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    \384\ https://www.nhtsa.gov/laws-regulations/corporate-average-fuel-economy.
[GRAPHIC] [TIFF OMITTED] TP03SE21.173

    While Figure V-12 does not show precise values, it gives us a sense
of which inputs are ones for which a different assumption would have a
much different effect on analytical findings, and which ones would not
have much effect. Assuming a more-discounted or lower social cost of
carbon would have a relatively large effect, as would assuming a
different oil price, or doubling the assumed ``payback period.'' Making
very high levels of mass reduction unavailable in the modeling appears
to have a (relatively) very large effect on costs, but this is to some
extent an artifact of the ``standard setting'' runs used for the
preamble and PRIA analysis, where electrification is limited due to
statutory restrictions. On the other hand, assumptions about which
there has been significant disagreement in the past, like the rebound
effect or the sales-scrappage response, appear to cause only relatively
small changes in net benefits. Chapter 7 of the PRIA provides a much
fuller discussion of these findings, and presents net benefits
estimated under each of the cases included in the sensitivity analysis,
including the subset for which impacts are summarized in Figure V-13.

[GRAPHIC] [TIFF OMITTED] TP03SE21.174

BILLING CODE 4910-59-C
    The results presented in the earlier subsections of Section V and
discussed in Section VI reflect the agency's best judgments regarding
many different factors, and the sensitivity analysis discussed here is
simply to illustrate the obvious, that differences in assumptions can
lead to differences in analytical outcomes, some of which can be large
and some of which may be smaller than expected. Policy-making in the
face of future uncertainty is inherently complex. Section VI explains
how NHTSA proposes to balance the statutory factors in light of the
analytical findings, the uncertainty that we know exists, and our
Nation's policy goals, to determine the CAFE standards that NHTSA
tentatively concludes are maximum feasible for MYs 2024-2026.

VI. Basis for NHTSA's Tentative Conclusion That the Proposed Standards
Are Maximum Feasible

    In this section, NHTSA discusses the factors, data, and analysis
that the agency has considered in the tentative selection of the
proposed CAFE standards for MYs 2024-2026. The primary purpose of EPCA,
as amended by EISA, and codified at 49 U.S.C. chapter 329, is energy
conservation, and fuel economy standards help to conserve energy by
requiring automakers to make new vehicles travel a certain distance on
a gallon of fuel.\385\ The goal of the CAFE standards is to conserve
energy, while taking into account the statutory factors set forth at 49
U.S.C. 32902(f), as discussed below.
---------------------------------------------------------------------------

    \385\ While individual vehicles need not meet any particular mpg
level, as discussed elsewhere in this preamble, fuel economy
standards do require vehicle manufacturers' fleets to meet certain
compliance obligations based on fuel economy levels target curves
set forth by NHTSA in regulation.
---------------------------------------------------------------------------

    The provision at 49 U.S.C. 32902(f) states that when setting
maximum feasible CAFE standards for new passenger cars and light
trucks, the Secretary of Transportation\386\ ``shall consider
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.'' In previous rulemakings,
including the 2012 final rule issued during the Obama Administration
and the recent 2020 final rule, NHTSA considered technological
feasibility, including the availability of various fuel-economy-
improving technologies to be applied to new vehicles in the timeframe
of the standards depending on the ultimate stringency levels, and also
considered economic practicability, including the differences between a
range of regulatory alternatives in terms of effects on per-vehicle
costs, the ability of both the industry and individual manufacturers to
comply with standards at various levels, as well as effects on vehicle
sales, industry employment, and consumer demand. NHTSA also considered
how compliance with other motor vehicle standards of the Government
might affect manufacturers' ability to meet CAFE standards represented
by a range of regulatory alternatives, and how the need of the U.S. to
conserve energy could be more or less addressed under a range of
regulatory alternatives, in terms of considerations like costs to
consumers, the national balance of payments, environmental implications
like climate and smog effects, and foreign policy effects such as the
likelihood that U.S. military and other expenditures could change as a
result of more or less oil consumed by the U.S. vehicle fleet. These
elements are discussed in detail throughout this analysis. As will be
explained in greater detail below, while NHTSA is considering all of
the same factors in proposing revised CAFE standards for MYs 2024-2026
that it considered in previous rulemakings, the agency's balancing of
those factors has shifted, and NHTSA is therefore choosing to set CAFE
standards at a different level from what both the 2012 final rule and
the 2020 final rule set forth. Besides the factors specified in
32902(f), NHTSA has also historically considered the safety effects of
potential CAFE standards, and additionally considers relevant case law.
---------------------------------------------------------------------------

    \386\ By delegation, the NHTSA Administrator.
---------------------------------------------------------------------------

    NHTSA and EPA have coordinated in setting standards, and many of
the factors that NHTSA considers to set maximum feasible standards
complement factors that EPA considers under the Clean Air Act. The
balancing of competing factors by both EPA and NHTSA are consistent
with each agency's statutory authority and recognize the statutory
obligations the Supreme Court pointed to in Massachusetts v. EPA. NHTSA
also

considers the Ninth Circuit's decision in Center for Biological
Diversity v. NHTSA, which remanded NHTSA's 2006 final rule establishing
standards for MYs 2008-2011 light trucks and underscored that ``the
overarching purpose of EPCA is energy conservation.''\387\
---------------------------------------------------------------------------

    \387\ 538 F.3d 1172 (9th Cir. 2008).
---------------------------------------------------------------------------

    This proposal contains a range of regulatory alternatives for MYs
2024-2026, from retaining the 1.5 percent annual increases set in 2020,
up to a stringency increase of 10 percent annually. The analysis
supported this range of alternatives based on factors relevant to
NHTSA's exercise of its 32902(f) authority, such as fuel saved and
emissions reduced, the technologies available to meet the standards,
the costs of compliance for automakers and their abilities to comply by
applying technologies, the impact on consumers with respect to cost,
fuel savings, and vehicle choice, and effects on safety, among other
things.
    NHTSA's tentative 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 2024-2026
(Alternative 2 of this analysis) are maximum feasible. The Biden
Administration is deeply committed to working aggressively to improve
energy conservation, and higher standards appear increasingly likely to
be economically practicable given almost-daily announcements by major
automakers about forthcoming new high-fuel-economy vehicle models, as
described below. Despite only one year having passed since the 2020
final rule, enough has changed in the U.S. and the world that
revisiting the CAFE standards for MYs 2024-2026, and raising their
stringency considerably, is both appropriate and reasonable.
    The following sections discuss in more detail the statutory
requirements and considerations involved in NHTSA's tentative
determination of maximum feasible CAFE standards, and NHTSA's
explanation of its balancing of factors for this tentative
determination.

A. EPCA, as Amended by EISA

    EPCA, as amended by EISA, contains a number of provisions regarding
how NHTSA must set CAFE standards. DOT (by delegation, NHTSA) \388\
must establish separate CAFE standards for passenger cars and light
trucks \389\ for each model year,\390\ and each standard must be the
maximum feasible that the Secretary (again, by delegation, NHTSA)
believes the manufacturers can achieve in that model year.\391\ In
determining the maximum feasible levels of CAFE standards, EPCA
requires that NHTSA 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.\392\ In addition, NHTSA has the authority to
consider (and typically does consider) other relevant factors, such as
the effect of CAFE standards on motor vehicle safety and consumer
preferences. The ultimate determination of what standards can be
considered maximum feasible involves a weighing and balancing of
factors, and the balance may shift depending on the information before
NHTSA about the expected circumstances in the model years covered by
the rulemaking. The agency's decision must also be guided by the
overarching purpose of EPCA, energy conservation, while balancing these
factors.\393\
---------------------------------------------------------------------------

    \388\ EPCA and EISA direct the Secretary of Transportation to
develop, implement, and enforce fuel economy standards (see 49
U.S.C. 32901 et seq.), which authority the Secretary has delegated
to NHTSA at 49 CFR 1.95(a).
    \389\ 49 U.S.C. 32902(b)(1) (2007).
    \390\ 49 U.S.C. 32902(a) (2007).
    \391\ Id.
    \392\ 49 U.S.C. 32902(f) (2007).
    \393\ Center for Biological Diversity v. NHTSA, 538 F.3d 1172,
1197 (9th Cir. 2008) (``Whatever method it uses, NHTSA cannot set
fuel economy standards that are contrary to Congress's purpose in
enacting the EPCA--energy conservation.'').
---------------------------------------------------------------------------

    Besides the requirement that the standards be maximum feasible for
the fleet in question and the model year in question, EPCA/EISA also
contain several other requirements, as follow.
1. Lead Time
    EPCA requires that NHTSA prescribe new CAFE standards at least 18
months before the beginning of each model year.\394\ For amendments to
existing standards (as this NPRM proposes), EPCA requires that if the
amendments make an average fuel economy standard more stringent, at
least 18 months of lead time must be provided.\395\ Thus, if the first
year for which NHTSA is proposing to amend standards in this NPRM is MY
2024, NHTSA interprets this provision as requiring the agency to issue
a final rule covering MY 2024 standards no later than April 2022.
---------------------------------------------------------------------------

    \394\ 49 U.S.C. 32902(a) (2007).
    \395\ 49 U.S.C. 32902(g)(2) (2007).
---------------------------------------------------------------------------

2. Separate Standards for Cars and Trucks, and Minimum Standards for
Domestic Passenger Cars
    As mentioned above, EPCA requires NHTSA to set separate standards
for passenger cars and light trucks for each model year.\396\ NHTSA has
long interpreted this requirement as preventing the agency from setting
a single combined CAFE standard for cars and trucks together, based on
the plain language of the statute. Congress originally required
separate CAFE standards for cars and trucks to reflect the different
fuel economy capabilities of those different types of vehicles, and
over the history of the CAFE program, has never revised this
requirement. Even as many cars and trucks have come to resemble each
other more closely over time--many crossover and sport-utility models,
for example, come in versions today that may be subject to either the
car standards or the truck standards depending on their
characteristics--it is still accurate to say that vehicles with truck-
like characteristics such as 4-wheel drive, cargo-carrying capability,
etc., currently consume more fuel per mile than vehicles without these
characteristics.
---------------------------------------------------------------------------

    \396\ 49 U.S.C. 32902(b)(1) (2007).
---------------------------------------------------------------------------

    EPCA, as amended by EISA, also requires another separate standard
to be set for domestically-manufactured \397\ passenger cars. Unlike
the generally-applicable standards for passenger cars and light trucks
described above, the compliance obligation of the minimum domestic
passenger car standard (MDPCS for brevity) is identical for all
manufacturers. The statute clearly states that any manufacturer's
domestically manufactured passenger car fleet must meet the greater of
either 27.5 mpg on average, or 92 percent of the average fuel economy
projected by the Secretary for the combined domestic and non-domestic
passenger automobile fleets manufactured for sale in the United States
by all manufacturers in the model year, which projection shall be
published in the Federal Register when the standard for that model year
is promulgated in accordance with 49 U.S.C. 32902(b).\398\
---------------------------------------------------------------------------

    \397\ In the CAFE program, ``domestically-manufactured'' is
defined by Congress in 49 U.S.C. 32904(b). The definition roughly
provides that a passenger car is ``domestically manufactured'' as
long as at least 75 percent of the cost to the manufacturer is
attributable to value added in the United States, Canada, or Mexico,
unless the assembly of the vehicle is completed in Canada or Mexico
and the vehicle is imported into the United States more than 30 days
after the end of the model year.
    \398\ 49 U.S.C. 32902(b)(4) (2007).
---------------------------------------------------------------------------

    Since that requirement was promulgated, the ``92 percent'' has
always been greater than 27.5 mpg, and foreseeably will continue to be
so in the future. While NHTSA published 92 percent MDPCSs for MYs 2024-
2026 at 49 CFR 531.5(d) as part of the 2020 final rule, the statutory
language is clear that

the MDPCS must be determined at the time an overall passenger car
standards is promulgated and published in the Federal Register. Thus,
any time NHTSA establishes or changes a passenger car standard for a
model year, the MDPCS must also be evaluated or re-evaluated and
established accordingly.
    As in the 2020 final rule, NHTSA recognizes industry concerns that
actual total passenger car fleet standards have differed significantly
from past projections, perhaps more so when the agency has projected
significantly into the future. In that final rule, because the
compliance data showed that the standards projected in 2012 were
consistently more stringent than the actual standards, by an average of
1.9 percent. NHTSA stated that this difference indicated that in
rulemakings conducted in 2009 through 2012, NHTSA's and EPA's
projections of passenger car vehicle footprints and production volumes,
in retrospect, underestimated the production of larger passenger cars
over the MYs 2011 to 2018 period.\399\
---------------------------------------------------------------------------

    \399\ See 85 FR at 25127 (Apr. 30, 2020).
---------------------------------------------------------------------------

    Unlike the passenger car standards and light truck standards which
are vehicle-attribute-based and automatically adjust with changes in
consumer demand, the MDPCS are not attribute-based, and therefore do
not adjust with changes in consumer demand and production. They are
instead fixed standards that are established at the time of the
rulemaking. As a result, by assuming a smaller-footprint fleet, on
average, than what ended up being produced, the MYs 2011-2018 MDPCS
ended up being more stringent and placing a greater burden on
manufacturers of domestic passenger cars than was projected and
expected at the time of the rulemakings that established those
standards. In the 2020 final rule, therefore, NHTSA agreed with
industry concerns over the impact of changes in consumer demand (as
compared to what was assumed in 2012 about future consumer demand for
greater fuel economy) on manufacturers' ability to comply with the
MDPCS and in particular, manufacturers that produce larger passenger
cars domestically. Some of the largest civil penalties for
noncompliance in the history of the CAFE program have been paid for
noncompliance with the MDPCS. NHTSA also expressed concern that
consumer demand may shift even more in the direction of larger
passenger cars if fuel prices continue to remain low. Sustained low oil
prices can be expected to have real effects on consumer demand for
additional fuel economy, and consumers may foreseeably be even more
interested in 2WD crossovers and passenger-car-fleet SUVs (and less
interested in smaller passenger cars) than they are at present.
    Therefore, in the 2020 final rule, to help avoid similar outcomes
in the 2021-2026 timeframe to what had happened with the MDPCS over the
preceding model years, NHTSA determined that it was reasonable and
appropriate to consider the recent projection errors as part of
estimating the total passenger car fleet fuel economy for MYs 2021-
2026. NHTSA therefore projected the total passenger car fleet fuel
economy using the central analysis value in each model year, and
applied an offset based on the historical 1.9 percent difference
identified for MYs 2011-2018.
    For this proposal, recognizing that we are proposing to increase
stringency considerably over the baseline standards and that civil
penalties have also recently increased, NHTSA remains concerned that
the MDPCS may pose a significant challenge to certain manufacturers. To
that end, NHTSA is proposing to retain the 1.9 percent offset for the
MDPCS for MYs 2024-2026, which we have appropriately recalculated based
on the current projections for passenger cars based on the current
analysis fleet. Table VI-1 shows the calculation values used to
determine the total passenger car fleet fuel economy value for each
model year for the preferred alternative.
BILLING CODE 4910-59-P
[GRAPHIC] [TIFF OMITTED] TP03SE21.175

    Using this approach, the MDPCS under each regulatory alternative
would thus be as shown in Table VI-2.

[GRAPHIC] [TIFF OMITTED] TP03SE21.176

    NHTSA is also seeking comment on another approach to offsetting the
MDPCS. Recognizing that the analysis supporting this proposal does not
attempt to project how vehicle footprints may change in the future, nor
how that might affect the average fuel economy of passenger cars sold
in the U.S., NHTSA could instead attempt to make such a projection
explicitly.
    Examination of the average footprints of passenger cars sold in the
U.S. from 2008, when EPA began reporting footprint data, to 2020
indicates a clear and statistically significant trend of gradually
increasing average footprint (Figure VI-1). The average annual increase
in passenger car footprint, estimated by ordinary least squares,
indicates that the passenger car footprints increased by an average of
0.1206 square feet annually over the 2008-2020 period. The estimated
average increase is statistically significant at the 0.000001 level,
with a 95 percent confidence interval of (0.0929, 0.1483).
[GRAPHIC] [TIFF OMITTED] TP03SE21.177

    The alternate method for calculating an offset to the MDPCS would
be three steps, as follows:
    1. Starting from the average footprint of passenger cars in 2020 as
reported by EPA, add 0.1206 square feet per year through 2026.
    2. Calculate the estimated fuel economy of passenger cars using the
average projected footprint numbers calculated in step 1 and the
footprint functions that are the passenger car standards for the
corresponding model year, which then become ``the Secretary's projected
passenger car fuel economy numbers.''
    3. Apply the 92 percent factor to calculate the MDPCS for 2024,
2025, and 2026.
    The results of this approach are shown in Table VI-3.
    [GRAPHIC] [TIFF OMITTED] TP03SE21.178

    Comparing all of these, Table VI-4 shows (1) the unadjusted 92
percent MDPCS for MYs 2024-2026, (2) the proposed 1.9 percent-offset
MDPCS for MYs 2024-2026, and (3) the alternate approach offset MDPCS
for MYs 2024-2026.
[GRAPHIC] [TIFF OMITTED] TP03SE21.179

BILLING CODE 4910-59-C
    While the CAFE Model analysis underlying this proposal, the PRIA,
and the Draft SEIS does not reflect an offset to the unadjusted 92
percent MDPCS, separate analysis that does reflect the change
demonstrates that doing so does not change estimated impacts of any of
the regulatory alternatives under consideration, despite the mpg values
being slightly different as shown in Table VI-4.
    NHTSA seeks comment on the discussion above. To be clear, the
agency also seeks comment on whether to apply the MDPCS without any
modifier.
3. Attribute-Based and Defined by a Mathematical Function
    EISA requires NHTSA to set CAFE standards that are ``based on 1 or
more attributes related to fuel economy and express[ed] . . . in the
form of a mathematical function.'' \400\ Historically, NHTSA has based
standards on vehicle footprint, and proposes to continue to do so for
the reasons described in Section III.B of this preamble and Chapter 1
of the accompanying TSD. As in previous rulemakings, NHTSA is proposing
to define the standards in the form of a constrained linear function
that generally sets higher (more stringent) targets for smaller-
footprint vehicles and lower (less stringent) targets for larger-
footprint vehicles. These footprint curves are discussed in more detail
in Section III.B and TSD Chapter 1. NHTSA seeks comment in Section
III.B both on the continued use of footprint as the relevant attribute
and on the continued use of the constrained linear curve shapes.
---------------------------------------------------------------------------

    \400\ 49 U.S.C. 32902(b)(3)(A) (2007).
---------------------------------------------------------------------------

4. Number of Model Years for Which Standards May Be Set at a Time
    EISA also states that NHTSA shall ``issue regulations under this
title prescribing average fuel economy standards for at least 1, but
not more than 5, model years.'' \401\ In this NPRM, NHTSA is proposing
to set CAFE standards for three model years, MYs 2024-2026. This
proposal fits squarely within the plain language of the statute.
---------------------------------------------------------------------------

    \401\ 49 U.S.C. 32902(b)(3)(B) (2007).
---------------------------------------------------------------------------

5. Maximum Feasible Standards
    As discussed above, EPCA requires NHTSA to consider four factors in
determining what levels of CAFE standards would be maximum feasible.
NHTSA presents in the sections below its understanding of the meanings
of those four factors.
(a) Technological Feasibility
    ``Technological feasibility'' refers to whether a particular method
of improving fuel economy is available for deployment in commercial
application in the model year for which a standard is being
established. Thus, NHTSA is not limited in determining the level of new
standards to technology that is already being applied commercially at
the time of the rulemaking. For this proposal, NHTSA has considered a
wide range of technologies that improve fuel economy, while considering
the need to account for which technologies have already been applied to
which vehicle model/configuration, as well as the need to estimate
realistically the cost and fuel

economy impacts of each technology as applied to different vehicle
models/configurations. NHTSA has not, however, attempted to account for
every technology that might conceivably be applied to improve fuel
economy, nor does NHTSA believe it is necessary to do so given that
many technologies address fuel economy in similar ways.\402\
---------------------------------------------------------------------------

    \402\ For example, NHTSA has not considered high-speed flywheels
as potential energy storage devices for hybrid vehicles; while such
flywheels have been demonstrated in the laboratory and even tested
in concept vehicles, commercially-available hybrid vehicles
currently known to NHTSA use chemical batteries as energy storage
devices, and the agency has considered a range of hybrid vehicle
technologies that do so.
---------------------------------------------------------------------------

    NHTSA notes that the technological feasibility factor allows NHTSA
to set standards that force the development and application of new
fuel-efficient technologies, but this factor does not require NHTSA to
do so.\403\ In the 2012 final rule, NHTSA stated that ``[i]t is
important to remember that technological feasibility must also be
balanced with the other of the four statutory factors. Thus, while
`technological feasibility' can drive standards higher by assuming the
use of technologies that are not yet commercial, `maximum feasible' is
also defined in terms of economic practicability, for example, which
might caution the agency against basing standards (even fairly distant
standards) entirely on such technologies.'' \404\ NHTSA further stated
that ``. . . as the `maximum feasible' balancing may vary depending on
the circumstances at hand for the model year in which the standards are
set, the extent to which technological feasibility is simply met or
plays a more dynamic role may also shift.'' \405\ For purposes of this
proposal covering standards for MYs 2024-2026, NHTSA is certain that
sufficient technology exists to meet the standards--even for the most
stringent regulatory alternative. As will be discussed further below,
for this proposal, the question is more likely rather, given that the
technology exists, how much of it should be required to be added to new
cars and trucks in order to conserve more energy, and how to balance
that objective against the additional cost of adding that technology.
---------------------------------------------------------------------------

    \403\ See 77 FR at 63015 (Oct. 12, 2012).
    \404\ Id.
    \405\ Id.
---------------------------------------------------------------------------

(b) Economic Practicability
    ``Economic practicability'' has consistently referred to whether a
standard is one ``within the financial capability of the industry, but
not so stringent as to'' lead to ``adverse economic consequences, such
as a significant loss of jobs or unreasonable elimination of consumer
choice.'' \406\ In evaluating economic practicability, NHTSA considers
the uncertainty surrounding future market conditions and consumer
demand for fuel economy alongside consumer demand for other vehicle
attributes. There is not necessarily a bright-line test for whether a
regulatory alternative is economically practicable, but there are
several metrics that we discuss below that we find can be useful for
making this assessment. In determining whether standards may or may not
be economically practicable, NHTSA considers:
---------------------------------------------------------------------------

    \406\ 67 FR 77015, 77021 (Dec. 16, 2002).
---------------------------------------------------------------------------

    Application rate of technologies--whether it appears that a
regulatory alternative would impose undue burden on manufacturers in
either or both the near and long term in terms of how much and which
technologies might be required. This metric connects to the next two
metrics, as well.
    Other technology-related considerations--related to the application
rate of technologies, whether it appears that the burden on several or
more manufacturers might cause them to respond to the standards in ways
that compromise, for example, vehicle safety, or other aspects of
performance that may be important to consumer acceptance of new
products.
    Cost of meeting the standards--even if the technology exists and it
appears that manufacturers can apply it consistent with their product
cadence, if meeting the standards will raise per-vehicle cost more than
we believe consumers are likely to accept, which could negatively
impact sales and employment in this sector, the standards may not be
economically practicable. While consumer acceptance of additional new
vehicle cost associated with more stringent CAFE standards is
uncertain, NHTSA still finds this metric useful for evaluating economic
practicability. Elsewhere in this preamble, we seek comment
specifically on consumer valuation of fuel economy.
    Sales and employment responses--as discussed above, sales and
employment responses have historically been key to NHTSA's
understanding of economic practicability.
    Uncertainty and consumer acceptance \407\ of technologies--
considerations not accounted for expressly in our modeling analysis,
but important to an assessment of economic practicability given the
timeframe of this rulemaking. Consumer acceptance can involve
consideration of anticipated consumer responses not just to increased
vehicle cost and consumer valuation of fuel economy, but also the way
manufacturers may change vehicle models and vehicle sales mix in
response to CAFE standards.
---------------------------------------------------------------------------

    \407\ See, e.g., Center for Auto Safety v. NHTSA (CAS), 793 F.2d
1322 (D.C. Cir. 1986) (Administrator's consideration of market
demand as component of economic practicability found to be
reasonable).
---------------------------------------------------------------------------

    Over time, NHTSA has tried different methods to account for
economic practicability. Many years ago, prior to the MYs 2005-2007
rulemaking under the non-attribute-based (fixed value) CAFE standards,
NHTSA sought to ensure the economic practicability of standards in part
by setting them at or near the capability of the ``least capable
manufacturer'' with a significant share of the market, i.e., typically
the manufacturer whose fleet mix was, on average, the largest and
heaviest, generally having the highest capacity and capability so as
not to limit the availability of those types of vehicles to consumers.
NHTSA rejected the ``least capable manufacturer'' approach several
rulemakings ago and no longer believes that it is consistent with our
root interpretation of economic practicability. Economic practicability
focuses on the capability of the industry and seeks to avoid adverse
consequences such as (inter alia) a significant loss of jobs or
unreasonable elimination of consumer choice. If the overarching purpose
of EPCA is energy conservation, it seems reasonable to expect that
maximum feasible standards may be harder for some automakers than for
others, and that they need not be keyed to the capabilities of the
least capable manufacturer.
    NHTSA has also sought to account for economic practicability by
applying marginal cost-benefit analysis since the first rulemakings
establishing attribute-based standards, considering both overall
societal impacts and overall consumer impacts. Whether the standards
maximize net benefits has thus been a significant, but not dispositive,
factor in the past for NHTSA's consideration of economic
practicability. Executive Order 12866, as amended by Executive Order
13563, states that agencies should ``select, in choosing among
alternative regulatory approaches, those approaches that maximize net
benefits . . .'' In practice, however, agencies, including NHTSA, must
consider that the modeling of net benefits does not capture all
considerations relevant to economic practicability. Therefore, as in
past rulemakings, NHTSA is considering net societal impacts, net
consumer impacts,

and other related elements in the consideration of economic
practicability. That said, it is well within the agency's discretion to
deviate from the level at which modeled net benefits are maximized if
the agency concludes that the level would not represent the maximum
feasible level for future CAFE standards. Economic practicability is
complex, and like the other factors must be considered in the context
of the overall balancing and EPCA's overarching purpose of energy
conservation.
(c) The Effect of Other Motor Vehicle Standards of the Government on
Fuel Economy
    ``The effect of other motor vehicle standards of the Government on
fuel economy'' involves analysis of the effects of compliance with
emission, safety, noise, or damageability standards on fuel economy
capability and thus on average fuel economy. In many past CAFE
rulemakings, NHTSA has said that it considers the adverse effects of
other motor vehicle standards on fuel economy. It said so because, from
the CAFE program's earliest years \408\ until recently, the effects of
such compliance on fuel economy capability over the history of the CAFE
program have been negative ones. For example, safety standards that
have the effect of increasing vehicle weight thereby lower fuel economy
capability, thus decreasing the level of average fuel economy that
NHTSA can determine to be feasible. NHTSA has also accounted for EPA's
``Tier 3'' standards for criteria pollutants in its estimates of
technology effectiveness in this proposal, and State emissions
standards (like California's) that address the tailpipe NOX,
NMOG, and CO emissions that occur during cold start.\409\
---------------------------------------------------------------------------

    \408\ 43 FR 63184, 63188 (Dec. 15, 1977). See also 42 FR 33534,
33537 (Jun. 30, 1977).
    \409\ For most ICE vehicles on the road today, the majority of
tailpipe NOX, NMOG, and CO emissions occur during ``cold
start,'' before the three-way catalyst has reached the very high
temperature (e.g., 900-1000 [deg]F) at which point it is able to
convert (through oxidation and reduction reactions) those emissions
into less harmful derivatives. By limiting the amount of those
emissions, tailpipe smog standards require the catalyst to be
brought to temperature extremely quickly, so modern vehicles employ
cold start strategies that intentionally release fuel energy into
the engine exhaust to heat the catalyst to the right temperature as
quickly as possible. The additional fuel that must be used to heat
the catalyst is typically referred to as a ``cold-start penalty,''
meaning that the vehicle's fuel economy (over a test cycle) is
reduced because the fuel consumed to heat the catalyst did not go
toward the goal of moving the vehicle forward. The Autonomie work
employed to develop technology effectiveness estimates for this
proposal accounts for cold-start penalties, as discussed in the
Autonomie model documentation.
---------------------------------------------------------------------------

    In other cases, the effect of other motor vehicle standards of the
Government may be neutral, or positive. Since the Obama administration,
NHTSA has considered the GHG standards set by EPA as ``other motor
vehicle standards of the Government.'' In the 2012 final rule, NHTSA
stated that ``To the extent the GHG standards result in increases in
fuel economy, they would do so almost exclusively as a result of
inducing manufacturers to install the same types of technologies used
by manufacturers in complying with the CAFE standards.'' \410\ NHTSA
concluded in 2012 that ``no further action was needed'' because ``the
agency had already considered EPA's [action] and the harmonization
benefits of the National Program in developing its own [action].''
\411\ In the 2020 final rule, NHTSA reinforced that conclusion by
explaining that a textual analysis of the statutory language made it
clear that EPA's CO2 standards applicable to light-duty
vehicles are literally ``other motor vehicle standards of the
Government,'' because they are standards set by a Federal agency that
apply to motor vehicles. NHTSA and EPA are obligated by Congress to
exercise their own independent judgment in fulfilling their statutory
missions, even though both agencies' regulations affect both fuel
economy and CO2 emissions. There are differences between the
two agencies' programs that make NHTSA's CAFE standards and EPA's GHG
standards not perfectly one-to-one (even besides the fact that EPA
regulates other GHGs besides CO2, EPA's CO2
standards also differ from NHTSA's in a variety of ways, often because
NHTSA is bound by statute to a certain aspect of CAFE regulation).
NHTSA endeavors to create standards that meet our statutory obligations
and still avoid requiring manufacturers to build multiple fleets of
vehicles for the U.S. market.\412\ As in 2020, NHTSA has continued to
do all of these things with this proposal.
---------------------------------------------------------------------------

    \410\ 77 FR 62624, 62669 (Oct. 15, 2012).
    \411\ Id.
    \412\ Massachusetts v. EPA, 549 U.S. 497, 532 (2007) (``[T]here
is no reason to think that the two agencies cannot both administer
their obligations and yet avoid inconsistency.'').
---------------------------------------------------------------------------

    Similarly, NHTSA has considered and accounted for California's ZEV
mandate (and its adoption by the other Section 177 states) in
developing the baseline for this proposal. As discussed above, NHTSA
has not expressly accounted for California's GHG standards for the
model years subject to this rulemaking in the baseline analysis for
this proposal,\413\ but seeks comment on this approach for the final
rule. NHTSA notes again that no final decision has yet been made on the
CAA waiver for California.
---------------------------------------------------------------------------

    \413\ As discussed elsewhere, however, NHTSA has sought to
account in the baseline for the California Framework Agreement with
BMW, Ford, Honda, VWA, and Volvo.
---------------------------------------------------------------------------

(d) The Need of the U.S. To Conserve Energy
    NHTSA has consistently interpreted ``the need of the United States
to conserve energy'' to mean ``the consumer cost, national balance of
payments, environmental, and foreign policy implications of our need
for large quantities of petroleum, especially imported petroleum.''
\414\
---------------------------------------------------------------------------

    \414\ 42 FR 63184, 63188 (Dec. 15, 1977).
---------------------------------------------------------------------------

(1) Consumer Costs and Fuel Prices
    Fuel for vehicles costs money for vehicle owners and operators, so
all else equal, consumers benefit from vehicles that need less fuel to
perform the same amount of work. Future fuel prices are a critical
input into the economic analysis of potential CAFE standards because
they determine the value of fuel savings both to new vehicle buyers and
to society; the amount of fuel economy that the new vehicle market is
likely to demand in the absence of regulatory action; and they inform
NHTSA about the ``consumer cost . . . of our need for large quantities
of petroleum.'' For this proposal, NHTSA relied on fuel price
projections from the U.S. Energy Information Administration's (EIA)
Annual Energy Outlook (AEO) for 2021. Federal government agencies
generally use EIA's price projections in their assessment of future
energy-related policies.
    In previous CAFE rulemakings, discussions of fuel prices have
always been intended to reflect the price of motor gasoline. However, a
growing set of vehicle offerings that rely in part, or entirely, on
electricity suggests that gasoline prices are no longer the only fuel
prices relevant to evaluations of proposed CAFE standards. In the
analysis supporting this proposal, NHTSA considers the energy
consumption and resulting emissions from the entire on-road fleet,
which already contains a number of plug-in hybrid and fully electric
vehicles. Higher CAFE standards encourage manufacturers to improve fuel
economy; concurrently, manufacturers will foreseeably seek to continue
to maximize profit (or minimize compliance cost), and some reliance on
electrification is a viable strategy for some manufacturers, even
though NHTSA does not consider it in determining maximum feasible CAFE

stringency. Under the more stringent CAFE alternatives in this
proposal, we see a greater reliance on electrification technologies in
the analysis in the years following the explicitly-regulated model
years, even though internal combustion engines continue to be the most
common powertrain across the industry in the action years of this
proposal.
    While the current national average electricity price is
significantly higher than that of gasoline, on an energy equivalent
basis ($/MMBtu),\415\ electric motors convert energy into propulsion
much more efficiently than internal combustion engines. This means
that, even though the energy-equivalent prices of electricity are
higher, electric vehicles still produce fuel savings for their owners.
EIA also projects rising real gasoline prices over the next three
decades, while projecting real electricity prices to remain relatively
flat. As the reliance on electricity grows in the light-duty fleet,
NHTSA will continue to monitor the trends in electricity prices and
their implications for CAFE standards. Even if NHTSA is prohibited from
considering electrification as a technology during the model years
covered by the rulemaking, the consumer (and social) cost implications
of manufacturers otherwise switching to electrification may remain
relevant to the agency's considerations.
---------------------------------------------------------------------------

    \415\ Source: AEO 2021, Table 3.
---------------------------------------------------------------------------

    For now, gasoline is still the dominant fuel used in light-duty
transportation. As such, consumers, and the economy more broadly, are
subject to fluctuations in price that impact the cost of travel and,
consequently, the demand for mobility. Over the last decade, the U.S.
has become a stabilizing force in the global oil market and our
reliance on imported petroleum has decreased steadily. The most recent
Annual Energy Outlook, AEO 2021, projects the U.S. to be a net exporter
of petroleum and other liquids through 2050 in the Reference Case. Over
the last decade, EIA projections of real fuel prices have generally
flattened in recognition of the changing dynamics of the oil market and
slower demand growth, both in the U.S. and in developing markets. For
example, the International Energy Agency projects that global demand
for gasoline is unlikely to ever return to its 2019 level (before the
pandemic).\416\ However, vehicles are long-lived assets and the long-
term price uncertainty of petroleum still represents a risk to
consumers, albeit one that has decreased in the last decade. Continuing
to reduce the amount of money consumers spend on vehicle fuel thus
remains an important consideration for the need of the U.S. to conserve
energy.
---------------------------------------------------------------------------

    \416\ International Energy Agency, Oil 2021, (p. 30), https://iea.blob.core.windows.net/assets/1fa45234-bac5-4d89-a532-768960f99d07/Oil_2021-PDF.pdf.
---------------------------------------------------------------------------

(2) National Balance of Payments
    NHTSA has consistently included consideration of the ``national
balance of payments'' as part of the need of the U.S. to conserve
energy because of concerns that importing large amounts of oil created
a significant wealth transfer to oil-exporting countries and left the
U.S. economically vulnerable.\417\ As recently as 2009, nearly half the
U.S. trade deficit was driven by petroleum,\418\ yet this concern has
been less critical in more recent CAFE actions, in part because other
factors besides petroleum consumption have been playing a bigger role
in the U.S. trade deficit.\419\ While transportation demand is expected
to increase as the economy recovers from the pandemic, it is
foreseeable that the trend of trade in consumer goods and services
continuing to dominate the national balance of payments, as compared to
petroleum, will continue during the rulemaking timeframe.
---------------------------------------------------------------------------

    \417\ For the earliest discussion of this topic, see 42 FR
63184, 63192 (Dec. 15, 1977) (``A major reason for this need [to
reduce petroleum consumption] is that the importation of large
quantities of petroleum creates serious balance of payments and
foreign policy problems. The United States currently spends
approximately $45 billion annually for imported petroleum. But for
this large expenditure, the current large U.S. trade deficit would
be a surplus.'').
    \418\ See, Today in Energy: Recent improvements in petroleum
trade balance mitigate U.S. trade deficit, U.S. Energy Information
Administration (July 21, 2014). Available at https://www.eia.gov/todayinenergy/detail.php?id=17191 and in the docket for this
rulemaking, NHTSA-2021-0053.
    \419\ Consumer products are the primary drivers of the trade
deficit. In 2020, the U.S. imported $2.4 trillion in consumer goods,
versus $116.4 billion of petroleum, which is the lowest amount since
2002. The 2020 goods deficit of $904.9 billion was the highest on
record, while the 2020 petroleum surplus of $18.1 billion was the
first annual surplus on record. See U.S. Census Bureau, ``Annual
2020 Press Highlights,'' at census.gov/foreign-trade/statistics/highlights/AnnualPressHighlights.pdf, and available in the docket
for this rulemaking. While 2020 was an unusual year for U.S.
transportation demand, given the global pandemic, this is consistent
with existing trends in which consumer products imports
significantly outweigh oil imports.
---------------------------------------------------------------------------

    That said, the U.S. continues to rely on oil imports, and NHTSA
continues to recognize that reducing the vulnerability of the U.S. to
possible oil price shocks remains important. This proposal aims to
improve fleet-wide fuel efficiency and to help reduce the amount of
petroleum consumed in the U.S., and therefore aims to improve this part
of the U.S. balance of payments.
(3) Environmental Implications
    Higher fleet fuel economy reduces U.S. emissions of CO2
as well as various other pollutants by reducing the amount of oil that
is produced and refined for the U.S. vehicle fleet, but can also
potentially increase emissions by reducing the cost of driving, which
can result in increased vehicle miles traveled (i.e., the rebound
effect). Thus, the net effect of more stringent CAFE standards on
emissions of each pollutant depends on the relative magnitudes of its
reduced emissions in fuel refining and distribution and increases in
its emissions from vehicle use. Fuel savings from CAFE standards also
necessarily result in lower emissions of CO2, the main
greenhouse gas emitted as a result of refining, distribution, and use
of transportation fuels.
    NHTSA has considered environmental issues, both within the context
of EPCA and the context of the National Environmental Policy Act
(NEPA), in making decisions about the setting of standards since the
earliest days of the CAFE program. As courts of appeal have noted in
three decisions stretching over the last 20 years,\420\ NHTSA defined
``the need of the United States to conserve energy'' in the late 1970s
as including, among other things, environmental implications. In 1988,
NHTSA included climate change concepts in its CAFE NPRMs and prepared
its first environmental assessment addressing that subject.\421\ It
cited concerns about climate change as one of the reasons for limiting
the extent of its reduction of the CAFE standard for MY 1989 passenger
cars.\422\
---------------------------------------------------------------------------

    \420\ CAS, 793 F.2d 1322, 1325 n. 12 (D.C. Cir. 1986); Public
Citizen, 848 F.2d 256, 262-63 n. 27 (D.C. Cir. 1988) (noting that
``NHTSA itself has interpreted the factors it must consider in
setting CAFE standards as including environmental effects''); CBD,
538 F.3d 1172 (9th Cir. 2007).
    \421\ 53 FR 33080, 33096 (Aug. 29, 1988).
    \422\ 53 FR 39275, 39302 (Oct. 6, 1988).
---------------------------------------------------------------------------

    NHTSA also considers environmental justice issues as part of the
environmental considerations under the need of the U.S. to conserve
energy, per Executive Order 12898, ``Federal Actions to Address
Environmental Justice in Minority Populations'' \423\ and DOT Order
5610.2(c), ``U.S. Department of Transportation Actions to Address
Environmental Justice in Minority Populations and Low-Income
Populations.'' \424\ The affected environment for environmental justice
is nationwide, with a focus on areas that

could contain minority and low-income communities who would most likely
be exposed to the environmental and health effects of oil production,
distribution, and consumption, or the impacts of climate change. This
includes areas where oil production and refining occur, areas near
roadways, coastal flood-prone areas, and urban areas that are subject
to the heat island effect.
---------------------------------------------------------------------------

    \423\ 59 FR 629 (Feb. 16, 1994).
    \424\ Department of Transportation Updated Environmental Justice
Order 5610.2(c) (May 14, 2021).
---------------------------------------------------------------------------

    Numerous studies have found that some environmental hazards are
more prevalent in areas where minority and low-income populations
represent a higher proportion of the population compared with the
general population. In terms of effects due to criteria pollutants and
air toxics emissions, the body of scientific literature points to
disproportionate representation of minority and low-income populations
in proximity to a range of industrial, manufacturing, and hazardous
waste facilities that are stationary sources of air pollution, although
results of individual studies may vary. While the scientific literature
specific to oil refineries is limited, disproportionate exposure of
minority and low-income populations to air pollution from oil
refineries is suggested by other broader studies of racial and
socioeconomic disparities in proximity to industrial facilities
generally. Studies have also consistently demonstrated a
disproportionate prevalence of minority and low-income populations that
are living near mobile sources of pollutants (such as roadways) and
therefore are exposed to higher concentrations of criteria air
pollutants in multiple locations across the United States. Lower-
positioned socioeconomic groups are also differentially exposed to air
pollution and differentially vulnerable to effects of exposure.
    In terms of exposure to climate change risks, the literature
suggests that across all climate risks, low-income communities, some
communities of color, and those facing discrimination are
disproportionately affected by climate events. Communities overburdened
by poor environmental quality experience increased climate risk due to
a combination of sensitivity and exposure. Urban populations
experiencing inequities and health issues have greater susceptibility
to climate change, including substantial temperature increases. Some
communities of color facing cumulative exposure to multiple pollutants
also live in areas prone to climate risk. Indigenous peoples in the
United States face increased health disparities that cause increased
sensitivity to extreme heat and air pollution. Together, this
information indicates that climate impacts disproportionately affect
minority and low-income populations because of socioeconomic
circumstances, histories of discrimination, and inequity. Furthermore,
high temperatures can exacerbate poor air quality, further compounding
the risk to overburdened communities. Finally, health-related
sensitivities in low-income and minority populations increase risk of
damaging impacts from poor air quality under climate change,
underscoring the potential benefits of improving air quality to
communities overburdened by poor environmental quality.
    In the SEIS, Chapters 3, 4, 5, and 8 discuss the connections
between oil production, distribution, and consumption, and their health
and environmental impacts.
    All of the action alternatives considered in this proposal reduce
carbon dioxide emissions and, thus, the effects of climate change, as
compared to the baseline. Effects on criteria pollutants and air toxics
emissions are somewhat more complicated, for a variety of reasons, as
discussed in Section VI.C, although over time and certainly over the
lifetimes of the vehicles that would be subject to this proposal, these
emissions are currently forecast to fall significantly.
    As discussed above, while the majority of light-duty vehicles will
continue to be powered by internal combustion engines in the near- to
mid-term under all regulatory alternatives, the more stringent
alternatives do appear in the analysis to lead to greater
electrification in the mid- to longer-term. While NHTSA is prohibited
from considering electric vehicles in determining maximum feasible CAFE
levels, electric vehicles (which appear both in the agency's baseline
and which may be produced in model years following the period of
regulation as an indirect effect of more stringent standards, or in
response to other standards or to market demand) produce few to zero
tailpipe emissions, and thus contribute meaningfully to the
decarbonization of the transportation sector, in addition to having
environmental, health, and economic development benefits, although
these benefits may not yet be equally distributed across society. They
also present new environmental (and social) questions, like those
associated with reduced tailpipe emissions, upstream electricity
production, minerals extraction for battery components, and ability to
charge an electric vehicle. The upstream environmental effects of
extraction and refining for petroleum are well-recognized; minerals
extraction and refining can also have significant downsides. As one
example of documentation of these effects, the United Nations
Conference on Trade and Development issued a report in July 2020
describing acid mine drainage and uranium-laced dust associated with
cobalt mines in the DRC, along with child labor concerns; considerable
groundwater consumption and dust issues that harm miners and indigenous
communities in the Andes; issues with fine particulate matter causing
human health effects and soil contamination in regions near graphite
mines; and so forth.\425\ NHTSA's SEIS discusses these and other
effects (such as production and end-of-life issues) in more detail, and
NHTSA will continue to monitor these issues going forward insofar as
CAFE standards may increase electrification levels even if NHTSA does
not expressly consider electrification in setting those standards,
because NHTSA does not control what technologies manufacturers use to
meet those standards, and because NHTSA is required to consider the
environmental effects of its standards under NEPA.
---------------------------------------------------------------------------

    \425\ UNCTAD, ``Commodities at a Glance: Special issue on
strategic battery raw materials,'' No. 13, Geneva, 2020, at 46.
Available at https://unctad.org/system/files/official-document/ditccom2019d5_en.pdf and in the docket for this rulemaking, NHTSA-
2021-0053.
---------------------------------------------------------------------------

    NHTSA carefully considered the environmental effects of this
proposal, both quantitative and qualitative, as discussed in the SEIS
and in Sections VI.C and VI.D.
(4) Foreign Policy Implications
    U.S. consumption and imports of petroleum products impose costs on
the domestic economy that are not reflected in the market price for
crude petroleum or in the prices paid by consumers for petroleum
products such as gasoline. These costs include (1) higher prices for
petroleum products resulting from the effect of U.S. oil demand on
world oil prices; (2) the risk of disruptions to the U.S. economy
caused by sudden increases in the global price of oil and its resulting
impact of fuel prices faced by U.S. consumers, and (3) expenses for
maintaining the strategic petroleum reserve (SPR) to provide a response
option should a disruption in commercial oil supplies threaten the U.S.
economy, to allow the U.S. to meet part of its International Energy
Agency obligation to maintain emergency oil stocks, and to provide a
national defense fuel reserve. Reducing U.S. consumption of crude oil
or refined petroleum products (by reducing motor

fuel use) can reduce these external costs.\426\
---------------------------------------------------------------------------

    \426\ A 2006 report by the Council on Foreign Relations
identified six foreign policy costs that it said arose from U.S.
consumption of imported oil. These costs include (1) the adverse
effect that significant disruptions in oil supply will have for
political and economic conditions in the U.S. and other importing
countries; (2) the fears that the current international system is
unable to ensure secure oil supplies when oil is seemingly scarce
and oil prices are high; (3) political realignment from dependence
on imported oil that limits U.S. alliances and partnerships; (4) the
flexibility that oil revenues give oil-exporting countries to adopt
policies that are contrary to U.S. interests and values; (5) an
undermining of sound governance by the revenues from oil and gas
exports in oil-exporting countries; and (6) an increased U.S.
military presence in the Middle East that results from the strategic
interest associated with oil consumption. Council on Foreign
Relations, National Security Consequences of U.S. Oil Dependency,
Independent Task Force Report No. 58, October 2006. Available at
https://cdn.cfr.org/sites/default/files/report_pdf/0876093659.pdf
and in the docket for this rulemaking, NHTSA-2021-0053. Brown and
Huntington (2015) find that these six costs are either implicitly
incorporated in the welfare-theoretic analysis, are not
externalities, or cannot be quantified. Brown, Stephen and Hillard
Huntington, Evaluating U.S. oil security and import reliance, Energy
Policy 108, 2015, at 512-523. Available at https://www.sciencedirect.com/science/article/abs/pii/S0301421515000026 and
for hard copy review at DOT headquarters. To the extent that these
costs are externalities that cannot be quantified, the measured
security costs of U.S. reliance on imported oil will be understated.
---------------------------------------------------------------------------

    Stephen Brown, who has published extensively on price shock and
foreign policy risks associated with U.S. oil consumption, stated in a
recent paper that:

    Over the past few years, world oil market conditions have
changed considerably (with the United States importing much less
oil), new estimates of the probabilities of world oil supply
disruptions have become available, and new estimates of the response
of U.S. real GDP to oil supply shocks and the short-run elasticity
of oil demand have become available. These developments suggest that
it is time to update the estimates of the security costs of U.S. oil
consumption. The new estimates of the oil security premiums suggest
that U.S. oil security may have become less of an issue than it was
in the past, mostly as a result of new estimates of the short-run
elasticity of demand and the response of U.S. real GDP to oil price
shocks.\427\
---------------------------------------------------------------------------

    \427\ Brown, Stephen. ``New Estimates of the security costs of
U.S. oil consumption,'' Energy Policy, Vol. 113, Feb. 2018, at 172.
Available at https://www.sciencedirect.com/science/article/abs/pii/S0301421517307413 and for hard copy review at DOT headquarters.

    Brown notes that ``Because we have not observed a modern economy
with large oil supply disruptions, we have no reliable method to
quantify the effects of these disruptions,'' and ``The result could
be an average of old and new results or estimation problems and a
poor fit.'' \428\ Geopolitical risk can still affect global oil
prices, of course, because oil is a global market, and thus can
affect U.S. oil prices, although possibly by less than in the
past.\429\ The U.S. still maintains a military presence in certain
parts of the world to help secure global access to petroleum
supplies. Chapter 6.2.4 of the TSD discusses this topic in more
detail. Brown concludes that:
---------------------------------------------------------------------------

    \428\ Id. at 181.
    \429\ Also in 2018, Beccue, Huntington, Leiby, and Vincent
reported on their findings of an expert panel on oil market
disruption risks and likelihoods, and stated that based on these
findings, during the period of 2016-2025, ``It is very likely that a
disruption greater than 2 MMBD will occur (81%). However, it is
unlikely that disruptions greater than 15 MMBD will occur (1%).''
They further state that ``. . . experts in the current study expect
that both gross shocks and excess capacity will be lower than
before, resulting in similar net disruptions [to what was estimated
in 2005]. Although turmoil remains high in these countries with the
ongoing Iraq war, tensions between Iran and its Arab neighbors, and
concern over the ability of terrorists to cut oil supply facilities,
these conditions do not produce larger oil market disruptions.''
They conclude that ``In general, this panel of energy security
experts has concluded that current world events and energy markets
have increased the likelihood of oil disruptions since 1996 but
demonstrated a similar risk profile compared to the 2005 period.
Moreover, their assessments indicate that lower oil price paths make
net disruptions of any given size more likely.'' Beccue et al., ``An
updated assessment of oil market disruption risks,'' Energy Policy,
Vol. 115, Apr. 2018, at 456. Available at https://www.sciencedirect.com/science/article/abs/pii/S0301421517308285 and
for hard copy review at DOT headquarters.

    Nonetheless, only the highest estimates of the oil security
premiums suggest that U.S. oil security is nearly an equally
important issue to the environmental costs of oil use. The mid-
estimates from the model that may best represent how the world oil
market and the U.S. economy will respond to world oil supply
disruptions of various sizes . . . find U.S. consumption of imported
or domestic oil does yield important security costs, but those costs
are much lower than the estimated environmental costs of oil use.
Consistent with Brown and Huntington (2013), the substitution of
domestic oil for imported oil only slightly improves U.S. oil
security. Oil conservation is more effective than increased domestic
oil production at improving U.S. oil security.\430\
---------------------------------------------------------------------------

    \430\ Brown, 2018, at 182.

    NHTSA agrees both that oil conservation improves U.S. oil security,
and that the environmental costs of oil use are intertwined with the
security costs of oil use in some ways as climate change destabilizes
traditional geopolitical power structures over time. The effect of
climate change on natural resources inevitably has security
implications--population changes and shifts have already been forced in
some countries, which can create social and security effects at all
geopolitical levels--local, national, regional, and global. CAFE
standards over the last few decades have conserved significant
quantities of oil, and the petroleum intensity of the U.S. fleet has
decreased significantly. Continuing to improve energy conservation and
reduce U.S. oil consumption by raising CAFE standards further has the
potential to continue to help with all of these considerations.
    As standards and market demand move the U.S. light-duty vehicle
fleet toward electrification, different potential foreign policy
implications arise. Most vehicle electrification is enabled by lithium-
ion batteries. Lithium-ion battery global value chains have several
phases: Sourcing (mining/extraction); processing/refining; cell
manufacturing; battery manufacturing; installation in an EV; and
recycling.\431\ Because lithium-ion battery materials have a wide
global diversity of origin, accessing them can pose varying
geopolitical challenges.\432\ The U.S. International Trade Commission
(USITC) recently summarized 2018 data from the U.S. Geological Survey
on the production/sourcing of the four key lithium-ion battery
materials, as shown in Table VI-5.
---------------------------------------------------------------------------

    \431\ Scott, Sarah, and Robert Ireland, ``Lithium-Ion Battery
Materials for Electric Vehicles and their Global Value Chains,''
Office of Industries Working Paper ID-068, U.S. International Trade
Commission, June 2020, at 7. Available at https://www.usitc.gov/publications/332/working_papers/gvc_overview_scott_ireland_508_final_061120.pdf and in the docket
for this rulemaking, NHTSA-2021-0053.
    \432\ Id. at 8.

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

[GRAPHIC] [TIFF OMITTED] TP03SE21.180

    Of these  sources, the USITC notes that while ``lithium has
generally not faced political instability risks,'' ``Because of the
[Democratic Republic of Congo's] ongoing political instability, as well
as poor labor conditions, sourcing cobalt faces significant
geopolitical challenges.'' \434\ Nickel is also used extensively in
stainless steel production, and much of what is produced in Indonesia
and the Philippines is exported to China for stainless steel
manufacturing.\435\ Obtaining graphite for batteries does not currently
pose geopolitical obstacles, but the USITC notes that Turkey has great
potential to become a large graphite producer, which would make
stability there a larger concern.\436\
---------------------------------------------------------------------------

    \433\ Id., citing U.S. Geological Survey, Mineral Commodity
Summaries, Feb. 2019.
    \434\ Id. at 8, 9.
    \435\ Id at 9.
    \436\ Id.
---------------------------------------------------------------------------

    For materials processing and refining, China is the largest
importer of unprocessed lithium, which it then transforms into
processed or refined lithium,\437\ the leading producer of refined
cobalt (with Finland a distant second),\438\ one of the leading
producers of primary nickel products (along with Indonesia, Japan,
Russia, and Canada) and one of the leading refiners of nickel into
nickel sulfate, the chemical compound used for cathodes in lithium-ion
batteries,\439\ and one of the leading processors of graphite intended
for use in lithium-ion batteries as well.\440\ In all regions,
increasing attention is being given to vertical integration in the
lithium-ion battery industry from material extraction, mining and
refining, battery materials, cell production, battery systems, reuse,
and recycling. The United States is lagging in upstream capacity;
although the U.S. has some domestic lithium deposits, it has very
little capacity in mining and refining any of the key raw materials. As
mentioned elsewhere, however, there can be benefits and drawbacks in
terms of environmental consequences associated with increased mining,
refining, and battery production.
---------------------------------------------------------------------------

    \437\ Id.
    \438\ Id. at 10.
    \439\ Id.
    \440\ Id.
---------------------------------------------------------------------------

    China and the European Union (EU) are also major consumers of
lithium-ion batteries, along with Japan, Korea, and others. Lithium-ion
batteries are used not only in light-duty vehicles, but in many
ubiquitous consumer goods, and are likely to be used eventually in
other forms of transportation as well. Thus, securing sufficient
batteries to enable large-scale shifts to electrification in the U.S.
light-duty vehicle fleet may face new issues as vehicle companies
compete with other new sectors. NHTSA will continue to monitor these
issues going forward.
    President Biden has already issued an Executive Order on
``America's Supply Chains,'' aiming to strengthen the resilience of
America's supply chains, including those for automotive batteries.\441\
Reports are to be developed within one year of issuance of the
Executive Order, and NHTSA will monitor these findings as they develop.
---------------------------------------------------------------------------

    \441\ Executive Order 14017, ``America's Supply Chains,'' Feb.
24, 2021. 86 FR 11849 (Mar. 1, 2021).
---------------------------------------------------------------------------

(e) Factors That NHTSA Is Prohibited From Considering
    EPCA also provides that in determining the level at which it should
set CAFE standards for a particular model year, NHTSA may not consider
the ability of manufacturers to take advantage of several EPCA
provisions that facilitate compliance with CAFE standards and thereby
reduce the costs of compliance.\442\ NHTSA cannot consider compliance
credits that manufacturers earn by exceeding the CAFE standards and
then use to achieve compliance in years in which their measured average
fuel economy falls below the standards. NHTSA also cannot consider the
use of alternative fuels by dual fueled automobiles, nor the fuel
economy (i.e., the availability) of dedicated alternative fueled
automobiles--including battery-electric vehicles--in any model year.
EPCA encourages the production of alternative fuel vehicles by
specifying that their fuel economy is to be determined using a special
calculation procedure that results in those vehicles being assigned a
higher equivalent fuel economy level than they actually achieve.
---------------------------------------------------------------------------

    \442\ 49 U.S.C. 32902(h).
---------------------------------------------------------------------------

    The effect of the prohibitions against considering these statutory
flexibilities in setting the CAFE standards is that the flexibilities
remain voluntarily-employed measures. If NHTSA were instead to assume
manufacturer use of those flexibilities in setting new standards (as
NHTSA does in the ``EIS analysis,'' but not the ``standard setting
analysis''), compliance with higher standards would appear more cost-
effective and, potentially, more feasible, which would thus effectively
require manufacturers to use those flexibilities if NHTSA determined
that standards should be more stringent. By keeping NHTSA from
including them in our stringency determination, the provision ensures
that those statutory credits

remain true compliance flexibilities. However, the flip side of the
effect described above is that preventing NHTSA from assuming use of
dedicated alternative fuel vehicles for compliance makes it more
difficult for the CAFE program to facilitate a complete transition of
the U.S. light-duty fleet to full electrification.
    In contrast, for the non-statutory fuel economy improvement value
program that NHTSA developed by regulation, NHTSA does not consider
these fuel economy adjustments subject to the 32902(h) prohibition on
considering flexibilities. The statute is very clear as to which
flexibilities are not to be considered. When the agency has introduced
additional flexibilities such as A/C efficiency and ``off-cycle''
technology fuel improvement values, NHTSA has considered those
technologies as available in the analysis. Thus, this analysis includes
assumptions about manufacturers' use of those technologies, as detailed
in Chapter 3.8 of the accompanying TSD.
    NHTSA notes that one of the recommendations in the 2021 NAS Report
was for Congress to ``amend the statute to delete the [32902(h)]
prohibition on considering the fuel economy of dedicated alternative
fueled vehicles in setting CAFE standards.'' \443\ Recognizing that
changing statutory text is Congress' affair and not NHTSA's, the
committee further recommended that if Congress does not change the
statute, NHTSA should consider adding another attribute to the fuel
economy standard function, like ``the expected market share of ZEVs in
the total U.S. fleet of new light-duty vehicles--such that the
standards increase as the share of ZEVs in the total U.S. fleet
increases.'' \444\ NHTSA discusses this recommendation further in
Section III.B.
---------------------------------------------------------------------------

    \443\ 2021 NAS Report, Summary Recommendation 5.
    \444\ Id.
---------------------------------------------------------------------------

    While NHTSA does not consider the prohibited items in its standard-
setting analysis or for making its tentative decision about what levels
of standards would be maximum feasible, NHTSA notes that it is informed
by the ``EIS'' analysis presented in the PRIA. The EIS analysis does
not contain these restrictions, and therefore accounts for credit
availability and usage, and manufacturers' ability to employ
alternative fueled vehicles, for purpose of conformance with E.O. 12866
and NEPA regulations. Under the EIS analysis, compliance generally
appears less costly. For example, this EIS analysis shows
manufacturers' costs averaging about $1,070 in MY 2029 under the
proposed standards, as compared to the $1,175 shown by the standard
setting analysis. Again, however, for purposes of tentatively
determining maximum feasible CAFE levels, NHTSA considers only the
standard setting analysis shown in the NPRM, consistent with Congress'
direction.
(f) Other Considerations in Determining Maximum Feasible CAFE Standards
    NHTSA has historically considered the potential for adverse safety
effects in setting CAFE standards. This practice has been upheld in
case law.\445\ In this proposal, NHTSA has considered the safety
effects discussed in Section V of this preamble and in Chapter 5 of the
accompanying PRIA. NHTSA discusses its consideration of these effects
in Section VI.D.
---------------------------------------------------------------------------

    \445\ As courts have recognized, ``NHTSA has always examined the
safety consequences of the CAFE standards in its overall
consideration of relevant factors since its earliest rulemaking
under the CAFE program.'' Competitive Enterprise Institute v. NHTSA,
901 F.2d 107, 120 n. 11 (D.C. Cir. 1990) (``CEI-I'') (citing 42 FR
33534, 33551 (Jun. 30, 1977). Courts have consistently upheld
NHTSA's implementation of EPCA in this manner. See, e.g.,
Competitive Enterprise Institute v. NHTSA, 956 F. 2d 321, 322 (D.C.
Cir. 1992) (``CEI-II'') (in determining the maximum feasible
standard, ``NHTSA has always taken passenger safety into account)
(citing CEI-I, 901 F.2d at 120 n. 11); Competitive Enterprise
Institute v. NHTSA, 45 F.3d 481, 482-83 (D.C. Cir. 1995) (CEI-III)
(same); Center for Biological Diversity v. NHTSA, 538 F.3d 1172,
1203-04 (9th Cir. 2008) (upholding NHTSA's analysis of vehicle
safety issues associated with weight in connection with the MYs
2008-2011 light truck CAFE rulemaking).
---------------------------------------------------------------------------

B. Administrative Procedure Act

    The Administrative Procedure Act governs agency rulemaking
generally and provides the standard of judicial review for agency
actions. To be upheld under the ``arbitrary and capricious'' standard
of judicial review under the APA, an agency rule must be rational,
based on consideration of the relevant factors, and within the scope of
the authority delegated to the agency by statute. The agency must
examine the relevant data and articulate a satisfactory explanation for
its action including a ``rational connection between the facts found
and the choice made.'' \446\
---------------------------------------------------------------------------

    \446\ Burlington Truck Lines, Inc. v. United States, 371 U.S.
156, 168 (1962).
---------------------------------------------------------------------------

    Statutory interpretations included in an agency's rule are subject
to the two-step analysis of Chevron, U.S.A. v. Natural Resources
Defense Council.\447\ Under step one, where a statute ``has directly
spoken to the precise question at issue,'' id. at 842, the court and
the agency ``must give effect to the unambiguously expressed intent of
Congress.'' \448\ If the statute is silent or ambiguous regarding the
specific question, the court proceeds to step two and asks ``whether
the agency's answer is based on a permissible construction of the
statute.'' \449\ The APA also requires that agencies provide notice and
comment to the public when proposing regulations,\450\ as NHTSA is
doing in this proposal.
---------------------------------------------------------------------------

    \447\ 467 U.S. 837 (1984).
    \448\ Id. at 843.
    \449\ Id.
    \450\ 5 U.S.C. 553.
---------------------------------------------------------------------------

    NHTSA recognizes that this proposal, like the 2020 final rule, is
reconsidering standards previously promulgated. 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 authority and
remain consistent with the agency's views and practices. As a matter of
law, ``an Agency is entitled to change its interpretation of a
statute.'' \451\ 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.'' \452\
---------------------------------------------------------------------------

    \451\ Phoenix Hydro Corp. v. FERC, 775 F.2d 1187, 1191 (D.C.
Cir. 1985).
    \452\ 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).
---------------------------------------------------------------------------

    ``Changing policy does not, on its own, trigger an especially
`demanding burden of justification.' '' \453\ Providing a reasoned
explanation ``would ordinarily demand that [the Agency] display
awareness that it is changing position.'' \454\ Beyond that, however,
``[w]hen an agency changes its existing position, it `need not always
provide a more detailed justification than what would suffice for a new
policy created on a blank slate.' '' \455\ While the agency ``must show
that there are good reasons for the new policy,'' the agency ``need not
demonstrate to a court's satisfaction that the reasons for the new
policy are

better than the reasons for the old one.'' \456\ ``[I]t suffices that
the new policy is permissible under the statute, that there are good
reasons for it, and that the Agency believes it to be better, which the
conscious change of course adequately indicates.'' \457\ For instance,
``evolving notions'' about the appropriate balance of varying policy
considerations constitute sufficiently good reasons for a change in
position.\458\ Moreover, it is ``well within an Agency's discretion''
to change policy course even when no new facts have arisen: Agencies
are permitted to conduct a ``reevaluation of which policy would be
better in light of the facts,'' without ``rely[ing] on new facts.''
\459\
---------------------------------------------------------------------------

    \453\ See Mingo Logan Coal Co. v. EPA, 829 F.3d 710, 718 (D.C.
Cir. 2016) (quoting Ark Initiative v. Tidwell, 816 F.3d 119, 127
(D.C. Cir. 2016)).
    \454\ FCC v. Fox Television Stations, Inc. 556 U.S. 502, 515
(2009) (emphasis in original) (``An agency may not, for example,
depart from a prior policy sub silentio or simply disregard rules
that are still on the books.'').
    \455\ Encino Motorcars, LLC, 136 S Ct. at 2125-26 (quoting Fox
Television Stations, Inc. 556 U.S. at 515).
    \456\ Fox Television Stations, Inc., 556 U.S. at 515 (emphasis
in original).
    \457\ Id. (emphasis in original).
    \458\ N. Am.'s Bldg. Trades Unions v. Occupational Safety &
Health Admin., 878 F.3d 271, 303 (D.C. Cir. 2017) (quoting the
agency's rule).
    \459\ Nat'l Ass'n of Home Builders v. EPA, 682 F.3d 1032, 1037-
38 (D.C. Cir. 2012).
---------------------------------------------------------------------------

    To be sure, providing ``a more detailed justification'' is
appropriate in some cases. ``Sometimes [the agency] must [provide a
more detailed justification than what would suffice for a new policy
created on a blank slate]--when, for example, its new policy rests upon
factual findings that contradict those which underlay its prior policy;
or when its prior policy has engendered serious reliance interests that
must be taken into account.'' \460\ This preamble, and the accompanying
TSD and PRIA, all provide extensive detail on the agency's updated
analysis, and Section VI.D contains the agency's explanation of how the
agency has considered that analysis and other relevant information in
tentatively determining that the proposed CAFE standards are maximum
feasible for MYs 2024-2026 passenger cars and light trucks.
---------------------------------------------------------------------------

    \460\ See Fox Television Stations, Inc., 556 U.S. at 515 (2009).
---------------------------------------------------------------------------

C. National Environmental Policy Act

    As discussed above, EPCA requires NHTSA to determine the level at
which to set CAFE standards for each model year by considering the four
factors of 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. The
National Environmental Policy Act (NEPA) directs that environmental
considerations be integrated into that process.\461\ To explore the
potential environmental consequences of this rulemaking action, NHTSA
has prepared a Supplemental Environmental Impact Statement (``SEIS'')
for this proposal.\462\ The purpose of an EIS is to ``provide full and
fair discussion of significant environmental impacts and [to] inform
decisionmakers and the public of the reasonable alternatives which
would avoid or minimize adverse impacts or enhance the quality of the
human environment.'' \463\
---------------------------------------------------------------------------

    \461\ NEPA is codified at 42 U.S.C. 4321-47. The Council on
Environmental Quality (CEQ) NEPA implementing regulations are
codified at 40 CFR parts 1500-08.
    \462\ Because this proposal revises CAFE standards established
in the 2020 final rule, NHTSA chose to prepare a SEIS to inform that
amendment of the MYs 2024-2026 standards. See the SEIS for more
details.
    \463\ 40 CFR 1502.1.
---------------------------------------------------------------------------

    When preparing an EIS, NEPA requires an agency to compare the
potential environmental impacts of its proposed action and a reasonable
range of alternatives. In the SEIS, NHTSA analyzed a No Action
Alternative and three action alternatives. The alternatives represent a
range of potential actions the agency could take, and they are
described more fully in Section IV of this preamble, Chapter 1 of the
TSD, and Chapter 2 of the PRIA. The environmental impacts of these
alternatives, in turn, represent a range of potential environmental
impacts that could result from NHTSA's setting maximum feasible fuel
economy standards for passenger cars and light trucks.
    To derive the direct and indirect impacts of the action
alternatives, NHTSA compared each action alternative to the No Action
Alternative, which reflects baseline trends that would be expected in
the absence of any further regulatory action. More specifically, the No
Action Alternative in the SEIS assumed that the CAFE standards set in
the 2020 final rule for MYs 2021-2026 passenger cars and light trucks
would remain in effect. In addition, the No Action Alternative also
includes several other actions that NHTSA believes will occur in the
absence of further regulatory action, as discussed in more detail in
Section IV above: (1) California's ZEV mandate; (2) the ``Framework
Agreements'' between California and BMW, Ford, Honda, VWA, and Volvo,
which NHTSA implemented by including EPA's baseline GHG standards
(i.e., those set in the 2020 final rule) and introducing more stringent
GHG target functions for those manufacturers; and (3) the assumption
that manufacturers will also make any additional fuel economy
improvements estimated to reduce owners' estimated average fuel outlays
during the first 30 months of vehicle operation by more than the
estimated increase in new vehicle price. The No Action Alternative
provides a baseline against which to compare the environmental impacts
of other alternatives presented in the SEIS.\464\
---------------------------------------------------------------------------

    \464\ See 40 CFR 1502.2(e), 1502.14(d). CEQ has explained that
``[T]he regulations require the analysis of the no action
alternative even if the agency is under a court order or legislative
command to act. This analysis provides a benchmark, enabling
decision makers to compare the magnitude of environmental effects of
the action alternatives [See 40 CFR 1502.14(c).] . . . Inclusion of
such an analysis in the EIS is necessary to inform Congress, the
public, and the President as intended by NEPA. [See 40 CFR
1500.1(a).]'' Forty Most Asked Questions Concerning CEQ's National
Environmental Policy Act Regulations, 46 FR 18026 (Mar. 23, 1981).
---------------------------------------------------------------------------

    For the SEIS, NHTSA analyzed three action alternatives,
Alternatives 1 through 3, which ranged from increasing CAFE stringency
for MY 2024 by 9.14 percent for passenger cars and 11.02 percent for
light trucks, and increase stringency in MYs 2025 and 2026 by 3.26
percent per year for both passenger cars and light trucks (Alternative
1) to increasing CAFE stringency for each year, for each fleet, at 10
percent per year (Alternative 3). The range of action alternatives, as
well as the No Action Alternative, encompass a spectrum of possible
standards NHTSA could determine was maximum feasible based on the
different ways the agency could weigh EPCA's four statutory factors.
Throughout the SEIS, estimated impacts were shown for all of these
action alternatives, as well as for the No Action Alternative. For a
more detailed discussion of the environmental impacts associated with
the alternatives, see Chapters 3-6 of the SEIS, as well as Section V of
this preamble.
    NHTSA's SEIS describes potential environmental impacts to a variety
of resources, including fuel and energy use, air quality, climate, land
use and development, hazardous materials and regulated wastes,
historical and cultural resources, noise, and environmental justice.
The SEIS also describes how climate change resulting from global
greenhouse gas emissions (including CO2 emissions
attributable to the U.S. light-duty transportation sector under the
alternatives considered) could affect certain key natural and human
resources. Resource areas are assessed qualitatively and
quantitatively, as appropriate, in the SEIS, and the findings of that
analysis are summarized here.\465\
---------------------------------------------------------------------------

    \465\ The impacts described in this section come from NHTSA's
SEIS, which is being publicly issued simultaneously with this NPRM.
As described above, the SEIS is based on ``unconstrained'' modeling
rather than ``standard setting'' modeling. NHTSA conducts modeling
both ways in order to reflect the various statutory requirements of
EPCA/EISA and NEPA. The preamble employs the ``standard setting''
modeling in order to aid the decision-maker in avoiding
consideration of the prohibited items in 49 U.S.C. 32902(h) in
determining maximum feasible standards, but as a result, the impacts
reported here may differ from those reported elsewhere in this
preamble. However, NHTSA considers the impacts reported in the SEIS,
in addition to the other information presented in this preamble, the
TSD, and the PRIA, as part of its decision-making process.

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

    As the stringency of the alternatives increases, total U.S.
passenger car and light truck fuel consumption for the period of 2020
to 2050 decreases. Total light-duty vehicle fuel consumption from 2020
to 2050 under the No Action Alternative is projected to be 3,510
billion gasoline gallon equivalents (GGE). Light-duty vehicle fuel
consumption from 2020 to 2050 under the action alternatives is
projected to range from 3,409 billion GGE under Alternative 1 to 3,282
billion GGE under Alternative 3. Under Alternative 2, light-duty
vehicle fuel consumption from 2020 to 2050 is projected to be 3,344
billion GGE. All of the action alternatives would decrease fuel
consumption compared to the No-Action Alternative, with fuel
consumption decreases that range from 100 billion GGE under Alternative
1 to 227 billion GGE under Alternative 3.
    The relationship between stringency and criteria and air toxics
pollutant emissions is less straightforward, reflecting the complex
interactions among the tailpipe emissions rates of the various vehicle
types (passenger cars and light trucks, ICE vehicles and EVs, older and
newer vehicles, etc.), the technologies assumed to be incorporated by
manufacturers in response to CAFE standards, upstream emissions rates,
the relative proportions of gasoline, diesel, and electricity in total
fuel consumption, and changes in VMT from the rebound effect. In
general, emissions of criteria and toxic air pollutants increase very
slightly in the short term, and then decrease dramatically in the
longer term, across all action alternatives, with some exceptions. In
addition, the action alternatives would result in decreased incidence
of PM2.5-related health impacts in most years and
alternatives due to the emissions decreases. Decreases in adverse
health outcomes include decreased incidences of premature mortality,
acute bronchitis, respiratory emergency room visits, and work-loss
days.
    The air quality analysis in the SEIS identified the following
impacts on criteria air pollutants.
    For all criteria pollutants in 2025, emissions increase slightly
under the action alternatives compared to the No-Action Alternative.
The emission increases generally get larger (although they are still
small) from Alternative 1 through Alternative 3 (the most stringent
alternative in terms of required miles per gallon). This temporary
increase is largely due to new vehicle prices increasing in the short-
term, which slightly slows new-vehicle sales and encourages consumers
to buy used vehicles instead or retain existing vehicles for longer. As
the analysis timeframe progresses, the new, higher fuel-economy
vehicles become used vehicles, and the impacts of the standards change
direction. In 2025, across all criteria pollutants and action
alternatives, the smallest increase in emissions is 0.01 percent for
VOCs under Alternative 2; the largest increase is 0.6 percent and
occurs for SO2 under Alternative 3. We underscore that these
are fractions of a single percent.
    In 2035 and 2050, emissions of CO, NOX,
PM2.5, and VOCs generally decrease under the action
alternatives compared to the No-Action Alternative, except for CO in
2035 under Alternative 1 (0.07 percent increase) and NOX in
2035 under Alternative 3 (0.5 percent increase) (again, these are
fractions of a single percent), with the more stringent alternatives
having the largest decreases, except for NOX and
PM2.5 in 2035 (emissions decrease less or increase with more
stringent alternatives) and NOX in 2050 (emissions increase
under Alternative 3 relative to Alternative 2, due primarily to
slightly higher upstream emissions associated with greater
electrification rates). SO2 emissions generally increase
under the action alternatives compared to the No-Action Alternative
(except in 2035 under Alternative 1), with the more stringent
alternatives having the largest increases. SO2 increases are
largely due to higher upstream emissions associated with electricity
use by greater numbers of electrified vehicles being produced in
response to the standards. In 2035 and 2050, across all criteria
pollutants and action alternatives, the smallest decrease in emissions
is 0.03 percent and occurs for NOX under Alternative 2; the
largest decrease is 11.9 percent and occurs for VOCs under Alternative
3. The smallest increase in emissions is 0.07 percent and occurs for CO
under Alternative 1; the largest increase is 4.8 percent and occurs for
SO2 under Alternative 3.
    The air quality analysis identified the following impacts on toxic
air pollutants.
    Under each action alternative in 2025 compared to the No-Action
Alternative, increases in emissions would occur for all toxic air
pollutants by as much as 0.5 (half of 1) percent, except for DPM, for
which emissions would decrease by as much as 0.5 percent. For 2025, the
largest relative increases in emissions would occur for benzene and
1,3-butadiene, for which emissions would increase by as much as 0.5
percent. Percentage increases in emissions of acetaldehyde, acrolein,
and formaldehyde would be even smaller.
    Under each action alternative in 2035 and 2050 compared to the No-
Action Alternative, decreases in emissions would occur for all toxic
air pollutants, except for acetaldehyde, acrolein, and 1,3-butadiene in
2035 under Alternative 1 where emissions would increase by 0.2 (one-
fifth of 1), 0.01, and 0.1 percent, respectively, with the more
stringent alternatives having the largest decreases, except for benzene
(emissions increase in 2035 under Alternative 3 relative to Alternative
2). The largest relative decreases in emissions would occur for
formaldehyde, for which emissions would decrease by as much as 10.3
percent. Percentage decreases in emissions of acetaldehyde, acrolein,
benzene, 1,3-butadiene, and DPM would be less.
    The air quality analysis identified the following health impacts.
    In 2025, Alternative 3 would result in slightly increased adverse
health impacts (mortality, acute bronchitis, respiratory emergency room
visits, and other health effects) nationwide compared to the No-Action
Alternative as a result of increases in emissions of NOX,
PM2.5, and SO2. Alternative 2 would also result
in slightly increased adverse health impacts from mortality and non-
fatal heart attacks due to increases in NOX,
PM2.5, and SO2 emissions, while Alternative 1
would result in decreased adverse health impacts. The more stringent
alternatives are associated with the largest increases in adverse
health impacts, or the smallest decreases in impacts, relative to the
No-Action Alternative. Again, in the short-term, these slight changes
in health impacts are projected under the action alternatives as the
result of increases in the prices of new vehicles slightly delaying
sales of new vehicles and encouraging more VMT in older vehicles
instead, but this trend shifts over time as higher fuel-economy new
vehicles become used vehicles and older vehicles are removed from the
fleet.
    In 2035 and 2050, all action alternatives would result in decreased

adverse health impacts nationwide compared to the No-Action Alternative
as a result of general decreases in emissions of NOX,
PM2.5, and DPM. The decreases in adverse health impacts get
larger from Alternative 1 to Alternative 3.
    In terms of climate effects, all action alternatives would decrease
U.S. passenger car and light truck fuel consumption compared with the
No-Action Alternative, resulting in reductions in the anticipated
increases in global CO2 concentrations, temperature,
precipitation, and sea level, and increases in ocean pH that would
otherwise occur. The impacts of the action alternatives on global mean
surface temperature, precipitation, sea level, and ocean pH would be
small in relation to global emissions trajectories. Although these
effects are small, they occur on a global scale and are long lasting;
therefore, in aggregate, they can have large consequences for health
and welfare and can make an important contribution to reducing the
risks associated with climate change.
    The alternatives would have the following impacts related to GHG
emissions.
    Passenger cars and light trucks are projected to emit 89,600
million metric tons of carbon dioxide (MMTCO2) from 2021
through 2100 under the No-Action Alternative. Alternative 1 would
decrease these emissions by 5 percent through 2100. Alternative 3 would
decrease these emissions by 10 percent through 2100. Emissions would be
highest under the No-Action Alternative, and emission reductions would
increase from Alternative 1 to Alternative 3.
    Compared with total projected CO2 emissions of 984
MMTCO2 from all passenger cars and light trucks under the
No-Action Alternative in the year 2100, the action alternatives are
expected to decrease CO2 emissions from passenger cars and
light trucks in the year 2100 from 6 percent under Alternative 1 to 12
percent under Alternative 3.
    The emission reductions in 2025 compared with emissions under the
No-Action Alternative are approximately equivalent to the annual
emissions from 1,284,000 vehicles under Alternative 1 to 2,248,000
vehicles under Alternative 3. For scale, a total of 253,949,000
passenger cars and light trucks are projected to be on the road in 2025
under the No-Action Alternative.
    CO2 emissions affect the concentration of CO2
in the atmosphere, which in turn affects global temperature, sea level,
precipitation, and ocean pH. For the analysis of direct and indirect
impacts, NHTSA used the Global Change Assessment Model Reference
Scenario to represent the Reference Case emissions scenario (i.e.,
future global emissions assuming no comprehensive global actions to
mitigate GHG emissions).
    Estimated CO2 concentrations in the atmosphere for 2100
would range from 788.33 pollutant per million parts (ppm) under
Alternative 3 to approximately 789.11 ppm under the No-Action
Alternative, indicating a maximum atmospheric CO2 decrease
of approximately 0.77 ppm compared to the No-Action Alternative.
Atmospheric CO2 concentration under Alternative 1 would
decrease by 0.37 ppm compared with the No-Action Alternative.
    Global mean surface temperature is projected to increase by
approximately 3.48 [deg]C (6.27 [deg]F) under the No-Action Alternative
by 2100. Implementing the most stringent alternative (Alternative 3)
would decrease this projected temperature rise by 0.003 [deg]C (0.006
[deg]F), while implementing Alternative 1 would decrease projected
temperature rise by 0.002 [deg]C (0.003 [deg]F).
    Projected sea-level rise in 2100 ranges from a high of 76.28
centimeters (30.03 inches under the No-Action Alternative to a low of
76.22 centimeters (30.01 inches) under Alternative 3. Alternative 3
would result in a decrease in sea-level rise equal to 0.06 centimeter
(0.03 inch) by 2100 compared with the level projected under the No-
Action Alternative compared to a decrease under Alternative 1 of 0.03
centimeter (0.01 inch) compared with the No-Action Alternative.
    Global mean precipitation is anticipated to increase by 5.85
percent by 2100 under the No-Action Alternative. Under the action
alternatives, this increase in precipitation would be reduced by 0.00
to 0.01 percent.
    Ocean pH is anticipated to be 8.2180 under Alternative 3, about
0.0004 more than the No-Action Alternative. Under Alternative 1, ocean
pH in 2100 would be 8.2178, or 0.0002 more than the No-Action
Alternative.
    The action alternatives would reduce the impacts of climate change
that would otherwise occur under the No-Action Alternative. Although
the projected reductions in CO2 and climate effects are
small compared with total projected future climate change, they are
quantifiable and directionally consistent and would represent an
important contribution to reducing the risks associated with climate
change.
    Although NHTSA does quantify the changes in monetized damages that
can be attributable to each action alternative, many specific impacts
of climate change on health, society, and the environment cannot be
estimated quantitatively. Therefore, NHTSA provides a qualitative
discussion of these impacts by presenting the findings of peer-reviewed
panel reports including those from the Intergovernmental Panel on
Climate Change (IPCC), U.S. Global Change Research Program (GCRP), the
U.S. Climate Change Science Program (CCSP), the National Research
Council, and the Arctic Council, among others. While the action
alternatives would decrease growth in GHG emissions and reduce the
impact of climate change across resources relative to the No-Action
Alternative, they would not themselves prevent climate change and
associated impacts. Long-term climate change impacts identified in the
scientific literature are briefly summarized below, and vary
regionally, including in scope, intensity, and directionality
(particularly for precipitation). While it is difficult to attribute
any particular impact to emissions that could result from this
proposal, the following impacts are likely to be beneficially affected
to some degree by reduced emissions from the action alternatives:
     Impacts on freshwater resources could include changes in
rainfall and streamflow patterns, warming temperatures and reduced
snowpack, changes in water availability paired with increasing water
demand for irrigation and other needs, and decreased water quality from
increased algal blooms. Inland flood risk could increase in response to
increasing intensity of precipitation events, drought, changes in
sediment transport, and changes in snowpack and the timing of snowmelt.
     Impacts on terrestrial and freshwater ecosystems could
include shifts in the range and seasonal migration patterns of species,
relative timing of species' life-cycle events, potential extinction of
sensitive species that are unable to adapt to changing conditions,
increases in the occurrence of forest fires and pest infestations, and
changes in habitat productivity due to increased atmospheric
concentrations of CO2.
     Impacts on ocean systems, coastal regions, and low-lying
areas could include the loss of coastal areas due to inundation,
submersion, or erosion from sea-level rise and storm surge, with
increased vulnerability of the built environment and associated
economies. Changes in key habitats (e.g., increased temperatures,
decreased oxygen, decreased ocean pH, increased

salinization) and reductions in key habitats (e.g., coral reefs) may
affect the distribution, abundance, and productivity of many marine
species.
     Impacts on food, fiber, and forestry could include
increasing tree mortality, forest ecosystem vulnerability, productivity
losses in crops and livestock, and changes in the nutritional quality
of pastures and grazing lands in response to fire, insect infestations,
increases in weeds, drought, disease outbreaks, or extreme weather
events. Increased concentrations of CO2 in the atmosphere
can also stimulate plant growth to some degree, a phenomenon known as
the CO2 fertilization effect, but the impact varies by
species and location. Many marine fish species could migrate to deeper
or colder water in response to rising ocean temperatures, and global
potential fish catches could decrease. Impacts on food and agriculture,
including yields, food processing, storage, and transportation, could
affect food prices, socioeconomic conditions, and food security
globally.
     Impacts on rural and urban areas could affect water and
energy supplies, wastewater and stormwater systems, transportation,
telecommunications, provision of social services, incomes (especially
agricultural), air quality, and safety. The impacts could be greater
for vulnerable populations such as lower-income populations,
historically underserved populations, some communities of color and
tribal and Indigenous communities, the elderly, those with existing
health conditions, and young children.
     Impacts on human health could include increases in
mortality and morbidity due to excessive heat and other extreme weather
events, increases in respiratory conditions due to poor air quality and
aeroallergens, increases in water and food-borne diseases, increases in
mental health issues, and changes in the seasonal patterns and range of
vector-borne diseases. The most disadvantaged groups such as children,
the elderly, the sick, those experiencing discrimination, historically
underserved populations, some communities of color and tribal and
Indigenous communities, and low-income populations are especially
vulnerable and may experience disproportionate health impacts.
     Impacts on human security could include increased threats
in response to adversely affected livelihoods, compromised cultures,
increased or restricted migration, increased risk of armed conflicts,
reduction in adequate essential services such as water and energy, and
increased geopolitical rivalry.
    In addition to the individual impacts of climate change on various
sectors, compound events may occur more frequently. Compound events
consist of two or more extreme weather events occurring simultaneously
or in sequence when underlying conditions associated with an initial
event amplify subsequent events and, in turn, lead to more extreme
impacts. To the extent the action alternatives would result in
reductions in projected increases in global CO2
concentrations, this rulemaking would contribute to reducing the risk
of compound events.
    NHTSA has considered the SEIS carefully in arriving at its
tentative conclusion that Alternative 2 is maximum feasible, as
discussed below. We seek comment on the SEIS associated with this NPRM.

D. Evaluating the EPCA Factors and Other Considerations To Arrive at
the Proposed Standards

    Despite only one year having passed since the 2020 final rule,
enough has changed in the United States and in the world that
revisiting the CAFE standards for MYs 2024-2026 is reasonable and
appropriate. The global coronavirus pandemic, with all of its tragedy,
also demonstrated what happens to U.S. and global oil consumption (and
CO2 and other pollutant emissions) when driving demand
plummets. The Biden Administration committed itself in its earliest
moments to improving energy conservation and tackling climate change.
Nearly all auto manufacturers have announced forthcoming new advanced
technology, high-fuel-economy vehicle models, making strong public
commitments that mirror those of the Administration. Five major
manufacturers voluntarily bound themselves to stricter GHG national-
level requirements as part of the California Framework agreement. While
some facts on the ground remain similar to what was before NHTSA in the
prior analysis--gas prices remain relatively low in the U.S., for
example, and while light-duty vehicle sales fell sharply in MY 2020,
the vehicles that did sell tended to be, on average, larger, heavier,
and more powerful, all factors which increase fuel consumption--again,
enough has changed that a rebalancing of the EPCA factors is
appropriate for model years 2024-2026.
    In the 2020 final rule, NHTSA interpreted the need of the U.S. to
conserve energy as less important than in previous rulemakings. This
was in part because of structural changes in global oil markets as a
result of shale oil drilling in the U.S., but also because in the
context of environmental effects, NHTSA interpreted the word
``conserve'' as ``to avoid waste.'' NHTSA concluded then that the
ultimate difference to the climate (among the regulatory alternatives)
of thousandths of a degree Celsius in 2100 did not represent a
``wasteful'' use of energy, given the other considerations involved in
the balancing of factors.
    One of those factors was consumer demand for vehicles with higher
fuel economy levels. In the 2020 final rule, NHTSA expressed concern
that low gasoline prices and apparent consumer preferences for larger,
heavier, more powerful vehicles would make it exceedingly difficult for
manufacturers to achieve higher standards without negative consequences
to sales and jobs, and would cause consumer welfare losses. Since then,
however, more and more manufacturers are announcing more and more
vehicle models with advanced engines and varying levels of
electrification. It is reasonable to conclude that manufacturers (who
are all for-profit companies) would not be announcing plans to offer
these types of vehicles if they did not expect to be able to sell
them,\466\ and thus that manufacturers are more sanguine about consumer
demand for fuel efficiency and the market for fully electric vehicles
going forward than they have been previously.
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    \466\ To the extent that manufacturers are offering these
vehicles in response to expected regulations, NHTSA still believes
that they would not do so if they believed the vehicles were
unsaleable or unmanageably detrimental to profits. Vehicle
manufacturers are sophisticated corporate entities well able to
communicate their views to regulatory agencies.
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    Additionally, NHTSA no longer believes that it is reasonable or
appropriate to focus only on ``avoiding waste'' in evaluating the need
of the U.S. to conserve energy. EPCA's overarching purpose is energy
conservation. The need of the U.S. to conserve energy may be reasonably
interpreted as continuing to push the balancing toward greater
stringency.
    The following sections will walk through the four statutory factors
in more detail and discuss NHTSA's decision-making process more
thoroughly. To be clear at the outset, however, the fundamental
balancing of factors for this proposal is different from the 2020 final
rule because the evidence suggests that manufacturers believe there is
a market for advanced technology vehicles with higher fuel economy, and
CAFE standards are likely to be maximum feasible if they are set at
levels that reflect that evidence.

    We may begin with the need of the U.S to conserve energy, which as
stated is being considered more holistically in this proposal as
compared to in the 2020 final rule. According to the analysis presented
in Section V and in the accompanying PRIA and SEIS, Alternative 3 would
save consumers the most in fuel costs, and would achieve the greatest
reductions in climate change-causing CO2 emissions.
Alternative 3 would also maximize fuel consumption reductions, better
protecting consumers from international oil market instability and
price spikes. As discussed above, for now, gasoline is still the
dominant fuel used in light-duty transportation. As such, consumers,
and the economy more broadly, are subject to fluctuations in price that
impact the cost of travel and, consequently, the demand for mobility.
Vehicles are long-lived assets and the long-term price uncertainty of
petroleum still represents a risk to consumers. By increasing the fuel
economy of vehicles in the marketplace, more stringent CAFE standards
better insulate consumers against these risks over longer periods of
time. Fuel economy improvements that reduce demand for oil are a more
certain hedging strategy against price volatility than increasing U.S.
energy production. Continuing to reduce the amount of money consumers
spend on vehicle fuel thus remains an important consideration for the
need of the U.S. to conserve energy.
    Additionally, the SEIS finds that overall, projected changes in
both upstream and downstream emissions of criteria and toxic air
pollutants are mixed, with emissions of some pollutants remaining
constant or increasing and emissions of some pollutants decreasing.
These increases are associated with both upstream and downstream
sources, and therefore, may disproportionately affect minority and low-
income populations that reside in proximity to these sources. However,
the magnitude of the change in emissions relative to the No-Action
alternative is minor for all action alternatives, and would not be
characterized as high or adverse; over time, adverse health impacts are
projected to decrease nationwide under each of the action alternatives.
    For the other considerations that contribute to the need of the
U.S. to conserve energy, it follows reasonably that reducing fuel
consumption more would improve our national balance of payments more,
and our energy security, as discussed above. It is therefore likely
that Alternative 3 best meets the need of the U.S. to conserve energy.
    During interagency review, the Department of Energy urged NHTSA to
propose Alternative 3, on the basis that ``a faster transition to
battery electric vehicles (BEVs) is feasible,'' because a variety of
market analysts and the National Academies of Sciences, Engineering,
and Medicine find that BEVs will reach cost parity with ICE vehicles by
or before 2025. DOE further commented that new BEV prices would drop
over time because ``DOE has set aggressive technology targets for
battery costs and electric drive technologies, . . . And DOE has a
consistent track record in meeting its technology targets: DOE met or
exceeded its technology cost and performance goals for battery and
electric drive technologies every year between 2012 and 2018.''
[citation omitted] While NHTSA appreciates this comment from DOE, as
stated repeatedly throughout this proposal, NHTSA is statutorily
prohibited from considering the fuel economy of dedicated alternative
fuel vehicles during the rulemaking time frame when determining what
levels of standards would be maximum feasible. NHTSA believes that
Alternative 3 could potentially end up being maximum feasible in the
final rule depending on a variety of factors, but NHTSA would be
prohibited from basing such a finding exclusively on the date by which
DOE estimates that BEVs will achieve cost parity with ICEs.
    We next evaluate how the regulatory alternatives fare in terms of
economic practicability. NHTSA recognizes that the amount of lead time
available before MY 2024 is less than what was provided in the 2012
rule. As will be discussed further below, NHTSA believes that the
evidence suggests that the proposed standards are still economically
practicable, and not out of reach for a significant portion of the
industry. CAFE standards can help support industry by requiring ongoing
improvements even if demand for more fuel economy flags unexpectedly.
    For the proposed standards, the annual rates of increase in the
passenger car and light truck standards represent increases over the
required levels in MY 2023 and are as shown in Table VI-6.
[GRAPHIC] [TIFF OMITTED] TP03SE21.181

    Part of the way that we try to evaluate economic practicability,
and thus where the tipping point in the balancing of factors might be,
is through a variety of metrics, examined in more detail below. If the
amounts of technology or per-vehicle cost increases required to meet
the standards appear to be beyond what we believe the market could
bear; or sales and employment appear to be unduly impacted, the agency
may decide that the standards under consideration may not be
economically practicable. We underscore again, as throughout this
preamble, that the modeling analysis does not dictate the ``answer,''
it is merely one source of information among others that aids the
agency's balancing of the standards. We similarly underscore that there
is no single bright line beyond which standards might be economically
practicable, and that these metrics are not intended to suggest one;
they are simply ways to think about the information before us.
    Economic practicability may be evaluated in terms of how much
technology manufacturers would have to apply to meet a given regulatory

alternative. Technology application can be considered as ``which
technologies, and when''--both the technologies that NHTSA's analysis
suggests would be used, and how that application occurs given
manufacturers' product redesign cadence. While the need of the U.S. to
conserve energy may encourage the agency to be more technology-forcing
in its balancing, and while technological feasibility is not limiting
in this rulemaking given the state of technology in the industry,
regulatory alternatives that require extensive application of very
advanced technologies (that may have known or unknown consumer
acceptance issues) or that require manufacturers to apply additional
technology in earlier model years, in which meeting the standards is
already challenging, may not be economically practicable, and may thus
be beyond maximum feasible.
    The first issue is timing of technology application. While the MY
2024 standards provide less lead time for an increase in stringency
than was provided by the standards set in 2012, NHTSA believes that the
standards for MYs 2021-2023 should provide a relative ``break'' for
compliance purposes. NHTSA does not believe that significant additional
technology application would be required by the CAFE standards in the
years immediately preceding the rulemaking time frame. That said, NHTSA
is aware of, and has accounted for, several manufacturers voluntarily
agreeing with CARB to increase their fuel economy during those model
years. Manufacturers would have to apply more technology than would be
required by the MYs 2021-2023 CAFE standards alone to meet those higher
fuel economy levels. Again, NHTSA interprets these agreements as
evidence that the participating companies believe that applying that
additional technology is practicable, because for-profit companies can
likely be relied upon to make decisions that maximize their profit.
Companies who did not agree with CARB to meet higher targets may not
increase their fuel economy levels by as much over MYs 2021-2023, but
they, too, will get the relative ``break'' in CAFE obligations
mentioned above, and have additional time to plan for the higher
stringency increases in subsequent years. Those manufacturers can opt
to employ more modest technologies to improve fuel economy (beyond
their standard) to generate credits to carry forward into more
challenging years, or concentrate limited research and development
resources on the next generation of higher fuel economy vehicles that
will be needed to meet the proposed standards in MYs 2024-2026 (and
beyond), rather investing in more modest improvements in the near-term.
    NHTSA's analysis estimates manufacturers' product ``cadence,''
representing them in terms of estimated schedules for redesigning and
``freshening'' vehicles, and assuming that significant technology
changes will be implemented during vehicle redesigns--as they
historically have been. Once applied, a technology will be carried
forward to future model years until superseded by a more advanced
technology. NHTSA does not consider model years in isolation in the
analysis, because that is not consistent with how industry responds to
standards, and thus would not accurately reflect practicability. If
manufacturers are already applying technology widely and intensively to
meet standards in earlier years, requiring them to add yet more
technology in the model years subject to the rulemaking may be less
economically practicable; conversely, if the preceding model years
require less technology, more technology during the rulemaking time
frame may be more economically practicable. The tables below illustrate
how the agency has modeled that process of manufacturers applying
technologies in order to comply with different alternative standards.
The technologies themselves are described in detail in Chapters 2 and 3
of the accompanying TSD.
[GRAPHIC] [TIFF OMITTED] TP03SE21.182

[GRAPHIC] [TIFF OMITTED] TP03SE21.183

    Although NHTSA's analysis is intended to estimate ways
manufacturers could respond to new standards, not to predict how
manufacturers will respond to new standards, manufacturers have
indicated in meetings with the agency and in public announcements
(including the CARB Framework Agreements) that they do intend to
increase technology application over the coming years, and specifically
electrification technology which NHTSA does not model as part of its
standard-setting analysis, considered for decision-making, due to the
49 U.S.C. 32902(h) restrictions for MYs 2024-2026.
    As the tables illustrate, both Alternative 2 and Alternative 3
appear to require rapid deployment of fuel efficiency technology across
a variety of vehicle systems--body improvements due to weight reduction
and improved aerodynamic drag, engine advancements, and
electrification.\467\ The aggressive application that is simulated to
occur between MY 2020 (which NHTSA observed and is the starting point
of this analysis) and MY 2023 occurs in all of the alternatives, for
both cars and light trucks. This reflects both the task presented to
signatories by the California Framework and existing compliance
positions (in some fleets) across the industry to improve fuel economy
in the near-term. In general, technology market shares for Alternative
3 look similar to those for Alternative 2, with the notable exception
of plug-in hybrids which differ by only a couple of percent for cars
and about 5 percent for light trucks. While still relatively small
differences on their own, the market share of plug-in hybrids is
currently less than one percent in total. While manufacturers could
certainly choose to produce fully electric vehicles instead of PHEVs,
fully electric vehicles are projected to grow by multiples of their
current market share as well. The market for high levels of
electrification is likely to continue growing but NHTSA acknowledges
that consumer demand, especially in the near-term, remains somewhat
unclear. If policy decisions are made to extend or expand incentives
for electric vehicle purchases, NHTSA could potentially consider the
greater reliance on electrification in Alternative 3 to be a smaller
risk.
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    \467\ While these technology pathways reflect NHTSA's statutory
restrictions under EPCA/EISA, it is worth noting that they represent
only one possible solution. In the simulations that support the
SEIS, PHEV market share grows by less, and is mostly offset by an
increase in BEV market share.
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    NHTSA's analysis seeks to account for manufacturers' capital and
resource constraints in several ways--through the restriction of
technology application to refreshes and redesigns, through the phase-in
caps applied to certain technologies, and through the explicit
consideration of vehicle components (like powertrains) and technologies
(like platforms based on advanced materials) that are shared by models
throughout a manufacturer's portfolio. NHTSA is aware that there is a
significant difference in the level of capital and resources required
to implement one or more new technologies on a single vehicle model,
and the level of capital and resources required to implement those same
technologies across the entire vehicle fleet. NHTSA realizes that it
would not be economically practicable to expand some of the most
advanced technologies to every vehicle in the fleet within the
rulemaking time frame, although it should be possible to increase the
application of advanced technologies across the fleet in a progression
that accounts for those resource constraints. That is what NHTSA's
analysis tries to do.
    Another consideration for economic practicability is the extent to
which new standards could increase the average cost to acquire new
vehicles, because even insofar as the underlying application of
technology leads to reduced outlays for fuel over the useful lives of
the affected vehicles, these per-vehicle cost increases provide both a
measure of the degree of effort faced by manufacturers, and also the
degree of adjustment, in the form of potential vehicle price increases,
that will ultimately be required of vehicle

purchasers. Table VI-9 and Table VI-10 show the agency's estimates of
average cost increase under the Preferred Alternative for passenger
cars and light trucks, respectively. Because our analysis includes
estimates of manufacturers' indirect costs and profits, as well as
civil penalties that some manufacturers (as allowed under EPCA/EISA)