apply an adjustment factor to account for vehicle emission control
deterioration or variability in use (section 206(a)).
    EPA establishes the test procedures under which compliance with the
CAA GHG standards is measured. EPA's testing authority under the CAA is
broad and flexible. EPA has also developed tests with additional cycles
(the so-called 5-cycle tests) which are used for purposes of fuel
economy labeling and are used in EPA's program for extending off-cycle
credits under the light-duty vehicle GHG program.
iii. Compliance and Enforcement Authority
    EPA oversees testing, collects and processes test data, and
performs calculations to determine compliance with CAA standards. CAA
standards apply not only at certification but also throughout the
vehicle's useful life. The CAA provides for penalties should
manufacturers fail to comply with their fleet average standards, and
there is no option for manufacturers to pay fines in lieu of compliance
with the standards. Under the CAA, penalties for violation of a fleet
average standard are typically determined on a vehicle-specific basis

by determining the number of a manufacturer's highest emitting vehicles
that cause the fleet average standard violation. Penalties for
reporting requirements under Title II of the CAA apply per day of
violation, and other violations apply on a per vehicle, or a per part
or component basis. See CAA sections 203(a) and 205(a) and 40 CFR 19.4.
    Section 207 of the CAA grants EPA broad authority to require
manufacturers to remedy vehicles if EPA determines there are a
substantial number of noncomplying vehicles. In addition, section 205
of the CAA authorizes EPA to assess penalties of up to $48,762 per
vehicle for violations of various prohibited acts specified in the CAA.
In determining the appropriate penalty, EPA must consider a variety of
factors such as the gravity of the violation, the economic impact of
the violation, the violator's history of compliance, and ``such other
matters as justice may require.''
4. Averaging, Banking, and Trading Provisions for CO2
Standards
    EPA is finalizing provisions to extend credit life that are more
targeted than those proposed. EPA proposed to extend credit carry-
forward for MY 2016-2020 credits, including a two-year extension of MY
2016 credits and a one-year extension of MY 2017-2020 credits. After
considering the comments received on this topic and further analyzing
manufacturers' need for extended credit life, EPA is adopting a
narrower approach in the final rule of adopting the one-year credit
life extension only for MY 2017 and 2018 credits so they may be used in
MYs 2023 and 2024, respectively. This section provides background on
the ABT program as well as a summary of the proposed rule, public
comments, and final rule provisions.
i. Background on Averaging, Banking, and Trading Program Under Previous
Programs
    Averaging, banking, and trading (ABT) is an important compliance
flexibility that has been built into various highway engine and vehicle
programs (and nonroad engine and equipment programs) to support
emissions standards that, through the introduction and application of
new technologies, result in reductions in air pollution. The light-duty
ABT program for GHG standards includes existing provisions initially
established in the 2010 rule for how credits may be generated and used
within the program.\47\ These provisions include credit carry-forward,
credit carry-back (also called deficit carry-forward), credit transfers
(within a manufacturer), and credit trading (across manufacturers).
---------------------------------------------------------------------------

    \47\ 40 CFR 86.1865-12.
---------------------------------------------------------------------------

    Credit carry-forward refers to banking (saving) credits for future
use, after satisfying any needs to offset prior MY debits within a
vehicle category (car fleet or truck fleet). Credit carry-back refers
to using credits to offset any deficit in meeting the fleet average
standards that had accrued in a prior MY. A manufacturer may have a
deficit at the end of a MY (after averaging across its fleet using
credit transfers between cars and trucks)--that is, a manufacturer's
fleet average level may fail to meet the manufacturer's required fleet
average standard for the MY, for a limited number of model years, as
provided in the regulations. The CAA does not specify or limit the
duration of such credit provisions, and in the MY 2012-2016 and 2017-
2025 light-duty GHG programs, EPA chose to adopt 5-year credit carry-
forward (generally, with an exception noted below) and 3-year credit
carry-back provisions as a reasonable approach that maintained
consistency between EPA's GHG and NHTSA CAFE regulatory provisions.\48\
While some stakeholders had suggested that light-duty GHG credits
should have an unlimited credit life, EPA did not adopt that suggestion
for the light-duty GHG program because it would pose enforcement
challenges and could lead to some manufacturers accumulating large
banks of credits that could interfere with the program's goal to
develop and transition to progressively more advanced emissions control
technologies in the future.
---------------------------------------------------------------------------

    \48\ The EPCA/EISA statutory framework for the CAFE program
limits credit carry-forward to 5 years and credit carry-back to 3
years.
---------------------------------------------------------------------------

    Although the existing credit carry-forward and carry-back
provisions generally remained in place for MY 2017 and later standards,
EPA finalized provisions in the 2012 rule allowing all unused (banked)
credits generated in MYs 2010-2015 (but not MY 2009 early credits) to
be carried forward through MY 2021. See 40 CFR 86.1865-12(k)(6)(ii); 77
FR 62788 (October 15, 2012). This credit life extension provided
additional carry-forward years for credits generated in MYs 2010-2015,
thereby providing greater flexibility for manufacturers in using these
credits. This provision was intended to facilitate the transition to
increasingly stringent standards through MY 2021 by helping
manufacturers resolve lead time issues they might face in the early MYs
of the program. This extension of credit carry-forward also provided an
additional incentive for manufacturers to generate credits earlier, for
example in MYs 2014 and 2015, thereby encouraging the earlier use of
additional CO2 reducing technologies. In addition, the
existing 5-year carry-forward provisions applied to MY 2016 and later
credits, making MY 2016 credits also eligible to be carried forward
through MY 2021.
    Transferring credits in the GHG program refers to exchanging
credits between the two averaging sets-- passenger cars and light
trucks--within a manufacturer. For example, credits accrued by
overcompliance with a manufacturer's car fleet average standard can be
used to offset debits accrued due to that manufacturer not meeting the
truck fleet average standard in a given model year. In other words, a
manufacturer's car and truck fleets together are, in essence, a single
averaging set in the GHG program. Finally, accumulated credits may be
traded to another manufacturer. Credit trading has occurred on a
regular basis in EPA's vehicle program.\49\ Manufacturers acquiring
credits may offset credit shortfalls and bank credits for use toward
future compliance within the carry-forward constraints of the program.
---------------------------------------------------------------------------

    \49\ EPA provides general information on credit trades annually
as part of its annual Automotive Trends and GHG Compliance Report.
The latest report is available at: https://www.epa.gov/automotive-trends and the docket for this rulemaking.
---------------------------------------------------------------------------

    The ABT provisions are an integral part of the vehicle GHG program
and the agency expects that manufacturers will continue to utilize
these provisions into the future. EPA's annual Automotive Trends Report
provides details on the use of these provisions in the GHG program.\50\
ABT allows EPA to consider standards more stringent than we would
otherwise consider by giving manufacturers an important tool to resolve
lead time and feasibility issues. EPA believes the targeted one-year
extension of credit carry-forward for MY 2017 and 2018 credits that we
are finalizing, discussed below, is appropriate considering the
stringency and implementation timeframe of the revised standards.
---------------------------------------------------------------------------

    \50\ ``The 2021 EPA Automotive Trends Report, Greenhouse Gas
Emissions, Fuel Economy, and Technology since 1975,'' EPA-420-R-21-
023, November 2021.
---------------------------------------------------------------------------

ii. Extended Credit Carry-Forward
    As in the transition to more stringent standards under the 2012
rule, EPA recognizes that auto manufacturers will again be facing a
transition to more stringent standards for MYs 2023-2026.

We also recognize that the stringency increase from MY 2022 to MY 2023
is a relatively steep step in our program with shorter lead time for
MYs 2023 and 2024. Therefore, we believe it is again appropriate in the
context of the revised standards to provide a targeted, limited amount
of additional flexibility to carry-forward credits into MYs 2023-2024,
as manufacturers manage the transition to these more stringent
standards.
    EPA proposed to temporarily increase the number of years that MY
2016-2020 credits could be carried-forward to provide additional
flexibility for manufacturers in the transition to more stringent
standards. EPA proposed to increase credit carry-forward for MY 2016
credits by two years such that they would not expire until after MY
2023. For MY 2017-2020 credits, EPA proposed to extend the credit life
by one year, so that those banked credits can be used through MYs 2023-
2026, depending on the MY in which the credits are banked. For MY 2021
and later credits, EPA did not propose any modification to existing
credit carry-forward provisions, which allow credit carry-forward for 5
model years. EPA noted that the proposed extended credit carry-forward
would help some manufacturers to have lower overall costs and address
any potential lead time issues they may face during these MYs,
especially in the first year of the proposed standards (MY 2023). EPA
proposed to extend credit life only for credits generated against
applicable standards established in the 2012 rule for MYs 2016-2020.
EPA viewed these credits as a reflection of manufacturers' having
achieved reductions beyond and earlier than those required by the 2012
rule standards.
    As noted in the proposed rule and discussed above, there is
precedent for extending credit carry-forward temporarily beyond five
years to help manufacturers transition to more stringent standards. In
the 2012 rule, EPA extended carry-forward for MY 2010-2015 credits to
MY 2021 for similar reasons, to provide more flexibility for a limited
time during a transition to more stringent standards.\51\ ABT is an
important compliance flexibility and has been built into various
highway engine and vehicle programs to support emissions standards
programs that through the introduction of new technologies result in
reductions in air pollution. While the existing five-year credit life
provisions in the light-duty GHG program are generally sufficient to
provide for manufacturer flexibility while balancing the practical
challenges of properly tracking credits over an extended period of time
for compliance and enforcement purposes, there are occasions--such as
when the industry is transitioning to significantly more stringent
standards--where more flexibility may be appropriate.
---------------------------------------------------------------------------

    \51\ 77 FR 62788.
---------------------------------------------------------------------------

    EPA received a mix of comments regarding EPA's proposed provision
for limited extended credit carry-forward. The Alliance and several
individual manufacturers commented in support of the proposed credit
life extensions. The Alliance commented that ``limited expansion of
credit carry-forward provisions may provide some additional flexibility
for a limited number of manufacturers, and in theory could provide some
additional credit market liquidity during the rapidly tightening
standards in MYs 2023-2026.'' It also commented that carry-forward
credits do not reduce the environmental benefits of the standards as
these credits represent tons of emissions avoided in advance of
requirements. Honda provided similar comments and commented further
that the automobile industry is facing severe global supply chain
issues that continue to disrupt vehicle production volumes, launch
dates and compliance strategies. Honda stated that slight modifications
to the proposed credit carry forward provisions (e.g., Honda suggested
a two-year extension for MY 2016-2020 credits) could provide much
needed compliance flexibility during an exceedingly challenging
compliance planning time. Honda also commented that companies that
signed up to the California Framework agreement can reasonably be
expected to meet MY 2023 stringencies, but MY 2026 is likely to prove
difficult for most, if not all, manufacturers. In addition, Honda
commented in support of extending the credit carry forward provisions
beyond those specified in the proposed rule. Nissan commented that EPA
should extend the life of all model year 2015 and later GHG credits
through at least model year 2026 to provide manufacturers with
necessary compliance flexibility. Nissan believed that their
recommended approach would enable manufacturers to invest appropriate
resources at the appropriate time without eroding overall industry GHG
benefits.
    EV manufacturers did not support the proposed extended credit
carry-forward, commenting that it is unnecessary and could lead to loss
of emissions reductions. Tesla commented that it estimates the
extension of the MY 2016 and 2017 credit bank will result in a
reduction in stringency of 4.3 g/mile in MY 2023. Tesla commented that
the one-year extension of the credit lifetime for model years beyond MY
2017 will further reduce stringency by another ~5 g/mile. Additionally,
Tesla commented that ``the credit lifetime extension will also lessen
the immediate value of earned credits in the trading market as
underperforming manufacturers now may have greater opportunity on when
to deploy credits. Operating under a consistent set of credit lifetime
regulations, manufacturers over complying have been able to enter a
robust credit marketing, basing credit value and need, in part, on a
five-year lifetime. Under the proposal, the immediacy of the market
will diminish, meaning less revenue and opportunity for an
overperforming manufacturer that seeks to utilize credit revenue sales
to invest in increased manufacturing of advanced technology vehicles.
Like the other proposed flexibilities, this proposed change in credit
lifetime reduces the standard's stringency, diminishes the level of
investment going back into advanced manufacturing, and only serves to
reward those manufacturers that delay deploying advanced
technologies.''
    The California Air Resources Board (CARB) also did not support the
credit life extensions in the proposed rule, commenting ``when
manufacturers planned their products to generate the credits, they were
aware of the constraints on their use and available terms. Because
these credits were earned before the Final SAFE Rules went into effect,
they reflect manufacturer planning to meet the more stringent standards
then in effect with improved technology after those credits had
expired. Furthermore, extending the credit life is not necessary to
facilitate compliance. In the time available, manufacturers can
incentivize sales of vehicles with more of the necessary technologies
if they are needed to meet the proposed standards, including additional
zero-emission technologies.'' The California Attorney General commented
that extending credit life for standards weaker than Alternative 2
could further delay the emissions reductions that are urgently needed.
    Several environmental and health NGOs opposed the proposed
extension as unnecessary and were concerned that it could lead to a
loss of emissions reductions. A coalition of NGOs recommended that EPA
not extend the lifetime of MY 2016-2020 credits as proposed,
particularly not beyond MY 2024. They commented that extending credit
life does not spur the development or application of more advanced
technologies or vehicle

electrification and represents a windfall since manufacturers have not
taken the extension into account in the product plans. Union of
Concerned Scientists (UCS) commented that the proposed extension is not
necessary, presenting modeling of the proposed standards and
Alternative 2 in the proposed rule and found that the proposed
standards could be met without the extended credit life with the same
technology penetration rates as estimated by EPA for the proposed rule.
American Council for an Energy- Efficient Economy (ACEEE) also
commented that the extension was unnecessary because manufacturers
could use their MY 2018 and 2019 credits in MYs 2023 and 2024 and those
credits would likely still be available because it is unlikely
manufacturers would need to use them prior to those years due to the
previous credit banks and the less stringent standards adopted in the
SAFE rule for MYs 2021-2022.
    After analyzing the public comments and further analyzing the need
for and impacts of extending credit carry-forward, EPA is finalizing a
one-year credit life extension only for MYs 2017-2018 credits, as shown
in Table 11. This approach focuses the credit carry-forward extension
on MYs 2023-2024 where lead-time is limited and manufacturers' ability
to make adjustments to meet the more stringent standards is most
constrained. EPA is not including the proposed one-year extension for
MYs 2019 and 2020 credits out to MYs 2025 and 2026, respectively,
because EPA believes there is sufficient lead time for manufacturers to
make adjustments in their product and technology mix to meet the
standards without the extension (see EPA's technical assessment of the
standards in section III, of this preamble). MYs 2019 and 2020 credits
will continue to be allowed to be carried forward through MYs 2024 and
2025, respectively, under the existing five year credit life
provisions. EPA is not finalizing the two-year extension of the MY 2016
credits because we agree with the public comments that this additional
year of credit life extension is unnecessary and could have the effect
of weakening the MY 2022 SAFE standards.
    If EPA were to extend MY 2016 credits, given the significant volume
of currently banked credits that expire in MY2021 (as do the MY2016
credits), EPA expects that most of the MY 2016 credits would remain
banked for use in MY 2023. However, if the MY2016 credits were
extended, it is also possible due to the high number of credits held by
some manufacturers, that some credits could be used or traded toward
compliance with the weakened SAFE standards in MY 2022, for which EPA
believes clearly no additional flexibility is warranted. This was not
EPA's intent in proposing the extension. After considering the
feasibility of the standards without the extension for MY 2016 credits,
EPA determined that the MY 2023 standards could be met without the
extension. Also, without an extension, MY 2016 credits will expire in
MY 2021, a MY where several manufacturers will already have relatively
large banks of MY 2010-2015 credits that also expire in MY 2021 (as
noted, the 2012 rule provided a ``one-time'' extended credit life for
these credits, and thus several manufacturers in the industry have
built up extensive banks of credits all due to expire after MY 2021).
The result of declining to extend MY 2016 credits, is that there will
be an unusually high amount of credits that must be used or expire in
MY 2021. In turn, the availability of these expiring credits will
likely leave MY 2017-2021 credit balances unused by many manufacturers
in MY 2021 and therefore available for use in MYs 2022 and beyond,
depending on each manufacturer's MY 2021 and later compliance
plans.\52\ By extending MY 2017 credits but not MY 2016 credits,
manufacturers' need for near-term flexibility are balanced with
concerns that excess credit banks could delay the introduction or
further penetration of technology. EPA believes that the extension of
MY 2017 and 2018 credits by one year provides a reasonable and
sufficient level of additional flexibility in meeting the final MYs
2023 and 2024 standards, focusing the additional flexibility on MYs
with relatively shorter lead time. Several manufacturers have MY 2017-
2018 vintage credits banked for future use, which could be used either
internally within the manufacturer or traded to another manufacturer,
so this provision provides additional flexibility for MYs 2023-2024
compliance.\53\
---------------------------------------------------------------------------

    \52\ ``The 2021 EPA Automotive Trends Report, Greenhouse Gas
Emissions, Fuel Economy, and Technology since 1975,'' EPA-420-R-21-
023, November 2021.
    \53\ ``The 2021 EPA Automotive Trends Report, Greenhouse Gas
Emissions, Fuel Economy, and Technology since 1975,'' EPA-420-R-21-
023, November 2021. See Table 5.19. Credits noted as expiring in MYs
2022-2023 represent MY 2017-2018 vintage credits, respectively.
These credits will now expire one year later, respectively, in MYs
2023-2024.

                                                           Table 11--Final Extension of Credit Carry-Forward for MY 2016-2020 Credits
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                MYs credits are valid under extension
                    MY credits are banked                    -----------------------------------------------------------------------------------------------------------------------------------
                                                                 2016        2017        2018        2019        2020        2021        2022        2023        2024        2025        2026
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2016........................................................  ..........          x           x           x           x           x   ..........  ..........  ..........  ..........  ..........
2017........................................................  ..........  ..........          x           x           x           x           x           +   ..........  ..........  ..........
2018........................................................  ..........  ..........  ..........          x           x           x           x           x           +   ..........  ..........
2019........................................................  ..........  ..........  ..........  ..........          x           x           x           x           x   ..........  ..........
2020........................................................  ..........  ..........  ..........  ..........  ..........          x           x           x           x           x   ..........
2021........................................................  ..........  ..........  ..........  ..........  ..........  ..........          x           x           x           x           x
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
x = Existing program. + = Additional years included in Final Rule.

    In response to the comments received, EPA believes the approach it
is finalizing provides manufacturers with the flexibility asked for
given the stated concerns about lead time, while also responding to
other concerns raised that the proposed extension is unnecessary and
could lead to a delay in application of emissions reducing technology.
By adopting a one-year extension only for MYs 2017-2018 credits, EPA
more narrowly focuses the extension on MYs 2023-2024 to help
manufacturers manage the transition to more stringent standards by
providing some additional flexibility. There is greater need for
flexibility in these early years because manufacturers will be somewhat
limited in making product plan changes in response to the final
standards. By not adopting the proposed extension for MY

2019 and MY 2020 credits, EPA's approach also responds to other
commenters' concerns that the proposed extension may slow the adoption
of emissions reducing technology. Concerning compliance with MYs 2025-
2026 standards, EPA agrees with comments that manufacturers will be
able to meet the standards through the application of technology and
changes to product mix that includes increasing sales of lower
emitting, credit generating vehicles, as shown in our technical
analysis for the final rule.
    In response to Tesla's comments that the extension may lessen the
value of credits in the trading market, EPA believes this could be true
if EPA were not adopting more stringent standards at the same time.
However, any loss of credit value is likely more than offset by the
stringent final standards which could make available credits even more
sought after by some manufacturers, and thus potentially increasing
credit value. EPA also notes that the GHG program regulations clearly
state, ``There are no property rights associated with CO2
credits generated under this subpart. Credits are a limited
authorization to emit the designated amount of emissions. Nothing in
this part or any other provision of law should be construed to limit
EPA's authority to terminate or limit this authorization through a
rulemaking.'' \54\ EPA retains the ability to revise credits provisions
as it believes prudent through rulemaking.
---------------------------------------------------------------------------

    \54\ 30 CFR 86.1865-12(k)(2). EPA adopted this regulatory
provision when it established the first GHG standards in the 2010
rule.
---------------------------------------------------------------------------

5. Certification, Compliance, and Enforcement
    EPA established comprehensive vehicle certification, compliance,
and enforcement provisions for the GHG standards as part of the
rulemaking establishing the initial GHG standards for MY 2012-2016
vehicles.\55\ Manufacturers have been using these provisions since MY
2012 and EPA neither proposed nor is adopting any changes in the areas
of certification, compliance, or enforcement.
---------------------------------------------------------------------------

    \55\ See 75 FR 25468-25488 and 77 FR 62884-62887 for a
description of these provisions. See also ``The 2020 EPA Automotive
Trends Report, Greenhouse Gas Emissions, Fuel Economy, and
Technology since 1975,'' EPA-420-R-21-003 January 2021 for
additional information regarding EPA compliance determinations.
---------------------------------------------------------------------------

6. On-Board Diagnostics Program Updates
    EPA regulations state that onboard diagnostics (OBD) systems must
generally detect malfunctions in the emission control system, store
trouble codes corresponding to detected malfunctions, and alert
operators appropriately. EPA adopted (as a requirement for an EPA
certificate) the 2013 CARB OBD regulation, with certain additional
provisions, clarifications and exceptions, in the Tier 3 Motor Vehicle
Emission and Fuel Standards final rulemaking (40 CFR 86.1806-17; 79 FR
23414, April 28, 2014). Since that time, CARB has made several updates
to their OBD regulations and continues to consider changes
periodically.\56\ Manufacturers may find it difficult to meet both the
2013 OBD regulation adopted in EPA regulations and the currently
applicable CARB OBD regulation on the same vehicles. This may result in
different calibrations being required for vehicles sold in states
subject to Federal OBD (2013 CARB OBD) and vehicles sold in states
subject to current CARB OBD.
---------------------------------------------------------------------------

    \56\ See https://ww2.arb.ca.gov/our-work/programs/obd-board-diagnostic-program/obd-workshops.
---------------------------------------------------------------------------

    To provide clarity and regulatory certainty to manufacturers, EPA
is finalizing as proposed a limited regulatory change to streamline OBD
requirements. Under this change, EPA can find that a manufacturer met
OBD requirements for purposes of EPA's certification process if the
manufacturer can show that the vehicles meet newer CARB OBD regulations
than the 2013 CARB regulation which currently establishes the core OBD
requirements for EPA certification and that the OBD system meets the
intent of EPA's regulation, including provisions that are in addition
to or different from the applicable CARB regulation. The intent of this
provision is to allow manufacturers to produce vehicles with one OBD
system (software, calibration, and hardware) for all 50 states. We
received only supportive comments on this change, from the auto
industry, as summarized in the Response to Comments (RTC) document for
this rulemaking.
7. Stakeholder Engagement
    In developing this rule, EPA conducted outreach with a wide range
of stakeholders, including auto manufacturers, automotive suppliers,
labor groups, state/local governments, environmental and public
interest groups, public health professionals, consumer groups, and
other organizations. We also coordinated with the California Air
Resources Board. Consistent with Executive Order 13990, in developing
this rule EPA has considered the views from labor unions, states, and
industry, as well as other stakeholders.
    EPA has considered all public comments received during the two-day
public hearing on August 25 and 26, 2021, and written comments
submitted to the docket during the public comment period, which closed
September 27, 2021. Responses to comments can be found in this preamble
and the Response to Comments document. We look forward to continuing to
engage with interested stakeholders as we embark on a future rulemaking
to set standards beyond 2026, so diverse views can continue to be
considered in our development of a longer-term program.
8. How do EPA's final standards relate to NHTSA's CAFE proposal and to
California's GHG program?
i. EPA and NHTSA Rulemaking Coordination
    In E.O. 13990, President Biden directed NHTSA and EPA to consider
whether to propose suspending, revising, or rescinding the SAFE rule
standards for MYs 2021-2026.\57\ Both agencies determined that it was
appropriate to propose revisions to their respective standards; EPA
proposed and is finalizing revisions to its GHG standards and, in a
separate rulemaking action, NHTSA proposed to revise its CAFE
standards.\58\ Since 2010, EPA and NHTSA have adopted fuel economy and
GHG standards in joint rulemakings. In the 2010 joint rule, EPA and
NHTSA explained the purpose of the joint rulemaking effort was to
develop a coordinated and harmonized approach to implementing the two
agencies' statutes. The joint rule approach was one appropriate
mechanism for the agencies to coordinate closely, given the common
technical issues both agencies needed to consider and the importance of
avoiding inconsistency between the programs. A few environmental NGOs
commented that the CAA does not require EPA to engage in joint
rulemaking for its LD GHG program.
---------------------------------------------------------------------------

    \57\ 86 FR 7037, January 25, 2021.
    \58\ 86 FR 49602, September 3, 2021.
---------------------------------------------------------------------------

    In light of additional experience as the GHG and CAFE standards
have co-existed since the 2010 rule and the agencies have engaged in
several joint rulemakings, EPA has concluded that while it remains
committed to ensuring that GHG emissions standards for light duty
vehicles are coordinated with fuel economy standards for those
vehicles, it is unnecessary for EPA to do so specifically through a
joint rulemaking.
    In reaching this conclusion, EPA notes that the agencies have
different statutory mandates and their respective programs have always
reflected those

differences. As the Supreme Court has noted ``EPA has been charged with
protecting the public's 'health' and 'welfare,' a statutory obligation
wholly independent of DOT's mandate to promote energy efficiency.''
\59\ The agencies have recognized these different mandates, and the
fact that they have produced different analytical approaches and
standards. For example, since EPA's responsibility is to address air
pollution, it sets standards not only for carbon dioxide (measured as
grams per mile), but also for methane and nitrous oxide. Even more
significantly, EPA regulates leakage of fluorocarbons from air
conditioning units by providing a credit against the tailpipe
CO2 standard for leakage reduction and adjusting those
standards numerically downwards to reflect the anticipated availability
of those credits. NHTSA, given its responsibility for fuel economy
(measured as miles per gallon), does not have these elements in the
CAFE program but has limits on transfers between car and truck fleets.
There have always been other differences between the programs as well,
which generally can be traced back to differences in statutory
mandates. As the agencies reconsider the SAFE 2 standards, the
difference in statutory lead time requirements has similarly led to a
difference in the model years for which standards are being revised.
---------------------------------------------------------------------------

    \59\ Massachusetts v. EPA, 549 U.S. at 532.
---------------------------------------------------------------------------

    We note that EPA coordinates with NHTSA regardless of whether it is
in the formal context of a joint rulemaking, and indeed we have done so
during the development of this rulemaking. Although there is no
statutory requirement for EPA to consult with NHTSA, EPA has consulted
significantly with NHTSA in the development of this rule. For example,
staff of the two agencies met to discuss various technical issues
including modeling inputs and assumptions, shared technical
information, and shared views related to the modeling used for each
rule. Under other areas of the CAA, consultation is the usual approach
Congress has specified when it recognizes that in addition to EPA,
another agency shares expertise and equities in an area. The CAA does
not require joint rulemaking, even for its many provisions that require
EPA consultation with other agencies on topics such as the impacts of
ozone-depleting substances on the atmosphere (CAA section 603(f)
requires consultation with Administrators of NASA and NOAA), renewable
fuels (CAA section 211(o)(2)(B)(ii) requires coordination with the
Secretaries of Energy and Agriculture, and section 211(o)(7) requires
consultation with those Secretaries), the importance of visibility on
public lands (CAA section 169A(d) requires consultation with Federal
Land Manager), regulation of aerospace coatings (CAA section 183(b)(3)
requires consultation with Secretaries of Defense and Transportation
and NASA Administrator), and federal procurement (CAA section 613
requires consultation with GSA Administrator and Secretary of Defense).
For example, for aircraft emissions standards, where CAA section
231(a)(2)(B)(i) requires EPA to set the standards in consultation with
the Federal Aviation Administration (FAA), and FAA implements the
standards, the two agencies may undertake, and have undertaken,
separate rulemakings. Likewise, when EPA revises test procedures for
NHTSA's fuel economy standards under EPA's authority in 42 U.S.C.
32904(c), those rules are not done as joint rulemaking (unless they
were included as part of a larger joint rulemaking on GHG and fuel
economy standards). Thus, EPA concludes that joint rulemaking is
unnecessary, particularly to the extent it was originally intended to
ensure that the agencies work together and coordinate their rules,
which the agencies are indeed doing through separate rulemaking
processes.
    We note that many commenters, including automakers, suppliers,
dealers and the UAW noted benefits of coordination between EPA and
NHTSA in establishing their respective programs, and urged EPA to
maintain a close alignment with NHTSA, to ensure that automakers can
continue to design and build vehicles to meet both sets of standards.
As explained above, and at proposal, EPA has coordinated and will
continue to coordinate with NHTSA in the development of EPA's and
NHTSA's standards even in the absence of joint rulemaking. While the
statutory differences between the programs remain, and thus some
differences in compliance strategies might result, EPA agrees with
commenters that it is an important goal for coordination that
automakers be able to produce a fleet of vehicles which achieves
compliance with both sets of standards simultaneously, and we believe
these standards are consistent with that longstanding practice and
goal. For example, EPA believes that the revised MY 2023 GHG standards
will not interfere with automakers' ability to comply with MY 2023 CAFE
standards even though NHTSA has not proposed revising CAFE standards
for that year.
ii. California GHG Program
    California has long been a partner in reducing light-duty vehicle
emissions, often leading the nation by setting more stringent standards
before similar standards are adopted by EPA. This historically has been
the case with GHG emissions standards in past federal rulemakings,
where California provided technical support to EPA's nationwide
programs. Prior to EPA's 2010 rule establishing the first nationwide
GHG standards for MYs 2012-2016 vehicles, California had adopted GHG
standards for MYs 2009-2016.\60\ California subsequently adopted its
MYs 2017-2025 GHG standards as part of its Advanced Clean Car (ACC)
program. After EPA adopted its standards in the 2012 rule for MYs 2017-
2025, California adopted a deemed-to-comply regulation whereby
manufacturers could demonstrate compliance with California's standards
by complying with EPA's standards.\61\ California also assisted and
worked with EPA in the development of the 2016 Draft Technical
Assessment Report for the Mid-term Evaluation,\62\ issued jointly by
EPA, CARB and NHTSA, that served as an important technical basis for
EPA's original January 2017 Final Determination that the standards
adopted in the 2012 rule for MYs 2022-2025 remained appropriate.
California also conducted its own Midterm Review that arrived at a
similar conclusion.\63\
---------------------------------------------------------------------------

    \60\ EPA issued a waiver for CARB's 2009-2016 model year
vehicles in 2009 (74 FR 32744). EPA subsequently issued a within-
the-scope waiver determination for CARB's subsequent deemed-to-
comply regulation (CARB adopted this regulation after EPA finalized
its 2012-2016 model year GHG standards in 2010 on June 14, 2011 (76
FR 34693).
    \61\ The California Air Resources Board (CARB) received a waiver
of Clean Air Act preemption on January 9, 2013 (78 FR 2211) for its
Advanced Clean Car (ACC) program. CARB's ACC program includes the
MYs 2017-2025 greenhouse gas (GHG) standards as well as regulations
for zero-emission vehicle (ZEV) sales requirements and California's
low emission vehicle (LEV) III requirements.
    \62\ Draft Technical Assessment Report: Midterm Evaluation of
Light-Duty Vehicle Greenhouse Gas Emission Standards and Corporate
Average Fuel Economy Standards for Model Years 2022-2025, EPA-420-D-
16-900, July 2016.
    \63\ https://ww2.arb.ca.gov/our-work/programs/advanced-clean-cars-program/advanced-clean-cars-midterm-review.
---------------------------------------------------------------------------

    In August 2018, EPA and NHTSA jointly issued the SAFE rule
proposal, which included an EPA proposal to withdraw CARB's Advanced
Clean Car (ACC) waiver as it related to California GHG emission
standards and ZEV sales requirements (that would preclude California
from enforcing its own program) as well as a proposal to

sharply reduce the stringency of the national standards.\64\ In
September 2019, EPA and NHTSA then jointly issued a final SAFE ``Part
One'' rule, which included a final EPA action withdrawing CARB's ACC
waiver as it related to California GHG emission standards and ZEV sales
requirements.\65\ In response to the SAFE rule proposal, California and
five auto manufacturers entered into identical agreements commonly
referred to as the California Framework Agreements. The Framework
Agreements included national GHG emission reduction targets for MYs
2021-2026 that, in terms of stringency, are about halfway between the
original 2012 rule standards and those adopted in the final SAFE rule.
The Framework Agreements also included additional flexibilities such as
additional incentive multipliers for advanced technologies, off-cycle
credits, and full-size pickup strong hybrid incentives.
---------------------------------------------------------------------------

    \64\ EPA's waiver for CARB's Advanced Clean Car regulations is
at 78 FR 2211 (January 9, 2013). The SAFE NPRM is at 83 FR 42986
(August 24, 2018).
    \65\ 84 FR 51310 (Sept. 27, 2019).
---------------------------------------------------------------------------

    EPA has considered California standards in past vehicle standards
rules as we considered the factors of feasibility, costs of compliance
and lead time. The California Framework Agreement provisions, and the
fact that five automakers representing nearly 30 percent of national
U.S. vehicle sales voluntarily committed to them, at a minimum provide
a clear indication of manufacturers' capabilities to produce cleaner
vehicles than required by the SAFE rule standards in the implementation
timeframe of EPA's revised standards.\66\ EPA further discusses how we
considered the California Framework Agreements in the context of
feasibility and lead time for our standards in Section III.C of this
preamble. Some commenters supported continued coordination between EPA
and California on our respective light-duty GHG programs. EPA expects
to continue our long-standing practice of working closely with CARB and
all other interested stakeholders in development of future emissions
standards.
---------------------------------------------------------------------------

    \66\ The five California Framework Agreements may be found in
the docket for this rulemaking and at: https://ww2.arb.ca.gov/news/framework-agreements-clean-cars.
---------------------------------------------------------------------------

    In a separate but related action, on April 28, 2021, EPA issued a
Notice of Reconsideration for the previous withdrawal of the
California's ACC waiver as it relates to the ZEV sales mandate and GHG
emission standards (SAFE 1), requesting comments on whether the
withdrawal should be rescinded, which would reinstate the waiver.\67\
EPA conducted a virtual public hearing on June 2, 2021 and the comment
period closed on July 6, 2021. EPA will announce the results of its
reconsideration once it is complete.
---------------------------------------------------------------------------

    \67\ 80 FR 22421 (April 28, 2021).
---------------------------------------------------------------------------

B. Manufacturer Compliance Flexibilities

    EPA is finalizing a targeted set of additional temporary compliance
flexibilities intended to provide additional flexibility for
manufacturers in meeting the 2023 and 2024 standards. EPA proposed
temporary changes to certain flexibility provisions to provide limited
additional flexibility for manufacturers in transition to more
stringent standards. After considering comments and further analysis,
EPA is adopting a narrower set of flexibilities than proposed, focusing
them particularly on MYs 2023-2024 to help manufacturers manage the
transition to more stringent standards by providing some additional
flexibility in the near-term. One of the four flexibilities, extended
credit carry-forward, is discussed above in section II.A.4 of this
preamble. This section provides a detailed discussion of the remaining
three flexibilities, listed below, including a summary of the final
flexibility provisions compared to those proposed and public comment
highlights.
    (1) Credit carry-forward extension: As discussed previously in
Section II.A.4 of this preamble, EPA is finalizing provisions for
credit carry-forward extension that are more targeted than those
proposed. EPA proposed to extend credit carry-forward for MY 2016-2020
credits to allow more flexibility for manufacturers in using banked
credits in MYs 2023-2026. Specifically, EPA proposed a two-year
extension of MY 2016 credits and a one-year extension of MY 2017-2020
credits. After considering comments and further analyzing the need for
extended credit life, EPA is adopting a narrower approach for the final
rule of only adopting the one-year credit life extension for MY 2017-
2018 credits so they may be used in MYs 2023-2024.
    (2) Advanced technology multiplier incentives: EPA proposed
increased and extended advanced technology multiplier incentives for
MYs 2021-2025 but is finalizing the multipliers at their MY 2021 levels
as established in the 2012 rule (e.g., 1.5 for EVs rather than the
proposed 2.0) and including them only for MYs 2023-2024. Also, EPA
proposed to remove the multiplier incentives for natural gas vehicles
for MYs 2023-2026 established by the SAFE rule and is finalizing this
program change as proposed.
    (3) Full-size pickup truck incentives: EPA proposed to extend the
full-size pickup incentives for MYs 2022-2025, reinstating the
provisions of the 2012 rule after EPA had eliminated them for these
years as part of the SAFE rule. As with multipliers, EPA is finalizing
the full-size pickup credits only for MYs 2023-2024.
    (4) Off-cycle credits: EPA proposed additional opportunities for
menu-based off-cycle credits starting in MY 2020, along with updated
technology definitions for some of the menu technologies. EPA is
finalizing those additional credit opportunities only for MYs 2023-2026
and is not including them as an option for MYs 2020-2022. EPA is
adopting new definitions for certain menu technologies as proposed with
minor edits after considering comments.
    The use of the optional credit and incentive provisions has varied,
and EPA continues to expect it to vary, from manufacturer to
manufacturer. However, most manufacturers are currently using at least
some of the flexibilities.\68\ Although a manufacturer's use of the
credit and incentive provisions is optional.
---------------------------------------------------------------------------

    \68\ See ``The 2020 EPA Automotive Trends Report, Greenhouse Gas
Emissions, Fuel Economy, and Technology since 1975,'' EPA-420-R-21-
003 January 2021 for additional information regarding manufacturer
use of program flexibilities.
---------------------------------------------------------------------------

1. Multiplier Incentives for Advanced Technology Vehicles
i. Background on Multipliers Under Previous Programs
    In the 2012 rule, EPA included incentives for advanced technologies
to promote the commercialization of technologies that have the
potential to transform the light-duty vehicle sector by achieving zero
or near-zero GHG emissions in the longer term, but which faced major
near-term market barriers. EPA recognized that providing temporary
regulatory incentives for certain advanced technologies would decrease
the overall GHG emissions reductions associated with the program in the
near term, by reducing the effective stringency of the standards in
years in which the incentives were available, to the extent the
incentives were used. However, in setting the 2017-2025 standards, EPA
believed it was worthwhile to forego modest additional emissions
reductions in the near term in order to lay the foundation for much
larger GHG emissions reductions in the longer term. EPA also

believed that the temporary regulatory incentives may help bring some
technologies to market more quickly than in the absence of
incentives.\69\
---------------------------------------------------------------------------

    \69\ See 77 FR 62811 et seq.
---------------------------------------------------------------------------

    EPA established multiplier incentives for MYs 2017-2021 electric
vehicles (EVs), plug-in hybrid electric vehicles (PHEVs), fuel cell
vehicles (FCVs), and natural gas vehicles (NGVs).\70\ The multiplier
allows a vehicle to ``count'' as more than one vehicle in the
manufacturer's compliance calculation. Table 12 provides the
multipliers for the various vehicle technologies included in the 2012
final rule for MY 2017-2021 vehicles.\71\ Since the GHG performance for
these vehicle types is significantly better than that of conventional
vehicles, the multiplier provides a significant benefit to the
manufacturer. EPA chose the magnitude of the multiplier levels to be
large enough to provide a meaningful incentive, but not be so large as
to provide a windfall for vehicles that still would have been produced
even at lower multiplier levels. The multipliers for EVs and FCVs were
larger because these technologies faced greater market barriers at the
time.
---------------------------------------------------------------------------

    \70\ 77 FR 62810, October 15, 2012.
    \71\ 77 FR 62813-62816, October 15, 2012.

Table 12--Incentive Multipliers for EV, FCV, PHEVs, and NGVs Established
                              in 2012 Rule
------------------------------------------------------------------------
               Model years                 EVs and FCVs   PHEVs and NGVs
------------------------------------------------------------------------
2017-2019...............................             2.0             1.6
2020....................................            1.75            1.45
2021....................................             1.5             1.3
------------------------------------------------------------------------

    In the SAFE rule, EPA adopted a multiplier of 2.0 for MYs 2022-2026
natural gas vehicles (NGVs), noting that no NGVs were being sold by
auto manufacturers at that time. EPA did not extend multipliers for
other vehicle types in the SAFE rule, as the SAFE standards did not
contemplate the extensive use of these technologies in the future so
there was no need to continue the incentives.
ii. Proposed and Final Multiplier Extension and Cap
    EPA is adopting a narrower set of temporary advanced technology
multipliers in the final rule, limiting the multipliers to MYs 2023-
2024 and at multiplier values consistent with the MY 2021 multiplier
levels shown in Table 12, which are lower than the levels in the
proposed rule. EPA is also finalizing the proposed 10 g/mile multiplier
credit cap as proposed. This section first discusses the final
multiplier levels and model year availability followed by a discussion
of the multiplier cap.
a. Multiplier Levels and Model Year Applicability
    EPA proposed to extend multipliers for EVs, PHEVs, and FCVs for MYs
2022-2025, but with a cap to limit the magnitude of resulting emissions
reduction losses and to provide a means to more definitively project
the impact of the multipliers on the overall stringency of the program.
EPA noted in the proposed rule that with the revised more stringent
standards being proposed, the Agency believed limited additional
multiplier incentives would be appropriate for the purposes of
encouraging manufacturers to accelerate the introduction of zero and
near-zero emissions vehicles and maintaining momentum for that market
transition. EPA requested comment on all aspects of the proposed
extension of multipliers, including the proposed multiplier levels,
model years when multipliers are available, and the size and structure
of the multiplier credit cap.
    Given that the multipliers previously established in the 2012 rule
and modified in the SAFE rule only run through MY 2021, EPA proposed to
start the new multipliers in MY 2022 to provide continuity for the
incentives over MYs 2021-2025. As proposed the multipliers would
function in the same way as they have in the past, allowing
manufacturers to count eligible vehicles as more than one vehicle in
their fleet average calculations. The levels of the proposed
multipliers, shown in Table 13 below, are the same as those contained
in the California Framework Agreements for MY 2022-2025. EPA proposed
to sunset the multipliers after MY 2025, rather than extending them to
MY 2026, because EPA intended them to be a temporary part of the
program to incentivize technology in the near-term, consistent with
previous multipliers. EPA noted in the proposed rule that sunsetting
the multipliers at the end of MY 2025 would help signal that EPA does
not intend to include multipliers in its future proposal for standards
for MY 2027 and later MYs, where these technologies are likely to be
integral to the feasibility of the standards. The goal of a long-term
program would be to quickly transition the light-duty fleet to zero-
emission technology, in which case ``incentives'' would no longer be
appropriate, noting further that as zero-emissions technologies become
more mainstream, EPA believes it is appropriate to transition away from
multiplier incentives.

       Table 13--Proposed Multiplier Incentives for MYs 2022-2025
------------------------------------------------------------------------
           Model years               EVs and FCVs            PHEVs
------------------------------------------------------------------------
2022-2024.......................  2.0...............  1.6
2025............................  1.75..............  1.45
2026+...........................  1.0 (no multiplier  1.0 (no multiplier
                                   credits).           credits).
------------------------------------------------------------------------

    EPA also noted in the proposed rule that it believes sunsetting
multipliers would simplify programmatically a transition to a more
stringent program for MY 2027. The proposed MY 2025 sunset date
combined with the cap, discussed below, was intended to begin the
process of transitioning away from auto manufacturers' ability to make
use of the incentive multipliers. While EPA proposed to end multipliers
after MY 2025 for these reasons, EPA requested comments on whether it
would be more appropriate to allow multiplier credits to be generated
in MY 2026 without an increase in the cap, potentially providing an
additional incentive for manufacturers who had not yet produced
advanced technology vehicles by MY 2026. EPA noted, however, that
extending the multipliers through MY 2026 could also potentially
complicate transitioning to MY 2027 standards for some manufacturers.
    EPA received a range of comments on its proposed multipliers for
MYs 2021-2025, including both support for and opposition to including
multipliers in the program. The Alliance and several member auto
companies commented in support of including multipliers in the program.
The Alliance commented that multipliers have proven effective in
incentivizing increased production and sales of EVs and that it is
aligned with EPA in recognizing that multipliers have provided, and can
continue to provide, a meaningful incentive for manufacturers to help
drive additional EVs into the marketplace and to help overcome ongoing
market headwinds. The Alliance commented that ``for the duration of
this rule, it can be broadly summarized that while improving, there is
projected to remain a lingering price disparity between EVs and
conventional models. This disparity continues to support the basis of
the EV multiplier to deliver ``substantial induced innovation. Separate
from the issue of cost, there are several points of friction that EVs
have and may continue to struggle to overcome including availability of
public charging infrastructure.'' The

Alliance commented it believes the inclusion of EV multipliers for MY
2026 and a higher cap would better recognize the current state of EV
technology and markets and incentivize additional EV production. The
Alliance also commented that extending the multipliers out to MY 2026
would also recognize that some manufacturers are still developing EVs
and would be influenced by later incentives. The Alliance suggested
that EPA include an EV multiplier in MY 2026, and reconsider the need
for such incentives beyond MY 2026 based on technology and market
development in a subsequent rulemaking.
    Honda commented that policy levers such as advanced technology
multipliers can play an important role in driving continued investment
in the face of market uncertainty, multipliers have the potential to
bring the cost-effectiveness of long-term technologies more in line
with those of shorter-term technologies, and can help facilitate a
virtuous cycle in which reduced technology costs, passed along to
consumers, can further assist market uptake. Jaguar Land Rover
commented in support of lowering the multiplier levels to those in
place for MY 2021. Toyota commented that the multiplier should be
increased for PHEVs, to a level closer to that provided to EVs, as they
claim that PHEVs are often driven as EVs. Lucid, an EV-only
manufacturer, supported the multipliers.
    CARB commented that EPA's proposed multiplier levels are too high
because the proposed cap would be reached at around two percent of
sales, a level already met by some auto manufacturers. CARB commented
that, as such, the proposed cap would not provide much incentive for
increased EV sales. CARB commented that EPA should finalize multipliers
only for MYs 2023-2025 at a multiplier levels lower than the proposed
levels as they believed that this approach would require manufacturers
to sell more EVs in order to maximize multiplier incentive credits and
reach the cap, thus providing a greater incentive for manufacturers to
increase EV sales in this time frame. Similar comments were received
from other state government stakeholders including New York, Minnesota,
New Mexico, as well as NACAA. South Coast Air Quality Management
District (SCAQMD) supported multipliers and suggested extending them
out to MY 2026 but at a lower level as part of a phase-out.
    Other commenters supporting multipliers include Motor and Equipment
Manufacturers Association (MEMA), Manufacturers of Emission Controls
Association (MECA), ITB Group, and several individual suppliers. MEMA
and MECA commented that their support was conditioned on the incentives
sunsetting in 2025 and the program including a stringent cap, discussed
below. MEMA commented ``while MEMA can support these advanced
technology multiplier incentives, these multiplier incentives should
not be extended indefinitely, credits should not be set higher than the
proposed levels, and the proposed cap should not be increased.'' The
Electric Drive Transportation Association also supported multipliers,
commenting that EVs are still an emerging market and industry and that
multipliers promote investment in innovation and noting that there is
still significant uncertainty in multi-year EV market predictions. The
Edison Electric Institute also supported the proposed multipliers as
reasonable and well supported.
    Rivian and Tesla, both EV-only manufacturers, did not support
including multipliers. Rivian commented that ``artificially enhancing
the compliance value of EVs, the multiplier can enable manufacturers to
sell additional conventional vehicles if those units deliver a greater
financial return. It is also debatable whether the multiplier is even
necessary at this stage to help commercialize EV technology. With a
rapidly proliferating lineup of EVs in all body styles and vehicle
segments, the auto industry has amply demonstrated its ability to bring
compelling and competitive advanced technology vehicles to market.''
Tesla commented that the renewal of multipliers and increased value are
unnecessary and, rather than serve as an incentive, will further delay
manufacturers from deploying large amounts of electric vehicles in the
U.S. Tesla also commented that the proposed enhanced multiplier
unnecessarily rewards late-acting manufacturers with excessive credits
and richer credits after over a decade of notice from the EPA that such
incentives were temporary and destined to decline in reward.
    Environmental and health NGOs also did not support the proposed
multipliers, commenting that the incentives were not needed and would
result in a loss of emissions reductions. A coalition of NGOs commented
that the proposed multipliers would reduce the stringency of proposed
rule through MY 2021-MY 2026 by about 6 percent--an amount exceeding
one full year of emissions reductions and that the multipliers are no
longer serving their original purpose of incentivizing the production
of more EVs. NGOs commented that the multiplier credits represent a
windfall for manufacturers already planning to sell EVs. They commented
further that EPA, at a minimum, should end the lifetimes of any
multiplier credit in the final year for which they are granted such
that the multiplier credits are not banked to be used in MY 2027 and
later. UCS urged EPA to eliminate multipliers as the current program
already provides substantial incentives by excluding upstream
emissions; UCS submitted a modeling analysis which they believe
indicates that multipliers are ineffective in encouraging greater EV
sales.
    The Southern Environmental Law Center commented that, at a minimum,
EPA should revise the proposed rule so the MYs 2022 through 2024
multiplier incentives values start at 1.5 for EVs and FCVs, and 1.3 for
PHEVs--the values provided for the last year of advanced technology
credits (MY 2021) in the 2012 Rule--and then decrease to a value of 1.0
(no multiplier credits) by MY 2026.
    Securing America's Future Energy (SAFE) commented in support of the
proposed multipliers. SAFE further commented:

    [I]f EPA remains concerned that the multiplier will result in
fewer EV sales because the availability of the multiplier relaxes
the stringency of the standard, EPA could modify the operation of
the multiplier to mitigate those concerns while still incentivizing
the sale of electric vehicles. First, EPA could take into account
the possibility that the multiplier might relax the stringency of
the standards, and then further tighten the standards to maintain
its initial level of stringency. In the alternative, EPA could
modify the multiplier so that it would only apply to the incremental
percentage of EVs that an automaker sold over the percentage in the
previous year. By limiting the availability of the multiplier to the
incremental sales of EVs year over year, EPA could reduce the extent
to which it decreases the overall stringency of the standard. Yet,
by maintaining the multiplier for electric vehicles that represent
growth of the EV segment of an automakers' sales, the multiplier
would provide an ongoing and robust incentive for automakers to
continually increase their EV sales.

    The Institute for Policy Integrity commented that EPA should
consider whether scaling back some of the multiplier credits, or
limiting their application to MY 2023, would increase net social
benefits while still preserving more than enough compliance flexibility
to satisfy the requirement for lead time.
    The Alliance for Vehicle Efficiency (AVE) commented in support of
EPA's goal of offering advanced multiplier credits up until 2026 and
recommended EPA offer additional performance-based

credits to automotive manufacturers (OEMs) for any vehicle that exceeds
the standards ahead of EPA's compliance timeline, including ICE
vehicles. AVE commented that ``by steering OEMs towards specific
technologies that may only affect about 8 percent of the fleet by 2026
with extensive credits, EPA risks losing immediate and more extensive
environmental improvements in exchange for estimated environmental
gains years from now. EPA instead has an opportunity to accelerate the
adoption of advanced vehicle technologies and reduce emissions from the
vast majority of vehicles that will be sold between MYs 2023 to 2026
with performance-based credits.''
    After careful weighing the diverse and thoughtful comments received
regarding multipliers, EPA is finalizing temporary multipliers at lower
levels than those proposed and for fewer model years. Table 14 provides
the final multipliers.

         Table 14--Final Multiplier Incentives for MYs 2023-2024
------------------------------------------------------------------------
           Model years               EVs and FCVs            PHEVs
------------------------------------------------------------------------
2022............................  None..............  None.
2023-2024.......................  1.5...............  1.3.
2025+...........................  None..............  None.
------------------------------------------------------------------------

    EPA believes the approach being finalized strikes an appropriate
balance between providing additional near-term flexibility (with the
goal that multipliers can act as an incentive for manufacturers to ramp
up EV sales more quickly in this time period) and the overall emissions
reduction goals of the program. To the extent that manufacturers
utilize the optional multiplier flexibility to the maximum extent, it
provides additional flexibility of up to 10 g/mile (compared to a
projected total decrease in the fleet average targets over MYs 2023-
2024 of 32 g/mile, as shown in Table 8 of section II.A.1 of this
preamble.) for a manufacturer's overall fleet, consistent with the cap
level of the proposal. EPA's final approach is also directionally
responsive to many of the concerns raised about multipliers and
incorporates several of the suggestions made by commenters to narrow
the model years and reduce the magnitude of the multipliers. By
reducing the multiplier numeric levels by 50 percent compared to the
proposed rule (i.e., reducing the EV multiplier from 2.0 to 1.5),
manufacturers will need to sell twice as many advanced technology
vehicles if they wish to fully utilize the multiplier incentive and
reach the cap. In addition, by retaining the proposed cumulative cap of
10 g/mile, but focusing the multiplier incentives on MYs 2023-2024, the
result is an effective or average per year cap of 5.0 g/mile as opposed
to the 2.5 g/mile nominal per year cap proposed, under which the 10 g/
mile cumulative would spread over four rather than 2 years. EPA
believes this approach is responsive to comments that the proposed
multipliers would not represent an incentive but simply windfall
credits manufacturers would generate by selling the same number of EVs
as had been planned previously. In response to comments that the
proposed multipliers could have the effect of delaying or reducing EV
sales, EPA modeled the final program with and without the final
multipliers and found that the final multipliers are not expected to
reduce EV sales (see RIA Chapter 4.1.4).
    In response to comments provided by SAFE, EPA believes the concept
SAFE presented regarding incentivizing only incremental sales beyond
those sold by manufacturers in the previous model year to focus the
incentive more directly on increased sale has some merit, but EPA is
not adopting such an approach. EPA proposed that the multipliers would
be applied in the same way as those provided previously in the 2012
rule for MYs 2017-2021, with the exception of the credit cap. EPA would
want to seek input from all stakeholders on the merits and
implementation details of this type of approach prior to adopting such
a fundamental change to the program. Also, the approach offered by SAFE
would add complexity to the program which EPA does not believe to be
necessary for the few model years, MYs 2023-2024, for which EPA is
adopting new multipliers.
    Some auto manufacturers commented in support of extending
multipliers through MYs 2026 and even beyond, while other commenters
were concerned that providing multipliers in later model years would
reward manufacturers that introduce advanced technology vehicles such
as EVs later than other manufacturers. EPA does not intend for
multipliers to be an ongoing incentive but only a narrow flexibility to
help address lead time concerns in early model years. EPA proposed to
end the multipliers in MY 2025 and is finalizing ending them a year
earlier in MY 2024, which is consistent with EPA's intention that the
incentives be short lived and narrowly targeted. As discussed further
in Section III of this preamble, EPA believes that there is enough lead
time for manufacturers to prepare to meet the final standards starting
in MY 2025 without such incentives. Regarding comments that EPA should
not allow the multiplier credits to be used in MYs 2027 and later
because the credits could unduly delay the application of technology
and delay emissions reductions, EPA understands this concern. When
considering the feasibility of standards for MYs 2027 and later, EPA
intends to take credit banks and credit availability into
consideration.
    EPA received many comments on multiplier incentives and responds
fully to comments in the RTC for the rule.
b. Multiplier Incentive Credit Cap
    To limit the potential effect of the multipliers on reducing the
effective stringency of the standards, EPA proposed to cap the credits
generated by a manufacturer's use of the multipliers to the Megagram
(Mg) equivalent of 2.5 g/mile for their car and light truck fleets per
MY for MYs 2022-2025 or 10.0 g/mile on a cumulative basis.\72\ Above
the cap, the multiplier would effectively have a value of 1.0--in other
words, after a manufacturer reaches the cap, the multiplier would no
longer be available and would have no further effect on credit
calculations. A manufacturer would sum the Mg values calculated for
each of its car and light truck fleets at the end of a MY into a single
cap value that would serve as the overall multiplier cap for the
combined car and light truck fleets for that MY. This approach would
limit the effect on stringency of the standards for manufacturers that
use the multipliers to no greater than 2.5 g/mile less stringent each
year on average over MYs 2022-2025. EPA proposed that manufacturers
would be able to choose how to apply the cap within the four-year span
of MYs 2022-2025 to best fit their product plans. Under the proposed
approach, manufacturers could opt to use values other than 2.5 g/mile
in the cap calculation as long as the sum of those values over MYs
2022-2025 did not exceed 10.0 g/mile (e.g., 0.0, 2.5, 2.5, 5.0 g/mile
in MYs 2022-2025).
---------------------------------------------------------------------------

    \72\ Proposed Multiplier Credit Cap [Mg] = (2.5 g/mile
CO2 x VMT x Actual Annual Production)/1,000,000
calculated annually for each fleet and summed. The proposed approach
would allow manufacturers to use values higher than 2.5 g/mile in
the calculation as long as the sum of the cumulative values over MYs
2022-2025 did not exceed 10.0 g/mile. The vehicle miles traveled
(VMT) used in credit calculations in the GHG program, as specified
in the regulations, are 195,264 miles for cars and 225,865 for
trucks. See 40 CFR 86.1866-12. See also 40 CFR 86.1866-12(c) for the
calculation of multiplier credits to be compared to the cap.
---------------------------------------------------------------------------

    EPA received a range of comments regarding the proposed cap. The

Alliance and some individual auto manufacturers commented that EPA
should provide a cap more in line with that included in the California
Framework, equivalent to 23 g/mile (about 5.8 g/mile/year) through MY
2025 and 32 g/mile (about 6.4 g/mile/year) through MY 2026, in order to
further incentivize EVs. The Alliance commented that the proposed 10 g/
mile cap provides little incentive to increase EV production unless it
is taken in a single, or limited, years. The Alliance also commented
that the increased cap would better recognize the current state of EV
technology and markets. Auto Innovators believes additional EV
production can be incentivized by a higher credit cap while still
balancing with the policy goal of maximizing near-term GHG benefits.
Several individual manufacturers including Honda, Hyundai, JLR,
Mercedes, Nissan, Stellantis, and Toyota also commented in support of a
cap in line with or closer to the California Framework levels.
    Ford commented that a larger multiplier should be provided for
trucks compared to cars to alleviate proportionally lower benefits
provided to OEMs with a higher truck mix. Lucid commented that EV-only
manufacturers should not be subject to a cap because they are not off-
setting higher emitting ICE vehicles in their own fleets. Lucid
commented that the cap was intended to target manufacturers that
produce vehicles with internal combustion engines to prevent them from
counterbalancing high-emitting vehicles with ZEV sales.
    CARB and New York State Department of Environmental Quality (DEQ)
supported the proposed cap, but with lower multipliers such that more
EVs are needed to reach the cap, thus providing an incentive for
greater EV sales. UCS commented it supports EPA's cap and smaller
window of time for those multipliers if multipliers are to remain in
the final rule. It commented further that ``should EPA continue to move
forward with a new phase of EV multipliers, we are strongly supportive
of the agency's proposed approach with the cap. The current cap is
appropriately low--with a typical fleet compliance of 200-250 g/mile in
this timeframe, even using all of the cap in a single year would affect
no more than a few percent of a manufacturer's fleet in that year.
Because the total impact is relatively low, allowing manufacturers to
distribute the total cap utilization according to their own optimal
usage does not pose a drastic risk--however, generally such flexibility
is maximized by manufacturers at a cost to the goals of the program,
and any increase in the total g/mile value of the cap or additional
years in which the multipliers are made available significantly
enhances such risk.''
    MEMA supported including a cap, as noted above, commenting that
``without a cap and sunset, the advanced technology multiplier credits
could drive technologies down too narrow of a regulatory path, too
quickly. MEMA commented further that the cap should not be increased
beyond the level proposed. MECA submitted similar comments.
    The Southern Environmental Law Center commented that EPA should cap
the amount of credits generated by PHEVs that may be used to satisfy
the overall multiplier incentive credit cap--similar to the cap
established by California in the ZEV program for transitional zero
emissions vehicles.
    On the topic of allowing multiplier credits to be generated in MY
2026 and the credit cap, SCAQMD commented that it generally supported
sunsetting the multipliers in MY 2025 but if the rule design could
recognize narrower eligibility for generating credits in 2026, e.g.,
extending the incentive only to those manufacturers that have used less
than some fraction of the cap, it could promote this beneficial result
without further ossifying multipliers. SCAQMD commented ``[m]oreover,
if MY 2026 had its own year-specific, lesser cap, such that a
manufacturer would not rely too heavily on any new-gained multiplier
incentive, that may partly address EPA's stated concern that any MY
2026 credits could `potentially complicate transitioning to MY 2027
standards for some manufacturers.' ''
    After considering comments, EPA is finalizing the proposed credit
cap of 10.0 g/mile on a cumulative basis. The nominal credit cap on a
per year basis is five g/mile because the cap is spread over two MYs,
2023-2024, rather than the four MYs of 2022-2025 proposed.
    Commenters were generally supportive of including a multiplier cap
and while comments differed on the appropriate magnitude of the cap,
EPA believes its approach for the final cap addresses many of the
concerns expressed by commenters. Even though EPA reduced the number of
years over which multiplier incentives would be available from four to
two years, EPA is retaining the proposed cumulative cap of 10 g/mile.
This is equivalent to a nominal per year cap of 5.0 g/mile compared to
the 2.5 g/mile per year nominal cap proposed. This preserves the
magnitude of the additional flexibility proposed overall but focuses it
more narrowly on MYs 2023-2024. Based on current use of multipliers and
manufacturers' announced plans for the introduction of more advanced
technology vehicles in this time frame, EPA believes this provision
will provide additional flexibility in meeting the near-term standards
and help them manage the transition to more stringent standards.\73\
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    \73\ ``The 2021 EPA Automotive Trends Report, Greenhouse Gas
Emissions, Fuel Economy, and Technology since 1975,'' EPA-420-R-21-
023, November 2021. Manufacturers generated overall fleet average
multiplier credits equivalent to just under 3 g/mile (See Figure
5.5).
---------------------------------------------------------------------------

    EPA considered whether reducing the magnitude of the cap by half
would be appropriate, retaining the proposed nominal cap of 2.5 g/mile
per year. EPA decided that rather than reduce the magnitude of the cap,
it would be more appropriate to retain the 10 g/mile cap so that the
available total incentive credits, and the flexibility they represent
in the earliest years of the program, is retained. The approach EPA is
finalizing is also consistent with the Alliance comments that, as
proposed, the multipliers would provide little incentive and did not
recognize the current state of technology or the market. We believe, as
noted above, that concentrating the multipliers over two years with the
same cumulative cap, rather than the proposed four years, provides
additional incentive for increasing sales of advanced technology
vehicles. EPA recognizes, also, that while the effect on emissions
reductions would remain the same as under the proposed rule if
manufacturers are able to maximize the use of the multipliers in MYs
2023-24, given that the cap remains at 10 g/mi, we expect it to be less
likely for manufacturers to reach that level given the more limited
timeline and reduced multiplier levels compared to the proposal. EPA
believes the final approach better provides the intended incentive to
manufacturers to more quickly ramp up sales of these vehicles, which
are key in transitioning the light-duty fleet toward zero-emissions
vehicles.
    In response to comments that EPA should adopt a more generous
multiplier cap, in line with that included in the California Framework,
EPA did not take this approach because EPA believed the California
Framework cumulative cap to be too generous for the EPA program.
Conversely, other commenters believe that no multiplier should be
allowed because, even under the proposed cap, multipliers may act to
lessen the real world emission reductions from the standards. EPA notes
that the California Framework Agreements take effect in MY 2021
compared to EPA's final standards that

begin in MY 2023 and thus there is a significant difference in the
program time frames. Although EPA is adopting a nominal per year cap
that is more similar to that of the California Framework, EPA is not
increasing the cumulative cap from the proposed 10 g/mile cap. The
multipliers in EPA's final program are only available for MYs 2023-2024
compared to the longer duration of multipliers in the California
Framework, which provides additional multipliers in MYs 2020-2026. EPA
is providing more limited flexibilities in its final program in order
to preserve the most emissions reductions feasible while still
providing near-term flexibility in consideration of lead time.
iii. Natural Gas Vehicle Multipliers
    As noted above, the SAFE rule did not extend multipliers for
advanced technology vehicles but did extend and increase multiplier
incentives for dual-fuel and dedicated natural gas vehicles (NGVs). The
current regulations include a multiplier of 2.0, uncapped, for MYs
2022-2026 NGVs. In the SAFE rule, EPA said it was extending the
multipliers for NGVs because ``NGVs could be an important part of the
overall light-duty vehicle fleet mix, and such offerings would enhance
the diversity of potentially cleaner alternative fueled vehicles
available to consumers.'' \74\ After further considering the issue, as
proposed, EPA is removing the extended multiplier incentives added by
the SAFE rule from the GHG program after MY 2022. EPA is ending
multipliers for NGVs in this manner because NGVs are not a near-zero
emissions technology and EPA no longer believes it is appropriate to
incentivize these vehicles to encourage manufacturers to introduce them
in the light-duty vehicle market. EPA does not view NGVs as a pathway
for significant vehicle GHG emissions reductions in the future. Any NGV
multiplier credits generated in MY 2022 would be included under the
proposed multiplier cap. There are no NGVs currently offered by
manufacturers in the light-duty market and EPA is unaware of any plans
to introduce NGVs, so EPA does not expect the removal of multipliers
for NGVs to have an impact on manufacturers' ability to meet
standards.\75\
---------------------------------------------------------------------------

    \74\ 85 FR 25211.
    \75\ The last vehicle to be offered, a CNG Honda Civic, was
discontinued after MY 2015. It had approximately 20 percent lower
CO2 than the gasoline Civic. For more recent advanced
internal combustion engines, the difference may be less than 20
percent due to lower emissions of the gasoline-fueled vehicles.
---------------------------------------------------------------------------

    EPA requested comment on its proposed treatment of multipliers for
NGVs including whether they should be eliminated altogether for MYs
2023-2026 as proposed or retained partially or at a lower level for MYs
2023-2025. Comments on this topic are summarized and discussed in the
RTC document for the rule.
2. Full-Size Pickup Truck Incentives
    EPA is finalizing temporary full-size pickup incentives for a more
limited time frame than proposed, just for MYs 2023-2024 rather than
the proposed MYs 2022-2025. This section provides an overview of the
incentives, comments received, and the provisions EPA is finalizing in
the final rule.
i. Background on Full Size Pickup Incentives in Past Programs
    In the 2012 rule, EPA included a per-vehicle credit provision for
manufacturers that hybridize a significant number of their full-size
pickup trucks or use other technologies that comparably reduce
CO2 emissions. EPA's goal was to incentivize the penetration
into the marketplace of low-emissions technologies for these pickups.
The incentives were intended to provide an opportunity in the program's
early years to begin penetration of advanced technologies into this
category of vehicles, which face unique challenges in the costs of
applying advanced technologies due to the need to maintain vehicle
utility and meet consumer expectations. In turn, the introduction of
low-emissions technologies in this market segment creates more
opportunities for achieving the more stringent later year standards.
Under the existing program, full-size pickup trucks using mild hybrid
technology are eligible for a per-truck 10 g/mile CO2 credit
during MYs 2017-2021.\76\ Full-size pickup trucks using strong hybrid
technology are eligible for a per-truck 20 g/mile CO2 credit
during MYs 2017-2021, if certain minimum production thresholds are
met.\77\ EPA established definitions in the 2012 rule for full-size
pickup and mild and strong hybrid for the program.\78\
---------------------------------------------------------------------------

    \76\ As with multiplier credits, full-size pickup credits are in
Megagrams (Mg). Full-size pickup credits are derived by multiplying
the number of full-size pickups produced with the eligible
technology by the incentive credit (either 10 or 20 g/mile) and a
vehicle miles traveled (VMT) value for trucks of 225,865, as
specified in the regulations. The resulting value is divided by
1,000,000 to convert it from grams to Mg. EPA is not adopting a cap
for these credits and they are only available for full-size pickups,
rather than the entire fleet, so the calculation is simpler than
that for multiplier credits.
    \77\ 77 FR 62825, October 15, 2012.
    \78\ 77 FR 62825, October 15, 2012. Mild and strong hybrid
definitions as based on energy flow to the high-voltage battery
during testing. Both types of vehicles must have start/stop and
regenerative braking capability. Mild hybrid is a vehicle where the
recovered energy over the Federal Test Procedure is at least 15
percent but less than 65 percent of the total braking energy. Strong
hybrid means a hybrid vehicle where the recovered energy over the
Federal Test Procedure is at least 65 percent of the total braking
energy.
---------------------------------------------------------------------------

    Alternatively, manufacturers may generate performance-based credits
for full-size pickups. This performance-based credit is 10 g/mile
CO2 or 20 g/mile CO2 for full-size pickups
achieving 15 percent or 20 percent, respectively, better CO2
performance than their footprint-based targets in a given MY through MY
2021.\79\ This second option incentivizes other, non-hybrid, advanced
technologies that can reduce pickup truck GHG emissions and fuel
consumption at rates comparable to strong and mild hybrid technology.
These performance-based credits have no specific technology or design
requirements; automakers can use any technology or set of technologies
as long as the vehicle's CO2 performance is at least 15 or
20 percent below the vehicle's footprint-based target. However, a
vehicle cannot receive both hybrid and performance-based credits since
that would be double-counting.
---------------------------------------------------------------------------

    \79\ 77 FR 62826, October 15, 2012. For additional discussion of
the performance requirements, see Section 5.3.4 of the ``Joint
Technical Support Document: Final Rulemaking for 2017-2025 Light-
duty Vehicle Greenhouse Gas Emission Standards and Corporate Average
Fuel Economy Standards'' for the Final Rule,'' EPA-420-R-12-901,
August 2012.
---------------------------------------------------------------------------

    Access to any of these large pickup credits requires that the
technology be used on a minimum percentage of a manufacturer's full-
size pickups. These minimum percentages, established in the 2012 final
rule, are set to encourage significant penetration of these
technologies, leading to long-term market acceptance. Meeting the
penetration threshold in one MY does not ensure credits in subsequent
years; if the production level in a MY drops below the required
threshold, the credit is not earned for that MY. The required
penetration levels are shown in Table 15 below.\80\
---------------------------------------------------------------------------

    \80\ 40 CFR 86.1870-12.

               Table 15--Penetration Rate Requirements by Model Year for Full-Size Pickup Credits
                                                [% of production]
----------------------------------------------------------------------------------------------------------------
                                       2017            2018            2019            2020            2021
----------------------------------------------------------------------------------------------------------------
Strong hybrid...................              10              10              10              10              10
Mild Hybrid.....................              20              30              55              70              80
20% better performance..........              10              10              10              10              10
15% better performance..........              15              20              28              35              40
----------------------------------------------------------------------------------------------------------------

    Under the 2012 rule, the strong hybrid/20 percent better
performance incentives initially extended out through MY 2025, the same
as the 10 percent production threshold. However, the SAFE rule removed
these incentives after MY 2021, given the reduced stringency of the
SAFE standards. The mild hybrid/15 percent better performance incentive
was not affected by the SAFE rule, as those provisions end after MY
2021.\81\
---------------------------------------------------------------------------

    \81\ See 85 FR 25229.
---------------------------------------------------------------------------

ii. Proposed and Final Full Size Pickup Truck Incentives
    EPA proposed to reinstate the full-size pickup credits as they
existed before the SAFE rule, for MYs 2022 through 2025. As discussed
in the proposal, while no manufacturer has yet claimed these credits,
the rationale for establishing them in the 2012 rule remains valid. In
the context of the proposed rule that included more stringent standards
for MY 2023-2026, EPA believed these full-size pickup truck credits
were appropriate to further incentivize advanced technologies
penetrating this particularly challenging segment of the market. As
with the original program, EPA proposed to limit this incentive to
full-size pickups rather than broadening it to other vehicle types.
Introducing advanced technologies with very low CO2
emissions in the full-size pickup market segment remains a challenge
due to the need to preserve the towing and hauling capabilities of the
vehicles. The full-size pickup credits incentivize advanced
technologies into the full-size pickup truck segment to help address
cost, utility, and consumer acceptance challenges.
    EPA requested comments on whether or not to reinstate the
previously existing full-size pickup strong hybrid/20 percent better
performance incentives and on the proposed approach for doing so. EPA
also requested comment on the potential impacts of the full-size pickup
incentive credit, and whether, and how, EPA should take the projected
effects into account in the final rulemaking.
    EPA received a range of comments both supporting and opposing the
proposed full-size pickup incentives. The Alliance supported the
proposed full-size pickup hybrid and over-performance incentive credits
and suggested that they should be extended through MY 2026. The
Alliance commented that although many full-size pickup trucks are quite
efficient for their size, weight, and utility, they remain among the
highest emitting non-niche vehicles in the fleet. Incentivizing strong
hybridization or other technology solutions that yield GHG emission
rates 20 percent or better than their regulatory targets, the Alliance
believes, can help encourage manufacturer production and marketing to
foster greater long-term consumer market adoption in the transition to
EVs.
    Ford commented that it believes that the full-size pickup
incentives are essential in enabling continued adoption of advanced
technology in the full-size pickup segment and supports EPA's proposed
reinstatement. Ford commented further that one concern with this credit
mechanism is the requirement that 10 percent volume penetration of the
relevant technologies must be reached within a given model before any
credit is granted. Ford commented ``this `all-or-nothing' approach
poses risks and uncertainty to OEM compliance planning since it is
difficult to predict future volumes with precision, particularly for
new or advanced technologies such as hybridization. Ford believes that
the threshold is also unnecessary since an OEM is already motivated to
maximize volumes to the greatest extent possible--within market and
material constraints--in order to recoup the sizeable investments
needed to implement such technologies. For these reasons, Ford believes
it is appropriate to lower or remove the volume threshold requirement.
In the alternative, Ford asks that EPA clarify that an OEM may include
multiple technologies toward the 10 percent threshold, for example, by
combining BEV and HEV volumes to satisfy a given model's 10 percent
threshold requirement for the performance-based credit pathway.'' The
Alliance also supported this approach.
    CARB supported restoring the full-size pickup credits in
conjunction with revised standards but disagreed that the credits
should be restored for MY 2022, commenting that vehicles produced for
MY 2022 will remain subject to the substantially less stringent SAFE
standards and no action should be taken to effectively further weaken
the 2021 or 2022 standards.
    Environmental and health NGOs opposed the pickup incentives. Center
for Biological Diversity, Earthjustice, and Sierra Club (hereinafter
``CBD et al.'') jointly commented that the incentives were unnecessary,
noting automakers are making new electric trucks, and consumers are
buying them. CBD et al. elaborated ``For example, as of early June
2021, Ford had reached 100,000 reservations for its 2022 Ford F-150
electrified full-size truck. Rivian's electric R1T will be released
this year, and General Motors is planning an electric version of its
popular Chevrolet Silverado for 2023.'' CBD et al. commented that, as
these developments are happening on their own, there is no evidence
that EPA's incentives would further spur production.
    ACEEE commented, ``this is another instance of awarding credits in
excess of actual emission reductions, which reduces the stringency of
the standards. This specific incentive is also problematic because it
could encourage production of full-sized pickup trucks at the expense
of smaller vehicles. It also provides a loophole to the 2.5 g/mile EV
multiplier credit limit, by creating an alternative pathway for EV
pickup trucks to earn unwarranted credits after the fleetwide EV
multiplier limit has been reached. ACEEE estimates that this provision
alone could reduce stringency by up to 2 g/mile by MY 2025 and reduce
emissions savings by up to 1 percent for the entire period of the
proposed rule.'' UCS provided similar comments, stating that ``even in
the absence of the full-size pick-up strong hybrid/performance credit,
manufacturers have moved forward with plans for full-size pick-ups that
meet the criteria. The simple reason is that these vehicles are sold by
only a

small number of manufacturers, and as such represent a critical piece
of the portfolio of those manufacturers--a company like Ford cannot
afford for its best-selling vehicle to be a deficit-generator under the
standards. Since these vehicles are already planned, the agency's
reinstatement of the credit cannot be considered an incentive--instead,
it is a windfall credit.''
    SAFE also opposed the pickup incentives, commenting that
hybridization of pick-up trucks is no longer an innovative technology,
as it has been replaced by full electric pickup trucks, with towing and
hauling capacity similar to conventional pickups, that are entering the
market shortly. SAFE further commented that EPA acknowledged that the
proposed pickup incentives would allow additional GHG emissions and did
not to adequately support its proposed rule. SAFE commented that
``given the current state of pickup truck technology, EPA should focus
on incentivizing transformative electric pickup trucks and decline to
extend incentives to hybrids.''
    Tesla commented that EPA should not renew the full-size pick-ups
incentives, commenting that EPA's analysis underestimates the
deployment of newly manufactured full EV pick-up trucks. Tesla notes,
for example, EPA projects no delivery of the Tesla Cybertruck as is
scheduled in MY 2022, ignores any deployment of pickups by Rivian, and
appears to underestimate Toyota's deployment despite pronouncement of
seven models by MY 2025. Tesla commented that their modeling
anticipates that starting in MY 2023 this annual credit would further
erode the proposed standard's stringency starting at 0.3 g/mile and
grow in usage in MYs 2024 and 2025. Tesla also asserted this incentive
is not needed to incentivize deployment of actual EV pickups and should
be removed to increase the revised standards' stringency.
    Consumer Reports recommended that EPA simplify the credit by
eliminating the strong hybrid credit, and only provide the credit to
vehicles that meet the 20 percent improvement above the standard
threshold, regardless of technology used. Consumer Reports commented
that this would avoid potentially giving credits to strong hybrids
designed to deliver increased performance, but minimal efficiency
improvements. UCS provided similar comments regarding strong hybrid
pickups, commenting that strong hybrid pickups are not being designed
for efficiency, and given that, it makes sense to eliminate the strong
hybrid credit entirely. UCS further commented that if EPA wishes to
implement a full-size pick-up credit, it should only be for the 20
percent performance credit to ensure that at least the credit windfall
will be limited to efficient vehicles, not just a high-performance trim
level.
    After considering the wide range of comments, EPA is finalizing a
more limited time period for full-size pickup incentives--only for MYs
2023-2024. EPA is not finalizing the proposed incentives for MYs 2022
or 2025. These incentives will sunset at the end of MY 2024. EPA
believes this approach balances the need for flexibility in these near-
term model years given lead time considerations, with the overall
emissions reduction goals of the program. EPA believes that this more
targeted approach to full-size pickup truck credits is appropriate to
further incentivize advanced technologies in this segment, which
continues to be particularly challenging given the need to preserve the
towing and hauling capabilities while addressing cost and consumer
acceptance challenges. EPA is also retaining the production thresholds
to ensure that manufacturers taking advantage of the flexibility must
sell a significant number of qualifying vehicles to do so. While this
flexibility is more narrowly focused, since not all manufacturers
produce full-size pickups, it represents another avenue for credits
that may help manufacturers meet the near-term standards, in addition
to the other flexibilities included in the program.
    Regarding comments from Consumer Reports and UCS that EPA should
not include an incentive for strong hybrid technology, EPA understands
the concerns raised by the commenters and believes the comments have
some merit. However, EPA has decided to constrain the overall program
instead in terms of timeframe by only finalizing the incentive for two
model years, which directionally responds to the commenters more
general concerns about the potential impact of the proposal. The
approach EPA is finalizing is more in line with EPA's proposal and
request for comments regarding the scope full-size pickup incentives,
since EPA did not seek comments or otherwise consider not including the
strong hybrid portion of the full-size pickup incentive.
    EPA also is finalizing the proposed provision to prevent double
counting of the full-size pickup credits and the advanced technology
multipliers. In the 2012 rule, EPA included a provision that prevents a
manufacturer from using both the full-size pickup performance-based
credit pathway and the multiplier credits for the same vehicles. This
would prevent, for example, an EV full-size pickup from generating both
credits. EPA proposed the same restriction for vehicles qualifying for
the full-size pickup hybrid credit pathway. With the extended
multiplier credits and the full-size pickup credit, EPA believes
allowing both credits would be double-counting and inappropriate. EPA
did not receive adverse comments on this provision. Therefore, EPA is
modifying the regulations as proposed such that manufacturers may
choose between the two credits in instances where full-size pickups
qualify for both but may not use both credits for the same vehicles. A
manufacturer may choose to use the full-size pickup strong hybrid
credit, for example, if the manufacturer either has reached the
multiplier credit cap or intends to do so with other qualifying
vehicles.
3. Off-Cycle Technology Credits
    EPA is finalizing a temporary increase in the off-cycle menu credit
cap from 10 to 15 g/mile, but over a more limited time frame than
proposed, from MY 2023 through 2026. Coinciding with the increased menu
cap, EPA is also adopting revised definitions for certain off-cycle
menu technologies as proposed, with minor edits in response to
comments, starting in MY 2023. EPA proposed to allow manufacturers the
option to take advantage of the higher cap, using the updated
definitions, in MYs 2020-2022. After considering comments, EPA is not
finalizing the provisions applicable to MYs 2020-2022, due to concerns
that they would provide unnecessary additional flexibility for the MY
2020-2022 standards established in the SAFE rule. The off-cycle credits
program and the revisions EPA is finalizing are discussed in the
section below.
i. Background on Off-Cycle Credits in Prior Programs
    Starting with MY 2008, EPA started employing a ``five-cycle'' test
methodology to measure fuel economy for purposes of new car window
stickers (labels) to give consumers better information on the fuel
economy they could more reasonably expect under real-world driving
conditions.\82\ However, for GHG compliance, EPA continues to use the
established ``two-cycle'' (city and highway test cycles, also known as
the FTP and HFET) test

methodology.\83\ As learned through development of the ``five-cycle''
methodology and prior rulemakings, there are technologies that provide
real-world GHG emissions improvements, but whose improvements are not
fully reflected on the ``two-cycle'' test. EPA established the off-
cycle credit program to provide an appropriate level of CO2
credit for technologies that achieve CO2 reductions, but may
not otherwise be chosen as a GHG control strategy, as their GHG
benefits are not measured on the specified 2-cycle test. For example:
High efficiency lighting is not measured on EPA's 2-cycle tests because
lighting is not turned on as part of the test procedure but reduces
CO2 emissions by decreasing the electrical load on the
alternator and engine. The key difference between the credits discussed
below and the incentives discussed in the previous two sections is that
off-cycle credits--as well as A/C credits, discussed in the next
section--represent real-world emissions reductions if appropriately
sized and therefore their use should not result in deterioration of
program benefits, and should not be viewed as cutting into the
effective stringency of the program.
---------------------------------------------------------------------------

    \82\ https://www.epa.gov/vehicle-and-fuel-emissions-testing/dynamometer-drive-schedules. See also 75 FR 25439 for a discussion
of 5-cycle testing.
    \83\ The city and highway test cycles, commonly referred to
together as the ``2-cycle tests'' are laboratory compliance tests
are effectively required by law for CAFE, and also used for
determining compliance with the GHG standards. 49 U.S.C. 32904(c).
---------------------------------------------------------------------------

    Under EPA's existing regulations, there are three pathways by which
a manufacturer may accrue off-cycle technology credits.\84\ The first
pathway is a predetermined list or ``menu'' of credit values for
specific off-cycle technologies that was effective starting in MY
2014.\85\ This pathway allows manufacturers to use credit values
established by EPA for a wide range of off-cycle technologies, with
minimal or no data submittal or testing requirements. The menu includes
a fleetwide cap on credits of 10 g/mile to address the uncertainty of a
one-size-fits-all credit level for all vehicles and the limitations of
the data and analysis used as the basis of the menu credits. A second
pathway allows manufacturers to use 5-cycle testing to demonstrate and
justify off-cycle CO2 credits.\86\ The additional emissions
tests allow emission benefits to be demonstrated over some elements of
real-world driving not captured by the GHG compliance tests, including
high speeds, rapid accelerations, and cold temperatures. Under this
pathway, manufacturers submit test data to EPA, and EPA determines
whether there is sufficient technical basis to approve the off-cycle
credits. The third pathway allows manufacturers to seek EPA approval,
through a notice and comment process, to use an alternative methodology
other than the menu or 5-cycle methodology for determining the off-
cycle technology CO2 credits.\87\ This option is only
available if the benefit of the technology cannot be adequately
demonstrated using the 5-cycle methodology.
---------------------------------------------------------------------------

    \84\ See ``The 2020 EPA Automotive Trends Report, Greenhouse Gas
Emissions, Fuel Economy, and Technology since 1975,'' EPA-420-R-21-
003 January 2021 for information regarding the use of each pathway
by manufacturers.
    \85\ See 40 CFR 86.1869-12(b).
    \86\ See 40 CFR 86.1869-12(c).
    \87\ See 40 CFR 86.1869-12(d).
---------------------------------------------------------------------------

    Prior to this rulemaking, EPA received comments from manufacturers
on multiple occasions requesting that EPA increase the menu credit cap.
Previously, EPA has opted not to increase the cap for several
reasons.\88\ First, the cap is necessary given the uncertainty in the
menu values for any given vehicle. Menu credits are values EPA
established to be used across the fleet rather than vehicle-specific
values. When EPA established the menu credits in the 2012 rule, EPA
included a cap because of the uncertainty inherent in using limited
data and modeling as the basis of a single credit value for either cars
or trucks. While off-cycle technologies should directionally provide an
off-cycle emissions reduction, quantifying the reductions and setting
appropriate credit values based on limited data was difficult.
Manufacturers wanting to generate credits beyond the cap may do so by
bringing in their own test data as the basis for the credits. Credits
established under the second and third pathways do not count against
the menu cap. Also, until recently most manufacturers still had
significant headroom under the cap allowing them to continue to
introduce additional menu technologies.\89\ Finally, during the
implementation of the program, EPA has expended significantly more
effort than anticipated on scrutinizing menu credits to determine if a
manufacturer's technology approach was eligible under the technology
definitions contained in the regulations. This further added to
concerns about whether the technology could reasonably be expected to
provide the real-world benefits that credits are meant to represent.
For these reasons, EPA has been reluctant to consider increasing the
cap.
---------------------------------------------------------------------------

    \88\ 85 FR 25237.
    \89\ See ``The 2020 EPA Automotive Trends Report, Greenhouse Gas
Emissions, Fuel Economy, and Technology since 1975,'' EPA-420-R-21-
003 January 2021 for information on the use of menu credits.
---------------------------------------------------------------------------

    EPA may make changes to the test procedures for the GHG program in
the future that could change the need for an off-cycle credits program,
but there were no such test procedure changes proposed in this rule.
EPA recognizes that off-cycle credits, therefore, will likely remain an
important source of emissions reductions under the program, at least
through MY 2026. Off-cycle technologies are often more cost effective
than other available technologies that reduce vehicle GHG emissions
over the 2-cycle tests and manufacturer use of the program continues to
grow. Off-cycle credits reduce program costs and provide additional
flexibility in terms of technology choices to manufacturers which has
resulted in many manufacturers using the program. Multiple
manufacturers were at or approaching the 10 g/mile credit cap in MY
2019.\90\ Also, in the SAFE rule, EPA added menu credits for high
efficiency alternators but did not increase the credit cap for the
reasons noted above.\91\ While adding the technology to the menu has
the potential to reduce the burden associated with the credits for both
manufacturers and EPA, it further exacerbates the credit cap issue for
some manufacturers.
---------------------------------------------------------------------------

    \90\ In MY 2019, Ford, FCA, and Jaguar Land Rover reached the 10
g/mile cap and three other manufacturers were within 3 g/mile of the
cap. See ``The 2020 EPA Automotive Trends Report, Greenhouse Gas
Emissions, Fuel Economy, and Technology since 1975,'' EPA-420-R-21-
003 January 2021.
    \91\ 85 FR 25236.
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ii. Proposed and Final Off-Cycle Credit Menu Cap Increase
    EPA is finalizing its proposed provision to increase the off-cycle
menu cap, but over a more limited time period (MY 2023 through 2026)
than proposed. EPA proposed increasing the cap on menu-based credits
from the current 10 g/mile to 15 g/mile beginning as early as MY 2020.
As a companion to increasing the credit cap, EPA also proposed
modifications to some of the off-cycle technology definitions to
improve program implementation and to better accomplish the goal of the
off-cycle credits program: To ensure emissions reductions occur in the
real-world from the use of the off-cycle technologies. EPA proposed
that manufacturers could optionally access the 15 g/mile menu cap in
MYs 2020-2022 if the manufacturers met all of the revised definitions.
EPA is finalizing the increased credit cap of 15 g/mile along with the
proposed definition changes

starting in MY 2023. For reasons discussed below, EPA is not finalizing
the proposed MY 2020-2022 opt-in provisions.
    EPA believes this is a reasonable approach to provide more
opportunity for menu-based credits in the off-cycle program, while
still keeping a limit in place. For MY 2020, manufacturers claimed an
average of 7.8 g/mile of menu credits with three manufacturers claiming
the maximum 10 g/mile of credits.\92\ Increasing the cap provides an
additional optional flexibility and also an opportunity for
manufacturers to earn more menu credits by applying additional menu
technologies, recognizing that some manufacturers may need to make
changes to some of their current designs if they choose to continue to
earn menu credits under the revised definitions.
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    \92\ ``The 2021 EPA Automotive Trends Report, Greenhouse Gas
Emissions, Fuel Economy, and Technology since 1975,'' EPA-420-R-21-
023, November 2021.
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    In the proposal, EPA requested comment on whether the menu credit
cap should be increased to 15 g/mile, EPA's proposed approach for
implementing the increased credit cap, including the start date of MY
2020, as well as the proposed application of revised technology
definitions. EPA specifically requested comment on whether an increased
credit cap, if finalized, should begin in MY 2020 as proposed or a
later MY such as MY 2021, 2022, or 2023. EPA encouraged commenters
supporting off-cycle provisions that differ from EPA's proposed rule to
address how such differences could be implemented to improve real-world
emissions benefits and how such provisions could be effectively
implemented.
    EPA received both supportive and adverse comments regarding the
proposed off-cycle menu cap increase. The Alliance supported raising
the credit cap for the off-cycle technology menu, effective in MY 2020,
commenting that the 10 g/mile cap was originally promulgated in the
2012 Rule and has become constraining to technology additions,
particularly with the addition of new menu technologies added in the
SAFE rule. The Alliance did not support tying the increased menu cap to
the revised definitions, commenting that the issues should be
considered separately. The Alliance commented that ``the cap should be
raised regardless of the decision whether to modify technology
definitions or not and, if modified technology definitions are adopted,
regardless of when a manufacturer applies the modified definitions.''
    The Alliance recommended that EPA not adopt the revised definitions
in this rulemaking but wait until the subsequent rule for MYs 2027 and
later. The Alliance commented that ``model year 2023 vehicles can be
built as soon as January 2022, leaving manufacturers only three to at
most nine months to design, validate, and certify vehicles with systems
that meet the new definitions. This lead-time is simply insufficient to
make the necessary level of changes. In MY 2019, the fleetwide average
use of active engine warmup, active transmission warmup, and passive
cabin ventilation technologies resulted in a credit of approximately
3.6 g/mile. Modifying definitions without sufficient lead-time would
likely result in an immediate loss of most, if not all of this credit,
further escalating the challenge of managing the large increase in
standard stringency proposed for MY 2023. The new definitions will
require innovative solutions and significant changes to vehicle design
to meet them.'' The Alliance commented further, ``if EPA adopts new
definitions for passive cabin ventilation, active engine warm-up, and/
or active transmission warm-up technologies, EPA should also continue
to recognize existing designs. EPA justifies its proposed provision to
modify technology definitions on the basis that current system designs
are not meeting EPA's original expectations. However, current system
designs are providing off-cycle emissions benefits. Given the benefits
of such systems, EPA should continue to provide credit for systems that
meet existing definitions through the menu, in addition to newly
defined systems.''
    Several individual manufacturers also raised lead time concerns
regarding the implementation of revised definitions. Stellantis
commented that if EPA wants to implement new technology definitions,
EPA should do so starting in MY 2027, allowing manufacturers to plan
and implement fleetwide changes. Stellantis argued that previous
systems were approved by EPA and that the benefits they provide are
threatened by the revised definitions. Toyota requested that the
revised definitions be effective starting with the 2025 model year at
the earliest to provide adequate lead time for appropriate
countermeasures and compliance plan adjustments. Hyundai requested that
the revised definitions not be implemented until 2027 MY for similar
reasons, adding that ``use of the higher 15 g/mile cap should be
permitted without prejudice in order to encourage the inclusion of more
fuel saving technologies.'' Ford commented that the ``Notice and
Comment process is the appropriate mechanism for making major policy or
technology definition clarifications to the off-cycle program. However,
such clarifications should not be retroactively applied, or be required
in order to qualify for the 15 g/mile cap for previous model years. It
should also be noted that Ford has relied on these credits to comply
with current and past regulatory structures, such as `One National
Program' and the California Framework Agreement.''
    JLR commented that it understands EPA's proposed provision to
change the technology definitions but requested that the menu be
expanded to include technologies that do not meet the new definition,
but do meet the old definition, with appropriate credit values
assigned. JLR also commented that there should be an option for
manufacturers to remain at the 10 g/mile cap with the original
technology definitions up to and including MY 2025. JLR commented that
this is required as, for technologies that involve significant changes
to the vehicle to meet the new definition such as active transmission
warm up, there must be a longer lead time for manufacturers to adapt to
this change in the regulation.
    MEMA commented that it strongly supports EPA expanding the off-
cycle technology credit program by increasing the credit cap on credits
received through the off-cycle menu from 10 g/mile to 15 g/mile.
Similarly, MECA commented that it supports EPA's continuation and
improvement of the off-cycle credit program with the higher credit cap.
BorgWarner commented that the credit cap ``should be removed to allow
and promote the true potential of these technologies to achieve the new
standards. We do not see the value of a cap that excludes technologies
that are shown to provide additional real-world fuel economy benefits.
Credit programs should be continued and expanded to provide important
flexibilities and broader pathways for greater innovation and lower
compliance costs.''
    Environmental Defense Fund (EDF) commented that the proposed off-
cycle program changes would help manufacturers meet the MY 2023-2024
standards and, in modeling performed to support their comments that the
standards are feasible, included a portion of the proposed increased
off-cycle credits. EDF commented that ``it is also eminently reasonable
to assume automakers could (and would) apply relatively inexpensive,
widely deployed off-cycle technologies that can be added

at the tail end of the product-development process.''
    ACEEE supported EPA's proposed provision to revise the definitions,
commenting that EPA should continue to scrutinize menu credits to
ensure that definitions only allow for technologies that have been
researched and tested and not others that may be superficially similar.
ACEEE, however, opposed beginning the 15 g/mile credit cap increase in
MY 2020, commenting that those vehicles have already been designed and
no new menu technologies will be added to the vehicles. Therefore, the
change would not lead to any additional emissions reductions but
instead, would effectively reduce the stringency of the proposed rule
by giving automakers credits for decisions that they have already made
and implemented. ACEEE estimated that if automakers were to take
advantage of the entire 5 g/mile retroactive cap increase, emission
savings from the proposed standards would be reduced by 19 percent.
    ACEEE also commented that the credit cap increase is concerning as
applied to future model years, as it believes the off-cycle credit
system already over awards credits and further weakens the rule
stringency. ACEEE commented that research has shown that some
technologies are awarded up to 100 percent more credits than
appropriate, equaling up to 3 g/mile of credits per technology (Gonder
et al. 2016; Kreutzer et al., 2017). Another concern raised by ACEEE is
that technologies that qualify for menu credits have not been evaluated
for redundancies or overlaps in benefits (Lutsey and Isenstadt 2018).
ACEEE commented that a vehicle that has more than one of the
technologies addressing the same inefficiencies may not achieve the sum
of the benefits of the individual technologies due to synergistic
effects.
    UCS also did not support raising the menu credit cap, commenting
that there is a lack of evidence demonstrating real-world reductions
associated with some off-cycle technologies and in some cases, there is
evidence that some credit levels are too high, supporting a reduction
rather than expansion of the program. UCS also commented in support of
implementing the revised definitions and suggest the definitions be
implemented immediately to avoid further unwarranted credits for these
inferior technologies. UCS also agrees with EPA that any manufacturers
seeking credit for technologies that do not meet the revised
definitions must do so through the off-cycle credit public comment
process pathway.
    CBD et al. commented that EPA should end, reduce, or significantly
reform the off-cycle credits program. CBD et al. commented that
uncertainties arise due to ``the lack of data submission; the lack of
testing; and the practice of `one-size-fits-all installation' by which
automakers who install the same technology not just on the specific
vehicle type and model they tested, but also on many or all of the
other cars and trucks in their fleets, without submitting any test data
on the level of emissions reductions, if any, they generate on these
different and diverse vehicles. CBD et al. commented that if EPA
proceeds with its current proposed rule, off-cycle credits should, at a
minimum, be limited and reformed so real-world results are assured and
verified, as stated in the Joint Comments. If the agency adopts
Alternative 2 plus, off-cycle credits should still not be expanded, and
their cap maintained.''
    Tesla also commented that EPA should end the off-cycle credits
program. Tesla argued that ``extending and expanding these credit
rewards old technology and, to the extent new technologies are deployed
to generate off-cycle credits, focuses critical R&D budgets on tweaking
legacy ICE platforms rather than directing these budgets to
electrification and greater emissions reductions. As such, EPA's
proposed rule, rather than confronting this built-in bias toward ICE
legacy technology, enhances the pre-existing bias by increasing the
off-cycle cap to 15 g/mile. Again, such perverse incentives should not
be extended, much less increased.''
    After carefully considering the comments, EPA is finalizing the 15
g/mile cap and revised definitions, beginning in MYs 2023 through 2026.
Given the level of concern expressed regarding optionally allowing the
cap to increase retroactively starting in MY 2020 and comments from
manufacturers that it would not be particularly useful to the extent
they may need to make technology changes in order to meet the new
definitions, EPA is not finalizing the optional provisions for MYs
2020-2022. EPA views the definition updates as important refinements to
the ongoing off-cycle program to improve its implementation and help
ensure that the program produces real-world benefits as intended and
continues believes that it is reasonable and appropriate to make these
updates in parallel with the cap increase for MYS 2023-2026.
    EPA acknowledges that off-cycle credits are meant to represent
real-world reductions and theoretically there would not be a loss of
emissions reductions associated with allowing manufacturers to use the
revised definitions and increased cap in MY 2021-2022 as proposed.
However, many commenters were concerned with EPA making any changes in
MYs 2021-2022 that could make it easier for manufacturers to meet the
revised less stringent standards established in the SAFE rule for those
years. EPA understands this concern, and also is concerned that
additional off-cycle credits in those years may represent a windfall
for manufacturers since there is no lead time for manufacturer to
change their product line in MYs 2021-2022 and therefore manufacturers
would likely only generate additional credits to the extent they had
already deployed qualifying technologies. For these reasons, also, EPA
is finalizing the start of both the revised definitions and increased
cap prospectively only, rather than retroactively in MYs 2021-2022. The
new definitions will go into effect in MY 2023 and EPA believes it's
appropriate that the cap be increased only once the revised definitions
go into effect to ensure the real-world reductions for these
technologies.
    EPA disagrees with comments that EPA should continue to allow the
use of the unrevised definitions and menu credits for several model
years into the future. When EPA established the menu, EPA intended it
to be a streamlined process not requiring manufacturers to produce data
on which to base credits. There are not data requirements associated
with menu credits. Also, EPA notes that claiming menu credits from the
off-cycle menu does not require EPA pre-approval. EPA made clear its
intended approach in the 2012 rule preamble establishing the menu where
EPA stated that ``both technologies and credit values based on the list
are established by rule. That is, there is no approval process
associated with obtaining the credit.'' \93\ As discussed in the
proposed rule, the original regulatory definitions for a few
technologies have allowed manufacturers to use technological approaches
that were not consistent with those envisioned in the 2012 rule that
established them. These approaches are unlikely to produce emissions
reductions matching the menu credits. For example, when establishing