratory (NREL) combined with a PEV likely
adopter model. Chapter 5 of the DRIA contains a detailed description of
the analysis of PEV charging demand, electric generation and the
resulting emissions and cost for different projected vehicle
electrification scenarios.
    Power sector modeling results of generation and grid mix from 2030
to 2050 and CO2 emissions from 2028 to 2050 for the
contiguous United States (CONUS) are shown in Figure 23. Power sector
CO2 emissions for the proposal are compared to a no-action
case in Figure 24. Power sector modeling results are summarized in more
detail within Chapter 5 of the DRIA. The results show significant
continued year-over-year growth in both total generation and the use of
renewables for electric generation (Figure 23) and year-over-year
reductions in CO2 emissions (Figure 24). Emissions of
NOX (Figure 25), SO2 (Figure 26),
PM2.5, and other EGU emissions followed similar general
trends to the CO2 emissions results. The largest differences
in modeled EGU emissions between the proposal and No Action case were
in 2035, when CO2, NOX and SO2 were
approximately 7 percent, 6 percent and 9 percent higher, respectively.
It should be noted, however, that this represents EGU emissions only
and does not include anticipated emissions reductions from vehicle
tailpipe or refinery emissions. By 2050, modeled EGU PM2.5,
and NOX emissions increased by less than 3 percent for the
proposal than for a No Action case and by less than 5 percent for
CO2 and SO2 emissions.
    Power sector modeling results showed that the increased use of
renewables will largely displace coal and (to a lesser

extent) natural gas EGUs and will primarily be driven by provisions of
the IRA. By 2035, power sector modeling results also showed that non-
hydroelectric renewables (primarily wind and solar) will be the largest
source of electric generation (approximately 46 percent of total
generation), and they would account for more than 70 percent of
generation by 2050. This displacement of coal EGUs by renewables was
also the primary factor in the year-over-year reductions in
CO2, NOX, SO2, PM2.5, and
other EGU emissions. Impacts on EGU GHG and criteria pollutant
emissions due to grid-related IRA provisions were substantially larger
than the impact of increased electricity demand due to increased
electrification of light and medium-duty vehicles within the proposal.
As EGU emissions continue to decrease between 2028 and 2050 due to
increasing use of renewables, and as vehicles increasingly electrify,
the power sector GHG and criteria pollutant emissions associated with
light- and medium-duty vehicle operation will continue to decrease.
    Power sector modeling also showed a significant increase in the use
of batteries for grid storage. When modeling PEV charge demand for both
the proposal and for a No Action case, grid battery storage capacity
increased from approximately zero capacity in 2020 to approximately 70
GW in 2030 and 170 GW in 2050, representing the equivalent of
approximately 100 GWh and 300 GWh of annual generation, respectively.
The increase in grid battery storage was primarily due to modeling of
incentives put in place under the IRA.
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BILLING CODE 6560-50-C
4. PEV Charging Infrastructure Considerations
    Charging infrastructure has been growing rapidly in the past few
years. There are over 50,000 non-residential public and private
charging stations in the U.S. today with more than 140,000 electric
vehicle supply equipment (EVSE) ports (or outlets that can charge
vehicles simultaneously).\578\ This is an increase from just over
85,000 EVSE ports as of the end of 2019.\579\ While estimates for
future infrastructure needs vary widely in the literature, an NREL
report found that the overall ratio of EVSE ports to the number of PEVs
on the road today generally compares favorably to projected needs in
two national studies.\580\ Of course, keeping up with charging needs as
PEV adoption grows will require continued expansion of charging
infrastructure.
---------------------------------------------------------------------------

    \578\ U.S. DOE, Alternative Fuels Data Center, ``Electric
Vehicle Charging Infrastructure Trends''. Accessed February 28,
2023, at https://afdc.energy.gov/fuels/electricity_infrastructure_trends.html.
    \579\ Ibid.
    \580\ Brown, A. et al., ``Electric Vehicle Charging
Infrastructure Trends from the Alternative Fueling Station Locator:
Second Quarter 2022,'' December 2022, Golden, CO: National Renewable
Energy Laboratory. NREL/TP-5400-84263. Accessed March 6, 2023, at
https://www.nrel.gov/docs/fy23osti/84263.pdf.
---------------------------------------------------------------------------

    EPA anticipates a mix of public and private investments will be
available to help meet these future infrastructure needs. The
Bipartisan Infrastructure Law (BIL) provides up to $7.5 billion over
five years to build out a national PEV charging network.\581\ Two-
thirds of this funding is for the National Electric Vehicle
Infrastructure (NEVI) Formula Program with the remaining $2.5 billion
for the Charging and Fueling Infrastructure (CFI) Discretionary Grant
Program. Both programs are administered under the Federal Highway
Administration with support from the Joint Office of Energy and
Transportation. The first phase of NEVI funding--a formula program for
states--was launched in 2022 and initial plans for all 50 states, DC,
and Puerto Rico have now been approved. Together, this initial $1.5
billion of investments will help deploy or expand charging
infrastructure on about 75,000 miles of highway.\582\ In March 2023,
the first funding opportunity was opened under the CFI Program with up
to $700 million to deploy PEV charging and hydrogen, propane, or
natural gas fueling infrastructure in communities and along
corridors.\583\ Ensuring equitable access to charging is one of the
stated goals of these infrastructure funds. Accordingly,

FHWA instructed states to incorporate public engagement in their
planning process for the NEVI Formula Program, including reaching out
to Tribes, and rural, underserved, and disadvantaged communities.\584\
Both the formula funding and discretionary grant program are subject to
the Justice40 target that 40 percent of the benefits go to
disadvantaged communities. Other programs with funding authorizations
under the BIL that could be used in part to support charging
infrastructure installations include the Congestion Mitigation & Air
Quality Improvement Program, National Highway Performance Program, and
Surface Transportation Block Grant Program among others.\585\
---------------------------------------------------------------------------

    \581\ Enacted as the Infrastructure Investment and Jobs Act,
Public Law 117-58. 2021. Accessed January 10, 2023, at https://www.congress.gov/bill/117th-congress/house-bill/3684.
    \582\ U.S. DOT, FHWA, ``Historic Step: All Fifty States Plus
D.C. and Puerto Rico Greenlit to Move EV Charging Networks Forward,
Covering 75,000 Miles of Highway,'' September 27, 2022. Accessed
January 10, 2023, at https://highways.dot.gov/newsroom/historic-step-all-fifty-states-plus-dc-and-puerto-rico-greenlit-move-ev-charging-networks.
    \583\ Joint Office of Energy and Transportation, ``Biden-Harris
Admin Opens First Round Applications for $2.5 Billion Program to
Build EV Charging in U.S. Communities,'' March 14, 2023. Accessed
March 31, 2023, at https://driveelectric.gov/news/#charging-fueling-infrastructure.
    \584\ U.S. DOT, FHWA, ``The National Electric Vehicle
Infrastructure (NEVI) Formula Program Guidance,'' February 10, 2022.
Accessed January 10, 2023, at https://www.fhwa.dot.gov/environment/alternative_fuel_corridors/nominations/90d_nevi_formula_program_guidance.pdf.
    \585\ Ibid.
---------------------------------------------------------------------------

    The Inflation Reduction Act (IRA) signed into law on August 16,
2022, can also help reduce the costs for deploying infrastructure.\586\
The IRA extends the Alternative Fuel Refueling Property Tax Credit
(Section 13404) through Dec 31, 2032, with modifications. Under the new
provisions, residents in low-income or rural areas would be eligible
for a 30 percent credit for the cost of installing residential charging
equipment up to a $1,000 cap. Businesses would be eligible for up to 30
percent of the costs associated with purchasing and installing charging
equipment in these areas (subject to a $100,000 cap per item) if
prevailing wage and apprenticeship requirements are met and up to 6
percent otherwise. The Joint Committee on Taxation estimates the cost
of this tax credit from FY 2022-2031 to be $1.738 billion,\587\ which
reflects a significant level of support for charging infrastructure and
other eligible alternative fuel property.
---------------------------------------------------------------------------

    \586\ Inflation Reduction Act of 2022, Public Law 117-169, 2022.
Accessed December 2, 2022, at https://www.congress.gov/117/bills/hr5376/BILLS-117hr5376enr.pdf.
    \587\ Joint Committee on Taxation, ``Estimated Budget Effects of
the Revenue Provisions of Title I--Committee on Finance, of an
Amendment in the Nature of a Substitute to H.R. 5376, ``An Act to
Provide for Reconciliation Pursuant to Title II of S. Con. Res.
14,'' as Passed by the Senate on August 7, 2022, and Scheduled for
Consideration by the House of Representatives on August 12, 2022''
JCX-18-22, August 9, 2022. Accessed January 11, 2023, at https://www.jct.gov/publications/2022/jcx-18-22/.
---------------------------------------------------------------------------

    States, utilities, auto manufacturers, charging network providers,
and others are also investing in and supporting PEV charging
infrastructure deployment. California announced plans in 2021 to invest
over $300 million in light-duty charging infrastructure and nearly $700
million in medium- and heavy-duty ZEV infrastructure.\588\ Several
states including New Jersey and Utah offer partial rebates for
residential, workplace, or public charging while others such as Georgia
and DC offer tax credits.\589\ The NC Clean Energy Technology Center
identified more than 200 actions taken across 38 states and DC related
to providing financial incentives for electric vehicles and or charging
infrastructure in 2022, a four-fold increase over the number of actions
in 2017.\590\ The Edison Electric Institute estimates that electric
companies have already invested nearly $3.7 billion.\591\ And over 60
electric companies and cooperatives serving customers in 48 states and
the District of Columbia have joined together to advance fast charging
through the National Electric Highway Coalition.\592\ Auto
manufacturers are investing in charging infrastructure by offering
consumers help with costs to install home charging or providing support
for public charging. For example, GM will pay for a standard
installation of a Level 2 (240 VAC) outlet for customers purchasing or
leasing a new Bolt.\593\ GM is also partnering with charging provider
EVgo to deploy over 2,700 DCFC ports \594\ and charging provider FLO to
deploy as many as 40,000 L2 ports.\595\ Volkswagen, Hyundai, and Kia
all offer customers complimentary charging at Electrify America's
public charging stations (subject to time limits or caps) in
conjunction with the purchase of select new EV models.\596\ Ford has
agreements with several charging providers to make it easier for their
customers to charge and pay across different networks \597\ and plans
to install publicly accessible DCFC ports at nearly 2,000
dealerships.\598\ Mercedes-Benz recently announced that it is planning
to build 2,500 charging points in North America by 2027.\599\ Tesla has
its own network with over 17,000 DCFC ports and nearly 10,000 Level 2
ports in the United States.\600\ Tesla recently announced that by 2024,
7,500 or more existing and new ports (including 3,500 DCFC) would be
open to all PEVs.\601\
---------------------------------------------------------------------------

    \588\ California Energy Commission, ``CEC Approves $1.4 Billion
Plan for Zero-Emission Transportation Infrastructure and
Manufacturing,'' November 15, 2021. Accessed January 11, 2023, at
https://www.energy.ca.gov/news/2021-11/cec-approves-14-billion-plan-zero-emission-transportation-infrastructure-and.
    \589\ Details on eligibility, qualifying expenses, and rebate or
tax credit amounts vary by state. See DOE Alternative Fuels Data
Center, State Laws and Incentives. Accessed January 11, 2023, at
https://afdc.energy.gov/laws/state.
    \590\ Apadula, E. et al., ``50 States of Electric Vehicles Q4
2022 Quarterly Report & 2022 Annual Review Executive Summary,''
February 2023, NC Clean Energy Technology Center. Accessed March 8,
2023, at https://nccleantech.ncsu.edu/wp-content/uploads/2023/02/Q4-22_EV_execsummary_Final.pdf. (Note: Includes actions by states and
investor-owned utilities.)
    \591\ EEI, ``Issues & Policy: National Electric Highway
Coalition''. Accessed January 11, 2023, at https://www.eei.org/issues-and-policy/national-electric-highway-coalition. (Note: $3.7
billion total includes infrastructure deployments and other customer
programs to advance transportation electrification.)
    \592\ Ibid.
    \593\ Chevrolet, ``Installation Made Easy. Home Charging
Installation on Us.'' Accessed March 3, 2023, at https://www.chevrolet.com/electric/living-electric/home-charging-installation.
    \594\ GM, ``To Put 'Everybody In' an Electric Vehicle, GM
introduces Ultium Charge 360,'' Accessed January 11, 2023, at
https://media.gm.com/media/us/en/gm/home.detail.html/content/Pages/news/us/en/2021/apr/0428-ultium-charge-360.html.
    \595\ Joint Office of Transportation and Energy, ``Private
Sector Continues to Play Key Part in Accelerating Buildout of EV
Charging Networks,'' February 15, 2023. Accessed March 6, 2023, at
https://driveelectric.gov/news/#private-investment.
    \596\ Details of complimentary charging and eligible vehicle
models vary by auto manufacturer. See: https://www.vw.com/en/models/id-4.html, https://www.hyundaiusa.com/us/en/electrified/charging,
and https://owners.kia.com/content/owners/en/kia-electrify.html.
    \597\ Ford, ``Ford Introduces North America's Largest Electric
Vehicle Charging Network, Helping Customers Confidently Switch to an
All-Electric Lifestyle,'' October 17, 2019. Accessed January 11,
2023, at https://media.ford.com/content/fordmedia/fna/us/en/news/2019/10/17/ford-introduces-north-americas-largest-electric-vehicle-charting-network.html.
    \598\ Joint Office of Transportation and Energy, ``Private
Sector Continues to Play Key Part in Accelerating Buildout of EV
Charging Networks,'' February 15, 2023. Accessed March 6, 2023, at
https://driveelectric.gov/news/#private-investment.
    \599\ Reuters, ``Mercedes to launch vehicle-charging network,
starting in North America,'' January 6, 2023. Accessed January 11,
2023, at https://www.reuters.com/business/autos-transportation/mercedes-launch-vehicle-charging-network-starting-north-america-2023-01-05/.
    \600\ DOE, Alternative Fuels Data Center, ``Electric Vehicle
Charging Station Locations''. Accessed February 28, 2023, at https://afdc.energy.gov/fuels/electricity_locations.html#/find/nearest?fuel=ELEC.
    \601\ The White House, ``Fact Sheet: Biden-Harris Administration
Announces New Standards and Major Progress for a Made-in-America
National Network of Electric Vehicle Chargers,'' February 15, 2023.
Accessed March 6, 2023, at https://www.whitehouse.gov/briefing-room/statements-releases/2023/02/15/fact-sheet-biden-harris-administration-announces-new-standards-and-major-progress-for-a-made-in-america-national-network-of-electric-vehicle-chargers/.
---------------------------------------------------------------------------

    Other charging networks are also expanding. Francis Energy, which
has fewer than 1,000 EVSE ports today,\602\ aims to deploy over 50,000
by the end of the decade.\603\ Electrify America

plans to more than double its network size \604\ to 10,000 fast
charging ports across 1,800 U.S. and Canadian stations by 2026. This is
supported in part by a $450 million investment from Siemens and
Volkswagen Group.\605\ Blink plans to invest over $60 million to grow
its network over the next decade. Charging companies are also
partnering with major retailers, restaurants, and other businesses to
make charging available to customers and the public. For example, EVgo
is deploying DCFC at certain Meijer locations, CBL properties, and
Wawa. Volta is installing DCFC and L2 ports at select Giant Food,
Kroger, and Stop and Shop stores, while ChargePoint and Volvo Cars are
partnering with Starbucks to make charging available at select
Starbucks locations.\606\ Other efforts will expand charging access
along major highways, including at up to 500 Pilot and Flying J travel
centers (through a partnership between Pilot, GM, and EVgo) and 200
TravelCenters of America and Petro locations (through a partnership
between TravelCenters of America and Electrify America).\607\ BP plans
to invest $1 billion toward charging infrastructure by the end of the
decade, including through a partnership to provide charging at various
Hertz locations across the country that could support rental and
ridesharing vehicles, taxis, and the general public.\608\
---------------------------------------------------------------------------

    \602\ DOE, Alternative Fuels Data Center, ``Electric Vehicle
Charging Station Locations''. Accessed March 6, 2023, at https://afdc.energy.gov/fuels/electricity_locations.html#/find/nearest?fuel=ELEC.
    \603\ Joint Office of Transportation and Energy, ``Private
Sector Continues to Play Key Part in Accelerating Buildout of EV
Charging Networks,'' February 15, 2023. Accessed March 6, 2023, at
https://driveelectric.gov/news/#private-investment.
    \604\ DOE, Alternative Fuels Data Center, ``Electric Vehicle
Charging Station Locations''. Accessed March 6, 2023, at https://afdc.energy.gov/fuels/electricity_locations.html#/find/nearest?fuel=ELEC.
    \605\ Joint Office of Transportation and Energy, ``Private
Sector Continues to Play Key Part in Accelerating Buildout of EV
Charging Networks,'' February 15, 2023. Accessed March 6, 2023, at
https://driveelectric.gov/news/#private-investment.
    \606\ Ibid.
    \607\ Ibid.
    \608\ Ibid.
---------------------------------------------------------------------------

    We assess the infrastructure needs and the associated costs for
this proposal from 2027 to 2055. We start with estimates of electricity
demand for the PEV penetration levels in the proposal compared to those
in the No Action case using the methodology described in Section
IV.C.3.\609\ A suite of NREL models is used to characterize the
quantity and mix of EVSE ports that could meet this demand, including
EVI-Pro to simulate charging demand from typical daily travel, EVI-
RoadTrip to simulate demand from long-distance travel, and EVI-OnDemand
to simulate demand from ride-hailing applications. EVSE ports are
broken out by charging location (home, work, or public) and by charging
type and power level: AC Level 1 (L1), AC Level 2 (L2), and DC fast
charging with a maximum power of 50 kW, 150 kW, 250 kW, or 350 kW (DC-
50, DC-150, DC-250, and DC-350). We anticipate that the highest number
of ports will be needed at homes, growing from under 12 million in 2027
to over 75 million in 2055 under the proposal. This is followed by
workplace charging, estimated at about 400,000 EVSE ports in 2027 and
over 12.7 million in 2055. Finally, we estimate public charging needs
growing from just over 110,000 ports to more than 1.9 million in that
timeframe.\610\ Figure 27 illustrates the growth in charging network
size needed for the proposal and No Action case over select years.\611\
---------------------------------------------------------------------------

    \609\ The No Action case referred to as part of the
infrastructure cost analysis was based on earlier work with lower
projected PEV penetration rates than the No Action case used for
compliance modeling and described in Section IV.B. (See discussion
in DRIA Chapter <IP_ADDRESS>.)
    \610\ The number of EVSE ports needed to meet a given level of
electricity demand will vary based on assumptions about the mix of
charging ports, charging preferences, and other factors. See DRIA
Chapter 5 for a more detailed description of the assumptions
underlying the EVSE port counts shown here.
    \611\ See DRIA Chapter 5 for estimated port counts for each year
from 2027 to 2055 in the proposal and No Action case.

---------------------------------------------------------------------------

[GRAPHIC] [TIFF OMITTED] TP05MY23.030

    We estimate the costs to deploy the number of EVSE ports needed
each year (2027-2055) to achieve the modeled network sizes for the
proposal and No Action case.\612\ Costs for each EVSE port are sourced
from recent literature and are intended to reflect upfront hardware and
installation costs. PEVs typically come with a charging cord that can
be used for L1 charging by plugging it into a standard 120 V outlet,
and, in some cases, for L2 charging by plugging into a 240 V outlet. We
include the cost for this cord as part of the vehicle costs described
in DRIA Chapter 2, and therefore we do not include it here. We make the
simplifying assumption that PEV owners opting for L1 home charging
already have access to a 120 V outlet and therefore do not incur
installation costs.\613\ Table 65 shows our assumed costs per EVSE
port.
---------------------------------------------------------------------------

    \612\ We assume a 15-year equipment lifetime for EVSE ports. We
did not estimate costs for EVSE maintenance or repair though we note
that this may be able to extend equipment lifetimes. See discussion
in DRIA Chapter 5.
    \613\ For Level 2 home charging, some PEV owners may opt to
simply install or upgrade to a 240 V outlet for use with a charging
cord while others may choose to purchase or install a wall-mounted
or other Level 2 charging unit. We assume a 50%:50% mix for the
costs shown in Table 65.

                            Table 65--Costs (Hardware and Installation) per EVSE Port
                                              [2019 dollars] \614\
----------------------------------------------------------------------------------------------------------------
                 Home                      Work                                Public
----------------------------------------------------------------------------------------------------------------
     L1         SFH L2      Other L2        L2           L2         DC-50       DC-150      DC-250      DC-350
----------------------------------------------------------------------------------------------------------------
        $0       $1,100       $3,700       $5,900       $5,900      $56,000    $121,000    $153,000    $185,000
----------------------------------------------------------------------------------------------------------------

    There are many factors that can impact equipment and installation
costs, including whether a charging unit has multiple EVSE ports, how
many ports are installed per site as well as regional differences.
Costs also vary in the literature. EPA welcomes comments on additional
studies or information that EPA should consider in assessing PEV
charging infrastructure costs for the final rule.
---------------------------------------------------------------------------

    \614\ Costs shown are expressed in 2019 dollars, consistent with
the original sources from the literature.
---------------------------------------------------------------------------

    See DRIA Chapter 5 for a more complete discussion of this analysis
including low and high sensitivities not shown here. The final PEV
charging infrastructure costs are presented in Section VIII of this
Preamble.

    EPA acknowledges that there may be additional infrastructure needs
and costs beyond those associated with charging equipment itself. While
planning for additional electricity demand is a standard practice for
utilities and not specific to PEV charging, the buildout of public and
private charging stations (particularly those with multiple high-
powered DC fast charging units) could in some cases require upgrades to
local distribution systems. For example, a recent study found power
needs as low as 200 kW could trigger a requirement to install a
distribution transformer.\615\ The use of onsite power control systems,
battery storage or renewables may be able to reduce the need for some
distribution upgrades; station operators may also opt to install these
to mitigate demand charges associated with peak power.\616\ However,
there is considerable uncertainty associated with the uptake of these
technologies as well as with future distribution upgrade needs, and we
do not model them directly as part of our infrastructure cost analysis.
We welcome comments on this and other aspects of our cost analysis.
---------------------------------------------------------------------------

    \615\ Borlaug, B. et al., ``Heavy-duty truck electrification and
the impacts of depot charging on electricity distribution systems,''
Nat Energy 6, 673-682 (2021). Accessed on January 11, 2023, at
https://doi.org/10.1038/s41560-021-00855-0.
    \616\ Alexander, M. et al., ``Assembly Bill 2127: Electric
Vehicle Charging Infrastructure Assessment,'' July 2021, California
Energy Commission. Accessed March 9, 2023, at https://www.energy.ca.gov/programs-and-topics/programs/electric-vehicle-charging-infrastructure-assessment-ab-2127.
---------------------------------------------------------------------------

    As discussed in the previous section, we model changes to power
generation due to the increased electricity demand anticipated in the
proposal as part of our upstream analysis. We project the additional
generation needed to meet the demand of the light- and medium-duty PEVs
in the proposal to be relatively modest compared to the No Action case,
ranging from less than 0.4 percent in 2030 to approximately 4 percent
in 2050 (as shown in Figure 23). The U.S. electricity end use between
the years 1992 and 2021 increased by around 25% \617\ without any
adverse effects on electric grid reliability or electricity generation
capacity shortages. As the proposal is estimated to increase electric
power end use by electric vehicles by between 0.1% (2028) and 4.2%
(2055)--approximately 18% of the increase that occurred between 1995
and 2021--grid reliability is not expected to be adversely affected by
the modest increase in electricity demand associated with electric
vehicle charging.
---------------------------------------------------------------------------

    \617\ Annual Energy Outlook 2022, U.S. Energy Information
Administration, March 3, 2022 (https://www.eia.gov/outlooks/aeo/narrative/introduction/sub-topic-01.php).
---------------------------------------------------------------------------

    The private sector and the government share responsibility for the
reliability of the electric power grid. Most of the electric power
grid--the commercial electric power transmission and distribution
system comprising power lines and other infrastructure--is owned and
operated by private industry. However, Federal, state, local, Tribal,
and territorial governments also have significant roles in enhancing
the reliability of the electric power grid.\618\ The Federal government
plays a key role in enhancing electric power grid reliability.\619\ For
instance, the Department of Homeland Security (DHS) is responsible for
coordinating the overall Federal effort to promote the security and
reliability of the nation's critical infrastructure sectors; the
Department of Energy (DOE) leads Federal efforts to ensure that the
nation's energy delivery system is secure, resilient, and reliable,
including research and technology development by national laboratories;
and the Federal Energy Regulatory Commission (FERC) regulates wholesale
electricity markets and is responsible for reviewing and approving
mandatory electric Reliability Standards, which are developed by the
North American Electric Reliability Corporation (NERC). NERC is the
federally designated U.S. electric reliability organization which
develops and enforces Reliability Standards; annually assesses seasonal
and long-term reliability; monitors the bulk power system through
system awareness; and educates, trains, and certifies industry
personnel. These efforts help to keep the U.S. electric power grid is
reliable.\620\ We also consulted with FERC and EPRI staff on bulk power
system reliability and related issues.
---------------------------------------------------------------------------

    \618\ Federal Efforts to Enhance Grid Resilience. General
Accounting Office, GAO-17-153, 1/25/2017. https://www.gao.gov/assets/gao-17-153.pdf.
    \619\ Electricity Grid Resilience. General Accounting Office,
GAO-21-105403, 9/20/2021, https://www.gao.gov/assets/gao-21-105403.pdf.
    \620\ https://www.nerc.com/AboutNERC/Pages/default.aspx.
---------------------------------------------------------------------------

    U.S. electric power utilities routinely upgrade the nation's
electric power system to improve grid reliability and to meet new
electric power demands. For example, when confronted with rapid
adoption of air conditioners in the 1960s and 1970s, U.S. electric
power utilities successfully met the new demand for electricity by
planning and building upgrades to the electric power distribution
system. Likewise, U.S. electric power utilities planned and built
distribution system upgrades required to service the rapid growth of
power-intensive data centers and server farms over the past two
decades. U.S. electric power utilities have already successfully
designed and built the distribution system infrastructure required for
1.4 million battery electric vehicles.\621\ Utilities have also
successfully integrated 46.1 GW of new utility-scale electric
generating capacity into the grid (EIA, 2022).\622\
---------------------------------------------------------------------------

    \621\ U.S. DOE Alternative Fuels Data Center, Maps and Data--
Electric Vehicle Registrations by State, https://afdc.energy.gov/data/.
    \622\ EIA, Electric Power Annual 2021, November 2022. https://www.eia.gov/electricity/annual/html/epa_01_01.html.
---------------------------------------------------------------------------

    When taking into consideration ongoing upgrades to the U.S.
electric power grid, and that the U.S. electric power utilities
generally have more capacity to produce electricity than is consumed
(EIA, 2022), the expected increase in electric power demand
attributable to vehicle electrification is not expected to adversely
affect grid reliability due to the modest increase in electricity
demand associated with electric vehicle charging. Moreover,
distribution system infrastructure became the largest share of capital
expenditures for U.S. investor-owned utilities (IOUs) in 2018,
according to the Edison Electric Institute (EEI).\623\ EEI also
projected that such expenditures would constitute one-third of total
IOU spending in 2022.
---------------------------------------------------------------------------

    \623\ https://www.eei.org/-/media/Project/EEI/Documents/Issues-and-Policy/Finance-And-Tax/bar_cap_ex.pdf?la=en&hash=3D08D74D12F1CCA51EE89256F53EBABEEAAF4673.
---------------------------------------------------------------------------

    The California Public Utilities Commission (CPUC) \624\ and the
California Energy Commission (CEC) \625\ have been actively engaged in
Vehicle-Grid Integration (VGI) efforts for over a decade, along with
the California Independent System Operator \626\ (California ISO),
large private and public electrical utilities (SCE, PG&E, SDG&E, etc.),
most major automakers (Ford, GM, FCA, BMW, Audi, Nissan,

Toyota, Honda, and others), and EV charger companies, the Electric
Power Research Institute (EPRI), and various other research
organizations.
---------------------------------------------------------------------------

    \624\ Order Instituting Rulemaking to Continue the Development
of Rates and Infrastructure for Vehicle Electrification. California
Public Utilities Commission, Rulemaking 18-12-006, 12/21/2020.
    \625\ Chhaya, Sunil, Norman McCollough, Viswanath Ananth,
Arindam Maitra, Ramakrishnan Ravikumar, Jamie Dunckley--Electric
Power Research Institute; George Bellino--Clean Fuel Connection,
Eric Cutter, Energy & Environment Economics, Michael Bourton, Kitu
Systems, Inc., Richard Scholer, Fiat Chrysler Automobiles, Charlie
Botsford, AeroVironment, Inc., 2019. Distribution System Constrained
Vehicle-to-Grid Services for Improved Grid Stability and
Reliability. California Energy Commission. Publication Number: CEC-
500-2019-027.
    \626\ California Independent System Operator (CAISO). 2014.
California VGI Roadmap: Enabling Vehicle-based Grid Services.
https://www.caiso.com/Documents/Vehicle-GridIntegrationRoadmap.pdf.
---------------------------------------------------------------------------

    These ongoing research efforts have demonstrated the ability of
U.S. electric utilities to reschedule up to 20 percent of electric
vehicle charging loads occurring at any hour of the day to any other
hour of the day.\627\ Conversely, these research efforts have also
demonstrated the ability of U.S. electric power utilities to reschedule
up to 30 percent of electric vehicle charging loads occurring at any
hour of day to any particular hour of that day. As the expected
increase in electric power demand resulting from PEV charging in this
proposal will be well under 20 percent, we do not anticipate it to pose
grid reliability issues.
---------------------------------------------------------------------------

    \627\ Lipman, Timothy, Alissa Harrington, and Adam Langton.
2021. Total Charge Management of Electric Vehicles. California
Energy Commission. Publication Number: CEC-500-2021- 055.
---------------------------------------------------------------------------

    The ability to shift and curtail electric power is a feature that
can improve grid operations and, therefore, grid reliability.
Integration of electric vehicle charging into the power grid, by means
of vehicle-to-grid software and systems that allow management of
vehicle charging time and rate, has been found to create value for
electric vehicle drivers, electric grid operators, and ratepayers.\628\
Management of PEV charging can reduce overall costs to utility
ratepayers by delaying electric utility customer rate increases
associated with equipment upgrades and may allow utilities to use
electric vehicle charging as a resource to manage intermittent
renewables. The development of new electric utility tariffs, including
those for submetering for electric vehicles, will also help to
facilitate the management of electric vehicle charging.
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    \628\ Chhaya, S., et al., ``Distribution System Constrained
Vehicle-to-Grid Services for Improved Grid Stability and
Reliability; Publication Number: CEC-500-2019-027, 2019. Accessed
December 13, 2022 at https://www.energy.ca.gov/sites/default/files/2021-06/CEC-500-2019-027.pdf.
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    We also note that DOE is engaged in multiple efforts to modernize
the grid and improve resilience and reliability. For example, in
November 2022, DOE announced $13 billion in funding opportunities under
BIL to support transmission and distribution infrastructure. This
includes $3 billion for smart grid grants with a focus on PEV
integration among other topics.\629\
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    \629\ DOE, ``Biden-Harris Administration Announces $13 Billion
to Modernize and Expand America's Power Grid,'' November 18, 2022.
Accessed January 11, 2023, at https://www.energy.gov/articles/biden-harris-administration-announces-13-billion-modernize-and-expand-americas-power-grid.
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5. Consumer Acceptance
    Consumer uptake of zero-emission vehicle technology is expected to
continue to grow with the key enablers of PEV acceptance, namely
increasing market presence, more model choices, expanding
infrastructure, and decreasing costs to consumers.\630\ First, annual
sales of light-duty PEVs in the U.S. have grown robustly and are
expected to continue to grow. New PEV sales represented 2.2 percent
(1.7 percent BEV and 0.5 percent PHEV) of new light-duty vehicle sales
in 2020 (Davis and Boundy 2021; U.S. Environmental Protection Agency
2021b), and annual PEV market share in 2021 was 4.6 percent (3.4
percent for BEVs and 1.2 percent for PHEVs). As of May 2022, actual PEV
market share was 6.6 percent (5.2 percent for BEVs and 1.4 percent for
PHEVs).\631\ This history of robust growth combined with vehicle
manufacturers' plans to expand of PEV production strongly suggests that
PEV market share will continue to grow rapidly. Second, the number of
PEV models available to consumers is increasing, meeting to consumers
demand for a variety of body styles and price points. Specifically, the
number of BEV and PHEV models available for sale in the U.S. has more
than doubled from about 24 in MY 2015 to about 60 in MY 2021, with
offerings in a growing range of vehicle segments.\632\ Recent model
announcements indicate that this number will increase to more than 80
models by MY 2023,\633\ and more than 180 models by 2025.\634\ Third,
the expansion of charging infrastructure has been keeping up with PEV
adoption. This trend is widely expected to continue, particularly in
light of very large public and private investments. Lastly, while the
initial purchase price of BEVs is currently higher than for most ICE
vehicles, the price difference is likely to narrow or become
insignificant as the cost of batteries fall and PEV production rises in
the coming years.\635\ Among the many studies that address cost parity,
an emerging consensus suggests that purchase price parity is likely to
be achievable by the mid-2020s for some vehicle segments and models,
and TCO parity even sooner for a broader segment of the
market.636 637
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    \630\ Jackman, D K, K S Fujita, H C Yang, and M Taylor. 2023.
Literature Review of U.S. Consumer Acceptance of New Personally
Owned Light Duty Plug-in Electric Vehicles. Washington, DC: U.S.
Environmental Protection Agency.
    \631\ https://www.autosinnovate.org/resources/electric-vehicle-sales-dashboard.
    \632\ Fueleconomy.gov, 2015 Fuel Economy Guide and 2021 Fuel
Economy Guide.
    \633\ Environmental Defense Fund and M.J. Bradley & Associates,
``Electric Vehicle Market Status--Update, Manufacturer Commitments
to Future Electric Mobility in the U.S. and Worldwide,'' April 2021.
    \634\ Environmental Defense Fund and ERM, ``Electric Vehicle
Market Update: Manufacturer Commitments and Public Policy
Initiatives Supporting Electric Mobility in the U.S. and
Worldwide,'' September 2022.
    \635\ International Council on Clean Transportation,
``Assessment of Light-Duty Electric Vehicle Costs and Consumer
Benefits in the United States in the 2022-2035 Time Frame,'' October
2022.
    \636\ Ibid.
    \637\ Environmental Defense Fund and ERM, ``Electric Vehicle
Market Update: Manufacturer Commitments and Public Policy
Initiatives Supporting Electric Mobility in the U.S. and
Worldwide,'' September 2022.
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    EPA, in coordination with the Lawrence Berkeley National
Laboratory, conducted a peer-reviewed literature review of consumer
acceptance of PEVs. In this literature review, we present what we refer
to as the ``4A framework,'' consisting of awareness, access, approval,
and adoption, that we use to define acceptance and organize a
comprehensive review of the scientific literature on this topic.\638\
Through that review, we identify enablers and obstacles to consumer
acceptance of PEVs. Across all stages of the 4A framework, we find that
the enablers and obstacles of PEV acceptance are largely external to
the consumer. We conclude that there is no evidence in the reviewed
literature to suggest anything immutable within consumers or inherent
to PEVs that irremediably obstructs acceptance. Rather, acceptance of
PEVs is achievable among mainstream consumers. For more information on
LD vehicle purchase considerations, see DRIA Chapter 4.1.
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    \638\ Jackman, D K, K S Fujita, H C Yang, and M Taylor. 2023.
Literature Review of U.S. Consumer Acceptance of New Personally
Owned Light Duty Plug-in Electric Vehicles. Washington, DC: U.S.
Environmental Protection Agency.
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6. Supply Chain, Manufacturing, and Mineral Security Considerations
    Although the market share of PEVs in the U.S. is already rapidly
growing, EPA recognizes that the proposed standards may accelerate this
trend. Assessing the feasibility of incremental penetrations of PEVs
that may result from the proposed standards includes consideration of
the capability of the supply chain to provide the required quantities
of critical minerals, components, and battery manufacturing capacity.
This section provides a general review of how we considered supply
chain and manufacturing considerations in this analysis, the sources we
considered, and how we used this information in the analysis. It also
provides a high-level discussion of the security implications

of increased demand for minerals and other commodities used to
manufacture electrified vehicles. Additional details on these aspects
of the analysis may be found in DRIA Chapter 3.1.3, including how we
used this information to develop modeling constraints on PEV
penetration for the compliance analysis.
    In performing this analysis, we considered the ability for global
and domestic manufacturing and critical mineral capacity to respond to
the projected demand for zero-emission vehicles that manufacturers may
choose to produce to comply under the various Alternatives. We
consulted with industry and government agency sources (including DOE,
USGS, and several analysis firms) to collect information on production
capacity, price forecasts, global mineral markets, and related topics,
and have considered this information to inform our assumptions about
future manufacturing capabilities and costs. We have included
consideration of the influence of critical minerals and materials
availability as well as vehicle and battery manufacturing capacities on
production of PEVs at various market penetration scenarios.
    We believe that the proposed rate of stringency is appropriate in
light of this assessment. It is also our assessment that widespread
automotive electrification in the U.S. will not lead to a critical
long-term dependence on foreign imports of minerals or components, nor
that increased demand for these products will become a vulnerability to
national security. First, in many cases the reason that these products
are often sourced from outside of the U.S. is not because the products
cannot be produced in the U.S., but because other countries have
already invested in developing a supply chain for their production. It
is likely that a domestic supply chain for these products would develop
over time as U.S. manufacturers work to secure reliable and
geographically proximate supplies of the components and materials
needed to build the products they manufacture, and to remain
competitive in a global market where electrification is already
proceeding rapidly. Second, many automakers, suppliers, startups, and
related industries have already recognized the need for increased
domestic production capacity as a business opportunity and are basing
business models on building out various aspects of the supply chain.
Third, Congress and the Administration have taken significant steps to
accelerate this activity by funding, facilitating, and otherwise
promoting the rapid growth of U.S. supply chains for these products
through the Inflation Reduction Act, the Bipartisan Infrastructure Law,
and numerous Executive Branch initiatives. EPA has confidence that
these efforts are effectively addressing supply chain concerns.
Finally, utilization of critical minerals is different from the
utilization of foreign oil, in that oil is consumed as a fuel while
minerals become a constituent of manufactured vehicles. Minerals that
are imported for vehicle production remain in the vehicle and can be
reclaimed through recycling. Each of these points will be expanded in
more detail in the following sections.
i. Critical Minerals
    Critical minerals are commonly taken to include a large diversity
of products, ranging from relatively plentiful materials that are
constrained primarily by production capacity and refining, such as
aluminum, to those that are both relatively rare and costly to process,
such as the rare-earth metals that are used in magnets for permanent-
magnet synchronous motors (PMSMs) and some semiconductor products.
Extraction, processing, and recycling of certain critical minerals (for
example, lithium, cobalt, nickel, manganese, graphite, and rare earth
metals) are important parts of the supply chain supporting the
production of electrified vehicle components.
    These minerals are also experiencing increasing demand across many
other sectors of the global economy, not just the transportation
industry, as the world seeks to reduce carbon emissions. As with any
emerging technology, a transition period must take place in which a
robust supply chain develops to support production of these products.
At the present time in the U.S. many of these minerals are commonly
sourced from global suppliers and do not yet benefit from a fully
developed domestic supply chain. As demand for these materials
increases due to increasing production of PEVs, current mining and
processing capacity across the world will be driven to expand over
time. The process of establishing new mining capacity, as well as
processing capacity for the mined product, can be subject to uncertain
issues such as permitting, investor expectations of demand and future
prices, and many others, making it difficult to predict with precision
the rate at which new capacity will be brought online in the future.
For example, depending on the source (hardrock mining or brine),
lithium mining capacity can take from five to ten years to develop a
new mine or mineral source, and has in some cases taken longer.
However, industry interest and motivation toward developing these
resources has become very high and is expected to remain so, as the
demand outlook for lithium and other battery minerals is very robust.
For example, rapid growth in lithium demand has driven new development
of resources and robust growth in supply, which is likely a factor in
recently observed reductions in lithium price, with strong profit
margins remaining even afterward.\639\ Due to such factors the price of
lithium is likely to stabilize at or near its historical levels by the
mid-2020s,\640\ a perspective also supported, for example, in
proprietary battery price forecasts such as those EPA has examined from
Wood Mackenzie.641 642 This expected stabilization of prices
after a period of elevation is a common feature of commodity markets
that experience rapid growth in demand, and further supports the
outlook that sufficient chemical product will be available to meet
growing demand.
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    \639\ New York Times, ``Falling Lithium Prices Are Making
Electric Cars More Affordable,'' March 20, 2023. Accessed on March
23, 2023 at https://www.nytimes.com/2023/03/20/business/lithium-prices-falling-electric-vehicles.html.
    \640\ Sun et al., ``Surging lithium price will not impede the
electric vehicle boom,'' Joule, doi:10.1016/j.joule. 2022.06.028
(https://dx.doi.org/10.1016/j.joule.2022.06.028).
    \641\ Wood Mackenzie, ``Battery & raw materials--Investment
horizon outlook to 2032,'' September 2022 (filename: brms-q3-2022-
iho.pdf). Available to subscribers.
    \642\ Wood Mackenzie, ``Battery & raw materials--Investment
horizon outlook to 2032,'' accompanying data set, September 2022
(filename: brms-data-q3-2022.xlsx). Available to subscribers.
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    The U.S. Geological Survey (USGS) lists 50 minerals as ``critical
to the U.S. economy and national security.'' 643 644
According to USGS, the Energy Act of 2020 defines a ``critical
mineral'' as ``a non-fuel mineral or mineral material essential to the
economic or national security of the U.S. and which has a supply chain
vulnerable to disruption.'' \645\ Critical minerals are not

necessarily short in supply but are seen as essential to the
manufacture of products that are important to the economy or national
security. The risk to their availability may stem from geological
scarcity, geopolitics, trade policy, or similar factors.\646\
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    \643\ U.S. Geological Survey, ``U.S. Geological Survey Releases
2022 List of Critical Minerals,'' February 22, 2022. Available at:
https://www.usgs.gov/news/national-news-release/us-geological-survey-releases-2022-list-critical-minerals.
    \644\ The full list includes: Aluminum, antimony, arsenic,
barite, beryllium, bismuth, cerium, cesium, chromium, cobalt,
dysprosium, erbium, europium, fluorspar, gadolinium, gallium,
germanium, graphite, hafnium, holmium, indium, iridium, lanthanum,
lithium, lutetium, magnesium, manganese, neodymium, nickel, niobium,
palladium, platinum, praseodymium, rhodium, rubidium, ruthenium,
samarium, scandium, tantalum, tellurium, terbium, thulium, tin,
titanium, tungsten, vanadium, ytterbium, yttrium, zinc, and
zirconium.
    \645\ U.S. Geological Survey, ``U.S. Geological Survey Releases
2022 List of Critical Minerals,'' February 22, 2022. Available at:
https://www.usgs.gov/news/national-news-release/us-geological-survey-releases-2022-list-critical-minerals.
    \646\ International Energy Agency, ``The Role of Critical
Minerals in Clean Energy Transitions,'' World Energy Outlook Special
Report, Revised version. March 2022.
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    Emission control catalysts for ICE vehicles utilize critical
minerals including cerium, palladium, platinum, and rhodium. These are
also required for PHEVs due to the presence of the ICE. Critical
minerals most relevant to lithium-ion battery production include
cobalt, graphite, lithium, manganese, and nickel, which are important
constituents of electrode active materials, their presence and relative
amounts depending on the chemistry formulation. Aluminum is also used
for cathode foils and in some cell chemistries. Rare-earth metals are
used in permanent-magnet electric machines, and include several
elements such as dysprosium, neodymium, and samarium.
    Some of the electrification technologies that use critical minerals
have alternatives that use other minerals or eliminate them entirely.
For these, automakers in some cases have some flexibility to modify
their designs to reduce or avoid use of minerals that are difficult or
expensive to procure. For example, in some PEV battery applications it
is feasible and increasingly common to employ an iron phosphate cathode
which has lower energy density but does not require cobalt, nickel, or
manganese. Similarly, rare earths used in permanent-magnet electric
machines have potential alternatives in the form of ferrite or other
advanced magnets, or the use of induction machines or advanced
externally excited motors, which do not use permanent magnets.
    This discussion therefore focuses on minerals that are most
critical for battery production, including nickel, cobalt, graphite,
and lithium.
    Availability of critical minerals for use in battery production
depends on two primary considerations: Production of raw minerals from
mining (or recycling) operations, and refining operations that produce
purified and processed substances (precursors, electrolyte solutions,
and finished electrode powders) made from the raw minerals, that can
then be made into battery cells.
    As shown in Figure 28, in 2019 about 50 percent of global nickel
production occurred in Indonesia, Philippines, and Russia, with the
rest distributed around the world. Nearly 70 percent of cobalt
originated from the Democratic Republic of Congo, with some significant
production in Russia and Australia, and about 20 percent in the rest of
the world. More than 60 percent of graphite production occurred in
China, with significant contribution from Mozambique and Brazil for
another 20 percent. About half of lithium was mined in Australia, with
Chile accounting for another 20 percent, and China about 10 percent.
[GRAPHIC] [TIFF OMITTED] TP05MY23.032

    According to the Administration's 100-day review under E.O. 14017,
of the major actors in mineral refining, 60 percent of lithium refining
occurred in China, with 30 percent in Chile, and 10 percent in
Argentina. 72 percent of cobalt refining occurred in China, with
another 17 percent distributed among Finland, Canada, and Norway. 21
percent of Class 1 nickel refining occurred in Russia, with 16 percent
in China, 15 percent in Japan, and 13 percent in Canada.\648\ Similar
conclusions were reached in an analysis by the International Energy
Agency, shown in Figure 29.
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    \647\ International Energy Agency, ``The Role of Critical
Minerals in Clean Energy Transitions,'' World Energy Outlook Special
Report, Revised version. March 2022.
    \648\ The White House, ``Building Resilient Supply Chains,
Revitalizing American Manufacturing, and Fostering Broad-Based
Growth,'' 100-Day Reviews under Executive Order 14017, June 2021 (p.
121).

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[GRAPHIC] [TIFF OMITTED] TP05MY23.033

    Currently, the U.S. is lagging behind much of the rest of the world
in critical mineral production. Although the U.S. has nickel reserves,
and opportunity also exists to recover significant nickel from mine
waste remediation and similar activities, it is more convenient for
U.S. nickel to be imported from other countries, with 68 percent coming
from Canada, Norway, Australia, and Finland, countries with which the
U.S. has good trade relations.\650\ According to the USGS, ample
reserves of nickel exist in the U.S. and globally, potentially
constrained only by processing capacity.\651\ The U.S. has numerous
cobalt deposits but few are developed while some have produced cobalt
only in the past; about 72 percent of U.S. consumption is
imported.\652\ Similar observations may be made about graphite and
lithium. Significant lithium deposits do exist in the U.S. in Nevada
and California as well as several other locations,653 654
and are currently the target of development by suppliers and
automakers.\655\ U.S. deposits of natural graphite also exist but
graphite has not been produced in the U.S. since the 1950s and
significant known resources are largely undeveloped.\656\
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    \649\ International Energy Agency, ``The Role of Critical
Minerals in Clean Energy Transitions,'' World Energy Outlook Special
Report, Revised version. March 2022.
    \650\ The White House, ``Building Resilient Supply Chains,
Revitalizing American Manufacturing, and Fostering Broad-Based
Growth,'' 100-Day Reviews under Executive Order 14017, June 2021.
    \651\ Ibid.
    \652\ U.S. Geological Survey, ``Cobalt Deposits in the United