[Federal Register Volume 87, Number 84 (Monday, May 2, 2022)]
[Rules and Regulations]
[Pages 25710-26092]
[FR Doc No: 2022-07200]

Vol. 87

Monday,

No. 84

May 2, 2022

Part II

Department of Transportation

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National Highway Traffic Safety Administration

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49 CFR Parts 531, 533, 536, et al.

Corporate Average Fuel Economy Standards for Model Years 2024-2026
Passenger Cars and Light Trucks; Final Rule

Federal Register / Vol. 87 , No. 84 / Monday, May 2, 2022 / Rules and
Regulations

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DEPARTMENT OF TRANSPORTATION

National Highway Traffic Safety Administration

49 CFR Parts 531, 533, 536, and 537

[NHTSA-2021-0053]
RIN 2127-AM34

Corporate Average Fuel Economy Standards for Model Years 2024-
2026 Passenger Cars and Light Trucks

AGENCY: National Highway Traffic Safety Administration (NHTSA).

ACTION: Final rule.

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SUMMARY: NHTSA, on behalf of the Department of Transportation, is
finalizing revised fuel economy standards for passenger cars and light
trucks for model years (MYs) 2024-2025 that increase at a rate of 8
percent per year, and increase at a rate of 10 percent per year for MY
2026 vehicles. NHTSA currently projects that the revised standards
would require an industry fleet-wide average of roughly 49 mpg in MY
2026, and would reduce average fuel outlays over the lifetimes of
affected vehicles that provide consumers hundreds of dollars in net
savings. These standards are directly responsive to the agency's
statutory mandate to improve energy conservation and reduce the
Nation's energy dependence on foreign sources. This final rule fulfills
NHTSA's obligation to revisit the standards set forth in ``The Safer
Affordable Fuel Efficient (SAFE) Vehicles Rule for Model Years 2021-
2026 Passenger Cars and Light Trucks,'' as directed by President
Biden's January 20, 2021, Executive order ``Protecting Public Health
and the Environment and Restoring Science To Tackle the Climate
Crisis.'' The revised standards set forth in this final rule are
consistent with the policy direction in the order, to among other
things, listen to the science, improve public health and protect our
environment, and to prioritize both environmental justice and the
creation of the well paying union jobs necessary to deliver on these
goals. This final rule addresses public comments to the notice of
proposed rulemaking and also makes certain minor changes to fuel
economy reporting requirements.

DATES: This rule is effective July 1, 2022.

ADDRESSES: For access to the dockets or to read background documents or
comments received, please visit https://www.regulations.gov, and/or
Docket Management Facility, M-30, U.S. Department of Transportation,
West Building, Ground Floor, Room W12-140, 1200 New Jersey Avenue SE,
Washington, DC 20590. The Docket Management Facility is open between 9
a.m. and 4 p.m. Eastern Time, Monday through Friday, except Federal
holidays.

FOR FURTHER INFORMATION CONTACT: For technical and policy issues, Greg
Powell, CAFE Program Division Chief, Office of Rulemaking, National
Highway Traffic Safety Administration, 1200 New Jersey Avenue SE,
Washington, DC 20590; email: [email protected]. For legal issues,
Rebecca Schade, NHTSA Office of Chief Counsel, National Highway Traffic
Safety Administration, 1200 New Jersey Avenue SE, Washington, DC 20590;
email: [email protected].

SUPPLEMENTARY INFORMATION:
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Does this action apply to me?

    This action affects companies that manufacture or sell new
passenger automobiles (passenger cars) and non-passenger automobiles
(light trucks) as defined under NHTSA's CAFE regulations.\1\ Regulated
categories and entities include:
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    \1\ ``Passenger car'' and ``light truck'' are defined in 49 CFR
part 523.
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BILLING CODE 4910-59-C
    This list is not intended to be exhaustive, but rather provides a
guide regarding entities likely to be regulated by this action. To
determine whether particular activities may be regulated by this
action, you should carefully examine the regulations. You may direct
questions regarding the applicability of this action to the persons
listed in FOR FURTHER INFORMATION CONTACT.

Executive Summary

    NHTSA, on behalf of the Department of Transportation, is amending
standards regulating corporate average fuel economy (CAFE) for
passenger cars and light trucks for MYs 2024-2026. This final rule
responds to NHTSA's statutory obligation to set CAFE standards at the
maximum feasible level that the agency determines vehicle manufacturers
can achieve in each model year, in order to improve energy
conservation. NHTSA's review of the prior standards was instigated in
response to President Biden's directive in Executive Order 13990 of
January 20, 2021, ``Protecting Public Health and the Environment and
Restoring Science To Tackle the Climate Crisis,'' that ``The Safer
Affordable Fuel-Efficient (SAFE) Vehicles Rule for Model Years 2021-
2026 Passenger Cars and Light Trucks'' (2020 final rule, SAFE rule, or
SAFE 2 final rule) (85 FR 24174, April 30, 2020) be immediately
reviewed for consistency with NHTSA's statutory obligation and our
Nation's abiding commitment to promote and protect our public health
and the environment, among other things. NHTSA undertook that review
immediately, and this final rule is the result of that review,
conducted with reference to NHTSA's statutory obligations.
    The amended CAFE standards increase in stringency for both
passenger cars and light trucks, by 8 percent per year for MYs 2024-
2025, and by 10 percent per year for MY 2026. The agency calls the
amended standards Alternative 2.5. NHTSA concludes that these levels
are the maximum feasible for these model years as discussed in more
detail in Section VI. The final rule considers a range of regulatory
alternatives, consistent with NHTSA's obligations under the National
Environmental Policy Act (NEPA) and E.O. 12866. While E.O. 13990
directed the review of CAFE standards for MYs 2021-2026, statutory lead
time requirements \2\ mean that MY 2024 is the earliest model year that
can currently be amended in the CAFE program.\3\ The standards remain
vehicle-footprint-based, like the CAFE standards in effect since MY
2011. Recognizing that many readers think about CAFE standards in terms
of the miles per gallon (mpg) values that the standards are projected
to eventually require, NHTSA currently projects that the standards will
require, on an average industry fleet-wide basis, roughly 49 mpg in MY
2026. NHTSA notes both that real-world fuel economy is generally 20-30
percent lower than the estimated required CAFE level stated above, and
also that the actual CAFE standards are the footprint target curves for
passenger cars and light trucks, meaning that ultimate fleet-wide
levels will vary depending on the mix of vehicles that industry
produces for sale in those model years. Table I-1 shows the incremental
differences in stringency levels for passenger cars and light trucks,
by the different regulatory alternatives considered, in the model years
subject to regulation.
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    \2\ 49 U.S.C. 32902(a) and (g).
    \3\ 49 U.S.C. 32902(a).

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    This final rule reflects a conclusion significantly different from
the conclusion that NHTSA reached in the 2020 final rule, but this is
because important facts have changed, and because NHTSA has
reconsidered how to balance the relevant statutory considerations in
light of those facts. In this document, NHTSA concludes that
significantly more stringent standards are the maximum feasible that
the agency determines that vehicle manufacturers can achieve in the
rulemaking time frame. Standards that are more stringent than those
that were finalized in 2020 appear economically practicable, based on
manageable average per-vehicle cost increases, large consumer fuel
savings, minimal effects on sales, and estimated increases in
employment, among other things. Additionally, and importantly, contrary
to the 2020 final rule, NHTSA recognizes that the need of the United
States to conserve energy must include serious consideration of the
energy security risks, as well as environmental and public health
implications, of continuing to consume oil, which more stringent fuel
economy standards can reduce. By increasing fuel economy, more
stringent standards can also protect consumers from oil market
volatility from global events outside the borders of the U.S. that can
result in rapid fuel price increases domestically. Through greater
energy conservation, more stringent standards also reduce climate
impacts to our Nation, which further benefit our national security.
NHTSA also believes that the final standards are complementary to other
motor vehicle standards of the Government that are simultaneously
applicable during MYs 2024-2026.
    Moreover, at least part of the automobile industry is increasingly
demonstrating that improving fuel economy and reducing GHG emissions is
a growth market for them, and that the market rewards investment in
advanced technology. Nearly all auto manufacturers have rolled out new
higher fuel economy and electric vehicle models since MY 2020, and
continue to announce even more models forthcoming during the rulemaking
time frame. Five major manufacturers voluntarily bound themselves to
stricter GHG requirements than set forth by the U.S. Environmental
Protection Agency (EPA) in 2020 through contractual agreements with the
State of California.\4\ Some of the technologies that automakers will
deploy to meet those standards will both reduce emissions and improve
fuel economy. These companies (including both those who joined the
Framework Agreements with California and those that have not) are
sophisticated, for-profit enterprises. If they are taking these steps,
rolling out these new models, and making these announcements, NHTSA can
now be more confident than the agency was in 2020 that the market is
getting ready to make the leap to significantly higher fuel economy.
The California Framework Agreements and the clear planning by industry
to migrate toward more advanced technologies provide corroborating
evidence of the practicability of more stringent standards.
Additionally, more stringent CAFE standards can improve equity, by
encouraging industry to continue improving the fuel economy of all
vehicles, so that all Americans can benefit from higher fuel economy
and save money on fuel. While NHTSA does not consider the fuel economy
of electric vehicles in setting CAFE standards, consistent with
Congress' direction in 49 U.S.C. 32902(h), using electric vehicles to
meet the standards is a compliance option that many automakers are
pursuing. Further, NHTSA is setting these CAFE standards in the context
of a much larger conversation about the future of the U.S. light-duty
vehicle fleet, the increasing and obvious need to move away from fossil
fuels for reasons of national and energy security, and the evidence of
a changing climate that is emerging on an almost daily basis.
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    \4\ https://ww2.arb.ca.gov/news/framework-agreements-clean-cars
(accessed: March 23, 2022).
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    NHTSA concludes, as we will explain in more detail below, that
Alternative 2.5 is the maximum feasible alternative that manufacturers
can achieve for MYs 2024-2026, based on its significant fuel savings
benefits to consumers and its environmental and energy security
benefits relative to all other alternatives except Alternative 3.
Although Alternative 3 would provide greater fuel savings benefits,
NHTSA estimates that Alternative 3 would result in a large average per-
vehicle cost increase compared to the price of vehicles under
Alternative 2.5, which for many automakers could exceed $2,000. In
contrast to Alternative 3, Alternative 2.5

comes at a cost we believe the market can bear, and NHTSA believes it
is the appropriate choice given this record. We believe that providing
the greatest amount of lead time for the biggest stringency increase of
10 percent for MY 2026, the last of three years covered in the rule, is
reasonable and appropriate, particularly given the ongoing rapid
changes in the auto industry. Choosing Alternative 3 would require
industry to ramp up even faster, and thus provide less lead time, with
consequences for economic practicability. With relatively small sales
effects and positive effects on employment, we are confident that
Alternative 2.5 is feasible, and that industry can rise to meet these
standards.
    For all of these reasons, and based on consideration of the
comments received, NHTSA concludes that Alternative 2.5, with standards
that increase at 8 percent per year for MYs 2024 and 2025, and a 10-
percent increase in MY 2026, is maximum feasible.
    This action is also different from the 2020 final rule in that it
is issued by NHTSA alone, and EPA has issued a separate final rule.\5\
EPA's revised standards apply to MY 2023 as well as MYs 2024-2026.
NHTSA's 18-month lead time requirement precludes amendment of the MY
2023 CAFE standards. An important consequence of this is that EPA's
rate of stringency increase, after increasing in MY 2023, looks slower
than NHTSA's over the same time period, although collectively EPA's
standards achieve at least as stringent levels as NHTSA's Alternative
2.5 by MY 2026.\6\ NHTSA emphasizes, however, that the new standards
are what NHTSA believes best fulfill our statutory directive of energy
conservation. Additionally, in the context of the EPA standards, the
analysis we have done tackles the core question of whether compliance
with both standards should be achievable with the same vehicle fleet,
after manufacturers fully understand the requirements from both sets of
standards, and NHTSA believes that, as always, compliance with both
standards will be achievable with the same vehicle fleet. It is also
worth noting that the differences in what the two agencies' standards
require become smaller each year, until near alignment is achieved in
2026.
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    \5\ 86 FR 74434 (Dec. 30, 2021).
    \6\ EPA projected a fleet average fuel economy value of about 52
mpg associated with its MY 2026 standards (assuming full use of air
conditioning refrigerant credits). See Table 4-43, ``Revised 2023
and Later Model Year Light-Duty Vehicle GHG Emissions Standards:
Regulatory Impact Analysis,'' EPA-420-R-21-028, December 2021.
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    While NHTSA recognizes that the last three CAFE standard
rulemakings have been issued jointly with EPA, and that issuing
separate rules represents a change in regulatory approach, NHTSA
coordinated with EPA to avoid inconsistencies and produce requirements
that are consistent with the agencies' respective statutory
authorities.\7\ Additionally, and importantly, NHTSA has also
considered and accounted for California's Zero Emission Vehicle (ZEV)
program (and its adoption by a number of other states) in developing
the baseline for this final rule, and has also accounted in the
baseline for the aforementioned ``Framework Agreements'' between
California and BMW, Ford, Honda, VWA, and Volvo, which are national-
level GHG emission reduction agreements to which these companies
committed for several model years. NHTSA reasonably assumes that
automakers will meet other regulatory requirements that apply to them,
and commitments that they have made through the Framework Agreements.
Reflecting these in the analysis improves the accuracy of the baseline
in reflecting the state of the world without the revised CAFE
standards, and thus the information available to the decision-makers.
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    \7\ Throughout this preamble, NHTSA uses the term ``maximum
feasible'' as shorthand to refer to the statutory directive in EPCA,
requiring the agency to exercise its discretionary authority to set
CAFE standards at the ``maximum feasible average fuel economy level
that the Secretary decides the manufacturers can achieve in that
model year.'' 49 U.S.C. 32902(a).
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    A number of other improvements and updates have been made to the
analysis since the 2020 final rule based on NHTSA analysis, new data,
and public comments to the NPRM (86 FR 49602, Sept. 3, 2021) as
described in Section III. Table I-2 summarizes these, and they are
discussed in much more detail below and in the documents accompanying
this preamble.

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    NHTSA estimates that this action could reduce average fuel outlays
over the lifetimes of MY 2029 vehicles by about $1,387, while
increasing the average cost of those vehicles by about $1,087 over the
baseline described above, at a 3-percent discount rate. With the social
cost of greenhouse gases (SC-GHG) \8\ and all other benefits and costs
discounted at 3 percent, when considering the entire fleet for MYs
1981-2029, NHTSA estimates $128 billion in monetized costs and $145
billion in monetized benefits attributable to the new standards, such
that the present value of aggregate net monetized benefits to society
would be over $16 billion, not including other important unquantified
effects, such as energy security benefits, distributional effects, and
certain air quality benefits from the reduction of toxic air pollutants
and other emissions, among other things.
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    \8\ The ``social cost of greenhouse gases'' or ``SC-GHG'' refers
to the combination of the social costs of carbon dioxide
(CO2), methane (CH4), and nitrous oxide
(N2O) emissions. In this preamble, and in the TSD, FRIA,
and Final SEIS, NHTSA may occasionally use the term ``social cost of
carbon'' or ``SCC'' to refer to the SC-GHG, and means no substantive
difference between them.
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    These cost and benefit estimates are based on many different and
uncertain inputs. One of the inputs informing the benefits estimates is
the SC-GHG. In this final rule, NHTSA employed the SC-GHG values from
the Interim Revised Estimates developed by the Interagency Working
Group on the Social Cost of Greenhouse Gases (IWG), and discounted it
at values recommended by the IWG for its main analysis. Those values
are based on the best available science and economics and are the most
appropriate values to focus on in the analysis of this rule, though DOT
also affirms that, in its expert judgment, those values are
conservative estimates that likely significantly underestimate the full
benefits to social welfare of reducing greenhouse gas pollution. NHTSA
also explored in its sensitivity analyses values based on other
assumptions, including values calculated at different discount rates,
Furthermore, in light of pending litigation, NHTSA also explored an
analysis that used the same SC-GHG value employed in the 2020 final
rule. Specifically, on February 11, 2022, the United States District
Court for the Western District of Louisiana issued a preliminary
injunction that enjoined NHTSA from, among other activities,
``[a]dopting, employing, treating as binding, or relying upon any
Social Cost of Greenhouse Gas estimates based on global effects,'' as
well as from ``adopting, employing, treating as binding, or relying
upon the work product of the [IWG].'' \9\
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    \9\ Louisiana v. Biden, Order, No. 2:21-CV-01074, ECF No. 99
(W.D. La. Feb. 11, 2022).
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    Although the injunction was stayed by the United States Court of
Appeals for the Fifth Circuit on March 16, 2022,\10\ prior to the stay,
in order to comply with this prohibition, NHTSA conducted a cost-
benefit analysis based on the SC-GHG values presented in the 2020 final
rule. In DOT's judgment, those values do not reflect the best available
science and economics for estimating climate effects in the analysis of
this rule. As detailed more thoroughly elsewhere in this rule and the
supporting Technical Support Document (TSD) and Final Regulatory Impact
Analysis (FRIA), the only way to achieve an efficient allocation of
resources for greenhouse gas emissions reduction on a global basis--and
so benefit the United States and its citizens--is for all countries to
consider global estimates of climate damages. To correctly assess the
total climate damages to U.S. citizens and residents, an analysis must
account for all climate impacts that directly and indirectly affect the
welfare of U.S. citizens and residents, how U.S. greenhouse gas
mitigation activities affect mitigation activities by other countries,
and spillover effects from climate action elsewhere. The estimates used
in the 2020 rule, therefore, severely underestimate climate damages.
Nevertheless, even if NHTSA's cost-benefit analysis applied the
misleadingly low SC-GHG estimates from the 2020 rule, which severely
underestimate the impacts of climate effects on U.S. citizens, NHTSA
would still conclude in this rule that Alternative 2.5 is maximum
feasible under its statutory authority. Notably, for example, net
consumer benefits from significant fuel savings remained positive for
Alternative 2.5 independent of any estimate of climate benefits.
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    \10\ Louisiana v. Biden, Order, No. 22-30087, Doc. No.
00516242341 (5th Cir. Mar. 16, 2022).
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    Moreover, NHTSA is required to consider four statutory factors--
technological feasibility, economic practicability, the effect of other
motor vehicle standards of the Government on fuel economy, and the need
of the United States to conserve energy--to determine whether the
standards it adopts are maximum feasible,\11\ and NHTSA finds that
Alternative 2.5 is the maximum feasible on the basis of these factors,
and particularly considering the statutory mandate to improve energy
conservation and reduce the Nation's energy dependence on foreign
sources. The cost-benefit analysis is not one of those statutory
factors. While NHTSA's estimates of costs and benefits are important
considerations and are directed by E.O. 12866, again, it is the
balancing required by statute--that is, the requirement to set CAFE
standards at ``the maximum feasible average fuel economy level that the
Secretary decides the manufacturers can achieve in that model year'' 49
U.S.C. 32902(a)--that is the basis for the setting of CAFE standards.
Cost-benefit analysis provides only one informative data point in
addition to the host of considerations that NHTSA must balance by
statute when determining maximum feasible standards. As such, any
changes in the monetized climate benefit figures that resulted from
using the SC-GHG value from the 2020 final rule did not justify
disrupting the overall balance of other significant qualitative and
quantitative considerations and factors that support the selection of
the Preferred Alternative--as described at length throughout this final
rule. When the 5th Circuit stayed the injunction, NHTSA returned to
using the Interim SC-GHG developed by the IWG, discounted at 3 percent,
because we believe it to be the more accurate and reasonable value.
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    \11\ 49 U.S.C. 32902(g).
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    It is worth emphasizing that CAFE standards apply only to new
vehicles. The costs attributable to new CAFE standards are thus
``front-loaded,'' because they result primarily from the application of
fuel-saving technology to new vehicles. By contrast, the impact of new
CAFE standards on fuel consumption and energy savings, air pollution,
and greenhouse gases--and the associated benefits to society--occur
over an extended time, as drivers buy, use, and eventually scrap these
new vehicles. By accounting for many model years and extending well
into the future (2050), our analysis accounts for these differing
patterns in impacts, benefits, and costs. Given the front-loaded costs
versus longer-term benefits, it is likely that an analysis extending
even further into the future would reveal at least some additional net
present benefits. Our analysis also accounts for the potential that, by
changing new vehicle prices and fuel economy levels, CAFE standards
could indirectly impact the operation of vehicles produced before or
after the MYs 2024-2026 for which we are finalizing new CAFE standards.
This means that some of the final rule's impacts and corresponding
benefits and costs are actually attributable to indirect

impacts on vehicles produced before and after MYs 2024-2026.
    The bulk of our analysis considers a ``model year'' perspective
that considers the lifetime impacts attributable to all vehicles
produced prior to MY 2030, accounting for the operation of these
vehicles over their entire lives (with some MY 2029 vehicles estimated
to be in service as late as 2068). This approach emphasizes the role of
MYs 2024-2026, while accounting for the potential that it may take
manufacturers a few additional years to produce fleets fully responsive
to the final MY 2026 standards,\12\ and for the potential that the
final standards could induce some changes in the operation of vehicles
produced prior to MY 2024, for example, some individuals might choose
to keep older vehicles in operation, rather than purchase new ones.
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    \12\ The fact that manufacturers have up to three model years to
``settle'' compliance for a given model year is a function of
statutory flexibilities--namely, that overcompliance credits may be
``carried back'' up to three model years--and does not in any way
imply that NHTSA believes that the MY 2026 standards are not
feasible in MY 2026.
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    Our analysis also considers a ``calendar year'' (CY) perspective
that includes the annual impacts attributable to all vehicles estimated
to be in service in each calendar year for which our analysis includes
a representation of the entire registered light-duty fleet. For this
final rule, this calendar year perspective covers each of CYs 2021-
2050, with differential impacts accruing as early as MY 2023.\13\
Compared to the ``model year'' perspective, this calendar year
perspective emphasizes model years of vehicles produced in the longer
term, beyond those model years for which standards are currently being
promulgated. Table I-3 summarizes estimates of selected impacts viewed
from each of these two perspectives, for each of the regulatory
alternatives considered in this final rule.\14\
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    \13\ For a presentation of effects by calendar year, please see
FRIA Chapter 6.5 and Chapter 6.6.
    \14\ As discussed at length below, Alternative 0 is the set of
CAFE standards promulgated in 2020, and thus constitutes the ``No-
Action Alternative.'' Impacts of the four ``Action Alternatives''
are measured relative to this baseline. Alternatives 1, 2, 2.5, and
3 specify passenger car and light truck standards for each of MYs
2024-2026 that NHTSA estimates will, taken together, increase
overall CAFE requirements in MY 2026 by about 14, 22, 25, and 30
percent, respectively, although actual average requirements will
ultimately depend on the future composition of the fleet, which
NHTSA cannot predict with certainty. Above, Table I-1 shows
corresponding projected increases in average requirements for each
fleet in each model year. Below, Section IV.B discusses the specific
definitions of each of these regulatory alternatives.
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    Additional important health, environmental, and energy security
benefits could not be fully quantified or monetized. Finally, for
purposes of comparing the benefits and costs of new CAFE standards to
the benefits and costs of other Federal regulations, policies, and
programs, we have computed ``annualized'' benefits and costs.
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    \15\ Climate benefits are based on reductions in CO2,
CH4, and N2O emissions and are calculated
using four different estimates of the global social cost of each
greenhouse gas (SC-GHG model average at 2.5 percent, 3 percent, and
5 percent discount rates; 95th percentile at 3 percent discount
rate), which each increase over time. For the presentational
purposes of this table and other similar summary tables, we show the
benefits associated with the average global SC-GHG at a 3 percent
discount rate, but the agency does not have a single central SC-GHG
point estimate. We emphasize the importance and value of considering
the benefits calculated using all four SC-GHG estimates. See Section
III.G.2 for more information. Where percent discount rate values are
reported in this table, the social benefits of avoided climate
damages are discounted at 3 percent. The climate benefits are
discounted at the same discount rate as used in the underlying SC-
GHG values for internal consistency.
    \16\ To be clear, monetized values do not include other
important unquantified effects, such as certain climate benefits,
certain energy security benefits, distributional effects, and
certain air quality benefits from the reduction of toxic air
pollutants and other emissions, among other things.
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    Again, and as discussed in detail below, the monetized estimated
costs and benefits of this final rule are relevant to and inform the
agency's conclusion regarding which levels of CAFE standards are
maximum feasible for MYs 2024-2026, but they do not fully capture the
total benefits of the standards and are not part of the factors
contained in the governing statute. It is the balancing of the four
statutory factors (none of which expressly requires maximization of net
benefits, although NHTSA does consider net benefits pursuant to E.O.
12866) that provides the basis for setting CAFE standards. Notably,
NHTSA confirms that on the basis of its four statutory factors, and
particularly considering the statutory mandate to improve energy
conservation and reduce the Nation's energy dependence on foreign
sources, NHTSA would select Alternative 2.5 as the maximum feasible
even if the cost-benefit analysis had adopted different assumptions for
the monetization of climate benefits.
    It is also worth emphasizing that, although NHTSA is prohibited
from considering the availability of certain flexibilities in making
our determination about the levels of CAFE standards that would be
maximum feasible,\17\ manufacturers have a variety of flexibilities
available to them to aid their compliance. Table I-12 through Table I-
15 below summarize available compliance flexibilities.
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    \17\ 49 U.S.C. 32902(h).
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    NHTSA recognizes that the lead time for this final rule is shorter
than some past rulemakings have provided, and that the economy and the
country are in the process of recovering from a global pandemic and the
resulting economic distress. At the same time, NHTSA also recognizes
that at least parts of the industry are nonetheless stepping up their
product offerings and releasing more and more high-fuel-economy vehicle
models, and many companies did not deviate significantly over the past
ten years from product plans established in response to the EPA and
NHTSA standards set forth in the 2012 final rule (77 FR 62624, Oct. 15,
2012) and the EPA standards confirmed by EPA in its January 2017 Final
Determination. With these and other considerations in mind, NHTSA is
amending the CAFE standards for MYs 2024-2026, and believes that
Alternative 2.5 is maximum feasible and represents the best balancing
of multiple statutory and policy goals for these model years. NHTSA,
like any other Federal agency, is afforded an opportunity to reconsider
prior views and, when warranted, to adopt new positions. Indeed, as a
matter of good governance, agencies should revisit their positions when
appropriate, especially to ensure that their actions and regulations
reflect legally sound interpretations of the agency's statutory
authority and remain consistent with the agency's policy views and
practices. As a matter of law, ``an Agency is entitled to change its
interpretation of a statute.'' \18\ Nonetheless, ``[w]hen an Agency
adopts a materially changed interpretation of a statute, it must in
addition provide a `reasoned analysis' supporting its decision to
revise its interpretation.'' \19\ The analysis presented in this
preamble and in the accompanying TSD, FRIA, Final Supplemental
Environmental Impact Statement (Final SEIS), CAFE Model Documentation,
and extensive

rulemaking docket fully supports the agency's decision and revised
balancing of the statutory factors for MYs 2024-2026 standards.
---------------------------------------------------------------------------

    \18\ Phoenix Hydro Corp. v. FERC, 775 F.2d 1187, 1191 (D.C. Cir.
1985).
    \19\ Alabama Educ. Ass'n v. Chao, 455 F.3d 386, 392 (D.C. Cir.
2006) (quoting Motor Vehicle Mfrs. Ass'n of U.S., Inc. v. State Farm
Mut. Auto. Ins. Co., 463 U.S. 29, 57 (1983)); see also Encino
Motorcars, LLC v. Navarro, 136 S. Ct. 2117, 2125 (2016) (``Agencies
are free to change their existing policies as long as they provide a
reasoned explanation for the change.'') (citations omitted).
---------------------------------------------------------------------------

II. Overview of the Final Rule

    In this final rule, NHTSA is revising CAFE standards for MYs 2024-
2026. On January 20, 2021, the President signed E.O. 13990,
``Protecting Public Health and the Environment and Restoring Science To
Tackle the Climate Crisis.'' \20\ In it, the President directed that
the 2020 final rule must be immediately reviewed for consistency with
the policy commitments in that E.O., including listening to the
science; improving public health and protect our environment; ensuring
access to clean air and water; limiting exposure to dangerous chemicals
and pesticides; holding polluters accountable, including those who
disproportionately harm communities of color and low-income
communities; reducing greenhouse gas emissions; bolstering resilience
to the impacts of climate change; restoring and expanding our national
treasures and monuments; and prioritizing both environmental justice
and the creation of the well-paying union jobs necessary to deliver on
these goals.\21\ E.O. 13990 states expressly that the Administration
prioritizes listening to the science, improving public health and
protecting the environment, reducing greenhouse gas emissions, and
improving environmental justice while creating well-paying union
jobs.\22\ The E.O. thus directs that the 2020 final rule be reviewed at
once and that (in this case) the Secretary of Transportation consider
``suspending, revising, or rescinding'' it, via an NPRM, by July
2021.\23\ On September 3, 2021, NHTSA published an NPRM to revise these
requirements, which are being finalized, with changes in response to
public comments and additional analysis, in this final rule.
---------------------------------------------------------------------------

    \20\ 84 FR 7037 (Jan. 25, 2021).
    \21\ Id., sections 1, 2.
    \22\ Id., section 1.
    \23\ Id., section 2(a)(ii).
---------------------------------------------------------------------------

    Section 32902(g)(1) of title 49, United States Code allows the
Secretary (by delegation to NHTSA) to prescribe regulations amending an
average fuel economy standard prescribed under 49 U.S.C. 32902(a), like
those prescribed in the 2020 final rule, if the amended standard meets
the requirements of section 32902(a). The Secretary's authority to set
fuel economy standards is delegated to NHTSA at 49 CFR 1.95(a);
therefore, NHTSA is revising fuel economy standards for MYs 2024-2026.
Section 32902(g)(2) states that when the amendment makes an average
fuel economy standard more stringent, it must be prescribed at least 18
months before the beginning of the model year to which the amendment
applies. NHTSA generally calculates the 18-month lead time requirement
as April of the calendar year prior to the start of the model year.
Thus, 18 months before MY 2023 would be April 2021, because MY 2023
begins in October 2022. Because of this lead time requirement, NHTSA is
not amending the CAFE standards for MYs 2021-2023, even though the 2020
final rule also covered those model years. For purposes of the CAFE
program, the 2020 final rule's standards for MYs 2021-2023 will remain
in effect.
    For the model years for which there is statutory lead time to amend
the standards, however, NHTSA is amending the currently applicable fuel
economy standards. Although only two years have passed since the 2020
final rule, the agency believes it is reasonable and appropriate to
revisit the CAFE standards for MYs 2024-2026. In particular, the agency
has further considered the serious adverse effects on energy
conservation that the standards finalized in 2020 would cause as
compared to the final standards. The need of the U.S. to conserve
energy is greater than understood in the 2020 final rule. In addition,
informed by an updated technical analysis, standards that are more
stringent than those that were finalized in 2020 appear economically
practicable, based on manageable average per-vehicle cost increases,
minimal effects on sales, and estimated increases in employment, as
well as higher (and increasing) consumer demand for more fuel economy,
among other considerations. NHTSA also believes that the final
standards are complementary to other motor vehicle standards of the
Government that affect fuel economy that are simultaneously applicable
during MYs 2024-2026. The renewed focus on addressing energy
conservation and the industry's apparent ability to meet more stringent
standards show that a rebalancing of the EPCA factors, and a
corresponding issuance of more stringent standards, is appropriate for
MYs 2024-2026.
    The following sections introduce the action in more detail.

Summary of NPRM

    In the NPRM, NHTSA proposed to revise the existing CAFE standards
for MYs 2024-2026. NHTSA explained that it was proposing to revise
those standards because it had reconsidered its determination made in
2020 about what levels of CAFE stringency would be maximum feasible for
those model years, after reviewing the standards in response to the
President's direction in E.O. 13990. NHTSA discussed the differences
between the proposal and the 2020 final rule, including NHTSA's
tentative conclusion that significantly more stringent standards would
be maximum feasible, based on a reconsideration of how to balance the
relevant statutory considerations and updated technical information.
NHTSA also discussed the fact that it was issuing the proposal
independently, unlike several past rulemakings in which NHTSA and EPA
had issued joint proposals. NHTSA explained that EPA's revised
standards apply to MY 2023 as well as MYs 2024-2026, while NHTSA's 18-
month lead time requirement precluded amendment of the MY 2023 CAFE
standards. An important consequence of this was that EPA's proposed
rate of stringency increase, after taking a big leap in MY 2023, looked
slower than NHTSA's over the same time period. NHTSA emphasized,
however, that the proposed standards were what NHTSA believed best
fulfilled our statutory directive of energy conservation, and that the
agencies had worked closely together in developing their respective
proposals, and that by the end of the rulemaking time frame, alignment
would be achieved between the two agencies' standards. NHTSA also
explained that it had employed an analytical baseline for the NPRM that
included both a representation of the California ZEV program (and its
adoption in a number of states) and the California ``Framework
Agreements'' between that state and BMW, Ford, Honda, Volkswagen of
America (VWA), and Volvo. NHTSA also described other analytical
improvements made for the NPRM since the 2020 final rule.
    NHTSA proposed CAFE standards for MYs 2024-2026 that would increase
at a rate of 8 percent per year, for both passenger cars and light
trucks, and also took comment on a wide range of alternatives,
including retaining the 2020 standards and returning to levels
consistent with what was set forth in the 2012 final rule. Table II-1
and Table II-2 below contain descriptions of the regulatory
alternatives on which comment was sought, and the estimated translation
of those alternatives into mpg levels, respectively, for the reader's
reference. The proposal was accompanied by a Preliminary Regulatory
Impact Analysis (PRIA), a Draft Supplemental Environmental Impact
Statement (Draft SEIS), and the

CAFE Model software source code and documentation, all of which were
also subject to comment in their entirety and all of which received
significant comments.
[GRAPHIC] [TIFF OMITTED] TR02MY22.026

[GRAPHIC] [TIFF OMITTED] TR02MY22.027

    NHTSA also sought comment on another potential alternative, the
effects of which were not expressly quantified, under which MYs 2024-
2025 would increase at 8 percent per year, but MY 2026 would increase
at 10 percent per year. NHTSA explained that average requirements and
achieved CAFE levels would ultimately depend on manufacturers' and
consumers' responses to standards, technology developments, economic
conditions, fuel prices, and other factors. NHTSA estimated that over
the lives of vehicles produced prior to MY 2030, the proposal would
save about 50 billion gallons of gasoline and increase electricity
consumption (as the percentage of electric vehicles increased over
time) by about 275 terawatts (TWh), compared to the levels of gasoline
and electricity consumption that NHTSA projected would occur under the
baseline standards. Accounting for emissions from both vehicles and
upstream energy sector processes, NHTSA estimated that the proposal
would reduce greenhouse gas emissions by about 465 million metric tons
of carbon dioxide, about 500 thousand metric tons of methane, and about
12 thousand metric tons of nitrous oxide. NHTSA also estimated that
emissions of criteria pollutants would generally decline dramatically
over time.
    In terms of economic effects, NHTSA estimated that for an average
MY 2029 vehicle subject to the proposed standards, consumers could see
a price increase of $960, but would gain lifetime fuel savings of
$1,280. With the SC-GHG discounted at 2.5 percent and other benefits
and costs discounted at 3 percent, NHTSA estimated that costs and
benefits could be approximately $120 billion and $121 billion,
respectively, such that the present value of aggregate net benefits to
society could be somewhat less than $1 billion. With the SC-GHG
discounted at 3 percent and other benefits and costs discounted at 7
percent, NHTSA estimated approximately $90 billion in costs and $76
billion in benefits, such that the present value of aggregate net costs
to society could be approximately $15 billion.
    NHTSA explained that it tentatively concluded that Alternative 2
was maximum feasible for MYs 2024-2026 based on new information and a
reconsideration of how to interpret and balance the statutory factors,
as compared to the decision made in the 2020 final rule. The 2020 rule
had prioritized industry concerns and sought to reduce new vehicle
costs to consumers, based on assumptions about low consumer demand for
higher fuel economy vehicles and a discounting of the need of the U.S.
to conserve energy. In the NPRM, NHTSA recognized the importance of the
need of the U.S. to conserve energy, and tentatively concluded that
ongoing manufacturer announcements and rollouts of new higher-fuel-
economy vehicles indicated industry expectation of growing consumer
demand for those vehicles, such that more stringent standards could be
economically practicable. NHTSA underscored that ``an [a]gency is
entitled to change its interpretation of

a statute,'' \24\ even though ``[w]hen an [a]gency adopts a materially
changed interpretation of a statute, it must in addition provide a
`reasoned analysis' supporting its decision to revise its
interpretation.'' \25\
---------------------------------------------------------------------------

    \24\ Phoenix Hydro Corp. v. FERC, 775 F.2d 1187, 1191 (D.C. Cir.
1985).
    \25\ Alabama Educ. Ass'n. v. Chao, 455 F.3d 386, 392 (D.C. Cir.
2006) (quoting Motor Vehicle Mfrs. Ass'n. of U.S., Inc. v. State
Farm Mut. Auto. Ins. Co., 463 U.S. 29, 57 (1983)); see also Encino
Motorcars, LLC v. Navarro, 136 S. Ct. 2117, 2125 (2016) (``Agencies
are free to change their existing policies as long as they provide a
reasoned explanation for the change.'') (citations omitted).
---------------------------------------------------------------------------

    NHTSA also addressed the question of harmonization with other motor
vehicle standards of the Government that affect fuel economy. Even
though NHTSA and EPA issued separate rather than joint notices, NHTSA
explained that it had worked closely with EPA in developing the
respective proposals, and that the agencies had sought to minimize
inconsistency between the programs where doing so was consistent with
the agencies' respective statutory mandates. NHTSA emphasized that
differences between the proposals, especially as regards programmatic
flexibilities, were not new in the proposal, and that differences were
often a result of the different statutory frameworks. NHTSA reminded
readers that since the agencies had begun regulating concurrently under
President Obama, these differences have meant that manufacturers have
had (and will have) to plan their compliance strategies considering
both the CAFE standards and the GHG standards and assure that they are
in compliance with both. NHTSA explained that it was proposing CAFE
standards that would increase at 8 percent per year over MYs 2024-2026
because that was what NHTSA had tentatively concluded was maximum
feasible during those model years, under the EPCA factors.
    NHTSA was also confident that industry would still be able to build
a single fleet of vehicles to meet both the NHTSA and EPA standards,
even if it required them to be slightly more strategic than they might
otherwise have preferred. NHTSA sought comment broadly on all aspects
of the proposal.

B. Public Participation Opportunities and Summary of Comments

    The NPRM was published on NHTSA's website on August 10, 2021, and
published in the Federal Register on September 3, 2021,\26\ beginning a
60-day comment period. The agency left the docket open for considering
late comments to the extent practicable. A separate Federal Register
notification, also published on September 14, 2021 (86 FR 51092),
announced a virtual public hearing taking place on October 13th and
14th of 2021. Approximately 77 individuals and organizations signed up
to participate in the hearing. The hearing started at 9:30 a.m. EDT on
October 13th and ended at approximately 5:30 p.m., completing the
entire list of participants within a single day, resulting in a 58-page
transcript.\27\ The hearing also collected many pages of comments from
participants, in addition to the hearing transcript, all of which were
submitted to the docket for the rule.
---------------------------------------------------------------------------

    \26\ 86 FR 49602 (Sept. 3, 2021).
    \27\ The transcript is available in the docket for this rule.
---------------------------------------------------------------------------

    Besides the comments submitted as part of the public hearings,
NHTSA's docket received a total of 67,256 form letters, 1,636
individual comments from stakeholder organizations, and 693 attachments
in response to the proposal, for an overall total of 69,585
submissions. NHTSA also received several hundred comments on its Draft
SEIS to the separate Draft SEIS docket (NHTSA-2021-0054). While the
majority of individual comments were form letters, the agency received
over 6,000 pages of substantive comments on the proposal.
    Many commenters generally supported the proposal. Commenters
supporting the proposal tended to cite concerns about climate change,
which are relevant to the need of the United States to conserve energy,
and the need for Federal programs to continue or expand for a carbon-
neutral, carbon-free future. Commenters also expressed the need for
NHTSA and EPA harmonization and close coordination for their respective
programs. Citizens and environmental groups demonstrated strong support
for pushing the proposed standard to Alternative 3 or beyond, while
closing potential loopholes in the program. There were mixed views on
NHTSA's inclusion of battery electric vehicles in NHTSA's modeling
analysis. Many manufacturers supported alignment with EPA's proposed
standards, while electric vehicle manufacturers such as Tesla and
Rivian supported NHTSA's Alternative 3.
    In other areas, commenters expressed mixed views on the statutorily
mandated Petroleum Equivalency Factor (PEF) used to calculate mpg
values for electrified vehicles and the disclosure of credit trading
information in NHTSA's revised reporting templates.
    Discussion and responses to comments can be found throughout this
preamble in areas applicable to the comment received.
    Nearly every aspect of the NPRM's analysis and discussion received
some level of comment by at least one commenter. The comments received,
as a whole, were both broad and deep, and the agency appreciates the
level of engagement of commenters in the public comment process and the
information and opinions provided.

C. Changes in Light of Public Comments and New Information

    Comments received to the NPRM were considered carefully, because
they are critical for understanding stakeholders' positions, as well as
for gathering additional information that can help to inform the agency
about aspects or effects of the proposal that the agency may not have
considered at the time of the proposal. The views, data, requests, and
suggestions contained in the comments help us to form solutions and
make appropriate adjustments to our proposals so that we may be better
assured that the final standards we set are, indeed, maximum feasible
for the rulemaking time frame.
    For this final rule, the agency made substantive changes resulting
directly from the suggestions and recommendations from commenters, as
well as new information obtained from the time the proposal was
developed, and corrections both highlighted by commenters and
discovered internally. These changes reflect DOT's long-standing
commitment to ongoing refinement of its approach to estimating the
potential impacts of new CAFE standards. Through further consideration
and deliberation, and also in response to many public comments received
since then, NHTSA has made a number of changes to the CAFE Model since
the 2020 final rule, including those that are listed in the Executive
Summary and detailed in Section III, as well as in the TSD and FRIA
that accompany this final rule.

D. Final Standards--Stringency

    NHTSA is setting CAFE standards for passenger cars and light trucks
manufactured for sale in the United States in MYs 2024-2026. Passenger
cars are generally sedans, station wagons, and two-wheel drive
crossovers and sport utility vehicles (CUVs and SUVs), while light
trucks are generally 4WD sport utility vehicles, pickups, minivans, and
passenger/cargo vans.\28\ The final standards, represented by
Alternative 2.5 in NHTSA's analysis, increase at a rate of 8 percent
per year for both cars and trucks for MYs 2024-

2025, and at a rate of 10 percent for MY 2026 cars and trucks. The
final standards, like the proposed standards, are defined by a
mathematical equation that represents a constrained linear function
relating vehicle footprint to fuel economy targets for both cars and
trucks.\29\
---------------------------------------------------------------------------

    \28\ ``Passenger car'' and ``light truck'' are defined at 49 CFR
part 523.
    \29\ Vehicle footprint is roughly measured as the rectangle that
is made by the four points where the vehicle's tires touch the
ground. Generally, passenger cars have more stringent targets than
light trucks regardless of footprint, and smaller vehicles will have
more stringent targets than larger vehicles. No individual vehicle
or vehicle model need meet its target exactly, but a manufacturer's
compliance is determined by how its average fleet fuel economy
compares to the average fuel economy of the targets of the vehicles
it manufactures.
---------------------------------------------------------------------------

    The target curves for passenger cars and light trucks are as
follows; curves for MYs 2020-2023 are included in the figures for
context. NHTSA underscores that the equations and coefficients defining
the curves are, in fact, the CAFE standards, and not the mpg numbers
that the agency currently estimates could result from manufacturers
complying with the curves. Because the estimated mpg numbers are an
effect of the final standards, they are presented in Section II.E.
BILLING CODE 4910-59-P
[GRAPHIC] [TIFF OMITTED] TR02MY22.028

[GRAPHIC] [TIFF OMITTED] TR02MY22.029

    NHTSA has also amended the minimum domestic passenger car CAFE
standards for MYs 2024-2026. Section 32902(b)(4) of 49 U.S.C. requires
NHTSA to project the minimum standard when it promulgates passenger car
standards for a model year, so the minimum standards are established as
specific mpg values at this time. NHTSA retained the 1.9-percent offset
used in the 2020 final rule, such that the minimum domestic passenger
car standard is as shown in Table II-3.
[GRAPHIC] [TIFF OMITTED] TR02MY22.030

    The next section describes some of the effects that NHTSA estimates
would follow from the final standards for passenger cars and light
trucks for MYs 2024-2026, including how the curves shown above
translate to estimated average mile per gallon requirements for the
industry.

Final Standards--Impacts

    As for past CAFE rulemakings, NHTSA has used the CAFE Model to
estimate the effects of this final rule's CAFE standards, and of other
regulatory alternatives under consideration. Some inputs to the CAFE
Model are derived from other models, such as Argonne National
Laboratory's ``Autonomie'' vehicle simulation tool and Argonne's
``GREET'' fuel-cycle emissions analysis model, the U.S. Energy
Information Administration's (EIA's) National Energy Modeling System
(NEMS), and EPA's ``MOVES'' vehicle emissions model. Especially given
the scope of the NHTSA's analysis (through MY 2050, with driving of MY
2029 vehicles accounted for through CY 2068), these inputs involve a
multitude of uncertainties. For example, a set of inputs with
significant uncertainty could include future population and economic
growth, future gasoline and electricity prices, future petroleum market
characteristics (e.g., imports and exports), future battery costs,
manufacturers' future responses to standards and fuel prices, buyers'
future responses to changes in vehicle prices and fuel economy levels,
and future emission rates for ``upstream'' processes (e.g., refining,
finished fuel transportation, electricity generation). Considering that
all of this is, to some extent, uncertain from a current vantage point,
NHTSA underscores that all results of this analysis are, in turn,
uncertain, and simply represent the agency's best estimates based on
the information currently before us and on the agency's reasonable
judgment.
    NHTSA estimates that this final rule would increase the eventual
\30\ average of manufacturers' CAFE requirements to about 49 mpg by
2026 rather than, under the No-Action Alternative (i.e., the baseline
standards issued in 2020), about 40 mpg. For passenger cars, the
average in 2026 is estimated to reach just over 59 mpg, and for light
trucks, just over 42 mpg. This compares with 47 mpg and 34 mpg for cars
and trucks, respectively, under the No-Action Alternative.
---------------------------------------------------------------------------

    \30\ Here, ``eventual'' means by MY 2029, after most of the
fleet will have been redesigned under the MY 2026 standards. NHTSA
allows the CAFE Model to continue working out compliance solutions
for the regulated model years for three model years after the last
regulated model year, in recognition of the fact that manufacturers
do not comply perfectly with CAFE standards in each model year.
[GRAPHIC] [TIFF OMITTED] TR02MY22.031

    Because manufacturers do not comply exactly with each standard in
each model year, but rather focus their compliance efforts when and
where it is most cost-effective to do so, ``estimated achieved'' fuel
economy levels differ somewhat from ``estimated required'' levels for
each fleet, for each year. NHTSA estimates that the industry-wide
average fuel economy achieved in MY 2029 could increase from about 44
mpg under the No-Action Alternative to 50 mpg under the final rule's
standards.
[GRAPHIC] [TIFF OMITTED] TR02MY22.032

    As discussed above, NHTSA's analysis--unlike its CAFE analyses for
previous rulemakings--estimates manufacturers' potential responses to
the combined effect of CAFE standards and separate CO2
standards (including agreements some manufacturers have reached with
California), ZEV mandates, and fuel prices. Together, the
aforementioned regulatory programs are more binding (i.e., require more
of manufacturers) than any single program considered in isolation, and
this analysis, like past analyses, shows some estimated overcompliance
with the final CAFE standards, albeit by much less than what was shown
in the NPRM that preceded the 2020 final rule, and any overcompliance
is highly manufacturer-dependent.
    The estimated average CO2 levels equivalent to the above
required and achieved CAFE levels (using 8,887 grams of CO2
per gallon of gasoline vehicle certification fuel) are provided in
Table II-6 and Table II-7.

[GRAPHIC] [TIFF OMITTED] TR02MY22.033

[GRAPHIC] [TIFF OMITTED] TR02MY22.034

    Average requirements and achieved CAFE levels would ultimately
depend on manufacturers' and consumers' responses to standards,
technology developments, economic conditions, fuel prices, and other
factors.
    NHTSA estimates that over the lives of vehicles produced prior to
MY 2030, the final standards would save about 60 billion gallons of
gasoline and increase electricity consumption (as the percentage of
electric vehicles increases over time) by about 180 terawatts (TWh),
compared to levels of gasoline and electricity consumption NHTSA
projects would occur under the baseline standards (i.e., the No-Action
Alternative) as shown in Table II-8.\31\
---------------------------------------------------------------------------

    \31\ While NHTSA does not consider electrification in its
analysis during the rulemaking time frame, the analysis still
reflects application of electric vehicles in the baseline fleet and
during the model years after the rulemaking time frame, such that
electrification (and thus, electricity consumption) increases in
NHTSA's analysis even though NHTSA is not considering it in our
decision-making.
[GRAPHIC] [TIFF OMITTED] TR02MY22.035

    NHTSA's analysis also estimates total annual consumption of fuel by
the entire on-road fleet from CY 2020 through CY 2050. On this basis,
gasoline and electricity consumption by the U.S. light-duty vehicle
fleet evolves as shown in Figure II-3 and Figure II-4, each of which
shows projections for the No-Action Alternative (Alternative 0, i.e.,
the baseline), Alternative 1, Alternative 2, Alternative 2.5 (the
Preferred Alternative), and Alternative 3.

[GRAPHIC] [TIFF OMITTED] TR02MY22.036

[GRAPHIC] [TIFF OMITTED] TR02MY22.037

    Accounting for emissions from both vehicles and upstream energy
sector processes (e.g., petroleum refining and electricity generation),
which are relevant to NHTSA's evaluation of the need of the United
States to conserve energy, NHTSA estimates that the final rule would
reduce greenhouse gas emissions by about 607 million metric tons of
carbon dioxide (CO2), about 733 thousand metric tons of
methane (CH4), and about 17 thousand tons of nitrous oxide
(N2O).
BILLING CODE 4910-59-P
[GRAPHIC] [TIFF OMITTED] TR02MY22.038

    As for fuel consumption, NHTSA's analysis also estimates annual
emissions attributable to the entire on-road fleet from CY 2020 through
CY 2050. Also accounting for both vehicles and upstream processes,
NHTSA estimates that CO2 emissions could evolve over time as
shown in Figure II-5, which accounts for both emissions from both
vehicles and upstream processes.

[GRAPHIC] [TIFF OMITTED] TR02MY22.039

BILLING CODE 4910-59-C
    Estimated emissions of methane and nitrous oxides follow similar
trends. As discussed in the TSD, FRIA, and this preamble, NHTSA has
performed two types of supporting analysis. This document and FRIA
focus on the ``standard setting'' analysis, which sets aside the
potential that manufacturers could respond to standards by using
compliance credits or introducing new alternative fuel vehicle
(including BEVs) models during the ``decision years'' (for this
document, 2024, 2025, and 2026). The accompanying Final SEIS focuses on
an ``unconstrained'' analysis, which does not set aside these potential
manufacturer actions. The Final SEIS presents much more information
regarding projected GHG emissions, as well as model-based estimates of
corresponding impacts on several measures of global climate change.
    Also accounting for vehicular and upstream emissions, NHTSA has
estimated annual emissions of most criteria pollutants (i.e.,
pollutants for which EPA has issued National Ambient Air Quality
Standards). NHTSA estimates that under each regulatory alternative,
annual emissions of carbon monoxide (CO), volatile organic compounds
(VOC), nitrogen oxide (NOX), and particulate matter with a
diameter equal to or less than 2.5 microns (PM2.5)
attributable to the light-duty on-road fleet will decline dramatically
between 2020 and 2050, and that emissions in any given year could be
very nearly the same under each regulatory alternative. For example,
Figure II-6 shows NHTSA's estimate of future NOX emissions
under each alternative.
BILLING CODE 4910-59-P

[GRAPHIC] [TIFF OMITTED] TR02MY22.040

BILLING CODE 4910-59-C
    On the other hand, as discussed in the FRIA and Final SEIS, NHTSA
projects that annual SO2 emissions attributable to the
light-duty on-road fleet could increase modestly under the action
alternatives, because, as discussed above, NHTSA projects that each of
the action alternatives could lead to greater use of electricity (for
PHEVs and BEVs). The adoption of actions--such as actions prompted by
President Biden's Executive order directing agencies to develop a
Federal Clean Electricity and Vehicle Procurement Strategy--to reduce
electricity generation emission rates beyond projections underlying
NHTSA's analysis (discussed in Chapter 5 of the TSD) could dramatically
reduce SO2 emissions under all regulatory alternatives
considered here.\32\
---------------------------------------------------------------------------

    \32\ https://www.whitehouse.gov/briefing-room/presidential-actions/2021/01/27/executive-order-on-tackling-the-climate-crisis-at-home-and-abroad/ (accessed February 11, 2022).
---------------------------------------------------------------------------

    For the ``standard setting'' analysis, the FRIA accompanying this
document provides additional detail regarding projected criteria
pollutant emissions and health effects, as well as the inclusion of
these impacts in this benefit-cost analysis. For the ``unconstrained''
or ``EIS'' type of analysis, the Final SEIS accompanying this document
presents much more information regarding projected criteria pollutant
emissions, as well as model-based estimates of corresponding impacts on
several measures of urban air quality and public health. As mentioned
above, these estimates of criteria pollutant emissions are based on a
complex analysis involving interacting simulation techniques and a
myriad of input estimates and assumptions. Especially extending well
past 2040, the analysis involves a multitude of uncertainties.
Therefore, actual criteria pollutant emissions could ultimately be
different from NHTSA's current estimates.
    To illustrate the effectiveness of the technology added in response
to this final rule, Table II-10 presents NHTSA's estimates for
increased vehicle cost and lifetime fuel expenditures if we assumed the
behavioral response to the lower cost of driving were zero.\33\ These
numbers are presented in lieu of NHTSA's primary estimate of lifetime
fuel savings, which would give an incomplete picture of technological
effectiveness because the analysis accounts for consumers' behavioral
response to the lower cost-per-mile of driving a more fuel-efficient
vehicle.
---------------------------------------------------------------------------

    \33\ While this comparison illustrates the effectiveness of the
technology added in response to this final rule, it does not
represent a full consumer welfare analysis, which would account for
drivers' likely response to the lower cost-per-mile of driving, as
well as a variety of other benefits and costs they will experience.
The agency's complete analysis of the final rule's likely impacts on
passenger car and light truck buyers appears in the FRIA, Appendix
I, Table A-23-1.

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

[GRAPHIC] [TIFF OMITTED] TR02MY22.041

    With the SC-GHG discounted at 3 percent and other benefits and
costs discounted at 3 percent, NHTSA estimates that monetized costs and
benefits could be approximately $128 billion and $145 billion,
respectively, such that the present value of aggregate monetized net
benefits to society could be approximately $16 billion. With the SC-GHG
discounted at 3 percent and other benefits and costs discounted at 7
percent, NHTSA estimates approximately $96 billion in monetized costs
and $100 billion in monetized benefits could be attributable to
vehicles produced prior to MY 2030 over the course of their lives, such
that the present value of aggregate net monetized benefits to society
could be approximately $4 billion.
[GRAPHIC] [TIFF OMITTED] TR02MY22.042

    The following two tables provides a range of benefits and net
benefits representing varying discount rates for the social cost of
carbon with all other benefits discounted at 3 percent and 7 percent,
respectively.
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[GRAPHIC] [TIFF OMITTED] TR02MY22.044

BILLING CODE 4910-59-C
    Model results can be viewed many different ways, and NHTSA's
rulemaking considers both ``model year'' and ``calendar year''
perspectives. The ``model year'' perspective, above, considers vehicles
projected to be produced in some range of model years, and accounts for
impacts, benefits, and costs attributable to these vehicles from the
present (from the model year's perspective, 2020) until they are
projected to be scrapped. The bulk of NHTSA's analysis considers
vehicles produced prior to MY 2030, accounting for the estimated
indirect impacts new standards could have on the remaining operation of
vehicles already in service. This perspective emphasizes impacts on
those model years nearest to those (2024-2026) for which NHTSA is
finalizing new standards. NHTSA's analysis also presents some results
focused only on MYs 2024-2026, setting aside the estimated indirect
impacts on earlier model years, and the impacts estimated to occur
during MYs 2027-2029, as some manufacturers and products ``catch up''
to the standards.
    Another way to present the benefits and costs of the final rule is
the ``calendar year'' perspective shown in Table II-14, which is
similar to how EPA presents benefits and costs in its final analysis
for GHG standards. The calendar year perspective considers all vehicles
projected to be in service in each of some range of future calendar
years. NHTSA's presentation of results from this perspective considers
CYs 2021-2050, because the model's representation of the full on-road
fleet extends through 2050. Unlike the model year perspective, this
perspective includes vehicles projected to be produced during MYs 2021-
2050. This perspective emphasizes longer-term impacts that could accrue
if standards were to continue without change. Under the calendar year
perspective, net benefits for the standards are estimated to be nearly
$112 billion by 2050 at a 3 percent discount rate, and over $73 billion
by 2050 at a 7 percent discount rate.
[GRAPHIC] [TIFF OMITTED] TR02MY22.045

    Finally, Table II-15 shows costs and benefits over the narrow
perspective of the lives of MY 2023-2026 vehicles while Table II-11
shows a wider perspective of the costs and benefits over the remaining
lives of all vehicles produced through MY 2029.
[GRAPHIC] [TIFF OMITTED] TR02MY22.046

    Though based on the exact same model results, these two
perspectives provide considerably different views of estimated costs
and benefits. Because technology costs account for a large share of
overall estimated costs, and are also projected to decline over time
(as manufacturers gain more experience with new technologies), costs
tend to be ``front loaded''--occurring early in a vehicle's life and
tending to be higher in earlier model years than in later model years.
Conversely, because social benefits of standards occur as vehicles are
driven, and because both fuel prices and the social cost of
CO2 emissions are projected to increase in the future,
benefits tend to be ``back loaded.'' As a result, estimates of future
fuel savings, CO2 reductions, and net social benefits are
higher under the calendar year perspective than under the model year
perspective. On the other hand, with longer-term impacts playing a
greater role, the calendar year perspective is more subject to
uncertainties regarding, for example, future technology costs and fuel
prices.
    Even though NHTSA and EPA estimate benefits, costs, and net
benefits using similar methodologies and achieve similar results,
different approaches to accounting may give the false appearance of
significant divergences. Table II-13 above presents NHTSA's results
using comparable accounting to EPA's preamble Table 4. EPA also
presents cost and benefit information in its RIA over CYs 2021 through
2050.\34\ The numbers most comparable to those presented in EPA's RIA
are those NHTSA developed to complete its Final SEIS using an identical
accounting approach. This is because the statutory limitations
constraining NHTSA's standard setting analysis, such as those in 49
U.S.C. 32902(h), do not similarly apply to its ``unconstrained''
analysis, some effects of which are used in NHTSA's Final SEIS.\35\
NHTSA's ``unconstrained'' analysis estimates $312 billion in monetized
costs, $443 billion in monetized benefits, and $132 billion in
monetized net benefits using a 3-percent discount rate over CYs 2021
through 2050, with the social cost of carbon discounted at 3
percent.\36\ NHTSA describes its cost and benefit accounting approach
in Section V of this preamble.
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    \34\ EPA's RIA is available at https://www.epa.gov/regulations-emissions-vehicles-and-engines/final-rule-revise-existing-national-ghg-emissions (accessed: March 24, 2022).
    \35\ As the Final SEIS analysis contains information that NHTSA
is statutorily prevented from considering, the agency is limited on
the extent this analysis is used in regulatory decision-making.
Additionally, the Final SEIS includes no cost and benefit analysis,
and does not rely in any way on the social cost of greenhouse gas
emissions.
    \36\ See FRIA Chapter 6.5 for more information regarding NHTSA's
estimates of annual benefits and costs using NHTSA's standard
setting analysis. See Tables B-7-25 through B-7-30 in Appendix II of
the FRIA for a more detailed breakdown of NHTSA's Final SEIS
analysis.
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Final Standards Are the Maximum Feasible

    NHTSA's conclusion, after consideration of the factors described
below and information in the administrative record for this action, is
that 8-percent increases in stringency for MYs 2024-2025 and a 10-
percent increase for MY 2026 for both passenger cars and light trucks
(Alternative 2.5 of this analysis) are maximum feasible. The Department
of Transportation is deeply committed to working aggressively to
improve energy conservation and reduce environmental harms and economic
and security risks associated with energy use. NHTSA agrees with many
public comments suggesting that the need of the United States to
conserve energy and protect the environment compels more stringent
standards than those set in 2020 if they appear to be consistent with
the other factors that NHTSA must consider. NHTSA has concluded that
Alternative 2.5 is technologically feasible, is economically
practicable (based on manageable average per-vehicle cost increases,
minimal effects on sales, and estimated increases in employment, among
other considerations), and is complementary to other motor vehicle
standards of the Government on fuel economy that are simultaneously
applicable during MYs 2024-2026, as described in more detail below.
Despite only 2 years having passed since the 2020 final rule, enough
has changed in the United States and the world, including as reflected
in the technical analysis, that revisiting the CAFE standards for MYs
2024-2026, and raising their stringency considerably, is both
appropriate and reasonable.
    The 2020 final rule set CAFE standards that increased at 1.5
percent per year for cars and trucks for MYs 2021-2026, in large part
because it prioritized industry concerns and reducing upfront costs to
consumers and manufacturers--even at the expense of longer-term net
savings to consumers. This final rule reflects greater emphasis on the
statutory priority of energy conservation, while also taking into
account other statutory requirements. Moreover, NHTSA is also legally
required to consider the environmental implications of this action
under NEPA, and while the 2020 final rule did undertake a NEPA
analysis, it did not prioritize the environmental

considerations encompassed within the statutory mandate to set
``maximum feasible'' fuel economy standards to conserve energy. This
rule also reflects NHTSA's updated technical analysis.
    NHTSA recognizes that the amount of lead time available before MY
2024 is less than what was provided in the 2012 rule. The amount of
lead time is nevertheless consistent with the agency's statutory
requirements. As will be discussed further in Section VI, NHTSA
believes that the evidence suggests that the final standards are
economically practicable as explained above and as discussed in Section
VI.
    We note further that while this final rule is different from the
2020 final rule (and also from the 2012 final rule), NHTSA, like any
other Federal agency, is afforded an opportunity to reconsider prior
views and, when warranted, to adopt new positions. Indeed, as a matter
of good governance, agencies should revisit their positions when
appropriate, especially to ensure that their actions and regulations
reflect legally sound interpretations of the agency's statutory
authority and remain consistent with the agency's policy views and
practices. As a matter of law, ``an [a]gency is entitled to change its
interpretation of a statute.'' \37\ Nonetheless, ``[w]hen an [a]gency
adopts a materially changed interpretation of a statute, it must in
addition provide a `reasoned analysis' supporting its decision to
revise its interpretation.'' \38\ This preamble and the accompanying
TSD and FRIA all provide extensive detail on the agency's updated
analysis, and Section VI contains the agency's explanation of how the
agency has considered that analysis and other relevant information in
determining that the standards represented by Alternative 2.5 are
maximum feasible for MY 2024-2026 passenger cars and light trucks.
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    \37\ Phoenix Hydro Corp. v. FERC, 775 F.2d 1187, 1191 (D.C. Cir.
1985).
    \38\ Alabama Educ. Ass'n v. Chao, 455 F.3d 386, 392 (D.C. Cir.
2006) (quoting Motor Vehicle Mfrs. Ass'n of U.S., Inc. v. State Farm
Mut. Auto. Ins. Co., 463 U.S. 29, 57 (1983)); see also Encino
Motorcars, LLC v. Navarro, 136 S. Ct. 2117, 2125 (2016) (``Agencies
are free to change their existing policies as long as they provide a
reasoned explanation for the change.'') (citations omitted).
---------------------------------------------------------------------------

Final Standards Are Feasible in the Context of EPA's Final Standards
and California's Programs

    The NHTSA and EPA final rules remain coordinated despite being
issued as separate regulatory actions. Because NHTSA and EPA are
regulating the exact same vehicles and manufacturers will use many of
the same technologies to meet both sets of standards, NHTSA coordinated
with EPA during the development of each agency's independent rulemaking
to revise their respective standards set forth in the 2020 final rule.
The NHTSA CAFE and EPA CO2 standards for MY 2026 represent
roughly equivalent levels of stringency. While the rates of increase
for the final CAFE and CO2 standards for MYs 2024-2026 are
different, the specific differences in what the two agencies' standards
require become smaller each year, until near alignment is achieved in
2026. NHTSA nevertheless coordinated closely with EPA to minimize
inconsistency between the programs while still ensuring that NHTSA's
standards were maximum feasible for MYs 2024-2026.
    While NHTSA's and EPA's programs differ in certain other respects,
like programmatic flexibilities, those differences are not new in this
final rule. Some parts of the programs are harmonized, and others
differ, often as a result of the respective statutory frameworks. Since
NHTSA and EPA began coordinating their regulations under President
Obama, differences in programmatic flexibilities have meant that
manufacturers have had (and will have) to plan their compliance
strategies considering both the CAFE standards and the GHG standards
and assure that they are in compliance with both. NHTSA is finalizing
CAFE standards that increase at 8 percent per year over MYs 2024-2025
and at 10 percent per year for MY 2026 because that is what NHTSA has
concluded is maximum feasible in those model years, under the EPCA
factors. Auto manufacturers are extremely sophisticated companies, well
able to manage compliance strategies that account for multiple
regulatory programs concurrently. Past experience with these programs
indicates that each manufacturer will optimize its compliance strategy
around whichever standard is most binding for its fleet of vehicles. If
different agencies' standards are more binding for some companies in
certain years, this does not mean that manufacturers must build
multiple fleets of vehicles, simply that they will have to be more
strategic about how they build their fleet. NHTSA discusses this issue
in greater detail in Section VI.A of this preamble. Critically, NHTSA
has concluded that it is feasible for manufacturers to meet both the
EPA and the NHTSA standards.\39\
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    \39\ This is consistent with NHTSA's and EPA joint finding in
the 2012 final rule, as discussed further in Section VI below.
---------------------------------------------------------------------------

    NHTSA has also considered and accounted for California's ZEV
mandate (and its adoption by a number of other states) in developing
the baseline for this final rule, as additional legal obligations that
automakers will be meeting during this time frame, and has also
accounted for the Framework Agreements between California and BMW,
Ford, Honda, VWA, and Volvo, as those companies have committed to
meeting those Agreements. NHTSA believes that it is appropriate to
include ZEV in the baseline for this final rule because EPA has granted
a waiver of Clean Air Act preemption to California for its Clean Cars
Program,\40\ and it is appropriate for the baseline to reflect other
legal obligations that automakers will be meeting during this time
period. The baseline should reflect the state of the world without the
CAFE standards so that the regulatory analysis can identify the
distinct effects of the CAFE standards. In addition, according to
information provided by California,\41\ there has been extensive
industry overcompliance with the ZEV standards, which suggests that
regardless of the waiver, many companies intend to produce ZEVs in
volumes comparable to what the current ZEV mandate would require. Thus,
including state ZEV mandates in the regulatory baseline for this final
rule is consistent with guidance in OMB Circular A-4 directing agencies
to develop analytical baselines that are as accurate as possible
regarding the state of the world in the absence of the regulatory
action being evaluated. However, because modeling a subnational fleet
is not currently an analytical option for NHTSA, NHTSA has not
expressly accounted for California GHG standards in the analysis for
this final rule. Chapter 6 of the accompanying FRIA shows the estimated
effects of all of these programs simultaneously.
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    \40\ 87 FR 14332 (Mar. 14, 2022).
    \41\ See, e.g., https://ww2.arb.ca.gov/sites/default/files/2020-01/appendix_a_minimum_zev_regulation_compliance_scenarios_formatted_ac.pdf (accessed: March 24, 2022) (stating that ``Since the 2012
adoption of the ACC requirements, vehicle technology has advanced
faster and developed more broadly than originally anticipated, and
the assumptions used in the original rulemaking scenario no longer
reflect vehicles expected in the 2018 through 2025 timeframe.'').
---------------------------------------------------------------------------

III. Technical Foundation for Final Rule Analysis

    Why does NHTSA conduct this analysis?
    NHTSA is establishing revised CAFE standards for passenger cars and
light trucks produced for MYs 2024-2026. NHTSA establishes CAFE
standards under the Energy Policy and Conservation Act, as amended, and
this final rule is undertaken pursuant to that authority. This final
rule would require

CAFE stringency for both passenger cars and light trucks to increase at
a rate of 8 percent, 8 percent, and 10 percent per year annually during
MY 2024, MY 2025, and MY 2026, respectively. NHTSA estimates that over
the useful lives of vehicles produced prior to MY 2030, these standards
would save about 60 billion gallons of gasoline and increase
electricity consumption by about 180 TWh. Accounting for emissions from
both vehicles and upstream energy sector processes (e.g., petroleum
refining and electricity generation), NHTSA estimates that these
standards would reduce greenhouse gas emissions by about 605 million
metric tons of carbon dioxide (CO2), about 730 thousand
metric tons of methane (CH4), and about 17 thousand tons of
N2O.
    When NHTSA promulgates new regulations, it generally presents an
analysis that estimates the impacts of such regulations, and the
impacts of other regulatory alternatives. These analyses derive from
statutes such as the Administrative Procedure Act (APA), National
Environmental Policy Act (NEPA), Executive orders (such as E.O. 12866
and E.O. 13653), and from other administrative guidance (e.g., Office
of Management Budget Circular A-4). For CAFE, the Energy Policy and
Conservation Act (EPCA), as amended by the Energy Independence and
Security Act (EISA), contains a variety of provisions that require
NHTSA to consider certain compliance elements in certain ways and avoid
considering other things, in determining maximum feasible CAFE
standards. Collectively, capturing all of these requirements and
guidance elements analytically means that, at least for CAFE, NHTSA
presents an analysis that spans a meaningful range of regulatory
alternatives, that quantifies a range of technological, economic, and
environmental impacts, and that does so in a manner that accounts for
EPCA's express requirements for the CAFE program (e.g., passenger cars
and light trucks are regulated separately, and the standard for each
fleet must be set at the maximum feasible level in each model year).
    NHTSA's decision regarding the final standards is thus supported by
extensive analysis of potential impacts of the regulatory alternatives
under consideration. Along with this preamble, a TSD, a FRIA, and a
Final SEIS, together provide an extensive and detailed enumeration of
related methods, estimates, assumptions, and results. These additional
analyses can be found in the rulemaking docket for this final rule \42\
and on NHTSA's website.\43\ NHTSA's analysis has been constructed
specifically to reflect various aspects of governing law applicable to
CAFE standards and has been expanded and improved in response to
comments received to the prior rulemaking and to the proposal, as well
as additional work conducted over the last year or two. Further
improvements may be made in the future based on comments received to
the proposal, which were either out of scope for this rulemaking or for
which the improvements were too extensive or complex to implement in
the available time, on the 2021 NAS Report,\44\ and on other additional
work generally previewed in these rulemaking documents. The analysis
for this final rule aided NHTSA in implementing its statutory
obligations, including the weighing of various considerations, by
reasonably informing decision-makers about the estimated effects of
choosing different regulatory alternatives.
    NHTSA's analysis makes use of a range of data (i.e., observations
of things that have occurred), estimates (i.e., things that may occur
in the future), and models (i.e., methods for making estimates). Two
examples of data include (1) records of actual odometer readings used
to estimate annual mileage accumulation at different vehicle ages and
(2) CAFE compliance data used as the foundation for the ``analysis
fleet'' containing, among other things, production volumes and fuel
economy levels of specific configurations of specific vehicle models
produced for sale in the U.S. Two examples of estimates include (1)
forecasts of future GDP growth used, with other estimates, to forecast
future vehicle sales volumes and (2) the ``retail price equivalent''
(RPE) factor used to estimate the ultimate cost to consumers of a given
fuel-saving technology, given accompanying estimates of the
technology's ``direct cost,'' as adjusted to account for estimated
``cost learning effects'' (i.e., the tendency that it will cost a
manufacturer less to apply a technology as the manufacturer gains more
experience doing so).
---------------------------------------------------------------------------

    \42\ Docket No. NHTSA-2021-0053, which can be accessed at
https://www.regulations.gov.
    \43\ See https://www.nhtsa.gov/laws-regulations/corporate-average-fuel-economy.
    \44\ National Academies of Sciences, Engineering, and Medicine,
2021. Assessment of Technologies for Improving Fuel Economy of
Light-Duty Vehicles--2025-2035, Washington, DC: The National
Academies Press (hereafter, ``2021 NAS Report''). Available at
https://www.nationalacademies.org/our-work/assessment-of-technologies-for-improving-fuel-economy-of-light-duty-vehicles-phase-3 (accessed: February 11, 2022) and for hard-copy review at
DOT headquarters.
---------------------------------------------------------------------------

    NHTSA uses the CAFE Compliance and Effects Modeling System (usually
shortened to the ``CAFE Model'') to estimate manufacturers' potential
responses to new CAFE and CO2 standards and to estimate
various impacts of those responses. DOT's Volpe National Transportation
Systems Center (often simply referred to as the ``Volpe Center'')
develops, maintains, and applies the model for NHTSA. NHTSA has used
the CAFE Model to perform analyses supporting every CAFE rulemaking
since 2001. The 2016 rulemaking regarding heavy-duty pickup and van
fuel consumption and CO2 emissions also used the CAFE Model
for analysis.
    The basic design of the CAFE Model is as follows: The system first
estimates how vehicle manufacturers might respond to a given regulatory
scenario, and from that potential compliance solution, the system
estimates what impact that response will have on fuel consumption,
emissions, and economic externalities. In a highly summarized form,
Figure III-1 shows the basic categories of CAFE Model procedures and
the sequential flow between different stages of the modeling. The
diagram does not present specific model inputs or outputs, as well as
many specific procedures and model interactions. The model
documentation accompanying this preamble presents these details, and
Chapter 1 of the TSD contains a more detailed version of this flow
diagram for readers who are interested.
BILLING CODE 4910-59-P

[GRAPHIC] [TIFF OMITTED] TR02MY22.047

BILLING CODE 4910-59-C
    More specifically, the model may be characterized as an integrated
system of models. For example, one model estimates manufacturers'
responses, another estimates resultant changes in total vehicle sales,
and still another estimates resultant changes in fleet turnover (i.e.,
scrappage). Additionally, and importantly, the model does not determine
the form or stringency of the standards. Instead, the model applies
inputs specifying the form and stringency of standards to be analyzed
and produces outputs showing the impacts of manufacturers working to
meet those standards, which become the basis for comparing between
different potential stringencies. A regulatory scenario, meanwhile,
involves specification of the form, or shape, of the standards (e.g.,
flat standards, or linear or logistic attribute-based standards), scope
of passenger car and truck regulatory classes, and stringency of the
CAFE standards for each model year to be analyzed. For example, a
regulatory scenario may define CAFE standards that increase in
stringency by a given percent per year for a given number of
consecutive years.
    Manufacturer compliance simulation and the ensuing effects
estimation, collectively referred to as compliance modeling, encompass
numerous subsidiary elements. Compliance simulation begins with a
detailed user-provided initial forecast of the vehicle models offered
for sale during the simulation period.\45\ The compliance simulation
then attempts to bring each manufacturer into compliance with the
standards defined by the regulatory

scenario contained within an input file developed by the user.\46\
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    \45\ Because the CAFE Model is publicly available, anyone can
develop their own initial forecast (or other inputs) for the model
to use. The DOT-developed Market Data file that contains the
forecast used for this final rule is available on NHTSA's website at
https://www.nhtsa.gov/corporate-average-fuel-economy/cafe-compliance-and-effects-modeling-systems. (Accessed: March 22, 2022).
    \46\ With appropriate inputs, the model can also be used to
estimate impacts of manufacturers' potential responses to new
CO2 standards and to California's ZEV program.
---------------------------------------------------------------------------

    Estimating impacts involves calculating resultant changes in new
vehicle costs, estimating a variety of costs (e.g., for fuel) and
effects (e.g., CO2 emissions from fuel combustion) occurring
as vehicles are driven over their lifetimes before eventually being
scrapped, and estimating the monetary value of these effects.
Estimating impacts also involves consideration of consumer responses--
e.g., the impact of vehicle fuel economy, operating costs, and vehicle
price on consumer demand for passenger cars and light trucks. Both
basic analytical elements involve the application of many analytical
inputs. Many of these inputs are developed outside of the model and not
by the model. For example, the model applies fuel prices; it does not
estimate fuel prices.
    NHTSA also uses EPA's MOVES model to estimate ``tailpipe'' (a.k.a.
``vehicle'' or ``downstream'') emission factors for criteria
pollutants,\47\ and uses four DOE and DOE-sponsored models to develop
inputs to the CAFE Model, including three developed and maintained by
DOE's Argonne National Laboratory. The agency uses the DOE Energy
Information Administration's (EIA's) National Energy Modeling System
(NEMS) to estimate fuel prices,\48\ and uses Argonne's Greenhouse
gases, Regulated Emissions, and Energy use in Transportation (GREET)
model to estimate emissions rates from fuel production and distribution
processes.\49\ DOT also sponsored DOE/Argonne to use Argonne's
Autonomie full-vehicle modeling and simulation system to estimate the
fuel economy impacts for over a million combinations of technologies
and vehicle types.50 51 The TSD and FRIA describe details of
the agency's use of these models. In addition, as discussed in the
Final SEIS accompanying this final rule, DOT relied on a range of
climate models to estimate impacts on climate, air quality, and public
health. The Final SEIS discusses and describes the use of these models.
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    \47\ See https://www.epa.gov/moves. This final rule uses version
MOVES3, available at https://www.epa.gov/moves/latest-version-motor-vehicle-emission-simulator-moves. (Accessed: February 16, 2022).
    \48\ See https://www.eia.gov/outlooks/archive/aeo21. (Accessed:
February 16, 2022) This final rule uses fuel prices estimated using
the Annual Energy Outlook (AEO) 2021 version of NEMS (see https://www.eia.gov/outlooks/aeo/pdf/02%20AEO2021%20Petroleum.pdf).
(Accessed: February 16, 2022).
    \49\ Information regarding GREET is available at https://greet.es.anl.gov/index.php. (Accessed: February 16, 2022) This final
rule uses the 2021 version of GREET.
    \50\ As part of the Argonne simulation effort, individual
technology combinations simulated in Autonomie were paired with
Argonne's BatPaC model to estimate the battery cost associated with
each technology combination based on characteristics of the
simulated vehicle and its level of electrification. Information
regarding Argonne's BatPaC model is available at https://www.anl.gov/cse/batpac-model-software. (Accessed: February 16,
2022).
    \51\ In addition, the impact of engine technologies on fuel
consumption, torque, and other metrics was characterized using GT-
POWER simulation modeling in combination with other engine modeling
that was conducted by IAV Automotive Engineering, Inc. (IAV). The
engine characterization ``maps'' resulting from this analysis were
used as inputs for the Autonomie full-vehicle simulation modeling.
Information regarding GT-POWER is available at https://www.gtisoft.com/gt-suite-applications/propulsion-systems/gt-power-engine-simulation-software. (Accessed: February 16, 2022).
---------------------------------------------------------------------------

    To prepare for analysis supporting this final rule, DOT has refined
and expanded the CAFE Model through ongoing development. Examples of
such changes, some informed by past external comments, made since early
2020 include:
     Inclusion of 400- and 500-mile BEVs;
     Inclusion of high compression ratio (HCR) engines with
cylinder deactivation;
     Accounting for manufacturers' responses to both CAFE and
CO2 standards jointly (rather than only separately);
     Accounting for the ZEV mandates applicable in California
and the ``Section 177'' states;
     Accounting for some vehicle manufacturers' (BMW, Ford,
Honda, VW, and Volvo) voluntary agreement with the state of California
to continued annual national-level reductions of vehicle greenhouse gas
emissions through MY 2026, with greater rates of electrification than
would have been required under the 2020 final rule; \52\
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    \52\ For more information on the Framework Agreements for Clean
Cars, including the specific agreements signed by individual
manufacturers, see https://ww2.arb.ca.gov/news/framework-agreements-clean-cars. (Accessed: February 16, 2022).
---------------------------------------------------------------------------

     Inclusion of CAFE civil penalties in the ``effective
cost'' metric used when simulating manufacturers' potential application
of fuel-saving technologies;
     Refined procedures to estimate health effects and
corresponding monetized damages attributable to criteria pollutant
emissions;
     New procedures to estimate the impacts and corresponding
monetized damages of highway vehicle crashes that do not result in
fatalities;
     Procedures to ensure that modeled technology application
and production volumes are the same across all regulatory alternatives
in the earliest model years; and
     Procedures to more precisely focus application of the
EPCA's ``standard setting constraints'' (i.e., regarding the
consideration of compliance credits and additional dedicated
alternative fueled vehicles) to only those model years for which NHTSA
is proposing or finalizing new standards.
    These changes reflect DOT's long-standing commitment to ongoing
refinement of its approach to estimating the potential impacts of new
CAFE standards. Following the proposal preceding this document, NHTSA
made several further changes to the CAFE Model, including:
     New options for applying a dynamic fleet share model (of
the relative shares passenger cars and light trucks comprise of the
total U.S. new vehicle market);
     Provisions allowing direct input of the number of miles to
be included when valuing avoided fuel outlays in the models used to
estimate impacts on the total sales of new vehicles and the scrappage
of used vehicles;
     Expanded model output reporting to include all estimates
(for this analysis) of the social cost of carbon dioxide emissions
(i.e., the SCC) when reporting total and net benefits to society;
     Procedures to calculate and report the value of miles
reallocated between new and used vehicles (when holding overall travel
demand before accounting for the rebound effect constant between
regulatory alternatives);
     Adjustments to reduce exclude finance costs from reported
incremental costs to consumers, and reduce reported insurance costs by
20 percent (to prevent double-counting of the costs to replace totaled
vehicles); and
     Revisions to allow direct specification of total VMT even
in years for which the CAFE Model estimates new vehicle sales (in
particular, for this analysis, 2021, to account for VMT recovering
rapidly following the decline in the early months of the COVID-19
pandemic.
    The TSD accompanying this document elaborates on these changes to
the CAFE Model, as well as changes to input to the model for this
analysis.
    NHTSA underscores that this analysis exercises the CAFE Model in a
manner that explicitly accounts for the fact that in producing a single
fleet of vehicles for sale in the United States, manufacturers face the
combination of CAFE standards, EPA CO2 standards,

and ZEV mandates, and for five manufacturers, the voluntary agreement
with California to more stringent GHG reduction requirements (also
applicable to these manufacturers' total production for the U.S.
market) through MY 2026. These regulations and contracts have important
structural and other differences that affect the strategy a
manufacturer could use to comply with each of the above.
    As explained, the analysis is designed to reflect a number of
statutory and regulatory requirements applicable to CAFE and tailpipe
CO2 standard-setting. EPCA contains a number of requirements
governing the scope and nature of CAFE standard setting. Among these,
some have been in place since EPCA was first signed into law in 1975,
and some were added in 2007, when Congress passed EISA and amended
EPCA. EPCA/EISA requirements regarding the technical characteristics of
CAFE standards and the analysis thereof include, but are not limited
to, the following, and the analysis reflects these requirements as
summarized:
    Corporate Average Standards: Section 32902 of 49 U.S.C. requires
standards that apply to the average fuel economy levels achieved by
each corporation's fleets of vehicles produced for sale in the U.S.\53\
The CAFE Model calculates the CAFE and CO2 levels of each
manufacturer's fleets based on estimated production volumes and
characteristics, including fuel economy levels, of distinct vehicle
models that could be produced for sale in the U.S.
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    \53\ This differs from safety standards and traditional
emissions standards, which apply separately to each vehicle. For
example, every vehicle produced for sale in the U.S. must, on its
own, meet all applicable Federal motor vehicle safety standards
(FMVSS), but no vehicle produced for sale must, on its own, meet
Federal fuel economy standards. Rather, each manufacturer is
required to produce a mix of vehicles that, taken together, achieve
an average fuel economy level no less than the applicable minimum
level.
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    Separate Standards for Passenger Cars and Light Trucks: Section
32902 of 49 U.S.C. requires the Secretary of Transportation to set CAFE
standards separately for passenger cars and light trucks. The CAFE
Model accounts separately for passenger cars and light trucks when it
analyzes CAFE or CO2 standards, including differentiated
standards and compliance.
    Attribute-Based Standards: Section 32902 of 49 U.S.C. requires the
Secretary of Transportation to define CAFE standards as mathematical
functions expressed in terms of one or more vehicle attributes related
to fuel economy. This means that for a given manufacturer's fleet of
vehicles produced for sale in the U.S. in a given regulatory class and
model year, the applicable minimum CAFE requirement (i.e., the
numerical value of the requirement) is computed based on the applicable
mathematical function, and the mix and attributes of vehicles in the
manufacturer's fleet. The CAFE Model accounts for such functions and
vehicle attributes explicitly.
    Separately Defined Standards for Each Model Year: Section 32902 of
49 U.S.C. requires the Secretary to set CAFE standards (separately for
passenger cars and light trucks \54\) at the maximum feasible levels in
each model year. The CAFE Model represents each model year explicitly,
and accounts for the production relationships between model years.\55\
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    \54\ Chapter 329 of title 49 of the U.S. Code uses the term
``non-passenger automobiles,'' while NHTSA uses the term ``light
trucks'' in its CAFE regulations. The terms' meanings are identical.
    \55\ For example, a new engine first applied to given vehicle
model/configuration in MY 2020 will most likely be ``carried
forward'' to MY 2021 of that same vehicle model/configuration, in
order to reflect the fact that manufacturers do not apply brand-new
engines to a given vehicle model every single year. The CAFE Model
is designed to account for these real-world factors.
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    Separate Compliance for Domestic and Imported Passenger Car Fleets:
Section 32904 of 49 U.S.C. requires the EPA Administrator to determine
CAFE compliance separately for each manufacturers' fleets of domestic
passenger cars and imported passenger cars, which manufacturers must
consider as they decide how to improve the fuel economy of their
passenger car fleets. The CAFE Model accounts explicitly for this
requirement when simulating manufacturers' potential responses to CAFE
standards, and combines any given manufacturer's domestic and imported
cars into a single fleet when simulating that manufacturer's potential
response to CO2 standards (because EPA does not have
separate standards for domestic and imported passenger cars).
    Minimum CAFE Standards for Domestic Passenger Car Fleets: Section
32902 of 49 U.S.C. requires that domestic passenger car fleets meet a
minimum standard, which is calculated as 92 percent of the industry-
wide average level required under the applicable attribute-based CAFE
standard, as projected by the Secretary at the time the standard is
promulgated. The CAFE Model accounts explicitly for this requirement
for CAFE standards and sets this requirement aside for CO2
standards.
    Civil Penalties for Noncompliance: Section 32912 of 49 U.S.C. (and
implementing regulations) prescribes a rate (in dollars per tenth of a
mpg) at which the Secretary is to levy civil penalties if a
manufacturer fails to comply with a CAFE standard for a given fleet in
a given model year, after considering available credits. Some
manufacturers have historically demonstrated a willingness to pay civil
penalties rather than achieving full numerical compliance across all
fleets. The CAFE Model calculates civil penalties (adjusted for
inflation) for CAFE shortfalls and provides means to estimate that a
manufacturer might stop adding fuel-saving technologies once continuing
to do so would be effectively more ``expensive'' (after accounting for
fuel prices and buyers' willingness to pay for fuel economy) than
paying civil penalties. The CAFE Model does not allow civil penalty
payment as an option for CO2 standards.
    Dual-Fueled and Dedicated Alternative Fuel Vehicles: For purposes
of calculating CAFE levels used to determine compliance, 49 U.S.C.
32905 and 32906 specify methods for calculating the fuel economy levels
of vehicles operating on alternative fuels to gasoline or diesel
through MY 2020. After MY 2020, methods for calculating alternative
fuel vehicle (AFV) fuel economy are governed by regulation. The CAFE
Model is able to account for these requirements explicitly for each
vehicle model. However, 49 U.S.C. 32902 prohibits consideration of the
fuel economy of dedicated alternative fuel vehicle (AFV) models when
NHTSA determines what levels of CAFE standards are maximum feasible.
The CAFE Model therefore has an option to be run in a manner that
excludes the additional application of dedicated AFV technologies in
model years for which maximum feasible standards are under
consideration. As allowed under NEPA for analysis appearing in EISs
informing decisions regarding CAFE standards, the CAFE Model can also
be run without this analytical constraint. The CAFE Model does account
for dual- and alternative fuel vehicles when simulating manufacturers'
potential responses to CO2 standards. For natural gas
vehicles, both dedicated and dual-fueled, EPA has a multiplier of 2.0
for MY 2022.\56\
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    \56\ That said, the CAFE Model reflects the EPA regulatory
flexibilities in place when the NHTSA began work on this rulemaking
to reconsider CAFE standards previously issued for MYs 2024-2026,
including a multiplier of 2.0 for natural gas vehicles, both
dedicated and dual-fueled, for MYs 2022-2026, although EPA's recent
final rule eliminated this multiplier after MY 2022. As explained
elsewhere in this preamble, the effect of this particular difference
between the modeling and EPA's final requirements is not
significant, given the lack of NGVs in the analysis.

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    ZEV Mandates: The CAFE Model can simulate manufacturers' compliance
with ZEV mandates applicable in California and ``Section 177'' \57\
states. The approach involves identifying specific vehicle model/
configurations that could be replaced with PHEVs or BEVs, and
immediately making these changes in each model year, before beginning
to consider the potential that other technologies could be applied
toward compliance with CAFE or CO2 standards.
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    \57\ The term ``Section 177'' states refers to states which have
elected to adopt California's standards in lieu of Federal
requirements, as allowed under Section 177 of the CAA.
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    Creation and Use of Compliance Credits: Section 32903 of 49 U.S.C.
provides that manufacturers may earn CAFE ``credits'' by achieving a
CAFE level beyond that required of a given fleet in a given model year,
and specifies how these credits may be used to offset the amount by
which a different fleet falls short of its corresponding requirement.
These provisions allow credits to be ``carried forward'' and ``carried
back'' between model years, transferred between regulated classes
(domestic passenger cars, imported passenger cars, and light trucks),
and traded between manufacturers. However, credit use is also subject
to specific statutory limits. For example, CAFE compliance credits can
be carried forward a maximum of five model years and carried back a
maximum of three model years. Also, EPCA/EISA caps the amount of credit
that can be transferred between passenger car and light truck fleets
and prohibits manufacturers from applying traded or transferred credits
to offset a failure to achieve the applicable minimum standard for
domestic passenger cars. The CAFE Model explicitly simulates
manufacturers' potential use of credits carried forward from prior
model years or transferred from other fleets.\58\ Section 32902 of 49
U.S.C. prohibits consideration of manufacturers' potential application
of CAFE compliance credits when setting maximum feasible CAFE
standards. The CAFE Model can be operated in a manner that excludes the
application of CAFE credits for a given model year under consideration
for standard setting. For modeling CO2 standards, the CAFE Model does
not limit transfers. Insofar as the CAFE Model can be exercised in a
manner that simulates trading of CO2 compliance credits, such
simulations treat trading as unlimited.\59\
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    \58\ The CAFE Model does not explicitly simulate the potential
that manufacturers would carry CAFE or CO2 credits back
(i.e., borrow) from future model years, or acquire and use CAFE
compliance credits from other manufacturers. At the same time,
because EPA has currently elected not to limit credit trading, the
CAFE Model can be exercised in a manner that simulates unlimited
(a.k.a. ``perfect'') CO2 compliance credit trading
throughout the industry (or, potentially, within discrete trading
``blocs''). NHTSA believes there is significant uncertainty in how
manufacturers may choose to employ these particular flexibilities in
the future: for example, while it is reasonably foreseeable that a
manufacturer who over-complies in one year may ``coast'' through
several subsequent years relying on those credits rather than
continuing to make technology improvements, it is harder to assume
with confidence that manufacturers will rely on future technology
investments to offset prior-year shortfalls, or whether/how
manufacturers will trade credits with market competitors rather than
making their own technology investments. Historically, carry-back
and trading have been much less utilized than carry-forward, for a
variety of reasons including higher risk and preference not to `pay
competitors to make fuel economy improvements we should be making'
(to paraphrase one manufacturer), although NHTSA recognizes that
carry-back and trading are used more frequently when standards
increase in stringency more rapidly. Given the uncertainty just
discussed, and given also the fact that the agency has yet to
resolve some of the analytical challenges associated with simulating
use of these flexibilities, the agency considers borrowing and
trading to involve sufficient risk that it is prudent to support
this final rule with analysis that sets aside the potential that
manufacturers could come to depend widely on borrowing and trading.
While compliance costs in real life may be somewhat different from
what is modeled in this document as a result of this analytical
decision, that is broadly true no matter what, and the agency does
not believe that the difference would be so great that it would
change the policy outcome. Furthermore, a manufacturer employing a
trading strategy would presumably do so because it represents a
lower-cost compliance option. Thus, the estimates derived from this
modeling approach are likely to be conservative in this respect,
with real-world compliance costs possibly being lower.
    \59\ To avoid making judgments about possible future trading
activity, the model simulates trading by combining all manufacturers
into a single entity, so that the most cost-effective choices are
made for the fleet as a whole.
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    Statutory Basis for Stringency: Section 32902 of 49 U.S.C. requires
the Secretary to set CAFE standards at the maximum feasible levels,
considering technological feasibility, economic practicability, the
need of the United States to conserve energy, and the impact of other
motor vehicle standards of the Government on fuel economy. EPCA/EISA
authorizes the Secretary to interpret these factors, and as the
Department's interpretation has evolved, NHTSA has continued to expand
and refine its qualitative and quantitative analysis to account for
these statutory factors. For example, one of the ways that economic
practicability considerations are incorporated into the analysis is
through the technology effectiveness determinations: the Autonomie
simulations reflect the agency's judgment that it would not be
economically practicable for a manufacturer to ``split'' an engine
shared among many vehicle model/configurations into myriad versions
each optimized to a single vehicle model/configuration.
    National Environmental Policy Act: In addition, NEPA requires the
Secretary to issue an EIS that documents the estimated impacts of
regulatory alternatives under consideration. The Final SEIS
accompanying this final rule documents changes in emission inventories
as estimated using the CAFE Model, but also documents corresponding
estimates--based on the application of other models documented in the
Final SEIS, of impacts on the global climate, on tropospheric air
quality, and on human health.
    Other Aspects of Compliance: Beyond these statutory requirements
applicable to DOT, EPA, or both are a number of specific technical
characteristics of CAFE and/or CO2 regulations that are also
relevant to the construction of this analysis. For example, EPA has
defined procedures for calculating average CO2 levels, and
has revised procedures for calculating CAFE levels, to reflect
manufacturers' application of ``off-cycle'' technologies that increase
fuel economy (and reduce CO2 emissions). Although too little
information is available to account for these provisions explicitly in
the same way that the agency has accounted for other technologies, the
CAFE Model includes and makes use of inputs reflecting the agency's
expectations regarding the extent to which manufacturers may earn such
credits, along with estimates of corresponding costs. Similarly, the
CAFE Model includes and makes use of inputs regarding credits EPA has
elected to allow manufacturers to earn toward CO2 levels
(not CAFE) based on the use of air conditioner refrigerants with lower
global warming potential (GWP), or on the application of technologies
to reduce refrigerant leakage. In addition, the CAFE Model accounts for
EPA ``multipliers'' for certain alternative fueled vehicles, based on
current regulatory provisions or on alternative approaches. Although
these are examples of regulatory provisions that arise from the
exercise of discretion rather than specific statutory mandate, they can
materially impact outcomes.
    Besides the updates to the model described above, any analysis of
regulatory actions that will be implemented several years in the
future, and whose benefits and costs accrue over decades, requires a
large number of assumptions. Over such time horizons, many, if not
most, of the relevant assumptions in such an analysis are inevitably
uncertain. Each successive CAFE analysis seeks to update assumptions to
reflect better the current

state of the world and the best current estimates of future conditions.
    A number of assumptions have been updated since the 2020 final rule
for this final rule, and some of these assumptions have been further
updated since the proposal preceding this document. As discussed below,
NHTSA has updated its ``analysis fleet'' from a MY 2017 reference to a
MY 2020 reference, updated estimates of manufacturers' compliance
credit ``holdings,'' updated fuel price projections to reflect the U.S.
Energy Information Administration's (EIA's) 2021 Annual Energy Outlook
(AEO), updated projections of GDP and related macroeconomic measures,
and updated projections of future highway travel. While NHTSA would
have made these updates as a matter of course, we note that that the
COVID-19 pandemic impacted major analytical inputs such as fuel prices,
gross domestic product (GDP), vehicle production and sales, and highway
travel. However, while NHTSA was able to further update forecasts of
GDP and related macroeconomic measures after the 2021 proposal to
reflect a more rapid economic recovery from the pandemic than
anticipated in early 2021, EIA did not publish AEO 2022 early enough
for NHTSA to include a correspondingly updated fuel price forecast in
this analysis, so this analysis retains the fuel price forecasts from
AEO 2021. E.O. 13990 required the formation of an Interagency Working
Group (IWG) on the Social Cost of Greenhouse Gases and charged this
body with updating estimates of the social costs of carbon, nitrous
oxide, and methane. As discussed in the TSD, NHTSA has followed DOT's
determination that the values developed in the IWG's interim guidance
are the most consistent with the best available science and economics
and are the most appropriate estimates to use in the analysis of this
rule. Those estimates of costs per ton of emissions (or benefits per
ton of emissions reductions) are considerably greater than those
applied in the analysis supporting the 2020 final rule. Even still, the
estimates NHTSA is now using are not able to fully quantify and
monetize a number of important categories of climate damages; because
of those omitted damages and other methodological limits, DOT believes
its values for SC-GHG are conservative underestimates. These and other
updated analytical inputs are discussed in detail in the TSD. NHTSA
addresses comments about these assumptions later in this preamble.

What is NHTSA analyzing?

    As in the CAFE and CO2 rulemakings in 2010, 2012, and
2020, NHTSA is establishing attribute-based CAFE standards defined by a
mathematical function of vehicle footprint, which has observable
correlation with fuel economy. EPCA, as amended by EISA, expressly
requires that CAFE standards for passenger cars and light trucks be
based on one or more vehicle attributes related to fuel economy and be
expressed in the form of a mathematical function.\60\ Thus, the final
standards (and regulatory alternatives) take the form of fuel economy
targets expressed as functions of vehicle footprint (the product of
vehicle wheelbase and average track width) that are separate for
passenger cars and light trucks. Chapter 1.2.3 of the TSD discusses in
detail NHTSA's continued reliance on footprint as the relevant
attribute on which these standards are based.
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    \60\ 49 U.S.C. 32902(a)(3)(A).
---------------------------------------------------------------------------

    Under the footprint-based standards, the function defines a fuel
economy performance target for each unique footprint combination within
a car or truck model type. Using the functions, each manufacturer thus
will have a CAFE average standard for each year that is almost
certainly unique to each of its fleets,\61\ based upon the footprints
and production volumes of the vehicle models produced by that
manufacturer. A manufacturer will have separate footprint-based
standards for cars and for trucks, consistent with 49 U.S.C. 32902(b)'s
direction that NHTSA must set separate standards for cars and for
trucks. The functions are mostly sloped, so that generally, larger
vehicles (i.e., vehicles with larger footprints) will be subject to
lower mpg targets than smaller vehicles. This is because, generally
speaking, smaller vehicles are more capable of achieving higher levels
of fuel economy, mostly because they tend not to have to work as hard
(and therefore require as much energy) to perform their driving task.
Although a manufacturer's fleet average standards could be estimated
throughout the model year based on the projected production volume of
its vehicle fleet (and are estimated as part of EPA's certification
process), the standards with which the manufacturer must comply are
determined by its final model year production figures. A manufacturer's
calculation of its fleet average standards, as well as its fleets'
average performance at the end of the model year, will thus be based on
the production-weighted average target and performance of each model in
its fleet.\62\
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    \61\ EPCA/EISA requires NHTSA and EPA to separate passenger cars
into domestic and import passenger car fleets for CAFE compliance
purposes (49 U.S.C. 32904(b)), whereas EPA combines all passenger
cars into one fleet for GHG compliance purposes.
    \62\ As discussed in prior rulemakings, a manufacturer may have
some vehicle models that exceed their target and some that are below
their target. Compliance with a fleet average standard is determined
by comparing the fleet average standard (based on the production-
weighted average of the target levels for each model) with fleet
average performance (based on the production-weighted average of the
performance of each model).
---------------------------------------------------------------------------

    For passenger cars, consistent with prior rulemakings, NHTSA is
defining fuel economy targets as shown in Equation III-1.
BILLING CODE 4910-59-P
[GRAPHIC] [TIFF OMITTED] TR02MY22.048

Where:

TARGETFE is the fuel economy target (in mpg) applicable to a
specific vehicle model type with a unique footprint combination,
a is a minimum fuel economy target (in mpg),
b is a maximum fuel economy target (in mpg),
c is the slope (in gallons per mile per square foot, or gpm, per
square foot) of a line relating fuel consumption (the inverse of
fuel economy) to footprint, and
d is an intercept (in gpm) of the same line.

    Here, MIN and MAX are functions that take the minimum and maximum
values, respectively, of the set of included values. For example,
MIN[40, 35] = 35 and MAX(40, 25) = 40, such that MIN[MAX(40, 25), 35] =
35.
    For the Preferred Alternative, this equation is represented
graphically as the curves in Figure III-2.
[GRAPHIC] [TIFF OMITTED] TR02MY22.049