2025.....................................       -101      1,700        627        907      40,578          0          0          0          0          0
2026.....................................       -179      1,578      1,068       -116      49,405          0          0          1          0          0
2027.....................................       -285        810      1,565     -2,096      50,956         -1          0          1          0          0
2028.....................................       -417       -737      1,947     -5,207      40,971         -1          0          1          0          0
2029.....................................       -550     -2,316      2,334     -8,349      31,271         -1          0          1         -1          0
2030.....................................       -685     -4,109      2,632    -11,699      17,974         -2         -1          1         -1          0
2031.....................................       -822     -6,060      2,711    -15,123       3,162         -2         -1          1         -2          0
2032.....................................       -959     -8,095      2,815    -18,642     -13,706         -3         -1          1         -2          0
2033.....................................     -1,093    -10,153      2,860    -22,136     -31,953         -3         -1          1         -3          0
2034.....................................     -1,222    -12,156      2,943    -25,522     -50,254         -3         -2          1         -3         -1
2035.....................................     -1,335    -13,949      2,802    -28,431     -65,771         -4         -2          1         -4         -1
2036.....................................     -1,442    -15,614      2,753    -31,169     -81,171         -4         -3          1         -4         -1
2037.....................................     -1,543    -17,183      2,877    -33,815     -97,611         -4         -3          1         -5         -1
2038.....................................     -1,635    -18,592      2,989    -36,184    -113,133         -5         -3          2         -5         -2
2039.....................................     -1,712    -19,769      2,921    -38,110    -125,338         -5         -4          1         -6         -2
2040.....................................     -1,779    -20,767      2,895    -39,766    -135,945         -5         -4          1         -6         -2
2041.....................................     -1,839    -21,637      2,857    -41,158    -146,438         -5         -4          1         -7         -2
2042.....................................     -1,885    -22,312      2,856    -42,219    -155,765         -6         -5          1         -7         -3
2043.....................................     -1,924    -22,877      2,971    -43,164    -164,548         -6         -5          2         -7         -3
2044.....................................     -1,958    -23,341      3,088    -43,935    -172,591         -6         -5          2         -8         -3
2045.....................................     -1,984    -23,697      3,273    -44,563    -179,535         -6         -5          2         -8         -3
2046.....................................     -2,005    -23,979      3,496    -45,066    -185,798         -6         -5          2         -8         -3
2047.....................................     -2,031    -24,298      3,812    -45,678    -193,523         -6         -5          2         -8         -4
2048.....................................     -2,047    -24,515      4,060    -46,086    -199,886         -6         -6          2         -9         -4
2049.....................................     -2,067    -24,758      4,344    -46,550    -206,774         -7         -6          2         -9         -4
2050.....................................     -2,093    -25,057      4,912    -47,256    -215,607         -7         -6          2         -9         -4
--------------------------------------------------------------------------------------------------------------------------------------------------------

B. Health and Environmental Effects Associated With Exposure to Non-GHG
Pollutants Impacted by the Proposed Standards

    Along with reducing GHG emissions, these proposed standards would
also have an impact on non-GHG (criteria and air toxic pollutant)
emissions from vehicles and non-GHG emissions that occur during the
extraction, transport, distribution and refining of fuel and from power
plants. The non-GHG emissions that would be impacted by the proposed
standards contribute, directly or via secondary formation, to
concentrations of pollutants in the air which affect human and
environmental health. These pollutants include particulate matter,
ozone, nitrogen oxides, sulfur oxides, carbon monoxide and air toxics.
Chapter 7 of the DRIA includes more detailed information about the
health and environmental effects associated with exposure to these non-
GHG pollutants. This includes pollutant specific health effect
information, discussion of exposure to the mixture of traffic-related
pollutants in the near road environment, and effects of particulate
matter and gases on visibility, effects of ozone on ecosystems, and the
effect of deposition of pollutants from the atmosphere to the surface.

C. Air Quality Impacts of Non-GHG Pollutants

    Photochemical air quality modeling is necessary to accurately
project levels of most criteria and air toxic pollutants, including
ozone and PM. Air quality models use mathematical and numerical
techniques to simulate the physical and chemical processes that affect
air pollutants as they disperse and react in the atmosphere. Based on
inputs of meteorological data and source information, these models are
designed to characterize primary pollutants that are emitted directly
into the atmosphere and secondary pollutants that are formed through
complex chemical reactions within the atmosphere. Photochemical air
quality models have become widely recognized and routinely utilized
tools in regulatory analysis for assessing the impacts of control
strategies.
    Section V.A of the preamble presents projections of the changes in
non-GHG emissions due to the proposed standards. Section VII.E
describes the monetized non-GHG health impacts of this proposal which
are estimated using a reduced-form benefit-per-ton approach. The
atmospheric chemistry related to ambient concentrations of
PM2.5, ozone and air toxics is very complex, and making
predictions based solely on emissions changes is extremely difficult.
However, based on the magnitude of the emissions changes predicted to
result from the proposed standards, we expect that there will be very
small changes in ambient air quality in most places. The changes in
tailpipe and upstream non-GHG emissions that were inputs to the air
quality modeling analysis for the 2012 rule were larger than the
changes in non-GHG emissions projected for this proposal. The air
quality modeling for the 2012 rule projected very small impacts across
most of the country, with the direction of the small impact (increase
or decrease) dependent on location.\132\ For the next phase of LD GHG
standards to be considered in a separate, future rulemaking for model
years 2027 and beyond, we expect that impacts may be considerably
larger and are considering how best to project air quality impacts from
changes in non-GHG emissions.
---------------------------------------------------------------------------

    \132\ Insert 2012 rule RIA ref, EPA-420-R-12-016.
---------------------------------------------------------------------------

VI. Basis for the Proposed GHG Standards Under CAA Section 202(a)

    In this section, EPA discusses the basis for our proposed standards
under our authority in CAA section 202(a), how we are balancing the
factors considered in our assessment that the proposed standards are
appropriate, and how this balancing of factors differs from that used
in the SAFE rule. This section draws from information presented
elsewhere in this preamble, including EPA's statutory authority in
Section II, our presentation of compliance costs and technology
penetrations in Section III, GHG emissions impacts in Section IV, non-
GHG emissions impacts in Section V, and the total costs and benefits of
the proposal in Section VII.
    EPA has considered the technological feasibility and cost of the
proposed standards, available lead time for manufacturers, and other
relevant factors under section 202(a) of the CAA. Based on our
analyses, discussed in greater detail in other sections of this
preamble and in Chapter 2 of the DRIA, we believe that the proposed
standards are reasonable and appropriate. Greater reductions in GHG
emissions from light duty vehicles over these model years are both
feasible and warranted as a step to reduce the impacts of climate
change on public health and welfare. In addition, the proposal would
achieve reductions in emissions of some criteria pollutants and air
toxics that would achieve benefits for public health and welfare. Our
analysis for this proposed rule, as well as our earlier analyses of
similar standards, supports the conclusion that the proposed model
years 2023-2026 standards are technologically feasible and the costs of
compliance for manufacturers are reasonable. In addition, we project
that there would be a net savings to consumers over the lifetime of
vehicles meeting the proposed standards, which we think is a more
significant consideration, particularly for lower-income consumers,
than the anticipated increase in cost for new vehicles. Importantly,
the benefits of the proposed program would significantly exceed the
costs.

A. Consideration of Technological Feasibility and Lead Time

1. Technological Readiness of the Auto Industry in Meeting Revised GHG
Standards
    The technological readiness of the auto industry to meet the
proposed revised standards for model years 2023-2026 is best understood
in the context of the decade-long light-duty vehicle GHG emission
reduction program in which the auto industry has introduced a wide
lineup of ever more fuel-efficient, GHG-reducing technologies. Over
this time period, the industry has been planning for increasingly
stringent GHG emissions requirements. The result has been the
widespread and continual introduction of new and improved GHG-reducing
technologies across the industry, many of which were in the early
stages of development at the beginning of the EPA program in 2012. (See
Section III.A of this preamble and Chapter 2 of the DRIA for a
discussion of technological progression, status of technology
penetration, and our assessment of continuing technology penetration
across the fleet.)
    The technological achievements already developed and applied to
vehicles within the current new vehicle fleet will enable the industry
to achieve the proposed standards even without the development of new
technologies beyond those already widely available. Rather, in response
to the increased stringency of the proposed standards compared to
existing standards, automakers would be expected to adopt these
technologies at an increasing pace across more of their vehicle fleets.
In other words, the technologies needed to meet the proposed standards
are already widely available and in use on vehicles--there is no need
for development of new technologies for the time frame of these
proposed standards. Instead, compliance with the proposed standards
will necessitate

greater implementation and pace of technology penetration through
MY2026 using existing GHG reduction technologies. In addition, as we
discuss further below, our assessment shows that a large portion of the
current fleet (MY2021 vehicles), across a wide range of vehicle
segments, already meets their proposed MY2023 footprint-based
CO2 targets.
    The availability of current models across a range of vehicle
segments meeting the standards is notable because EPA recognizes that
auto design and development is a multi-year process, which imposes some
constraints on the ability of manufacturers to immediately redesign
vehicles with new technologies. However, EPA also understands that this
multi-year process means that the industry's product plans developed in
response to EPA's 2012 GHG standards rulemaking for MYs 2017-2025 has
largely continued, notwithstanding the SAFE rule that was published on
April 30, 2020 and that did not relax standards until MY 2021. In their
past comments on EPA's light-duty GHG programs, some automakers broadly
stated that they generally require about five years to design, develop,
and produce a new vehicle model.\133\ Under that schedule, it would
follow that in most cases the vehicles that automakers will be selling
during the first years of the proposed MY 2023-26 program were already
designed under the original, more stringent GHG standards finalized in
2012 for those model years. At the time of this proposal, the relaxed
GHG standards under the SAFE rule have been in place for little more
than one year. During this time, the ability of the industry to commit
to revised plans based on the SAFE rule's relaxed standards, especially
for MYs 2023 and later, has been highly uncertain in light of pending
litigation,\134\ and concern was regularly expressed across the auto
industry over the uncertain future of the SAFE standards. In fact, due
in part to this uncertainty, five automakers voluntarily agreed to more
stringent national emission reduction targets under the California
Framework Agreements (discussed further below). Therefore, the
automakers' own past comments regarding product plan development and
the regulatory and litigation history of the GHG standards since 2012
support EPA's expectation that automakers remain largely on track in
terms of technological readiness within their product plans to meet the
approximate trajectory of increasingly stringent standards initially
promulgated in 2012. Although we do not believe that automakers have
significantly changed their product plans in response to the SAFE final
rule issued in 2020, any that did would have done so relatively
recently and there is reason to expect that, for any automakers that
changed their plans after the SAFE rule, the automakers' earlier plans
could be reinstated or adapted with little change. We also note that
some automakers may have adopted product plans to overcomply with the
prior, more stringent standards, with the intention of selling credits
to other automakers. For these automakers, the proposed standards of
this rule, if adopted, would reduce or eliminate the sudden disruption
to product plans caused by the SAFE rule. EPA invites comment on the
impact of EPA's current and recent rulemakings on automakers' product
plans. It is important to note that we have considered the need for
manufacturers to transition from the SAFE standards (or the California
Framework emission reduction targets) to standards that are closer in
stringency to the 2012 standards and we have structured the proposed
standards (including the proposed footprint curves as well as the
combination of flexibility and credit options) to be less stringent
than the 2012 standards for model years 2023, 2024, and 2025.
---------------------------------------------------------------------------

    \133\ For example, in its comments on the 2012 rule, Ford stated
that manufacturers typically begin to firm up their product plans
roughly five years in advance of actual production. (Docket OAR-
2009-0472-7082.1, p. 10.)
    \134\ Competitive Enterprise Institute v. NHTSA, D.C. Cir. No.
20-1145 (and consolidated cases brought by several states,
localities, environmental and public organizations, and others),
filed on May 1, 2020 and later dates.
---------------------------------------------------------------------------

    EPA considers this an important aspect of its analysis that
mitigates concerns about lead time for manufacturers to meet the
proposed standards beginning with the 2023 model year. We see no reason
to expect that the major GHG-reducing technologies that automakers have
already developed and introduced, or have already been planning for
near-term implementation, will not be available for model year 2023-
2026 vehicles. Thus, in contrast to the situation that existed prior to
EPA's adoption of the initial light-duty GHG standards in the 2012
rule, automakers now have had the benefit of at least 8 to 9 years of
planning and development in preparation for meeting the proposed
standards.
    Another important factor in considering the feasibility of the
proposed standards is the fact that five automakers voluntarily entered
into the California Framework Agreements with the California Air
Resources Board, first announced in July 2019, to meet more stringent
GHG emission reduction targets nationwide than the relaxed standards in
the SAFE rule.\135\ These voluntary actions by automakers that
collectively represent approximately one-third of the U.S. vehicle
market speak directly to the feasibility of meeting standards at least
as stringent as the emission reduction targets under the California
Framework Agreements. As discussed in Section II.A.5, the California
Framework Agreements were a key consideration in our development and
assessment of the proposed EPA standards.
---------------------------------------------------------------------------

    \135\ https://ww2.arb.ca.gov/resources/documents/framework-agreements-clean-cars (last updated on May 22, 2021).
---------------------------------------------------------------------------

    It is important to note that our conclusion that the proposed
program is technologically feasible is based in part on a projection
that the standards will be met largely with the kinds of advanced
gasoline vehicle technologies already in place in vehicles within
today's fleet and does not rely on a significant penetration of
electric vehicles into the fleet during the 2023-2026 model years. As
discussed above, EPA modeled auto manufacturers' decisions in choosing
among available emission reduction technologies to incorporate in their
vehicles, taking into account both the projected costs and
effectiveness of the technologies. This updated analysis is consistent
with EPA's past analyses of standards similar to those proposed in this
notice, see Section III.B and Chapter 2 of the DRIA. The analysis
demonstrates that a wide variety of emission reducing technologies are
already available for manufacturers to incorporate into their gasoline
vehicles within the time frame of the proposed standards.
    We recognize that although the technology penetration rates that we
project in this rulemaking are generally similar to the technology
penetration rates that we projected in the SAFE rulemaking, in the SAFE
rulemaking EPA concluded that the projected level of advanced
technologies was ``too high from a consumer-choice perspective'' and
ultimately could lead to automakers changing the vehicle types they
offer.\136\ EPA currently does not believe this is an accurate
assessment or one that deserves weight that could overcome EPA's expert
assessment of the appropriate standards under section 202 of the CAA.
Rather, EPA's judgment is that the history of the significant
developments in automotive offerings over the last ten years supports
the conclusion that automakers are capable of deploying a

wide range of advanced technologies across the entire vehicle fleet,
and that consumers remain interested and willing to purchase vehicles
with advanced technologies. Reinforcing this updated judgement, the
recent announcements of BEV light-duty trucks and the introduction of
hybrid minivans and pickups exemplify such a trend, and EPA sees no
reason why the standards proposed in this rule would fundamentally
alter it.
---------------------------------------------------------------------------

    \136\ 85 FR 25116.
---------------------------------------------------------------------------

    Our updated analysis projects that about 8 percent of vehicles
meeting the MY 2026 proposed standards would be EV/PHEVs (See Section
III.B.3). Given manufacturers' public announcements about their
ambitious plans to transition fleets to electrified vehicles, we
believe it is possible that an even higher percentage of the industry-
wide fleet could be electrified during the time period of our proposed
model year 2023-2026 standards. Moreover, EPA is committed to
encouraging the rapid development and broad acceptance of zero-emission
vehicles, and we are proposing incentives to support this transition
(see Section II.B.2). Any acceleration in electric vehicle penetration
would be beneficial and would further expand the technology choices
available to manufacturers to meet the proposed standards.
2. Opportunities Provided Through Credits and Incentives Provisions
    In considering feasibility of the proposed standards EPA also
considers the impact of available compliance flexibilities on
automakers' compliance options. As we discuss above, the advanced
technologies that automakers are continuing to incorporate in vehicle
models today directly contribute to each company's compliance plan
(i.e., these vehicle models have lower GHG emissions). In addition,
automakers widely utilize the program's established ABT provisions
which provide a variety of flexible paths to plan compliance (See more
detail in Section II.A.4). EPA's annual Automotive Trends Report
illustrates how different automakers have chosen to make use of the GHG
program's various credit features.\137\ It is clear that manufacturers
are widely utilizing the various credit programs available, and we have
every expectation that manufacturers will continue to take advantage of
the compliance flexibilities and crediting programs to their fullest
extent, thereby providing them with additional powerful tools in
finding the lowest cost compliance solutions in light of the proposed
revised standards.
---------------------------------------------------------------------------

    \137\``The 2020 EPA Automotive Trends Report, Greenhouse Gas
Emissions, Fuel Economy, and Technology issue 1975,'' EPA-420-R-21-
003 January 2021.
---------------------------------------------------------------------------

    The GHG credit program was designed to recognize that automakers
typically have a multi-year redesign cycle and not every vehicle will
be redesigned every year to add GHG-reducing technology. Moreover, when
GHG-reducing technology is added, it will generally not achieve
emissions reductions corresponding exactly to a single year-over-year
change in stringency of the standards. Instead, in any given model
year, some vehicles will be ``credit generators,'' over-performing
compared to the footprint-based CO2 target in that model
year, while other vehicles will be ``debit generators'' and under-
performing against their footprint-based targets. Together, an
automaker's mix of credit-generator and debit-generator vehicles
contribute to its sales-weighted fleet average CO2
performance, compared to its standard, for that year. If a
manufacturer's sales-weighted fleet CO2 performance is
better than its fleet average standard at the end of the model year,
those credits can be banked for the automaker's future use in certain
years (under the credit carry-forward provisions) or sold to other
manufacturers (under the credit trading provisions). Likewise, if a
manufacturer's sales-weighted fleet CO2 performance falls
short of its fleet average standard at the end of a model year, the
automaker can use banked credits or purchase credits to meet the
standard. Furthermore, in recognition of the possibility that a
manufacturer might comply with a standard for a given model year with
credits earned in a future model year (under the allowance for ``credit
carryback''), a manufacturer may also choose to carry a deficit forward
up to three years before showing compliance with that model year.
    EPA has examined manufacturer certification data to assess the
extent to which model year 2021 vehicles already being produced and
sold today would be credit generators compared to the proposed model
year 2023 targets (accounting for projected off-cycle and air
conditioning credits). As detailed in Chapter 2.4 of the DRIA,
automakers are selling approximately 216 vehicle models (60 percent of
them are advanced gasoline technology vehicles) that would be credit
generators compared to the proposed model year 2023 targets, and they
appear in nearly all light-duty vehicle market segments. This
information supports our conclusion about the feasibility of vehicles
with existing technologies meeting the proposed MY2023 standards. We
also considered the ability of MY2021 vehicles to generate credits
based on the MY2021 and MY2022 standards relaxed in the SAFE rule. Of
the 1370 distinct MY2021 vehicle models, EPA's analysis (DRIA, Chapter
2.4) indicates that 355 of these models are credit generators for
MY2021, with most of those also generating credits for the MY2022 SAFE
standards (25 percent of today's new vehicle fleet offerings). This
represents an opportunity for manufacturers to build their credit banks
for both MY 2021 and MY2022 and carry those credits forward to help
meet the MY2023-2026 proposed standards. These data demonstrate the
opportunities for manufacturers to sell more of the credit-generator
vehicles as another available strategy to generate credits that will
help them comply with the proposed model year 2023 and later standards.
Our analysis clearly shows this could be done within vehicle segments
to maintain consumer choice (we would not expect that overall car/truck
fleet mix would shift), as credit-generating vehicles exist across
vehicle segments, representing 95 percent of vehicle sales. Under the
fleet-average based standards, manufacturers have multiple feasible
paths to compliance, including varying sales volumes of credit
generating vehicles,\138\ adopting GHG-reducing technologies, and
implementing other credit and incentive provisions including those
proposed in this notice.
---------------------------------------------------------------------------

    \138\ E.g., When fuel economy standards were not footprint-
based, less efficient vehicles were priced higher than more
efficient vehicles to encourage sales of the latter. Austin, D., and
T. Dinan (2004). ``Clearing the air: The costs and consequences of
higher CAFE standards and increased gasoline taxes.'' Journal of
Environmental Economics and Management 50: 562-582. Greene, D., P.
Patterson, M. Singh, and J. Li (2005). ``Feebates, rebates, and gas-
guzzler taxes: A study of incentives for increased fuel economy.''
Energy Policy 33: 757-775 found that automakers were more likely to
add technology than use pricing mechanisms to achieve standards.
Whitefoot, K., M. Fowlie, and S. Skerlos (2017). ``Compliance by
Design: Influence of Acceleration Trade-offs on CO2
Emissions and Costs of Fuel Economy and Greenhouse Gas
Regulations.'' Environmental Science and Technology 51: 10307-10315
find evidence consistent with automakers using trade-offs with
acceleration as yet another path to comply with fuel economy
standards.
---------------------------------------------------------------------------

    EPA further considered the issue of generating credits against the
MY2021 and MY2022 SAFE standards in the context of lead time. In
discussions during development of this proposed rule, some stakeholders
suggested that EPA should limit automakers' ability to generate credits
against the relaxed SAFE standards or discount the value of such
credits. These stakeholders argue that the nominal 1.5 percent year-
over-

year stringency increase of the SAFE standards barely keeps up with a
``business as usual'' scenario of industry GHG emissions
improvements.\139\ EPA has considered that argument. EPA also
considered the recent performance of the auto industry in meeting the
GHG standards; in MY2019 the industry-wide average performance was 7 g/
mi above the industry-wide average standard and compliance was achieved
by many manufacturers through applying banked credits.\140\ In light of
the implementation timeframe of the proposed revised standards
beginning in model year 2023, we are proposing to continue allowing
manufacturers to generate credits against the SAFE standards in model
years 2021 and 2022. We are not proposing to shorten the existing 5-
year credit carry-forward provision for credits generated in model
years 2021 and 2022, so those credits can be carried forward under the
existing regulations to facilitate the transition from the SAFE
standards to the proposed more stringent standards. However, EPA seeks
comment on whether there should be any restrictions placed on credits
generated in model years 2021 and 2022, for example, discounting of
MY2021 and MY2022 credits, given the relaxed stringency of the SAFE
standards in those model years.
---------------------------------------------------------------------------

    \139\ We note that the 2020 SAFE FRM presented a 0 percent year-
over-year alternative for MYs 2021-2026. In that scenario with no
stringency change, the modeled fleet improved fuel economy by 0.9
percent per year from 38.3 mpg in 2021 to 40.0 mpg in 2026. (see
2020 SAFE FRIA, Table I-19, Alternative 1)
    \140\ Trends Report, Figure ES-8.
---------------------------------------------------------------------------

    In addition, EPA is proposing a targeted set of extended credit and
compliance flexibility options for manufacturers, specifically designed
to further address any potential concerns of manufacturers about
stringency and lead time under the proposed standards (as explained in
detail in Section II.B.3 and II.C). These proposals include a limited
extension of credit carry-forward, such that credits from model years
2016-2020 would be available to carry forward for one (or two, in the
case of 2016 credits) additional model year(s) for compliance in model
years 2023-2026; an extension of the off-cycle credit menu cap from 10
grams/mile to 15 grams/mile to provide additional credit to
manufacturers who install technologies that reduce GHG emissions that
are not captured on EPA's GHG certification tests; and two forms of
incentive credits for applying advanced technologies in the
manufacturer's vehicle fleet (i.e., an extension of incentive
multipliers for EV, PHEV and FCV vehicles, and extra credits for full-
size pickup trucks that utilize strong hybrid technology or achieve
similar performance-based GHG reductions). Collectively, these proposed
flexibilities provide additional strategies manufacturers can use to
smooth their path to compliance with the proposed revised standards. In
fact, these additional credits and incentives provisions were an
important factor in EPA's consideration of the appropriate level of
stringency for this proposal, and they provide additional support for
our consideration of revised standards even more stringent than if we
were not including these provisions in the proposed program.
    Just as the fleet average standard approach of the light duty
vehicle GHG program allows manufacturers to design a compliance
strategy relying on the sale of both credit-generating vehicles and
debit generating vehicles in a single year, the credit banking and
trading provisions of the program allow manufacturers to design a
compliance strategy relying on overcompliance and undercompliance in
different years, or even by different manufacturers. Credit trading is
a compliance flexibility provision that allows one vehicle manufacturer
to purchase credits from another, accommodating the ability of
manufacturers to make strategic choices in planning for and reacting to
normal fluctuations in an automotive business cycle. When credits are
available for less than the marginal cost of compliance, EPA would
anticipate that an automaker might choose to adopt a compliance
strategy relying on credits.\141\ As shown in the most recent EPA
Trends Report, more than 10 vehicle firms collectively have
participated in 70 credit trading transactions since the inception of
the EPA program through Model Year 2019, including many of the largest
automotive firms.\142\ EPA does not believe that the fact that
automakers have adopted a compliance strategy relying on credits
(whether banked or purchased) is per se evidence that standards are not
appropriate under section 202.
---------------------------------------------------------------------------

    \141\ ``FCA historically pursued compliance with fuel economy
and greenhouse gas regulations in the markets where it operated
through the most cost effective combination of developing,
manufacturing and selling vehicles with better fuel economy and
lower GHG emissions, purchasing compliance credits, and, as allowed
by the U.S. federal Corporate Average Fuel Economy (``CAFE'')
program, paying regulatory penalties. The cost of each of these
components of FCA's strategy has increased and is expected to
continue to increase in the future. The compliance strategy for the
combined company is currently being assessed by Stellantis
management.'' Stellantis N.V. (2020). ``Annual Report and Form 20-F
for the year ended December 31, 2020.''
    \142\ EPA 2020 Trends Report, page 110 and Figure 5.15.
---------------------------------------------------------------------------

    EPA recognizes that several industry stakeholders suggested in
comments on the MTE and SAFE rule that underperformance compared to
CO2 targets indicated the standards were overly stringent,
EPA previously stated that a declining credit balance indicated future
compliance would be more difficult, and EPA was taking into
consideration the unwillingness of manufacturers to design a compliance
strategy around purchasing credits. However, as explained above, EPA
does not believe a declining credit balance is evidence the standards
are infeasible or less feasible than anticipated. EPA believes the more
accurate view is that manufacturers are able and willing to purchase
credits, as well as use banked credits, as part of their compliance
strategies and that significant use of credits for compliance is
indicative of EPA's flexibilities working as intended, to offer a wide
array of compliance strategies which reduce overall costs of
compliance.
    In summary, there is ample evidence that, in addition to the
demonstration of technological feasibility resulting from the ``head
start'' that automakers have toward complying with the proposed
standards, there are a wide range of credit and flexibility strategies,
as well as fleet mix strategies, that manufacturers can marshal to
enable them to comply with the proposed standards.

B. Consideration of Vehicle Costs of Compliance

    In addition to technological feasibility and lead time, EPA has
considered the cost for the auto industry to comply with the proposed
revised standards. See section III.B and Chapter 2 of the DRIA for our
analysis of compliance costs. As shown in Section III.B.2 and Chapter
4.1.2 of the DRIA, the average per-vehicle cost for a MY2026 vehicle is
$1,044 compared to the No Action scenario. Average per-vehicle costs
rise from $465 in MY2023 to $771 in MY2025. The $1,044 average per-
vehicle cost is consistent with prior EPA analyses (see DRIA Chapter
1.2). EPA has also evaluated costs by manufacturer (see Section
III.B.2) and finds the range of costs to be similarly consistent with
findings from prior analyses.
    The estimated costs to meet the proposed standards are lower than
those projected in the 2012 rule, which EPA estimated at about $1,200
(see DRIA Table 1-4). EPA found in the 2012 rule that these (higher)
costs were reasonable, even without considering

the fuel savings, which more than offsets these costs. See 77 FR 62663-
62665, 62880, and 62922. This decrease in estimated per-vehicle cost
since the 2012 rule is not surprising--technology to achieve
environmental improvements has often proved to be less costly than
EPA's initial estimates.\143\
---------------------------------------------------------------------------

    \143\ Anderson, John F and Sherwood, ``Comparison of EPA and
Other Estimates of Mobile Source Rule Costs to Actual Price
Changes,'' SAE paper 2003-1-1980.
---------------------------------------------------------------------------

    As part of these cost estimates, we project significant increases
in the use of advanced gasoline technologies (including mild and strong
hybrids), comprising more than 92 percent of the fleet. (See Section
III.B.3). EPA has considered the feasibility of the standards under
several different assumptions about future fuel prices, technology
application or credit trading (see DRIA Chapters 4 and 10), which shows
very small variations in average per-vehicle cost or technology
penetration mix. Our conclusion that there are multiple ways the
MY2023-2026 standards can be met given the wide range of technologies
at reasonable cost, and predominantly with advanced gasoline engine and
vehicle technologies, holds true across all these scenarios.
    These cost estimates are in the same range as EPA's earlier
analyses of similarly stringent GHG standards including the model year
2023 and later timeframe. (See Chapter 1 of the DRIA). EPA concludes
that the per-vehicle costs of the proposed standards are reasonable.

C. Consideration of Impacts on Consumers

    Another important consideration for EPA is the impact of the
proposed standards on consumers. EPA concludes that the proposed
standards would be beneficial for consumers because the lower operating
costs from significant fuel savings would offset the upfront vehicle
costs. Total fuel savings for consumers through 2050 are estimated at
$120 billion to $250 billion (7 percent and 3 percent discount rates,
see Section VII.I, Table 40). Thus, the proposal would result in
significant savings for consumers, as further described in Section
VII.J.
    The Administrator also carefully considered the affordability
impacts of these proposed standards, especially considering Executive
Order 14008 and EPA's increasing focus on environmental justice and
equity. EPA examined the impacts of the proposed standards on the
affordability of new and used cars and trucks in Section VII.M of this
preamble and Chapter 8.3 of the DRIA. Because lower-income households
spend more on gasoline than on vehicle purchases, the effects of
reduced operating costs may be especially important for these
households.
    EPA recognizes that in the SAFE rulemaking we placed greater weight
on the upfront costs of vehicles, and little weight on total cost of
ownership. In part, that rulemaking explained that approach on the
ground that ``[n]ew vehicle purchasers are not likely to place as much
weight on fuel savings that will be realized by subsequent owners.''
\144\ However, in light of changes in policy priorities (including
concern about accounting for benefits to lower-income households), EPA
now believes in assessing the benefits of these standards it is more
appropriate to consider the total fuel savings of the vehicle, over its
lifetime, including those fuel savings that may accrue to later owners.
Disregarding those benefits, which often accrue to lower income
households, who more often purchase used cars, would provide a less
accurate picture of total benefits to society. Likewise, EPA has
reconsidered the weight placed in the SAFE rulemaking on promoting
fleet turnover as a standalone factor and is now considering the
influence of turnover in the context of the full range effects of the
proposed standards. While recognizing that standards can influence
purchasing decisions, EPA currently believes that, for the range of
appropriate emissions standards, the emissions reductions from more
stringent standards far outweigh any temporary effect from delayed
purchases.
---------------------------------------------------------------------------

    \144\ 85 FR 25114.
---------------------------------------------------------------------------

D. Consideration of Emissions of GHGs and Other Air Pollutants

    An essential factor that EPA considered in determining the
appropriate level of the proposed standards is the reductions in
emissions that would result from the program. This primarily includes
reductions in vehicle GHG emissions, given the increased urgency of the
climate crisis. We also considered the effects of the proposed
standards on criteria pollutant and air toxics emissions and associated
public health and welfare impacts.
    The GHG emissions reductions from our proposed standards are
projected to exceed 2,200 MMT of CO2, 2.7 MMT of
CH4 and 71,000 metric tons of N2O, as the fleet
turns over year-by-year to new vehicles that meet the proposed
standards, in an analysis through 2050. See Section IV.A, Table 29. The
monetized benefit of these GHG reductions is estimated at $22 billion
to $280 billion across a range of discount rates and values for the
social cost of carbon (see Section VII.I). These GHG reductions are
important to continued progress in addressing climate change. In fact,
EPA believes that we will need to achieve far deeper GHG reductions
from the light-duty sector in future years beyond the compliance
timeframe for the proposed standards, which is why we will be
initiating a rulemaking in the near future to establish more stringent
standards after model year 2026.
    The criteria pollutant emissions reductions expected to result from
the proposed standards are also a factor considered by the
Administrator. The proposed standards would result in emissions
reductions of some criteria pollutants and air toxics and associated
benefits for public health and welfare. Public health benefits are
estimated to total $3.3 billion to $8 billion (7 percent and 3 percent
discount rates, see Section VII.H, Table 38). EPA finds that this
proposal is important in reducing the public health impacts of air
pollution.

E. Consideration of Energy, Safety and Other Factors

    EPA also evaluated the impacts of the proposed standards on energy,
in terms of fuel consumption and energy security. This proposal is
projected to reduce U.S. gasoline consumption by 291 million barrels
through 2050 (see Section VII.C). EPA considered the impacts of this
projected reduction in fuel consumption on energy security,
specifically the avoided costs of macroeconomic disruption (See Section
VII.F). We estimate the energy security benefits of the proposal in
2050 at $6.1 billion to $13 billion (7 percent and 3 percent discount
rate, see Section VII.H. Table 37). EPA considers this proposal to be
beneficial from an energy security perspective.
    Section 202(a)(4)(A) of the CAA specifically prohibits the use of
an emission control device, system or element of design that will cause
or contribute to an unreasonable risk to public health, welfare, or
safety. EPA has a long history of considering the safety implications
of its emission standards,\145\ up to and including the more recent
light-duty GHG regulations: The 2010 rule which established the MY2012-
2016 light-duty vehicle GHG

standards, the 2012 rule which first established MY2017-2025 light-duty
vehicle GHG standards, the MTE 2016 Proposed Determination and the 2020
SAFE rule. The relationship between GHG emissions standards and safety
is multi-faceted, and can be influenced not only by control
technologies, but also by consumer decisions about vehicle ownership
and use. EPA has estimated the impacts of this proposal on safety by
accounting for changes in new vehicle purchase, changes in vehicle
scrappage, fleet turnover, and VMT, and changes in vehicle weight as an
emissions control strategy. EPA finds that under this proposal, the
estimated risk of fatal and non-fatal injuries per distance traveled
will remain virtually unchanged (see Section VII.H). This proposal also
projects that as the costs of driving declines due to the improvement
in fuel economy, consumers overall will choose to drive more miles
(this is the ``VMT rebound'' effect). As a result of this personal
decision by consumers to drive more due to the reduce cost of driving,
EPA also projects this will result in an increase in accidents,
injuries, and fatalities. EPA recognizes that in the SAFE rulemaking
EPA placed emphasis on the estimated total number of fatal and non-
fatal injuries. However, EPA currently believes it is more appropriate
to consider the risk of injuries per mile traveled. EPA requests
comment on what role these negative impacts due to consumers' decision
to drive additional miles should play in EPA's standard-setting
decision-making.
---------------------------------------------------------------------------

    \145\ See, e.g., 45 FR 14496, 14503 (1980) (``EPA would not
require a particulate control technology that was known to involve
serious safety problems.'').
---------------------------------------------------------------------------

F. Balancing of Factors Under CAA 202(a)

    Under section 202(a) EPA has statutory authority providing
considerable discretion in setting or revising vehicle emission
standards with adequate lead time for the development and application
of technology to meet the standards. EPA's proposed standards properly
implement this statutory provision, as discussed above. As discussed
throughout this preamble, the emission reduction technologies needed to
meet the proposed standards are already available at reasonable cost,
and a significant fraction of new vehicles today already meets these
standards. Moreover, the flexibilities already available under EPA's
existing regulations, including fleet average standards and the ABT
program--in effect enabling manufacturers to spread the compliance
requirement for any particular model year across multiple model years--
and the additional flexibilities being proposed in this notice further
support EPA's conclusion that the proposed standards provide sufficient
time for the development and application of technology, giving
appropriate consideration to cost.
    EPA recognizes that the cost and technology penetration estimates
in this rule are similar to the estimates in the SAFE rulemaking and
that the Administrator is balancing the factors considered differently
than in the SAFE rule to reach his conclusion about what standards are
appropriate to propose. In the SAFE rulemaking, EPA promulgated relaxed
GHG standards that were projected to result in increases in GHG and
criteria pollutant emissions and adverse public health impacts (e.g.,
increases in premature mortality and illnesses due to increased air
pollution). The SAFE rulemaking was the most significant weakening of
mobile source emissions standards in EPA's history. It is particularly
notable that the rationale for the revision was not that the standards
had turned out to be technologically infeasible or, even that they
would impose unexpectedly high costs on society. As we have noted, the
estimated costs for more stringent standards in the SAFE rulemaking
were not significantly different from the costs estimated in 2012, or
for this rulemaking. Rather, in balancing the factors under
consideration for the SAFE rulemaking, EPA placed greatest weight on
reducing the cost of compliance on the regulated industry and the
upfront (but not total) cost to consumers, and placed little weight on
reductions in GHGs and other pollutants, contrary to EPA's traditional
approach to adopting standards under section 202.
    Although EPA continues to believe that the Administrator has
significant discretion to weigh various factors under Section 202, the
Administrator now notes that the purpose of adopting standards under
that provision of the Clean Air Act is to address air pollution that
may reasonably be anticipated to endanger public health and welfare and
that reducing air pollution has traditionally been the focus of such
standards. In this action, the Administrator is proposing more
stringent standards based on a balancing of the factors under
consideration different from that in the SAFE rulemaking, a balancing
that the Administrator believes is more consistent with Congressional
intent and the goals of the Clean Air Act.\146\ Taking into
consideration the importance of reducing GHG emissions and the primary
purpose of CAA section 202 to reduce the threat posed to human health
and the environment by air pollution, the Administrator finds it is
appropriate to place greater weight on reducing emissions and to adopt
standards that, when implemented, would result in significant
reductions of light duty vehicle emissions both the near term and over
the longer term. As discussed above and the DRIA Chapter 1.2.2, EPA has
updated the analyses for this rule. The updated analysis shows several
key analytical results that are similar to those from the SAFE final
rule. EPA concludes that the Administrator's current approach to
considering the relevant factors would fully support the proposed
standards even if they were based solely on the technical record and
conclusions that were used to set standards in the final SAFE rule.
---------------------------------------------------------------------------

    \146\ See, e.g., CAA sections 101(a)(2) (finding that ``the
increasing use of motor vehicles[ ] has resulted in mounting dangers
to the public health and welfare''); 101(b)(1) (declaring one
purpose of the CAA is ``to protect and enhance the quality of the
Nation's air resources, so as to promote the public health and
welfare''); 101(c) (``a primary goal of this chapter is to encourage
or otherwise promote reasonable Federal . . . actions . . . for
pollution prevention'').
---------------------------------------------------------------------------

    Finally, EPA estimates net benefits of this proposal in 2050 at $93
billion to $150 billion (7 percent and 3 percent discount rates, with 3
percent SC-GHG) (see Section VII.H). In comparison, the SAFE rule
estimated net benefits at $16.1 billion to negative $13.1 billion (7
percent and 3 percent discount rates, respectively)--in other words,
the SAFE rule estimated net costs to society under a 3 percent discount
rate. Our conclusion that the estimated benefits considerably exceed
the estimated costs of the proposed program reinforces our view that
the proposed standards represent an appropriate weighing of the
statutory factors and other relevant considerations.
    In summary, after consideration of a number of relevant factors,
given the technical feasibility of the proposed standards, the moderate
costs per vehicle, the savings to consumers in fuel costs over the
lifetime of the vehicle, the very significant reductions in GHG
emissions and fuel consumption, and the significantly greater
quantified benefits compared to quantified costs, EPA believes that the
proposed standards are appropriate under EPA's section 202(a)
authority.

VII. What are the estimated cost, economic, and other impacts of the
proposal?

    This Section VII discusses EPA's assessment of a variety of impacts
related to the proposed standards, including impacts on vehicle sales,
fuel

consumption, energy security, additional driving, and safety. It
presents an overview of EPA's estimates of GHG reduction benefits and
non-GHG health impacts. This Section VII presents a summary of
aggregate costs, drawing from the per-vehicle cost estimates presented
in Section III, and estimated program benefits. Finally, the section
discusses EPA's assessment of the potential impacts on consumers and
employment impacts. The DRIA presents further details of the analyses
presented in this Section VII.

A. Conceptual Framework for Evaluating Consumer Impacts

    A significant question in analyzing consumer impacts from vehicle
GHG standards has been why there have appeared to be existing
technologies that, if adopted, would reduce fuel consumption enough to
pay for themselves in short periods, but which were not widely adopted.
If the benefits to vehicle buyers outweigh the costs to those buyers of
the new technologies, conventional economic principles suggest that
automakers would provide them, and people would buy them. Yet
engineering analyses have identified a number of technologies whose
costs are quickly covered by their fuel savings, such as downsized-
turbocharged engines, gasoline direct injection, and improved
aerodynamics, that were not widely adopted before the issuance of
standards, but which were adopted rapidly afterwards.\147\ Why did
markets fail, on their own, to adopt these technologies? This question,
termed the ``energy paradox'' or ``energy efficiency gap,'' \148\ has
been discussed in detail in previous rulemakings.\149\ As discussed in
more detail in DRIA Chapter 8.1.1, EPA has evaluated whether the
efficiency gap exists, as well as potential explanations for why the
gap might exist.
---------------------------------------------------------------------------

    \147\ U.S. Environmental Protection Agency (2021). 2020 EPA
Automotive Trends Report: Greenhouse Gas Emissions, Fuel Economy,
and Technology since 1975, Chapter 4. EPA-420-R-21-003, https://www.epa.gov/automotive-trends/download-automotive-trends-report#Full%20Report, accessed 4/15/2021.
    \148\ Jaffe, A.B., and Stavins, R.N. (1994). ``The Energy
Paradox and the Diffusion of Conservation Technology.'' Resource and
Energy Economics 16(2): 91-122.
    \149\ 75 FR 25510-25513; 77 FR 62913-62917; U.S. Environmental
Protection Agency (2016), Proposed Determination on the
Appropriateness of the Model Year 2022-2025 Light-Duty Vehicle
Greenhouse Gas Emissions Standards under the Midterm Evaluation,
EPA-420-R-16-020, Appendix B.1.2; 85 FR 24603-24613.
---------------------------------------------------------------------------

    Whether the efficiency gap exists depends on the assessment of fuel
savings relative to technology costs and ``hidden costs,'' i.e., any
adverse effects on other vehicle attributes. In the Midterm
Evaluation,\150\ EPA evaluated both the costs and the effectiveness for
reducing fuel consumption (and GHG emissions) of technologies used to
meet the emissions standards to date; the agency found that the
estimates used in the original rulemakings were generally correct.
---------------------------------------------------------------------------

    \150\ https://www.epa.gov/regulations-emissions-vehicles-and-engines/midterm-evaluation-light-duty-vehicle-greenhouse-gas.
---------------------------------------------------------------------------

    EPA also examined the relationship between the presence of fuel-
saving technologies and negative evaluations of vehicle operating
characteristics, such as performance and noise, in auto reviews and
found that the presence of the technologies was more often correlated
with positive evaluations than negative ones.\151\ Preliminary work
with data from recent purchasers of new vehicles found similar
results.\152\ While these studies cannot prove that the technologies
pose no problems to other vehicle attributes, they suggest that it is
possible to implement the technologies without imposing hidden costs.
---------------------------------------------------------------------------

    \151\ Helfand, G., et al. (2016). ``Searching for Hidden Costs:
A Technology-Based Approach to the Energy Efficiency Gap in Light-
Duty Vehicles.'' Energy Policy 98: 590-606; Huang, H., et al.
(2018). ``Re-Searching for Hidden Costs: Evidence from the Adoption
of Fuel-Saving Technologies in Light-Duty Vehicles.'' Transportation
Research Part D 65: 194-212.
    \152\ Huang, H., G. Helfand, and K. Bolon (2018a). ``Consumer
Satisfaction with New Vehicles Subject to Greenhouse Gas and Fuel
Economy Standards.'' Presentation at the Society for Benefit-Cost
Analysis annual conference, March. https://benefitcostanalysis.org/docs/G.4_Huang_Slides.pdf, accessed 4/7/2021.
---------------------------------------------------------------------------

    EPA has also evaluated the relationship between performance and
fuel economy, in light of research arguing that fuel consumption must
come at the expense of other vehicle attributes.\153\ Research in
progress from Watten et al. (2021) \154\ distinguishes between
technologies that improve, or do not adversely affect, both performance
and fuel economy and technologies that reduce engine displacement,
which does trade off improved fuel economy for performance. Following
Moskalik et al. (2018),\155\ Watten et al. observe that the ``marginal
rate of attribute substitution'' between power and fuel economy has
changed substantially over time. In particular, it has become
relatively more costly to improve efficiency by reducing power, and
relatively less costly to add technologies that improve efficiency.
These technology improvements do not reduce power and in some cases may
enhance it. It supports the concept that automakers take consumer
preferences into account in identifying where to add technology.
---------------------------------------------------------------------------

    \153\ Knittel, C.R. (2011). ``Automobiles on Steroids: Product
Attribute Trade-Offs and Technological Progress in the Automobile
Sector.'' American Economic Review 101(7): pp. 3368-3399; Klier, T.
and Linn, J. (2016). ``The Effect of Vehicle Fuel Economy Standards
on Technology Adoption.'' Journal of Public Economics 133: 41-63;
McKenzie, D. and Heywood, J. B. (2015). ``Quantifying efficiency
technology improvements in U.S. cars from 1975-2009.'' Applied
Energy 157: 918-928.
    \154\ Watten, A., S. Anderson, and G. Helfand (2021).
``Attribute Production and Technical Change: Rethinking the
Performance and Fuel Economy Trade-off for Light-duty Vehicles.''
Working paper.
    \155\ Moskalik, A., K. Bolon, K. Newman, and J. Cherry (2018).
``Representing GHG Reduction Technologies in the Future Fleet with
Full Vehicle Simulation.'' SAE Technical Paper 2018-01-1273.
doi:10.4271/2018-01-1273.
---------------------------------------------------------------------------

    EPA cannot reject the observation that the energy efficiency gap
has existed for light-duty vehicles--that is, it appears that markets
on their own have not led to adoption of a number of technologies whose
fuel savings quickly outweigh the costs in the absence of standards. As
discussed in DRIA Chapter <IP_ADDRESS>, EPA has previously identified a
number of hypotheses to explain this apparent market failure.\156\ Some
relate to consumer behavior, such as putting little emphasis on future
fuel savings compared to up-front costs (a form of ``myopic loss
aversion''), not having a full understanding of potential cost savings,
or not prioritizing fuel consumption in the complex process of
selecting a vehicle. Other potential explanations relate to automaker
behaviors that grow out of the large fixed costs of investments
involved with switching to new technologies, as well as the complex and
uncertain processes involved in technological innovation and adoption.
---------------------------------------------------------------------------

    \156\ 75 FR 25510-25513; 77 FR 62913-62917; U.S. Environmental
Protection Agency (2016), Proposed Determination on the
Appropriateness of the Model Year 2022-2025 Light-Duty Vehicle
Greenhouse Gas Emissions Standards under the Midterm Evaluation,
EPA-420-R-16-020, Appendix B.1.2; 85 FR 24603-24613.
---------------------------------------------------------------------------

    It is challenging to identify which of these hypotheses for the
efficiency gap explain its apparent existence. On the consumer side,
EPA has explored the evidence on how consumers evaluate fuel economy in
their vehicle purchase decisions.\157\ As noted, there does not

appear to be consensus in that literature on that behavior; the
variation in estimates is very large. Even less research has been
conducted on producer-side behavior. The reason there continues to be
limited adoption of cost-effective fuel-saving technologies before the
implementation of more stringent standards remains an open question.
Yet, more stringent standards have been adopted without apparent
disruption to the vehicle market after they become effective.\158\
---------------------------------------------------------------------------

    \157\ U.S. Environmental Protection Agency (2010). ``How
Consumers Value Fuel Economy: A Literature Review.'' EPA-420-R-10-
008, https://cfpub.epa.gov/si/si_public_file_download.cfm?p_download_id=499454&Lab=OTAQ (accessed
4/15/2021); U.S. Environmental Protection Agency (2018). ``Consumer
Willingness to Pay for Vehicle Attributes: What is the Current State
of Knowledge?'' EPA-420-R-18-016, https://cfpub.epa.gov/si/si_public_file_download.cfm?p_download_id=536423&Lab=OTAQ (accessed
4/15/2021); Greene, D., A. Hossain, J. Hofmann, G. Helfand, and R.
Beach (2018). ``Consumer Willingness to Pay for Vehicle Attributes:
What Do We Know?'' Transportation Research Part A 118: 258-279.
    \158\ ``The 2020 EPA Automotive Trends Report, Greenhouse Gas
Emissions, Fuel Economy, and Technology since 1975,'' EPA-420-R-21-
003 January 2021. See Table 2-1 for total vehicle production by
model year.
---------------------------------------------------------------------------

B. Vehicle Sales Impacts

    As discussed in Section III.A EPA utilized the CCEMS model for this
analysis. The FRIA for the SAFE rule (starting p. 871) describes the
approach used in the model for estimating vehicle sales impacts. First,
it projects future new vehicle sales in the reference case based on
projections of macroeconomic variables. Second, it applies an
elasticity of -1 (that is, a one percent increase in price produces a
one percent decrease in the quantity sold) to the change in net price,
where net price is the difference in technology costs less an estimate
of the change in fuel costs over 2.5 years. This approach assumes that
both automakers and vehicle buyers take into consideration the fuel
savings that buyers might expect to accrue over the first 2.5 years of
vehicle ownership.
    As discussed in Section VII.C, and in more detail in DRIA Chapter
<IP_ADDRESS>, there does not yet appear to be consensus around the role of
fuel consumption in vehicle purchase decisions, and the assumption that
2.5 years of fuel consumption is the right number for both automakers
and vehicle buyers deserves further evaluation. As noted there, Greene
et al. (2018) provides a reference value of $1,150 for the value of
reducing fuel costs by $0.01/mile over the lifetime of an average
vehicle; for comparison, 2.5 years of fuel savings is only about 30
percent of that value, or about $334.\159\ This $334 is within the
large standard deviation in Greene et al. (2018) for the willingness to
pay to reduce fuel costs, but it is far lower than both the mean of
$1,880 (160 percent of that value) and the median of $990 (85 percent
of that value) per one cent per mile in the paper. On the other hand,
the 2015 NAS report (cited in the 2021 NAS report) observed that
automakers ``perceive that typical consumers would pay upfront for only
one to four years of fuel savings'' (pp. 9-10),\160\ a range of values
within that identified in Greene et al. (2018) for consumer response,
but well below the median or mean. Thus, it appears possible that
automakers operate under a different perception of consumer willingness
to pay for additional fuel economy than how consumers actually behave.
The CCEMS model does not differentiate between automaker perception and
consumer perception of the value of additional fuel economy in its
sales modeling.
---------------------------------------------------------------------------

    \159\ See Greene et al. (2018), Footnote 157. Greene et al.
(2018) cite a ballpark value of reducing driving costs by $0.01/mile
as $1150, but does not provide enough detail to replicate their
analysis perfectly. The 30% estimate is calculated by assuming,
following assumptions in Greene et al. (2018), that a vehicle is
driven 15,000 miles per year for 13.5 years, 10% discount rate.
Those figures produce a ``present value of miles'' of 108,600; thus,
a $0.01/mile change in the cost of driving would be worth $1086. In
contrast, saving $0.01/mile for 2.5 years using these assumptions is
worth about $318, or 29% of the value over 13.5 years. Multiplying
Greene et al.'s 29 percent to $1150 = $334.
    \160\ National Research Council (2015). Cost, Effectiveness, and
Deployment of Fuel Economy Technologies for Light-Duty Vehicles.
Washington, DC: The National Academies Press. https://doi.org/10.17226/21744, p. 9-10.
---------------------------------------------------------------------------

    In addition, setting the elasticity of demand at -1 in the SAFE
FRIA was based on literature more than 25 years old. EPA is currently
working to review more recent estimates of the elasticity of demand for
new vehicles. A smaller elasticity would not change the direction of
sales effects, but it would reduce the magnitude of the effects.
    The CCEMS model also makes use of a dynamic fleet share model (SAFE
FRIA p. 877) that estimates, separately, the shares of passenger cars
and light trucks based on vehicle characteristics, and then adjusts
them so that the market shares sum to one. The model also includes the
effects of the standards on vehicle scrappage based on a statistical
analysis (FRIA starting p. 926). The model looks for associations
between vehicle age, change in new vehicle prices, fuel prices, cost
per mile of driving, and macroeconomic measures and the scrappage rate,
with different equations for cars, SUVs/vans, and pickups. EPA's
project to review new vehicle demand elasticities also includes a
review of the literature on the relationship between new and used
vehicle markets and scrappage.
    For this proposal, EPA is maintaining these assumptions for its
modeling. We also examine a sensitivity case using an elasticity of -
0.4. We hope to complete our work on both the vehicle demand elasticity
and scrappage in time to be able to consider it for use in analyses
that will be developed for the final rule.
    With the modeling assumptions that both automakers and vehicle
buyers consider 2.5 years of future fuel consumption in the purchase
decision and that the demand elasticity is -1, vehicle sales would
decrease by roughly 2 percent compared to sales in the SAFE rule, as
discussed in more detail in DRIA Chapter 8.1.4. In contrast, when
modeled using a demand elasticity of -0.4, sales decrease by between
0.5 and 1 percent. If, however, automakers underestimate consumers'
valuation of fuel economy, then sales may increase relative to the
baseline under the proposed standards.

C. Changes in Fuel Consumption

    The proposed standards will reduce not only GHG emissions but also
fuel consumption. Reducing fuel consumption is a significant means of
reducing GHG emissions from the transportation fleet. Table 46 shows
the estimated fuel consumption changes under the proposed standards
relative to the No Action scenario and include rebound effects, credit
usage and advanced technology multiplier use.
    The largest changes in fuel consumption come from gasoline, which
follows from our projection that improvements to gasoline vehicles will
be the primary way that manufacturers meet the proposed standards. By
2050, our proposal would reduce gasoline consumption by more than 290
million barrels--a nearly 10 percent reduction in U.S. gasoline
consumption. Since only about 8 percent of the fleet is projected to be
either EV or PHEV by MY2026 to meet the proposed standards, we project
smaller changes in the electricity to fuel these vehicles.

                         Table 46--Change in Fuel Consumption From the Light-Duty Fleet
----------------------------------------------------------------------------------------------------------------
                                                     Gasoline       Percent of      Electricity     Percent of
                                                     (million        2020 U.S.       (gigawatt       2020 U.S.
                                                     barrels)       consumption       hours)        consumption
----------------------------------------------------------------------------------------------------------------
2023............................................              -9            -0.3             929             0.0
2026............................................             -43            -1.5           6,798             0.2
2030............................................            -124            -4.2          19,017             0.5
2035............................................            -211            -7.2          30,735             0.8
2040............................................            -263            -8.9          38,228             1.0
2050............................................            -291            -9.9          48,122             1.3
----------------------------------------------------------------------------------------------------------------
Notes: One barrel (BBL) contains 42 gallons of gasoline; according to the Energy Information Administration
  (EIA), US gasoline consumption in 2020 was 123.49 billion gallons (see https://www.eia.gov/tools/faqs/faq.php?id=23&t=10, last accessed July 19, 2021), roughly 16 percent less (due to the coronavirus pandemic)
  than the highest consumption on record (2018). According to the Department of Energy, there are 0.031 kWh of
  electricity per gallon gasoline equivalent, the metric reported by the CCEMS model for electricity consumption
  and used here to convert to kWh. According to statista.com, the US consumed 3,802 terawatt hours of
  electricity in 2020.

    With changes in fuel consumption come associated changes in the
amount of time spent refueling vehicles. Consistent with the
assumptions used in the SAFE FRM (and presented in Table 47), the costs
of time spent refueling are calculated as the total amount of time the
driver of a typical vehicle would spend refueling multiplied by the
value of their time. If less time is spent refueling vehicles under the
proposed standards, then a refueling time savings would be incurred.

                          Table 47--CCEMS Inputs Used To Estimate Refueling Time Costs
----------------------------------------------------------------------------------------------------------------
                                                                       Cars          Vans/SUVs        Pickups
----------------------------------------------------------------------------------------------------------------
  Fixed Component of Average Refueling Time in Minutes (by Fuel
                              Type)
----------------------------------------------------------------------------------------------------------------
Gasoline........................................................             3.5             3.5             3.5
Ethanol-85......................................................             3.5             3.5             3.5
Diesel..........................................................             3.5             3.5             3.5
Electricity.....................................................             3.5             3.5             3.5
Hydrogen........................................................               0               0               0
Compressed Natural Gas..........................................               0               0               0
Average Tank Volume Refueled....................................              65              65              65
Value of Travel Time per Vehicle (2018 $/hour)..................           20.46           20.79           20.79
----------------------------------------------------------------------------------------------------------------

D. Greenhouse Gas Emission Reduction Benefits

    EPA estimated the climate benefits for this proposed rulemaking
using measures of the social cost of three GHGs: Carbon, methane, and
nitrous oxide. While the program also accounts for reduction in HFCs
through the AC credits program, EPA has not quantified the associated
emission reductions. The social cost of each gas (i.e., the social cost
of carbon (SC-CO2), methane (SC-CH4), and nitrous oxide (SC-N2O)) is
the monetary value of the net harm to society associated with a
marginal increase in emissions in a given year, or the benefit of
avoiding that increase. Collectively, these values are referenced as
the ``social cost of greenhouse gases'' (SC-GHG). In principle, SC-GHG
includes the value of all climate change impacts, including (but not
limited to) changes in net agricultural productivity, human health
effects, property damage from increased flood risk and natural
disasters, disruption of energy systems, risk of conflict,
environmental migration, and the value of ecosystem services. The SC-
GHG therefore, reflects the societal value of reducing emissions of the
gas in question by one metric ton.
    We estimate the global social benefits of CO2, CH4, and N2O
emission reductions expected from this proposed rule using the SC-GHG
estimates presented in the February 2021 Technical Support Document
(TSD): Social Cost of Carbon, Methane, and Nitrous Oxide Interim
Estimates under E.O. 13990 (IWG 2021). These SC-GHG estimates are
interim values developed under E.O. 13990 for use in benefit-cost
analyses until an improved estimate of the impacts of climate change
can be developed based on the best available climate science and
economics. As discussed in Section 3.3 of the RIA, these interim SC-GHG
estimates have a number of limitations, including that the models used
to produce them do not include all of the important physical,
ecological, and economic impacts of climate change recognized in the
climate-change literature and that several model input assumptions are
outdated. As discussed in the February 2021 TSD, the Interagency
Working Group on the Social Cost of Greenhouse Gases (IWG) finds that,
taken together, the limitations suggest that these SC-GHG estimates
likely underestimate the damages from GHG emissions. The IWG is
currently working on a comprehensive update of the SC-GHG estimates (to
be released by January 2022 under E.O. 13990) taking into consideration
recommendations from the National Academies of Sciences, Engineering
and Medicine, recent scientific literature, public comments received on
the February 2021 TSD and other input from experts and diverse
stakeholder groups. We request comment on this approach to estimating
social benefits of GHG in this rulemaking in light of the ongoing
interagency process. See Section VII.I for a summary of the monetized
GHG benefits and Section 3.3 of the RIA for more on the application of
SC-GHG estimates.

E. Non-Greenhouse Gas Health Impacts

    It is important to quantify the health and environmental impacts
associated with the proposed program because a failure to adequately
consider ancillary impacts could lead to an incorrect assessment of a
program's costs and

benefits. Moreover, the health and other impacts of exposure to
criteria air pollutants and airborne toxics tend to occur in the near
term, while most effects from reduced climate change are likely to
occur over a time frame of several decades or longer. Ideally, human
health benefits would be estimated based on changes in ambient
PM2.5 and ozone as determined by full-scale air quality
modeling. However, the projected non-GHG emissions impacts associated
with the proposal would be expected to contribute to very small changes
in ambient air quality (see Preamble Section V.C for more detail).
    In lieu of air quality modeling, we use a reduced-form benefit-per-
ton (BPT) approach to inform our assessment of health impacts, which is
conceptually consistent with EPA's use of BPT estimates in several
previous RIAs.161 162 In this approach, the
PM2.5-related BPT values are the total monetized human
health benefits (the sum of the economic value of the reduced risk of
premature death and illness) that are expected from reducing one ton of
directly-emitted PM2.5 or PM2.5 precursor such as
NOX or SO2. We note, however, that the complex,
non-linear photochemical processes that govern ozone formation prevent
us from developing reduced-form ozone BPT values. This is an important
limitation to recognize when using the BPT approach.
---------------------------------------------------------------------------

    \161\ U.S. Environmental Protection Agency (U.S. EPA). 2012.
Regulatory Impact Analysis for the Final Revisions to the National
Ambient Air Quality Standards for Particulate Matter. EPA452/R-12-
003. Office of Air Quality Planning and Standards, Health and
Environmental Impacts Division, Research Triangle Park, NC.
December. Available at: http://www.epa.gov/ttnecas1/regdata/RIAs/finalria.pdf.
    \162\ U.S. Environmental Protection Agency (U.S. EPA). 2014.
Regulatory Impact Analysis for the Proposed Carbon Pollution
Guidelines for Existing Power Plants and Emission Standards for
Modified and Reconstructed Power Plants. EPA-542/R-14-002. Office of
Air Quality Planning and Standards, Research Triangle Park, NC.
June. Available at http://www.epa.gov/ttnecas1/regdata/RIAs/111dproposalRIAfinal0602.pdf.
---------------------------------------------------------------------------

    For tailpipe emissions, we apply national PM2.5-related
BPT values that were recently derived for the ``Onroad Light Duty
Vehicle'' sector.\163\ The onroad light-duty vehicle BPT values were
derived using detailed mobile sector source-apportionment air quality
modeling, and apply EPA's existing method for using reduced-form tools
to estimate PM2.5-related benefits.164 165
Compared to values that EPA has used in the past,\166\ these BPT values
provide better resolution by mobile sector and geographic area, two
features that make them especially useful for quantifying the benefits
of reducing emissions from the onroad light-duty sector.
---------------------------------------------------------------------------

    \163\ Wolfe, P.; Davidson, K.; Fulcher, C.; Fann, N.; Zawacki,
M.; Baker, K. R. 2019. Monetized Health Benefits Attributable to
Mobile Source Emission Reductions across the United States in 2025.
Sci. Total Environ. 650, 2490-2498. https://doi.org/10.1016/J.SCITOTENV.2018.09.273. Also see https://www.epa.gov/benmap/mobile-sector-source-apportionment-air-quality-and-benefits-ton.
    \164\ Zawacki, M.; Baker, K. R.; Phillips, S.; Davidson, K.;
Wolfe, P. 2018. Mobile Source Contributions to Ambient Ozone and
Particulate Matter in 2025. Atmos. Environ. 188, 129-141.
    \165\ Fann, N.; Fulcher, C. M.; Baker, K. 2013. The Recent and
Future Health Burden of Air Pollution Apportioned across U.S.
Sectors. Environ. Sci. Technol. 47 (8), 3580-3589. https://doi.org/10.1021/es304831q.
    \166\ US EPA, 2018. Technical Support Document: Estimating the
Benefit per Ton of Reducing PM2.5 Precursors from 17
Sectors. 2018. Office of Air Quality Planning and Standards.
Research Triangle Park, NC.
---------------------------------------------------------------------------

    To monetize the PM2.5-related impacts of upstream
emissions, we apply BPT values that were developed for the refinery
sector.\167\ While total upstream emissions also include electricity
generating unit sources, petroleum extraction, storage and transport
sources, as well as sources upstream from the refinery, the modeling
tool used to support this analysis only provides estimates of upstream
emissions impacts aggregated across all sources. Furthermore, we assume
the majority of upstream emission reductions associated with the
proposal would be related to domestic onsite refinery emissions and
domestic crude production, because the fleet penetration of electric
vehicles attributed to the proposed standards is relatively small
(i.e., the change in electric vehicle penetration is projected to
change from 4 percent in the No Action case to 8 percent under the
proposed standards). We therefore believe for purposes of this proposed
rule it is appropriate to apply the refinery values to all upstream
emissions. We solicit comment on this approach and any alternative
approaches that we should adopt for the final rule.
---------------------------------------------------------------------------

    \167\ U.S. Environmental Protection Agency (U.S. EPA). 2018.
Technical Support Document: Estimating the Benefit per Ton of
Reducing PM2.5 Precursors from 17 Sectors. 2018. Office
of Air Quality Planning and Standards. Research Triangle Park, NC.
---------------------------------------------------------------------------

    EPA bases its benefits analyses on peer-reviewed studies of air
quality and health effects and peer-reviewed studies of the monetary
values of public health and welfare improvements. Very recently, EPA
updated its approach to estimating the benefits of changes in
PM2.5 and ozone.168 169 These updates were based
on information drawn from the recent 2019 PM2.5 and 2020
Ozone Integrated Science Assessments (ISAs), which were reviewed by the
Clean Air Science Advisory Committee (CASAC) and the
public.170 171 Unfortunately, EPA has not had an opportunity
to update its BPT estimates to reflect these updates in time for this
proposal. Instead, we use PM2.5 BPT estimates that are based
on the review of the 2009 PM ISA \172\ and include a mortality risk
estimate derived from the Krewski et al. (2009) \173\ analysis of the
American Cancer Society (ACS) cohort and nonfatal illnesses consistent
with benefits analyses performed for the analysis of the final Tier 3
Vehicle Rule,\174\ the final 2012 PM NAAQS Revision,\175\ and the final
2017-2025 Light-duty Vehicle GHG Rule.\176\ We expect this lag in
updating our BPT

estimates to have only a minimal impact on total PM benefits, since the
underlying mortality risk estimate based on the Krewski study is
identical to an updated PM2.5 mortality risk estimate
derived from an expanded analysis of the same ACS cohort.\177\ The
Agency is currently working to update its BPT estimates to reflect
these recent updates for use in future rulemaking analyses. More
information on the BPT approach to valuing PM-related benefits can be
found in RIA Chapter 7.2 that accompanies this proposal.
---------------------------------------------------------------------------

    \168\ U.S. Environmental Protection Agency (U.S. EPA). 2021.
Regulatory Impact Analysis for the Final Revised Cross-State Air
Pollution Rule (CSAPR) Update for the 2008 Ozone NAAQS. EPA-452/R-
21-002. March.
    \169\ U.S. Environmental Protection Agency (U.S. EPA). 2021.
Estimating PM2.5- and Ozone-Attributable Health Benefits.
Technical Support Document (TSD) for the Final Revised Cross-State
Air Pollution Rule Update for the 2008 Ozone Season NAAQS. EPA-HQ-
OAR-2020-0272. March.
    \170\ U.S. Environmental Protection Agency (U.S. EPA). 2019.
Integrated Science Assessment (ISA) for Particulate Matter (Final
Report, 2019). U.S. Environmental Protection Agency, Washington, DC,
EPA/600/R-19/188, 2019.
    \171\ U.S. Environmental Protection Agency (U.S. EPA). 2020.
Integrated Science Assessment (ISA) for Ozone and Related
Photochemical Oxidants (Final Report). U.S. Environmental Protection
Agency, Washington, DC, EPA/600/R-20/012, 2020.
    \172\ U.S. Environmental Protection Agency (U.S. EPA). 2009.
Integrated Science Assessment for Particulate Matter (Final Report).
EPA-600-R-08-139F. National Center for Environmental Assessment--RTP
Division, Research Triangle Park, NC. December. Available at: http://cfpub.epa.gov/ncea/cfm/recordisplay.cfm?deid=216546.
    \173\ Krewski D., M. Jerrett, R.T. Burnett, R. Ma, E. Hughes, Y.
Shi, et al. 2009. Extended Follow-Up and Spatial Analysis of the
American Cancer Society Study Linking Particulate Air Pollution and
Mortality. HEI Research Report, 140, Health Effects Institute,
Boston, MA.
    \174\ U.S. Environmental Protection Agency. (2014). Control of
Air Pollution from Motor Vehicles: Tier 3 Motor Vehicle Emission and
Fuel Standards Final Rule: Regulatory Impact Analysis, Assessment
and Standards Division, Office of Transportation and Air Quality,
EPA-420-R-14-005, March 2014. Available on the internet: http://www3.epa.gov/otaq/documents/tier3/420r14005.pdf.
    \175\ U.S. Environmental Protection Agency. (2012). Regulatory
Impact Analysis for the Final Revisions to the National Ambient Air
Quality Standards for Particulate Matter, Health and Environmental
Impacts Division, Office of Air Quality Planning and Standards, EPA-
452-R-12-005, December 2012. Available on the internet: http://www3.epa.gov/ttnecas1/regdata/RIAs/finalria.pdf.
    \176\ U.S. Environmental Protection Agency (U.S. EPA). (2012).
Regulatory Impact Analysis: Final Rulemaking for 2017-2025 Light-
Duty Vehicle Greenhouse Gas Emission Standards and Corporate Average
Fuel Economy Standards, Assessment and Standards Division, Office of
Transportation and Air Quality, EPA-420-R-12-016, August 2012.
Available on the internet at: http://www3.epa.gov/otaq/climate/documents/420r12016.pdf.
    \177\ Turner, MC, Jerrett, M, Pope, A, III, Krewski, D, Gapstur,
SM, Diver, WR, Beckerman, BS, Marshall, JD, Su, J, Crouse, DL and
Burnett, RT (2016). Long-term ozone exposure and mortality in a
large prospective study. Am J Respir Crit Care Med 193(10): 1134-
1142.
---------------------------------------------------------------------------

    The PM-related BPT estimates used in this analysis are provided in
Table 48. We multiply these BPT values by projected national changes in
NOX, SO2 and directly-emitted PM2.5,
in tons, to estimate the total PM2.5-related monetized human
health benefits associated with the proposed program. As the table
indicates, these values differ among pollutants and depend on their
original source, because emissions from different sources can result in
different degrees of population exposure and resulting health impacts.
The BPT values for emissions of non-GHG pollutants from both onroad
light-duty vehicle use and upstream sources such as fuel refineries
will increase over time. These projected increases reflect rising
income levels, which increase affected individuals' willingness to pay
for reduced exposure to health threats from air pollution. The BPT
values also reflect future population growth and increased life
expectancy, which expands the size of the population exposed to air
pollution in both urban and rural areas, especially among older age
groups with the highest mortality risk.\178\
---------------------------------------------------------------------------

    \178\ For more information about income growth adjustment
factors and EPA's population projections, please refer to the
following: https://www.epa.gov/sites/production/files/2015-04/documents/benmap-ce_user_manual_march_2015.pdf.

                                                     Table 48--PM2.5-Related Benefit-per-Ton Values
                                                                       [2018$] \a\
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                  Onroad light duty vehicles \b\                        Upstream Sources\c\
                                                         -----------------------------------------------------------------------------------------------
                          Year                             Direct PM2.5                                    Direct PM2.5
                                                                                SO2             NOX                             SO2             NOX
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                        Estimated Using a 3 Percent Discount Rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
2020....................................................        $600,000        $150,000          $6,400        $380,000         $81,000          $8,100
2025....................................................         660,000         170,000           6,900         420,000          90,000           8,800
2030....................................................         740,000         190,000           7,600         450,000          98,000           9,600
2035....................................................         830,000         210,000           8,400  ..............  ..............  ..............
2040....................................................         920,000         230,000           9,000  ..............  ..............  ..............
2045....................................................       1,000,000         250,000           9,600  ..............  ..............  ..............
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                        Estimated Using a 7 Percent Discount Rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
2020....................................................         540,000         140,000           5,800         350,000          74,000           7,300
2025....................................................         600,000         150,000           6,200         380,000          80,000           7,900
2030....................................................         660,000         170,000           6,800         410,000          88,000           8,600
2035....................................................         750,000         190,000           7,500  ..............  ..............  ..............
2040....................................................         830,000         210,000           8,200  ..............  ..............  ..............
2045....................................................         900,000         230,000           8,600  ..............  ..............  ..............
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes:
\a\ The benefit-per-ton estimates presented in this table are based on estimates derived from the American Cancer Society cohort study (Krewski et al.,
  2009). They also assume either a 3 percent or 7 percent discount rate in the valuation of premature mortality to account for a twenty-year segmented
  premature mortality cessation lag.
\b\ Benefit-per-ton values for onroad light duty vehicles were estimated for the years 2020, 2025, 2030, 2035, 2040, and 2045. We hold values constant
  for intervening years (e.g., the 2020 values are assumed to apply to years 2021-2024; 2025 values for years 2026-2029; and 2045 values for years 2046
  and beyond).
\c\ Benefit-per-ton values for upstream sources were estimated only for the years 2020, 2025 and 2030. We hold values constant for intervening years and
  2030 values are applied to years 2031 and beyond.
\d\ We assume for the purpose of this analysis that total ``upstream emissions'' are most appropriately monetized using refinery sector benefit per-ton
  values.

    The monetized PM2.5 health impacts of the proposed
standards are presented in Table 54. Using PM2.5-related BPT
estimates to monetize the non-GHG impacts of the proposed standards
omits ozone-related impacts, unquantified PM-related health impacts, as
well as other impacts associated with reductions in exposure to air
toxics, ecosystem benefits, and visibility improvement. Section V of
this preamble provides a qualitative description of both the health and
environmental effects of the non-GHG pollutants impacted by the
proposed program.

F. Energy Security Impacts

    This proposal is designed to require reductions in the GHG
emissions of light-duty vehicles (LDV) and thereby reduce fuel
consumption. In turn, this proposed LDV GHG (2023-2026) proposal would
help to reduce U.S. petroleum imports. A reduction of U.S. petroleum
imports reduces both financial and strategic risks caused by potential
sudden disruptions in the supply of imported petroleum to the U.S.,
thus increasing U.S. energy security.
    In order to understand the energy security implications of reducing
U.S. oil imports, EPA has worked with Oak Ridge National Laboratory
(ORNL), which has developed approaches for evaluating the social costs
and energy security implications of oil use. When conducting this
analysis, ORNL considers the full cost of importing petroleum into the
U.S. The full economic cost (i.e., oil security premiums, as labeled
below) is defined to include two components in addition

to the purchase price of petroleum itself. These are: (1) The higher
costs/benefits for oil imports resulting from the effect of changes in
U.S. demand on the world oil price (i.e., the ``demand'' or
``monopsony'' costs/benefits); and (2) the risk of reductions in U.S.
economic output and disruption to the U.S. economy caused by sudden
disruptions in the supply of imported oil to the U.S. (i.e., the
avoided macroeconomic disruption/adjustment costs).
    For this proposed rule, EPA is using oil security premiums
estimated using ORNL's methodology, which incorporates oil price
projections and energy market and economic trends from the EIA's Annual
Energy Outlook (AEO). For this analysis, we are using oil security
premiums based on AEO 2018, but for the final rule we intend to update
this analysis to AEO 2021. We only consider the avoided macroeconomic
disruption/adjustment costs oil security premiums (i.e., labeled
macroeconomic oil security premiums below), since the monopsony impacts
of this proposed rule are considered transfer payments. See previous
EPA GHG vehicle rules for a discussion of the monopsony oil security
premiums.\179\ In addition, EPA and ORNL have worked together to revise
the oil security premiums based upon recent energy security literature
(see Chapter 3.2.5 of the DRIA accompanying this proposed rule for how
the macroeconomic oil security premiums have been updated based upon a
review of recent energy security literature on this topic). We do not
consider military cost impacts from this proposed rule due to
methodological issues in quantifying these impacts (see Chapter 3.2.3
of the DRIA for a review of the literature on the military costs
impacts of U.S. oil import reductions).
---------------------------------------------------------------------------

    \179\ See Energy Security Impacts. Effect of Oil Use on the
Long-Run Oil Price. Section 10. 5.2.1. pp.10-25. 2016. 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.
---------------------------------------------------------------------------

    To calculate the energy security benefits of this proposed rule,
EPA is using the ORNL oil security premium methodology with: (1)
Estimated oil savings calculated by EPA and (2) an oil import reduction
factor of 91 percent, which shows how much U.S. oil imports are reduced
from changes in U.S. oil consumption. Each of these assumptions is
discussed in more detail in Chapter 3.2 of the accompanying DRIA. Below
EPA presents the macroeconomic oil security premiums used for the
proposed standards for selected years from 2023-2050 in Table 49.

  Table 49--Macroeconomic Oil Security Premiums for Selected Years From
                                2023-2050
                            [2018$/Barrel] *
------------------------------------------------------------------------
                                                    Macroeconomic oil
                  Year (range)                      security premiums
                                                         (range)
------------------------------------------------------------------------
2023...........................................      $3.63 ($1.22-$6.13)
2026...........................................      $3.78 ($1.17-$6.37)
2030...........................................      $3.99 ($1.13-$6.74)
2035...........................................      $4.30 ($1.14-$7.35)
2040...........................................      $4.66 ($1.26-$7.96)
2050...........................................      $5.57 ($1.89-$9.53)
------------------------------------------------------------------------
* Top values in each cell are the midpoints, the values in parentheses
  are the 90 percent confidence intervals.

G. Impacts of Additional Driving

    As discussed in Chapter 3.1 of the RIA, the assumed rebound effect
might occur when an increase in vehicle fuel efficiency encourages
people to drive more as a result of the lower cost per mile of driving.
Along with the safety considerations associated with increased vehicle
miles traveled (described in Section VII.H of this preamble),
additional driving can lead to other costs and benefits that can be
monetized.
    The increase in travel associated with the rebound effect produces
additional benefits to vehicle drivers, which reflect the value of the
added (or more desirable) social and economic opportunities that become
accessible with additional travel. Consistent with assumptions used in
the SAFE FRM, this analysis estimates the economic benefits from
increased rebound-effect driving as the owner/operator surplus from the
additional accessibility it provides.
    The equation for the calculation of the Drive Value:

Drive Value = (1/2) (VMTrebound) [($/mile)NoAction-($/
mile)Action]

    The economic value of the increased owner/operator surplus provided
by added driving is one half of the product of the decline in vehicle
operating costs per vehicle-mile and the resulting increase in the
annual number of miles driven. Because it depends on the extent of
improvement in fuel consumption, the value of benefits from increased
vehicle use changes by model year and varies among alternative
standards.
    In contrast to the benefits of additional driving are the costs
associated with that driving. If net operating costs of the vehicle
decline, then we expect a positive rebound effect. Increased vehicle
use associated with a positive rebound effect also contributes to
increased traffic congestion and highway noise. Depending on how the
additional travel is distributed throughout the day and where it takes
place, additional vehicle use can contribute to traffic congestion and
delays by increasing traffic volumes on facilities that are already
heavily traveled during peak periods. These added delays impose higher
costs on other road users in the form of increased travel time and
operating expenses. Because drivers do not take these external costs
into account in deciding when and where to travel, they must be
accounted for separately as a cost of the added driving associated with
the rebound effect.
    EPA relies on estimates of congestion and noise costs developed by
the Federal Highway Administration to estimate the increased external
costs caused by added driving due to the rebound effect. EPA employed
estimates from this source previously in the analysis accompanying the
light-duty 2010 and 2012 vehicle rulemakings and the 2016 Draft TAR and
Proposed Determination. We continue to find them appropriate for this
analysis after reviewing the procedures used by FHWA to develop them
and considering other available estimates of these values.
    FHWA's congestion cost estimates focus on freeways because non-
freeway effects are less serious due to lower traffic volumes and
opportunities to re-route around the congestion. EPA, however, applied
the congestion cost to the overall VMT. The results of this analysis
potentially overestimate the congestions costs associated with
increased vehicle use, and thus lead to a conservative estimate of net
benefits.
    EPA has used FHWA's ``Middle'' estimates for marginal congestion
and noise costs caused by increased travel from vehicles. This approach
is consistent with the methodology used in our prior analyses. The
values used are shown in Table 50.
    These congestion costs differ from those used in the SAFE FRM and,
as stated, are consistent with those used in the 2016 Draft TAR and the
2016 Proposed Determination. For this proposal, EPA has chosen not to
adopt the approach from the SAFE FRM where scaling factors were used to
adjust the underlying FHWA congestion cost estimates. In particular,
EPA now finds that scaling the marginal per-mile congestion costs by
the change in VMT per lane-mile on U.S. highways from 1997 to 2017 does
not account for changes in average speeds and improved road design, and
may have the potential to over-estimate costs. We

are continuing to use the FHWA congestion estimates without scaling,
consistent with the SAFE NPRM and prior EPA rulemakings, and adjusting
to measure in 2018 dollars. EPA invites comments on the congestion cost
values and methodology.

          Table 50--Costs Associated With Congestion and Noise
                     [2018 Dollars per vehicle mile]
------------------------------------------------------------------------
                                       Passenger
                                         cars      Van/SUVs     Pickups
------------------------------------------------------------------------
Congestion..........................      0.0634      0.0634      0.0566
Noise...............................      0.0009      0.0009      0.0009
------------------------------------------------------------------------

H. Safety Considerations in Establishing GHG Standards

    Consistent with previous light-duty GHG analyses, EPA has assessed
the potential of the proposed MY 2023-2026 standards to affect vehicle
safety. EPA applied the same historical relationships between mass,
size, and fatality risk that were established and documented in the
SAFE rulemaking. These relationships are based on the statistical
analysis of historical crash data, which included an analysis performed
by using the most recently available crash studies based on data for
model years 2007 to 2011. EPA used the findings of this analysis to
estimate safety impacts of the modeled mass reductions over the
lifetimes of new vehicles in response to MY 2023-2026 standards. As in
initially promulgating the GHG standards, the MTE Proposed
Determination and this proposal, EPA's assessment is that manufacturers
can achieve the MY 2023-2026 standards while using modest levels of
mass reduction as one technology option among many. On the whole, EPA
considers safety impacts in the context of all projected health impacts
from the proposal including public health benefits from the projected
reductions in air pollution.
    The projected change in risk of fatal and non-fatal injuries is
influenced by changes in fleet mix (car/truck share), vehicle scrappage
rates, distribution of VMT among vehicles in the fleet and vehicle
mass. Because the empirical analysis described previously did not
produce any mass-safety coefficients with a statistically significant
difference from zero, we analyzed safety results over the range of
coefficient values. We project that the effect of the proposed
standards on annual fatalities per billion miles driven ranges from a
decrease of 0.25 percent to an increase of 0.38 percent, with a central
estimate of a 0.07 percent increase.\180\
---------------------------------------------------------------------------

    \180\ These fatality risk values are the average of changes in
annual risk through 2050. The range of values is based on the 5% to
95% confidence interval of mass-safety coefficients presented in the
SAFE FRM.
---------------------------------------------------------------------------

    In addition to changes in risk, EPA also considered the projected
impact of the proposed standards on the absolute number of fatal and
non-fatal injuries. The majority of the fatalities projected would
result from the projected increased driving--i.e., people choosing to
drive more due to the lower operating costs of more efficient vehicles.
Our cost-benefit analysis accounts for both the value of this
additional driving and its associated risk, which we assume are
considerations in the decision to drive. The risk valuation associated
with this increase in driving partially offsets the associated increase
in societal costs due to increased fatalities and non-fatal injuries.
    This analysis projects that there will be an increase in vehicle
miles traveled (VMT) under the proposed standards of 449 billion miles
compared to the No Action scenario through 2050 (an increase of about
0.5 percent). EPA estimates that vehicle safety, in terms of risk
measured as the total fatalities per the total distance traveled over
this period, will remain almost unchanged at 4.642 fatalities per
billion miles under the proposal, compared to 4.640 fatalities per
billion miles for the no-action scenario. EPA has also estimated, over
the same 30 year period, that total fatalities will increase by 2,288,
with 1,952 deaths attributed to increased driving and 336 deaths
attributed to the increase in fatality risk. In other words,
approximately 85 percent of the change in fatalities under these
proposed standards is due to projected increases in VMT and mobility
(i.e., people driving more). Our analysis also considered the increase
in non-fatal injuries. Consistent with the SAFE FRM, EPA assumed that
non-fatal injuries scale with fatal injuries.
    EPA also estimated the societal costs of these safety impacts using
assumptions consistent with the SAFE FRM (see Table 51.) Specifically,
we are continuing to use the cost associated with each fatality of
$10.4 million. We have also continued to use a scalar of approximately
1.6 applied to fatality costs to estimate non-fatal injury costs. In
addition, we have accounted for the driver's inherent valuation of risk
when making the decision to drive more due to rebound. This risk
valuation partially offsets the fatal and non-fatal injury costs
described previously, and, consistent with the SAFE FRM, is calculated
as 90 percent of the fatal and non-fatal injury costs due to rebound to
reflect the fact that consumers do not fully evaluate the risks
associated with this additional driving.

I. Summary of Costs and Benefits

    This section presents a summary of costs, benefits, and net
benefits of the proposed program. Table 51 shows the estimated annual
monetized costs of the proposed program for the indicated calendar
years. The table also shows the present-values (PV) of those costs and
the annualized costs for the calendar years 2021-2050 using both 3
percent and 7 percent discount rates.\181\ The table includes an
estimate of foregone consumer sales surplus, which measures the loss in
benefits attributed to consumers who would have purchased a new vehicle
in the absence of the proposed standards.
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    \181\ For the estimation of the stream of costs and benefits, we
assume that after implementation of the proposed MY 2023-2026
standards, the 2026 standards apply to each year thereafter.

                                                  Table 51--Costs Associated With the Proposed Program
                                                               [Billions of 2018 dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 Foregone
                                                                 consumer                                                        Non-fatal
                        Calendar year                             sales      Technology   Congestion   Noise ($)     Fatality   crash costs  Total costs
                                                                surplus a    costs ($)       ($)                    costs ($)       ($)          ($)
                                                                   ($)
--------------------------------------------------------------------------------------------------------------------------------------------------------
2023.........................................................         0.26          6.7        0.046      0.00073         0.16         0.26          7.4
2026.........................................................         0.64           15         0.19        0.003         0.61            1           18
2030.........................................................         0.43           14         0.59       0.0095         0.58         0.96           17
2035.........................................................         0.28           12            1        0.017          0.2         0.33           14
2040.........................................................         0.21           11          1.3        0.021       -0.038       -0.062           12
2050.........................................................         0.16          9.9          1.3        0.021      -0.0093       -0.015           11
PV, 3%.......................................................          5.7          210           15         0.24          4.5          7.6          240
PV, 7%.......................................................          3.7          130          7.3         0.12          3.4          5.6          150
Annualized, 3%...............................................         0.29           11         0.75        0.012         0.23         0.39           12
Annualized, 7%...............................................          0.3           10         0.59       0.0095         0.27         0.45           12
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a ``Foregone Consumer Sales Surplus'' refers to the difference between a vehicle's price and the buyer's willingness to pay for the new vehicle; the
  impact reflects the reduction in new vehicle sales described in Section VII.B. See Section 8 of CAFE_Model_Documentation_FR_2020.pdf in the docket for
  more information.

    Table 52 shows the undiscounted annual monetized fuel savings of
the proposed program. The table also shows the present- and annualized-
values of those fuel savings for the same calendar years using both 3
percent and 7 percent discount rates. The net benefits calculations use
the aggregate value of fuel savings (calculated using pre-tax fuel
prices) since savings in fuel taxes do not represent a reduction in the
value of economic resources utilized in producing and consuming fuel.
Note that the fuel savings shown in Table 52 result from reductions in
fleet-wide fuel use and include rebound effects, credit usage and
advanced technology multiplier use. Thus, fuel savings grow over time
as an increasing fraction of the fleet is projected to meet the
proposed standards.

                           Table 52--Fuel Savings Associated With the Proposed Program
                                           [Billions of 2018 dollars]
----------------------------------------------------------------------------------------------------------------
                                                                    Retail fuel      Fuel tax      Pre-tax fuel
                          Calendar year                             savings ($)     savings ($)     savings ($)
----------------------------------------------------------------------------------------------------------------
2023............................................................            0.78             0.2            0.58
2026............................................................             3.5            0.95             2.6
2030............................................................              12             2.7             8.9
2035............................................................              21             4.4              17
2040............................................................              28             5.4              23
2050............................................................              32             5.6              26
PV, 3%..........................................................             310              62             250
PV, 7%..........................................................             150              32             120
Annualized, 3%..................................................              16             3.2              13
Annualized, 7%..................................................              12             2.5             9.9
----------------------------------------------------------------------------------------------------------------
Note: Electricity expenditure increases are included.

    Table 53 presents estimated annual monetized benefits from non-
emission sources for the indicated calendar years. The table also shows
the present- and annualized-value of those benefits for the calendar
years 2021-2050 using both 3 percent and 7 percent discount rates.

                                  Table 53--Benefits From Non-Emission Sources
                                           [Billions of 2018 dollars]
----------------------------------------------------------------------------------------------------------------
                                                                                Energy        Total  non-
                  Calendar year                     Drive value   Refueling time     security        emission
                                                        ($)         savings ($)    benefits ($)    benefits ($)
----------------------------------------------------------------------------------------------------------------
2023............................................           0.065          -0.019            0.03           0.076
2026............................................            0.25           -0.12            0.15            0.28
2030............................................            0.83           -0.15            0.46             1.1
2035............................................             1.6            -0.1            0.83             2.3
2040............................................             2.1          -0.017             1.1             3.2
2050............................................             2.3             0.1             1.5             3.9
PV, 3%..........................................              23           -0.94              13              35
PV, 7%..........................................              11           -0.72             6.1              17
Annualized, 3%..................................             1.2          -0.048            0.64             1.8

Annualized, 7%..................................            0.92          -0.058            0.49             1.4
----------------------------------------------------------------------------------------------------------------
* See Section VII.G, Section VII.C and Section VII.F for more on drive value, refueling time and energy
  security, respectively.

    Table 54 presents estimated annual monetized benefits from non-GHG
emission sources for the indicated calendar years. The table also shows
the present- and annualized-values of those benefits for the calendar
years 2021-2050 using both 3 percent and 7 percent discount rates.

                                                   Table 54--PM2.5-Related Emission Reduction Benefits
                                                             [Billions of 2018 dollars] a b
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               Tailpipe benefits ($)           Upstream benefits ($)       Total PM2.5-related benefits
                                                         ----------------------------------------------------------------               ($)
                      Calendar year                                                                                -------------------------------
                                                               3% DR           7% DR           3% DR           7% DR           3% DR           7% DR
--------------------------------------------------------------------------------------------------------------------------------------------------------
2023....................................................          -0.013          -0.012           0.029           0.027           0.016           0.015
2026....................................................          -0.047          -0.042           0.014           0.015          -0.033          -0.028
2030....................................................           0.035           0.032           0.089           0.084            0.12            0.12
2035....................................................            0.23            0.21            0.34            0.31            0.57            0.52
2040....................................................            0.46            0.41            0.48            0.44            0.94            0.85
2050....................................................            0.74            0.67            0.34            0.31             1.1            0.98
PV......................................................             4.3             1.6             4.5               2             8.8             3.6
Annualized..............................................            0.22            0.13            0.23            0.16            0.45            0.29
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes:
\a\ Note that the non-GHG impacts associated with the standards presented here do not include the full complement of health and environmental effects
  that, if quantified and monetized, would increase the total monetized benefits. Instead, the non-GHG benefits are based on benefit-per-ton values that
  reflect only human health impacts associated with reductions in PM2.5 exposure.
\b\ Calendar year non-GHG benefits presented in this table assume either a 3 percent or 7 percent discount rate in the valuation of PM-related premature
  mortality to account for a twenty-year segmented cessation lag. Note that annual benefits estimated using a 3 percent discount rate were used to
  calculate the present and annualized values using a 3 percent discount rate and the annual benefits estimated using a 7 percent discount rate were
  used to calculate the present and annualized values using a 7 percent discount rate.

    Table 55 shows the benefits of reduced GHG emissions, and
consequently the annual quantified benefits (i.e., total GHG benefits),
for each of the four interim social cost of GHG (SC-GHG) values
estimated by the interagency working group. As discussed in the RIA
Chapter 3.3, there are some limitations to the SC-GHG analysis,
including the incomplete way in which the integrated assessment models
capture catastrophic and non-catastrophic impacts, their incomplete
treatment of adaptation and technological change, uncertainty in the
extrapolation of damages to high temperatures, and assumptions
regarding risk aversion.

                     Table 55--Climate Benefits From Reductions in Greenhouse Gas Emissions
                                           [Billions of 2018 dollars]
----------------------------------------------------------------------------------------------------------------
                                                                    Discount rate and statistic
                                                 ---------------------------------------------------------------
                  Calendar year                                                    2.5% Average       3% 95th
                                                  5% Average ($)  3% Average ($)        ($)       percentile ($)
----------------------------------------------------------------------------------------------------------------
2023............................................           0.063            0.21            0.31            0.63
2026............................................            0.31               1             1.5               3
2030............................................               1             3.2             4.6             9.5
2035............................................               2               6             8.5              18
2040............................................             2.8             8.1              11              25
2050............................................             3.9              10              14              31
PV..............................................              22              91             140             280
Annualized......................................             1.4             4.7             6.7              14
----------------------------------------------------------------------------------------------------------------
Notes:
The present value of reduced GHG emissions is calculated differently than other benefits. The same discount rate
  used to discount the value of damages from future emissions (SC-GHGs at 5, 3, 2.5 percent) is used to
  calculate the present value of SC-GHGs for internal consistency. Annual benefits shown are undiscounted
  values.

    Table 56 presents estimated annual net benefits for the indicated
calendar years. The table also shows the present and annualized value
of those net benefits for the calendar years 2021-2050 using both 3
percent and 7 percent discount rates. The table includes the benefits
of reduced GHG emissions (and consequently the annual net benefits) for
each of the four SC-GHG values considered by EPA. We estimate that the
total benefits of the proposed program far exceed the costs and would
result in a net present value of benefits that ranges between $17-330
billion, depending on which SC-GHG and discount rate is assumed.

  Table 56--Net Benefits (Emission Benefits + Non-Emission Benefits + Fuel Savings - Costs) Associated With the
                                                Proposed Program
                                         [Billions of 2018 dollars] a b
----------------------------------------------------------------------------------------------------------------
                                                                                Net benefits,
                                                   Net benefits,   Net benefits,   Net benefits,   with climate
                                                   with climate    with climate    with climate   benefits based
                  Calendar year                   benefits based  benefits based  benefits based  on 3% discount
                                                  on 5% discount  on 3% discount      on 2.5%       rate, 95th
                                                     rate ($)        rate ($)      discount rate  percentile SC-
                                                                                ($)           GHG ($)
----------------------------------------------------------------------------------------------------------------
2023............................................            -6.6            -6.5            -6.4            -6.1
2026............................................             -14             -14             -13             -12
2030............................................            -5.8            -3.7            -2.3             2.7
2035............................................             7.6              12              14              24
2040............................................              17              22              26              39
2050............................................              23              30              34              51
PV, 3%..........................................              73             140             190             330
PV, 7%..........................................              17              86             140             270
Annualized, 3%..................................             4.1             7.3             9.4              17
Annualized, 7%..................................               1             4.2             6.3              14
----------------------------------------------------------------------------------------------------------------
Notes:
\a\ The present value of reduced GHG emissions is calculated differently than other benefits. The same discount
  rate used to discount the value of damages from future emissions (SC-GHG at 5, 3, 2.5 percent) is used to
  calculate present value of SC-GHGs for internal consistency, while all other costs and benefits are discounted
  at either 3% or 7%. Annual costs and benefits shown are undiscounted values.
\b\ Note that the non-GHG impacts associated with the standards presented here do not include the full
  complement of health and environmental effects that, if quantified and monetized, would increase the total
  monetized benefits. Instead, the non-GHG benefits are based on benefit-per-ton values that reflect only human
  health impacts associated with reductions in PM2.5 exposure.