The 2017 model year technology package for LHD and MHD diesel engine includes continued development and refinement of the 2014 model year technology package, in particular the additional improvement to aftertreatment systems.  This package leads to a projected 9 percent reduction for LHD and MHD diesel engines in the 2017 model year.  The HHD diesel engine technology packages for the 2017 model year include the continued development of the 2014 model year technology package plus turbocompounding.  A similar approach to evaluating the impact of individual technologies as taken to develop the overall reduction of the 2014 model year package was taken with the 2017 model year package.  The Heavy-duty FTP cycle improvements lead to a 5 percent reduction on the cycle for HHDD, as detailed in RIA Chapter <IP_ADDRESS>.  The agencies used a 100 percent application rate of the technology package to determine the final 2017 MY standards.  The agencies believe that bottom cycling technologies are still in the development phase and will not be ready for production by the 2017 model year.  Therefore, these technologies were not included in determining the stringency of the final standards.  However, we do believe the bottoming cycle approach represents a significant opportunity to reduce fuel consumption and GHG emissions in the future.  EPA and NHTSA are therefore both finalizing provisions described in Section IV to create incentives for manufacturers to continue to invest to develop this technology.
The overall projected improvements in CO2 emissions and fuel consumption over the baseline are included in Table III-17.
Table III-17: Percent Fuel Consumption and CO2 Emission Reductions Over the Heavy-duty FTP Cycle

2014
2017
LHD Diesel
5%
9%
MHD Diesel
5%
9%
HHD Diesel
3%
5%
Technology Package Costs
NHTSA and EPA jointly developed costs associated with the engine technologies to assess an overall package cost for each regulatory category.  Our engine cost estimates for diesel engines used in vocational vehicles include a separate analysis of the incremental part costs, research and development activities, and additional equipment, such as emissions equipment to measure N2O emissions.  Our general approach used elsewhere in this action (for HD pickup trucks, gasoline engines, Class 7 and 8 tractors, and Class 2b-8 vocational vehicles) estimates a direct manufacturing cost for a part and marks it up based on a factor to account for indirect costs.  See also 75 FR 25376.  We believe that approach is appropriate when compliance with final standards is achieved generally by installing new parts and systems purchased from a supplier.  In such a case, the supplier is conducting the bulk of the research and development on the new parts and systems and including those costs in the purchase price paid by the original equipment manufacturer.  The indirect costs incurred by the original equipment manufacturer need not include much cost to cover research and development since the bulk of that effort is already done.  For the MHD and HHD diesel engine segment, however, the agencies believe we can make a more accurate estimate of technology cost using this alternate approach because the primary cost is not expected to be the purchase of parts or systems from suppliers or even the production of the parts and systems, but rather the development of the new technology by the original equipment manufacturer itself.  Therefore, the agencies believe it more accurate to directly estimate the indirect costs.  EPA commonly uses this approach in cases where significant investments in research and development can lead to an emission control approach that requires no new hardware.  For example, combustion optimization may significantly reduce emissions and cost a manufacturer millions of dollars to develop but will lead to an engine that is no more expensive to produce.  Using a bill of materials approach would suggest that the cost of the emissions control was zero reflecting no new hardware and ignoring the millions of dollars spent to develop the improved combustion system.  Details of the cost analysis are included in the RIA Chapter 2.  To reiterate, we have used this different approach because the MHD and HHD diesel engines are expected to comply in large part via technology changes that are not reflected in new hardware but rather knowledge gained through laboratory and real world testing that allows for improvements in control system calibrations  -  changes that are more difficult to reflect through direct costs with indirect cost multipliers.
The agencies developed the engineering costs for the research and development of diesel engines with lower fuel consumption and CO2 emissions.  The aggregate costs for engineering hours, technician support, dynamometer cell time, and fabrication of prototype parts are estimated at $6.8 million (2009$) per manufacturer per year over the five years covering 2012 through 2016.  In aggregate, this averages out to $284 per engine during 2012 through 2016 using an annual sales value of 600,000 light-, medium- and heavy-HD engines.  The agencies received comments from Horriba regarding the assumption the agencies used in the proposal that said manufacturers would need to purchase new equipment for measuring N20 and the associated costs.  Horriba provided information regarding the cost of stand-alone FTIR instrumentation (estimated at $50,000 per unit) and cost of upgrading existing emission measurement systems with NDIR analyzers (estimated at $25,000 per unit).  The agencies further analyzed our assumptions along with Horriba's comments.  Thus, we have revised the equipment costs estimates and assumed that 75 percent of manufacturers would update existing equipment while the other 25 percent would require new equipment.  The agencies are estimating costs of $63,087 (2009$) per engine manufacturer per engine subcategory (light-, medium- and heavy-HD) to cover the cost of purchasing photo-acoustic measurement equipment for two engine test cells. This would be a one-time cost incurred in the year prior to implementation of the standard (i.e., the cost would be incurred in 2013).  In aggregate, this averages out to less than $1 per engine in 2013 using an annual sales value of 600,000 light-, medium- and heavy-HD engines.
EPA also developed the incremental piece cost for the components to meet each the 2014 and 2017 standards.  These costs shown in Table III-18 which include a low complexity ICM of 1.15; flat-portion of the curve learning is considered applicable to each technology.
Table III-18: Heavy-duty Diesel Engine Component Costs inclusive of Indirect Cost Markups (2009$)

2014 Model Year
2017 Model Year
Cylinder Head (flow optimized, increased firing pressure, improved thermal management)
$6 (MHD & HH)
$11 (LHD)
$6 (MHD & HHD)
$10 (LHD)
Exhaust Manifold (flow optimized, improved thermal management)
$0
$0
Turbocharger (improved efficiency)
$18
$17
EGR Cooler (improved efficiency)
$4
$3
Water Pump (optimized, variable vane, variable speed)
$91
$84
Oil Pump (optimized)
$5
$4
Fuel Pump (higher working pressure, increased efficiency, improved pressure regulation)
$5
$4
Fuel Rail (higher working pressure)
$10 (MHD & HHD)
$12 (LHD)
$9 (MHD & HHD)
$11 (LHD)
Fuel Injector (optimized, improved multiple event control, higher working pressure)
$11 (MHD & HHD)
$15 (LHD)
$10 (MHD & HHD)
$13 (LHD)
Piston (reduced friction skirt, ring and pin)
$3
$3
Aftertreatment system (improved effectiveness SCR, dosing, dpf)[a]
$0 (MHD & HHD)
$111 (LHD)
$0 (MHD & HHD)
$101 (LHD)
Valve Train (reduced friction, roller tappet)
$82 (MHD)
$109 (LHD)
$76 (MHD)
$101 (LHD)
    Note:
    [a] Note that costs for aftertreatment improvements for MHD and HHD diesel engines are covered via the engineering costs (see text).  For LH diesel engines, we have included the cost of aftertreatment improvements as a technology cost.
The overall costs for each diesel engine regulatory subcategory are included in Table III-19.
Table III-19: Diesel Engine Technology Costs per Engine (2009$)

                                     2014
                                     2017
LHD Diesel
                                     $388
                                     $358
MHD Diesel
                                     $234
                                     $216
HHD Diesel
                                     $234
                                     $216
Reasonableness of the Final Standards
The final engine standards appear to be reasonable and consistent with the agencies' respective authorities.  With respect to the 2014 and 2017 MY standards, all of the technologies on which the standards have already been demonstrated and their effectiveness is well documented.  The final standards reflect a 100 percent application rate for these technologies.  The costs of adding these technologies remain modest across the various engine classes as shown in Table III-19.  Use of these technologies would add only a small amount to the cost of the vehicle, and the associated reductions are highly cost effective, an estimated $20 per ton of CO2eq per vehicle.  This is even more cost effective than the estimated cost effectiveness for CO2eq removal and fuel economy improvement under the light-duty vehicle rule, already considered by the agencies to be a highly cost effective reduction.  Accordingly, EPA and NHTSA view these standards as reflecting an appropriate balance of the various statutory factors under section 202(a) of the CAA and under NHTSA's EISA authority at 49 U.S.C. 32902(k)(2).
Alternative Diesel Engine Standards Considered
Other than the specific option related to legacy engine products, the agencies are not finalizing diesel engine standards less stringent than the final standards because the agencies believe these standards are highly cost effective.
The agencies considered finalizing diesel engine standards which are more stringent reflecting the inclusion of other advanced technologies.  However, the agencies are not finalizing this level of stringency because our assessment is that these technologies would not be available for production by the 2017 model year.
Final Regulatory Flexibility Provisions
This section describes flexibility provisions intended to achieve the goals of the overall program while providing alternate pathways to achieve those goals, consistent with Executive Order 13563.  The primary flexibility provisions for combination tractors and vocational vehicles are incorporated in a program of averaging, banking, and trading of credits that EPA and NHTSA developed in association with each agency's respective CO2 and fuel consumption standards (see Section II above).  For HD pickups and vans, the primary flexibility provision is the fleet averaging program patterned after the agencies' light-duty GHG and CAFE programs.  Furthermore, EPA is not finalizing an emission credit program associated with the final N2O, CH4, or HFC standards but will allow manufacturers to comply with these standards using CO2 credits.  This section also describes other finalized flexibility provisions that apply, including advanced technology credits, innovative technology credits and early compliance credits.
Averaging, Banking, and Trading Program
Averaging, Banking, and Trading (ABT) of emissions credits have been an important part of many EPA mobile source programs under CAA Title II, including engine and vehicle programs.  NHTSA has also long had an averaging and banking program for light-duty CAFE under EPCA, and recently gained authority to add a trading program for light-duty CAFE through EISA.  ABT programs are useful because they can help to address many issues of technological feasibility and lead-time, as well as considerations of cost.  They provide manufacturers flexibilities that assist the efficient development and implementation of new technologies and therefore enable new technologies to be implemented at a more progressive pace than without ABT. ABT programs may be more than just add-on provisions included to help reduce costs, and can be, as in EPA's Title II programs an integral part of the standard setting itself.  A well-designed ABT program can provide important environmental and energy security benefits by increasing the speed at which new technologies can be implemented (which means that more benefits accrue over time than with slower-starting standards) and at the same time increase flexibility for, and reduce costs to, the regulated industry.  American Council for an Energy-Efficient Economy (ACEEE) has commented that ABT and related flexibilities should not be offered for this rule because the agencies are not promoting the use of new technologies but rather the use of existing technologies.  However, without ABT provisions (and other related flexibilities), standards would typically have to be numerically less stringent since the numerical standard would have to be adjusted to accommodate issues of feasibility and available lead time.  See 75 FR at 25412-13.
Section II above describes EPA's GHG emission standards and NHTSA's fuel consumption standards.  For each of these respective sets of standards, the agencies also proposed ABT provisions, consistent with each agency's statutory authority.  The agencies worked closely together to design these provisions to be essentially identical to each other in form and function.  Because of this fundamental similarity, the remainder of this section refers to these provisions collectively as "the ABT program" except where agency-specific distinctions are required.
As explained at proposal, and discussed in detail below, the structure of the GHG and fuel consumption ABT program for HD engines was based closely on EPA's earlier ABT programs for HD engines; the proposed program for HD pickups and vans was built on the existing light-duty GHG program flexibility provisions; and the first-time ABT provisions for combination tractors and vocational vehicles were proposed to be as consistent as possible with EPA's other HD vehicle regulations.  The flexibility provisions associated with this new regulatory category were intended to build systematically upon the structure of the existing programs.
As an overview, "averaging" means the exchange of emission or fuel consumption credits between engine families or truck families within a given manufacturer's regulatory subcategories and averaging sets. For example, specific "engine families," which manufacturers create by dividing their product lines into groups expected to have similar emission characteristics throughout their useful life, would be contained within an averaging set.  Averaging allows a manufacturer to certify one or more engine families (or vehicle families, as appropriate) within the same averaging set at levels above (i.e., that do not meet) the applicable emission or fuel consumption standard.  The increased emissions or fuel consumption over the standard would need to be offset by one or more engine (or vehicle) families within that manufacturer's averaging set that are certified below (i.e., that exceed) the same emission or fuel consumption standard, such that the average emissions or fuel consumption from all the manufacturer's engine families, weighted by engine power, regulatory useful life, and production volume, are at or below the level of the emission or fuel consumption standard  Total credits for each averaging set within each model year are determined by summing together the credits calculated for every engine family within that specific averaging set.
"Banking" means the retention of emission credits by the manufacturer for use in future model year averaging or trading. "Trading" means the exchange of emission credits between manufacturers, which can then be used for averaging purposes, banked for future use, or traded to another manufacturer.
In EPA's current HD program for criteria pollutants, manufacturers are restricted to averaging, banking and trading only credits generated by the engine families within a regulatory subcategory, and EPA and NHTSA proposed to continue this restriction in the GHG and fuel consumption program for engines and vehicles.  However, the agencies sought comment on potential alternative approaches in which fewer restrictions are placed on the use of credits for averaging, banking, and trading.  Particularly, the agencies requested comment on removing prohibitions on averaging and trading between some or all regulatory categories in the proposal, and on removing restrictions between some or all regulatory subcategories that are within the same regulatory category (e.g., allowing trading of credits between Class 7 day cabs and Class 8 sleeper cabs).  The agencies received many comments on the restrictions proposed for the ABT program, namely on the proposal that credits could only be averaged within the specified vehicle and engine subcategories and not averaged across subcategories or between vehicle and engine categories.  Many commenters, including Union of Concerned Scientist (UCS), NY Dept of Transportation, Natural Resources Defense Council,Oshkosh, Autocar, and Eaton, requested that the agencies maintain the restrictions as proposed in the NPRM.  UCS argued that allowing credits to be used across categories could undermine further technology advancements, and that manufacturers that have broad portfolios would have advantages over those manufacturers that do not.  The Center for Biological Diversity (CBD) argued that because of the various credit opportunities in the ABT program and the potential that manufacturers will pay penalties rather than comply with the standards, the program could actually cause an increase in emissions and a decrease in fuel efficiency.  On the other hand, several commenters, including EMA/TMA, Cummins, Volvo, and ATA, requested that the agencies maintain the proposed restrictions of averaging credits between the engine and vehicle categories, but reduce the restrictions on credit averaging across vehicle subcategories or engine subcategories or averaging sets within similar vehicle and engine weight classes (LHD, MHD and HHD).  Cummins requested that the agencies allow credit averaging between engine subcategories within the same weight classes (LHD, MHD and HHD).  Cummins explained that tractor and vocational engines in the corresponding weight classes not only share the same useful life but also use the same emission and fuel consumption technologies and therefore should be placed into the same engine averaging set. EMA/TMA argued that the NPRM restrictions would inhibit a manufacturer's ability to use credits to address market fluctuations, which would reduce the flexibility that the ABT program was intended to provide.  As an example, EMA/TMA stated that if the line-haul market were depressed for a period of time a manufacturer could make up any deficit selling more low-roof tractors with regional hauling operations. The same market shift could eliminate a manufacturer's ability to generate credits using its aerodynamic high-roof sleeper cab tractors and could create a credit deficit if there is a demand for more of the less aerodynamic low-roof tractors.  EMA/TMA argued that credit exchanges across vehicle categories within the same weight classes within the tractor subcategories and across vocational vehicle and tractor subcategories would allow a manufacturer more flexibility to deal with these types of market and customer demand situations.  Finally, several commenters, including Ford, DTNA NAD, NTEA and Navistar, requested that the agencies reduce the proposed restrictions even further by allowing credit averaging between vehicle categories and engine categories. Navistar argued that more flexibility was necessary for manufacturers like itself to increase innovation at a reasonable cost, stating that that more restrictions would increase costs within a shorter timeframe.
Based on comments received, the agencies continue to believe that the ABT program developed by the agencies increases and accelerates the technological feasibility of the GHG and fuel consumption standards by providing manufacturers flexibility in implementing new technologies in a way that may be more consistent with their business practices and cost considerations.  In response to the comments submitted by CBD, the agencies disagree with CBD's statements that the ABT program will adversely affect the fuel efficiency and GHG emission goals of this regulation.  This joint final rule requires vehicle and engine manufacturers to meet increasingly more stringent emission and fuel consumption standards which will result in emission reductions and fuel consumption savings.  Manufacturers will not have the option of not meeting the standards. The ABT program simply provides each manufacture the flexibility to meet these standards based upon their individual products and implementation plans.
CBD also argued that including any opportunities for manufacturers to earn credits in the final rule would violate NHTSA's statutory mandate to implement a program designed to achieve the maximum feasible improvement.  NHTSA strongly believes that creating credit flexibilities for manufacturers for this first phase of the HD National Program is fully consistent with the agency's obligation to develop a fuel efficiency improvement program designed to achieve the maximum feasible improvement.  EISA gives NHTSA broad authority to develop "compliance and enforcement protocols" that are "appropriate, cost-effective, and technologically feasible," and the agency believes that compliance flexibilities such as the opportunity to earn and use credits to meet the standards are a reasonable and appropriate interpretation of that authority, along with the other compliance and enforcement provisions developed for this final rule.  Unlike in NHTSA's light-duty program, where the agency is restricted from considering the availability of credits in determining the maximum feasible level of stringency for the fuel economy standards, in this HD National Program, NHTSA and EPA have based the levels of stringency in part on our assumptions of available flexibilities that have been built into the program to incentivize over-compliance in some respects, to balance out potential under-compliance in others.  By assuming the use of credits for compliance, the agencies were able to set the fuel consumption/GHG standards at more stringent levels than would otherwise have been feasible.  Greater improvements in fuel efficiency will occur under more stringent standards; manufacturers will simply have greater flexibility to determine where and how to make those improvements than they would have without credit options.  Further, this is consistent with the direction in EO 13563 to "seek to identify, as appropriate, means to achieve regulatory goals that are designed to promote innovation."After reviewing the other comments, the agencies have determined that some additional flexibilities will help to reduce manufacturing costs further and encourage technology implementation without creating an unfair advantage for manufactures with larger portfolios including engines and vehicles.  Therefore, the agencies have decided to allow credit averaging within and across vocational vehicle and tractor subcategories within the same weight class groups, as well as credit averaging across the same weight class vocational and tractor engine groups.  This added flexibility beyond what was proposed in the NPRM will not be extended to the HD pickup truck and van category because this group of vehicles is comprised of only one subcategory and is not broken down like the other categories and corresponding subcategories into different weight classes.  In essence, the HD pickup truck and van category is one large averaging set that will remain as proposed.  Vehicle manufacturers, large and small, will be able to average and trade credits generated within larger averaging sets across subcategories within similar vehicle weight classes.
However, the agencies are maintaining the restrictions against averaging vehicle credits with engine credits or between vehicle weight classes or engine subcategories.  EPA and NHTSA believe that the use of credits beyond these designated averaging sets could create an advantage that currently does not exist in the market for large integrated manufacturers.  For example, a manufacturer that produces both engines and heavy-duty highway vehicles could mix credits across engine and vehicle categories to gain an advantage over competitors that are not integrated.  Limiting credit ABT to within each engine averaging set and not allowing it between engines and vehicles will help prevent a competitive advantage due solely to the regulatory structure.  Similarly, large volume manufacturers of engines could shift credits between heavy heavy-duty diesel engines and light heavy-duty diesel engines to gain an advantage in one subcategory over other manufacturers that may not have multiple engine offerings over several regulatory engine subcategories.  Finally, relating credits between averaging sets of engines would be problematic because of the differences in regulatory useful lives.  The agencies want to avoid having credits from longer useful life categories flood shorter useful life categories, adversely impacting compliance with the final CO2 and fuel consumption standards in the shorter useful life category.  The agencies believe this approach will ensure that CO2 emissions are reduced and fuel consumption is improved in each engine subcategory without interfering with the ability of manufacturers to engage in free trade and competition.
Under previous ABT programs for other rulemakings, EPA and NHTSA have allowed manufacturers to carry forward credit deficits for a set period of time  -  if a manufacturer cannot meet an applicable standard in a given model year, it may make up its shortfall by overcomplying in a subsequent year.  In the NPRM the agencies proposed to allow manufacturers of engines, tractors, HD pickups and vans, and vocational vehicles to carry forward deficits for up to three years before reconciling the shortfall, but sought comments on alternative approaches for reconciling deficits.  DTNA, the only commenter who specifically commented on this in the proposal, supported the three year period and stated that it was sufficient for reconciling deficits.  The agencies have therefore included in the final rule the proposed 3 year reconciliation period.  However, the agencies' respective credit programs require manufacturers to use credits to offset a shortfall before credits may be banked or traded for additional model years.  This restriction reduces the chance of manufacturers passing forward deficits before reconciling shortfalls and exhausting those credits before reconciling past deficits.
For the heavy-duty pickup and van category, the agencies proposed a 5-year credit life provision, as adopted in the light-duty vehicle program.  Navistar requested that the agencies drop the 5-year credit expiration date proposed for the heavy-duty pickup and van category and not specify an expiration date for earned credits.  Navistar stated that such credits are necessary to further improve the flexibilities of this program in order to meet the new stringent standards within the limited lead time provided.  The agencies disagree.  The 5-year credit life is substantial, and allows credits earned early in the phase-in to be held and used without discounting throughout the phase-in period.  We do not see how extending the life of credits can assist manufacturers in dealing with lead time issues.
For engines, vocational vehicles and tractors, EPA also proposed that CO2 credits generated during this first phase of the HD National Program could not be used for later phases of standards, but NHTSA did not expressly specify the potential expiration of fuel consumption credits.  DTNA and Cummins requested that the agencies' surplus credits not expire.  DTNA suggested that the agencies drop any reference to credit expiration until the next rulemaking, at which time the agencies would have a better understanding of actual credit balances and what kind of lifespan for credits might be necessary or appropriate.  DTNA argued that in some of EPA's past programs, EPA had delayed a final decision about credit expiration until development of the subsequent rule when, EPA had a better understanding of associated credit balances, along with the stringency of the standards being proposed for future model years.  EPA had proposed to limit the lifespan of credits earned to the first phase of standards in the interest of ensuring a level playing field before the next phase begins.  Upon further consideration, the agencies recognize that this is a new program and it is unknown whether any manufacturers will have credit surpluses by the end of the first phase of standards, much less whether some manufacturers will have significantly larger credit surpluses that might create an unlevel playing field going into the next phase.  The agencies are adopting a 5-year credit life provision, as adopted in the light-duty vehicle program and proposed and adopted for the HD pickup trucks and vans.  Consistent with past EPA practice, the agencies will address credit life in any follow-on rulemaking.

The following sections provide further discussions of the flexibilities provided in this rule under the ABT program and the agencies' rationale for providing them.
Heavy-duty Engines
For the heavy-duty engine ABT program, EPA and NHTSA proposed to use six averaging sets per 1036.740 for EPA and 49 CFR 535.7(d) for NHTSA, which aligned with the proposed regulatory engine subcategories.  As described above, the agencies agree with commenters that increasing the size of averaging sets from within subcategories to across subcategories within the same engine weight classe would provide important additional flexibilities for engine manufacturers without negatively impacting fuel savings or emissions reductions, and are therefore finalizing an approach which aggregates the six proposed engine averaging sets into four averaging sets.  The four engine averaging sets are light heavy-duty (LHD) diesel, medium heavy-duty (MHD) diesel, heavy heavy-duty (HHD) diesel, and gasoline or spark ignited engines. The final ABT program will allow for averaging, banking, and trading of credits between HHD diesel engines which are certified for use in vocational vehicles and HHD diesel engines which are certified for installation in tractors.  Similarly, the MHD diesel engines certified for use in either vocational vehicles or tractors will be treated as a single averaging set.  The agencies intend to monitor this program and may consider revisiting the ABT averaging sets if appropriate in a potential future rulemaking.
Credits generated by engine manufacturers under this ABT program are restricted for use only within their engine averaging set, based on performance against the standard as defined in Section II.B and II.D\\J2756DAAEC001.AA.AD.EPA.GOV\Share\Project\GHG Heavy Duty Truck Rule 2009\1NPRM\Preamble\Primary Working Documents\P02 Proposed Standards.doc.  Thus, LHD diesel engine manufacturers can only use their LHD diesel engine credits for averaging, banking and trading with LHD diesel engines, not with MHD diesel or HHD diesel engines.  This limitation is consistent with ABT provisions in EPA's existing criteria pollutant program for engines and will help avoid the credits earned from longer useful life subcategories from flooding shorter useful life subcategories, which would adversely impact fuel savings and emissions reductions that would otherwise be achieved through compliance with the emission and fuel consumption standards in the shorter useful life subcategories.
The compliance program for the final rule adopts the proposed method for generating a manufacturer's CO2 emission and fuel consumption credit or deficit.  The manufacturer's certification test results would serve as the basis for the generation of the manufacturer's Family Certification Level (FCL).  The agencies did not receive comment on this proposal and continue to believe that it is the best approach.  The FCL is a new term we proposed for this program to differentiate the purpose of this credit generation technique from the Family Emission Limit (FEL) previously used in a similar context in other EPA rules.  A manufacturer may define its FCL at any level at or above the certification test results.  Credits for the ABT program are generated when the FCL is compared to its CO2 and fuel consumption standard, as discussed in Section II.  Credit calculation for the Engine ABT program, either positive or negative, is based on Equation IV-1 and Equation IV-2:
Equation IV-1: Final HD Engine CO2 credit (deficit)
HD Engine CO2 credit (deficit) (metric tons) = (Std-FCL) x (CF) x (Volume) x (UL) x (10[-6])
where
Std = the standard associated with the specific engine regulatory subcategory (g/bhp-hr)
FCL = Family Certification Level for the engine family
CF = a transient cycle conversion factor in bhp-hr/mile which is the integrated total cycle brake horsepower-hour divided by the equivalent mileage of the Heavy-duty FTP cycle.  For gasoline heavy-duty engines, the equivalent mileage is 6.3 miles.  For diesel heavy-duty engines, the equivalent mileage is 6.5 miles.  The CF determined by the Heavy-duty FTP cycle is used for engines certifying to the SET standard.
Volume = (projected or actual) production volume of the engine family
UL = useful life of the engine (miles)
10[-6] converts the grams of CO2 to metric tons
Equation IV-2: Final HD Engine Fuel Consumption credit (deficit) in gallons
HD Engine Fuel Consumption credit (deficit) (gallons) = (Std  -  FCL) x (CF) x (Volume) x (UL) x 10[2]
where
Std = the standard associated with the specific engine regulatory subcategory (gallon/100 bhp-hr)
FCL = Family Certification Level for the engine family (gallon/100 bhp-hr)
CF = a transient cycle conversion factor in bhp-hr/mile which is the integrated total cycle brake horsepower-hour divided by the equivalent mileage of the Heavy-duty FTP cycle.  For gasoline heavy-duty engines, the equivalent mileage is 6.3 miles.  For diesel heavy-duty engines, the equivalent mileage is 6.5 miles.  The CF determined by the Heavy-duty FTP cycle is used for engines certifying to the SET standard.
Volume = (projected or actual) production volume of the engine family
UL = useful life of the engine (miles)
10[2] = conversion to gallons
To calculate credits or deficits, manufacturers will determine an FCL for each engine family they have designated for the ABT program.  The agencies have defined engine families in 40 CFR 1036.230 and 49 CFR 535.4 and manufacturers may designate how to group their engines for certification and compliance purposes.  The FCL may be above or below its respective subcategory standard and is used to establish the CO2 credits earned in Equation IV-1 or the fuel consumption credits earned in Equation IV-2.  The final CO2 and fuel consumption standards are associated with specific regulatory subcategories as described in Sections II.B and II.D (gasoline, light heavy-duty diesel, medium heavy-duty diesel, and heavy heavy-duty diesel).  In the ABT program, engines certified with an FCL below the standard generate positive credits and an FCL above the standard generates negative credits. As discussed in Section II.B and II.D, engine averaging sets that include engine families for which a manufacture elects to use the alternative standard of a percent reduction from the engine family's 2011 MY baseline are ineligible to either generate or use credits.  Credit deficits accumulated in an averaging set where engine families have used the alternate standard can carry that deficit forward for three years following the model year for which that deficit was generated at which time the deficit must be reconciled with surplus credits.
The volume used in Equations IV-1 and IV-2 refers to the total number of eligible engines sold per family participating in the ABT program during that model year.  The useful life values in Equation IV-1 and IV-2 are the same as the regulatory classifications previously used for the engine subcategories.  Thus, for LHD diesel engines and gasoline engines, the useful life values are 110,000 miles; for MHD diesel engines, 185,000 miles; and for HHD diesel engines, 435,000 miles.
As described in Section II above, for purposes of EPA's standards, an engine manufacturer may choose to comply with the N2O or CH4 cap standards using CO2 credits.   A manufacturer choosing this option would convert its N2O or CH4 test results into CO2eq to determine the amount of CO2 credits required.  This approach recognizes the correlation of these elements in impacting global warming.  To account for the different global warming potential of these GHGs, manufacturers will determine the amount of CO2 credits required by multiplying the shortfall by the GWP.  For example, a manufacturer would use 25 kg of positive CO2 credits to offset 1 kg of negative CH4 credits.  Or a manufacturer would use 298 kg of positive CO2 credits to offset 1 kg of negative N2O credits.  In general the agencies do not expect manufacturers to use this provision, but are providing it as an alternative in the event an engine manufacturer has trouble meeting the CH4 and/or N2O emission caps.  There are no ABT credits for performance that falls below the CH4 or N2O caps.
Manufacturers of engines that generate a credit deficit at the end of the model year for any of its averaging sets can carry that deficit forward for three years following the model year for which that deficit was generated at which time the deficit must be reconciled with surplus credits.  Manufacturers must use credits once those credits have been generated to offset a shortfall before those credits can be banked or traded for additional model years.  This restriction reduces the chance of an engine manufacturer passing forward deficits before reconciling their shortfalls and exhausting those credits before reconciling past deficits.  Deficits will need to be reconciled at the reporting dates for year three.  Also, surplus credits earned in the engine categories will not have an expiration date.  The agencies will consider during the next phase of rulemaking whether to retain or to reset each manufacturer's banked credit surplus.
Additional flexibilities for engines are discussed later in Section IV(B).
Heavy-Duty Vocational Vehicles and Tractors
In addition to the engine ABT program described above, the NPRM also proposed a heavy-duty vehicle ABT program to facilitate reductions in GHG emissions and fuel consumption based on heavy-duty vocational vehicle and tractor design changes and improvements.  EPA and NHTSA had proposed averaging sets which aligned with the proposed twelve regulatory subcategories; however in response to the comments described, which requested that averaging sets be expanded across subcategories within similar weight classes, the agencies are finalizing only three averaging sets  -  LHD, MHD, and HHD based upon the three weight classes.  In other words, all HHD (Class 8) tractors and HHD vocational vehicles will be treated as a single averaging set.  Similarly, all MHD (Class 7) tractors and MHD (Class 6-7) vocational vehicles will be treated as a single averaging set.  For this category, the structure of the final ABT program should create incentives for vehicle manufacturers to advance new, clean technologies, or existing technologies earlier than they otherwise would. ABT provides manufacturers the flexibility to deal with unforeseen shifts in the marketplace that affect sales volumes.  This structure also allows for a straightforward compliance program for each sector, with aspects that are independently quantifiable and verifiable.
Credit calculation for the final HD Vocational Vehicle and Tractor CO2 and fuel consumption credits, either positive or negative, will be generated according to Equation IV-3 and Equation IV-4:
Equation IV-3:  The Final HD Vocational Vehicle and Tractor CO2 Credit (Deficit)
HD Vocational Vehicle and Tractor CO2 credit (deficit)(metric tons) = (Std-FEL) x (Payload Tons) x (Volume) x (UL) x (10[-6])
	where
Std = the standard associated with the specific regulatory subcategory (g/ton-mile)
Payload tons = the prescribed payload for each class in tons (12.5 tons for Class 7 tractors, 19 tons for Class 8 tractors, 2.85 tons for LHD vocational, 5.6 tons for MHD vocational, and 7.5 tons for HHD vocational vehicles)
FEL = Family Emission Limit for the vehicle family which is equal to the output from GEM (g/ton-mile)
Volume = (projected or actual) production volume of the vehicle family
UL = useful life of the vehicle (435,000 miles for HHD, 185,000 miles for MHD, and 110,000 miles for LHD)
10[-6] converts the grams of CO2 to metric tons
Equation IV-4:	Final HD Vocational Vehicle and Tractor Fuel Consumption credit (deficit) in gallons:
HD Vocational Vehicle and Tractor Fuel Consumption credit (deficit)(gallons) = (Std-FEL) x (Payload Tons) x (Volume) x (UL) x 10[3]
	where
Std = the standard associated with the specific regulatory subcategory (gallons/1,000 ton-mile)
Payload tons = the prescribed payload for each class in tons (12.5 tons for Class 7 tractors, 19 tons for Class 8 tractors, 2.85 tons for LHD vocational, 5.6 tons for MHD vocational, and 7.5 tons for HHD vocational vehicles)
FEL = Family Emission Limit for the vehicle family (gallons/1,000 ton-mile)
Volume = (projected or actual) production volume of the vehicle family
UL = useful life of the vehicle (435,000 miles for HHD, 185,000 miles for MHD, and 110,000 miles for LHD)
103 = conversion to gallons
Manufacturers of vocational vehicles and tractors that generate a credit deficit at the end of the model year for any of its averaging sets can carry that deficit forward for three years following the model year for which that deficit was generated at which time the deficit must be reconciled with surplus credits.  Manufacturers must use credits once those credits have been generated to offset a shortfall before those credits can be banked or traded for additional model years.  This restriction reduces the chance of a vehicle manufacturer passing forward deficits before reconciling their shortfalls and exhausting those credits before reconciling past deficits.  Deficits will need to be reconciled at the reporting dates for year three.  Also, surplus credits earned in the vehicle categories will not have an expiration date.  The agencies will consider during the next phase of rulemaking whether to retain or to reset each manufacturer's banked credit surplus.
 Additional flexibilities for HD vocational vehicles and tractors are discussed later in Section IV.B.
Heavy-Duty Pickup Truck and Van Flexibility Provisions
The NPRM included specific flexibility provisions for manufacturers of HD pickups and vans, similar to provisions adopted in the recent rulemaking for light-duty car and truck GHGs and fuel economy.  The agencies are finalizing the flexibilities as proposed in the NPRM.  In the heavy-duty pickup and van category a manufacturer's credit or debit balance will be determined by calculating their fleet average performance and comparing it to the manufacturer's CO2 and fuel consumption standards, as determined by their fleet mix, for a given model year.  A target standard is determined for each vehicle.  These targets, weighted by their associated production volumes, are summed at the end of the model year to derive the production volume-weighted manufacturer annual fleet average standard.  A manufacturer will generate credits if its fleet average CO2 or fuel consumption level is lower than its standard and will generate debits if its fleet average CO2 or fuel consumption level is above that standard. The end-of-year reports will provide the appropriate data to reconcile pre-compliance estimates with final model year figures.
In addition to production weighting, the EPA credit calculations include a factor for the vehicle useful life, in miles, in order to allow the expression of credits in metric tons, as in the light-duty GHG program.  The NHTSA credit calculation uses standard and performance levels in fuel consumption units (gallons per 100 miles), as opposed to fuel economy units (mpg) as done in the light-duty program, along with the vehicle useful life, in miles, allowing the expression of credits in gallons. The total model year fleet credit (debit) calculations will use the following equations:
CO2 Credits (Mg) = [(CO2 Std  -  CO2 Act) x Volume x UL] / 1,000,000
Fuel Consumption Credits (gallons) = (FC Std  -  FC Act) x Volume x UL x 100
Where:
CO2 Std = Fleet average CO2 standard (g/mi)
FC Std = Fleet average fuel consumption standard (gal/100 mile)
CO2 Act = Fleet average actual CO2 value (g/mi)
FC Act = Fleet average actual fuel consumption value (gal/100 mile)
Volume = the total production of vehicles in the regulatory class
UL = the useful life for the regulatory class (miles)
As described above, HD pickup and van manufacturers will be able to carry forward deficits from their fleet-wide average for three years before reconciling the shortfall.  Manufacturers will be required to provide a plan in their pre-model year reports showing how they will resolve projected credit deficits.  However, just as in the engine category, manufacturers will need to use credits earned once those credits have been generated to offset a shortfall before those credits can be banked or traded for additional model years.  This restriction reduces the chance of vehicle manufacturers passing forward deficits before reconciling their shortfalls and exhausting those credits before reconciling past deficits. Also, surplus credits earned in the HD pickup and van category will not have an expiration date.  The agencies will consider during the next phase of rulemaking whether to retain or to reset each manufacturer's banked credit surplus.
Additional flexibilities for heavy-duty pickup and van category are discussed below in Section IV.B.
Additional Flexibility Provisions
The NPRM proposed additional provisions to facilitate reductions in GHG emissions and fuel consumption beginning in the 2014 model year.  While EPA and NHTSA believed the ABT and flexibility structure would be sufficient to encourage reduction efforts by heavy-duty highway engine and vehicle manufacturers, the agencies understood that other efforts could create additional opportunities for manufacturers to reduce their GHG emissions and fuel consumption. These provisions would provide additional incentives for manufacturers to innovate and to develop new strategies and cleaner technologies.  The agencies requested comment on these provisions, as described below.
In addition, the agencies received several comments from natural gas vehicle (NGV)  interests arguing for greater crediting of NGVs than the proposed approach would have provided.  Clean Energy, Hayday Farms, Border Valley, AGA, Ryder, Encana, and a group of NGV interests commented that the NPRM ignored Congress' intent to incentivize the use of NGVs by not including the conversion factor that exists in the light-duty statutory language.  The commenters argued that Congress' intent to incentivize NGVs is evident in the formula contained in 49 U.S.C. 32905, which deems a gallon equivalent of gaseous fuel to have a fuel content of 0.15 gallon of fuel.  The commenters also argued that Congress implicitly intended NGVs to be incentivized in this rulemaking, as evidenced by the incentives in the light-duty statutory text.  AGA and Hayday suggested that the agencies were not including the NGV incentive from light-duty because Congress did not explicitly include it in 49 U.S.C. 32902(k), and argued that this would contradict the agencies' inclusion of other incentives similar to the light-duty rule.
The agencies continue to believe that alternative-fueled vehicles, including NGVs, provide fuel consumption benefits that should be accounted for in this program.  However, the agencies do not agree with the commenters' claim that the NGV incentive contained in the light-duty program is an explicit Congressional directive that must be also be applied to the heavy-duty program, nor that the light-duty incentive for NGVs should be interpreted as an implicit Congressional intent for NGVs to be incentivized in the heavy-duty program.  Further, the agencies believe that the fuel consumption benefits that FFVs will obtain in GEM accurately reflect their energy benefits and thus provide sufficient incentives for these vehicles.  The agencies would like to clarify that the decision not to include an NGV incentive was based on this determination, not on a belief that incentives present in the light-duty rule could not be developed for the heavy-duty rule if they were not explicitly included in Section 32902(k).
The American Trucking Association expressed support for estimating natural gas fuel efficiency by using carbon emissions from natural gas rather than energy content to estimate fuel consumption.  ATA explained that two vehicles can achieve the same fuel efficiency, yet one operated on natural gas would have a lower carbon dioxide emissions rate.  A natural gas conversion factor that uses carbon content versus energy content is a more appropriate method for calculating fuel consumption.  A number of other groups commented on the appropriate method to use in establishing fuel consumption from alternative fueled vehicles.  A group of NGV interests, Ryder, Border Valley Trading, Waste Management, Robert Bosch and the Blue Green Alliance encouraged the agencies to adopt the 0.15 conversion factor in estimating fuel consumption for FFVs and alternative fuel vehicles finalized in the LDV 2012-2016 GHG and fuel consumption standards.  The incentive effectively reduces the calculated fuel consumption for FFVs and alternative fuel vehicles by a factor of 85 percent.  The commenters argued that the incentive is needed for heavy-duty vehicles to encourage the use of natural gas and to reduce the nation's dependence on petroleum.
The agencies have reviewed this issue and continue to believe that the light-duty conversion factor is not appropriate for this rule.  Instead, the agencies are finalizing a conversion process from CO2 to fuel consumption that we believe accurately reflects the fuel consumption of the vehicles while at the same time providing a significant incentive for the alternative fuel use.  Using the agencies' calculation, NGVs will exhibit an approximate 20 percent benefit over conventional fuel use.  We believe this is a substantial enough advantage to spur the market for these vehicles.  The calculation at the same time does not overestimate the benefit from this technology, which could reduce the effectiveness of the regulation.  Therefore, the final rule does not include the light-duty 0.15 conversion factor for NGVs.
Early Credit Option
The NPRM proposed that manufacturers of HD engines, HD pick-up trucks and vans, combination tractors, and vocational vehicles be eligible to generate early credits if they demonstrate improvements in excess of the standards prior to the model year the standards become effective.  As an example, if a manufacturer's MY 2013 subcategory of tractors exceeds the EPA mandatory MY 2014 standard for those same vehicles, then that manufacturer could claim MY 2013 credits or "early credits" to utilize in its ABT program.  As noted in the NPRM, the start dates for EPA's GHG standards and NHTSA's fuel consumption standards vary by regulatory category (see Section II for the model years when the standards become effective), meaning that the early credits provision, if selected by a manufacturer, could begin during different model years.  The NPRM stated that manufacturers would need to certify their engines or vehicles to the standards at least six months before the start of the first model year of the mandatory standards and that limitations on the use of credits in the ABT programs  -  i.e., limiting averaging to within each vehicle or engine averaging set  -  would apply for the early credits as well.  In the NPRM, NHTSA and EPA requested comment on whether a credit multiplier, specifically a multiplier of 1.5, would be appropriate to apply to early credits from HD engines, combination tractors, and vocational vehicles, as a greater incentive for early compliance.
The agencies received comments from Cummins, DTNA, EMA/TMA, Navistar, Eaton, Bosch, CBD and CALSTART relating to these early credit provisions. All of these commenters supported the early credit provision for the most part, but many requested that the agencies eliminate some of the restrictions relating to this provision.  EMA/TMA argued that MY 2012 should also be considered for early credits and that the requirement to certify six months before the start of the first model year would unnecessarily restrict manufacturers from earning credits for technology introduced within six months of the respective model year.  Additionally, EMA/TMA stated that requiring certification of the entire averaging set instead of individual vehicle configurations would not allow for early introduction of new technologies. Cummins stated that the six month lead time requirement should be removed and that manufacturers be allowed to earn early credits for individual engine families rather than only for the entire averaging set, stating that removal of these restrictions would further benefit the environment. CBD stated that early credits should only be granted if the emission and fuel consumption benefits are in addition to or above the existing performance levels and are quantifiable and verifiable.
EPA and NHTSA have reviewed these comments and decided to clarify the early credit provision as proposed in the NPRM to account for the above concerns.  Early credits are intended to be an incentive to manufacturers to introduce more efficient engines and vehicles earlier than they would have planned.  However, the agencies do not want to provide a windfall of credits to manufacturers that may already have one or more products that meet the standards.  Therefore, the final rule will include the proposed option for a manufacturer to obtain early credits for products if they certify their entire subcategory at GHG emissions and fuel consumption levels below the standards.  The agencies are making a clarification in this rule that the manufacturers must certify their entire subcategory, not necessarily their entire averaging set, because the averaging sets are broadened under the final rulemaking from the proposed categories in the NPRM.  In addition, the agencies are providing the flexibility for combination tractor manufacturers to obtain early credits for their additional sales, as compared to their 2012 model year sales, of SmartWay certified combination tractors in 2013 model year.  The agencies view this subcategory of vehicles as the only segment of vehicles or engines where the true additional reductions due to the early credits can be quantified outside of certifying an entire subcategory, because the benefit is tied directly to the increase in the SmartWay vehicles manufactured in MY 2013 in excess of those manufactured in MY 2012.
A manufacturer may opt to apply for early credits from their 2013 model year SmartWay combination tractor sales by first calculating the difference between the number of SmartWay certified combination tractors sold in 2012 model year versus 2013 model year.  The increment in sales determines the number of 2013 model year SmartWay tractors which can be used to certify for early credits.  The manufacturer would then determine each tractor configuration's performance by modeling in GEM, using each vehicle configuration's appropriate inputs for coefficient of drag, tire rolling resistance, idle reduction, weight reduction, and vehicle speed limiter.  Next, the difference between a specific tractor configuration's performance and the 2014 MY standard for the appropriate regulatory subcategory (Class 8 sleeper cab high roof tractors) would be calculated.  The CO2 and fuel consumption credits are calculated using Equation IV-4 and IV-5.
As discussed above and in Section II, during the years when the EPA standards are mandatory, manufacturers will have the option of complying with NHTSA fuel consumption standards equivalent to the EPA emission standards in order to accumulate credits in the ABT program.  NHTSA would like to clarify that for the early credit provision, implementation must occur in MY 2013 exactly as implemented under the EPA emission program, and not in the model year immediately before the NHTSA standards become mandatory.  Further, once a manufacturer opts into the NHTSA program it must stay in the program for all the optional MYs and remain standardized with the implementation approach being used to meet the EPA emission program.  EPA and NHTSA intend for manufacturers' ABT credit balances to remain equivalent wherever possible.
The agencies also received comments from EMA/TMA and Cummins opposing the requirement to certify six months prior to the first model year of the mandatory standards for early credits.  The commenters argued and the agencies agreed that this restriction could cause some delays in technology rollout and are therefore removing this requirement for the final rules.  The agencies reviewed the restriction and evaluated the 2012-2016 MY Light-duty early credit program.  No such restriction exists for LD vehicles.  Upon reconsideration we believe that this requirement is not necessary for our implementation of the program.
Several commenters, including DTNA, Edison Electric Institute, Eaton, and Bosch, supported adding the provision to further incentivize early credits by using a 1.5 multiplier, stating that it would encourage early introduction of technology.  Cummins and UCS opposed the added provision stating that the opportunity to earn credits at their normal value should be sufficient incentive for early compliance. The agencies believe that this incentive will further encourage faster implementation of emission and fuel savings technology and help to reduce the costs manufacturers will incur in efforts to comply with these rules.  The agencies have therefore decided to finalize a 1.5 multiplier for early credits earned in MY 2013.
 With respect to heavy-duty pickups and vans, the agencies proposed that early credits could be generated on a fleetwide basis by comparison of the manufacturer's 2013 heavy-duty pickup and van fleet with the manufacturer's fleetwide targets, using the target standards equations for the 2014 model year.  75 FR at 74255.  The agencies are finalizing these provisions as proposed.  Under the structure for the fleet average standards, this credit opportunity entails certifying a manufacturer's entire HD pickup and van fleet in model year 2013.  Industry commenters argued that early credits should be calculated against a target curve that is less stringent than the 2014 curve.  We disagree.  Because it is the first year of a 5-year phase-in, the 2014 model year has quite modest emissions and fuel consumption reductions targets of only 15 percent.  Targeting even less significant improvements over the baseline would unduly increase the prospect for windfall credits by individual manufacturers who may have better than average baseline fleets.  Again, the agencies consider the availability of early credits to be a valuable complement to the overall program to the extent that they encourage early implementation of effective technologies.
Advanced Technology Credits
The NPRM proposed targeted provisions that were expected to promote the implementation of advanced technologies.  Specifically, manufacturers that incorporate these technologies would be eligible for special credits that could be applied to other heavy-duty vehicles or engines, including those in other heavy-duty categories.  The eligible technologies include:
         * Hybrid powertrain designs that include energy storage systems
         * Rankine cycle engines
         * All-electric vehicles
         * Fuel cell vehicles
NHTSA and EPA requested comment on the list of technologies identified as advanced technologies and whether additional technologies should be added to the list.   In addition to the increased fungibility of advanced technology credits, NHTSA and EPA requested comment on whether a credit multiplier, specifically a multiplier of 1.5, would be appropriate to apply to advanced technology credits, as a greater incentive for their introduction.
MEMA asked that the agencies expand the list of technologies that are eligible for Advanced Technology Credits to include advanced transmission and drivetrain technologies, tire and wheel accessories, and advanced engine accessories technologies (such as electronic air control systems and clutched turbocharged air compressor).  Bendix requested that weight reduction approaches, improved transmission and drivetrains, driver management and coaching, and tire and wheel improvements be allowed to receive credit through the Advanced Technology Credit Program.
The advanced technology credit program is intended to encourage development of technologies that are not yet commercially available.  In order to provide incentives for the research and development needed to introduce these technologies, Advanced Technology Credits are allowed to be applied to any heavy-duty vehicle or engine and are not limited to the vehicle category generating the credit.  Because of this flexibility in the application of ATCs, it is important that the list of eligible technologies be restricted to those that are not yet available in the market.  In addition, the technologies must lend themselves to straight forward methodologies for quantifying emissions and fuel consumption reductions.  For some of the technologies that MEMA and Bendix asked be included in the program, such as electrified accessories and tires, the agencies have already established a mechanism for quantifying reductions associated with these approaches.  For example, the agencies assumed in the regulatory impact analysis that some electrified accessories will be used to comply with the regulations.  Specifically, improved water and oil pumps are assumed to be used for 2014 LHD, MHD, and HHD FTP and SET diesel engines to comply with standards and would receive credit though engine certification process. (See RIA Chapter 2).  Any reductions in engine load and resulting emissions and fuel consumption resulting from accessory electrification will be accounted for in engine dynamometer testing.  However, other electrified accessories, such as power steering and air conditioning may not  -  if they do not impact engine operation over the FTP and SET cycles.  As such, we are allowing credit to be established through the Innovative Technology Credit Program described in section IV. B (2).  With regard to tire rolling resistance improvements, light weight wheels, and weight reduction associated with the use of super single tires, these are already credited in program and are accounted for in GEM modeling. Some improved transmissions  -  such as automatic manuals - have been available commercially for ten years and as such, this technology would not be eligible for ATC.  However, the agencies acknowledge the importance of including advanced transmissions and drivetrains in the program.  As such, we are allowing credit to be established through the Innovative Technology Credit Program described in Section IV. B (2).  Likewise, with regard to weight reduction, the agencies are allowing additional weight reduction approaches to be used for tractors through GEM modeling.  Weight saving approaches will not be credited for vocational vehicles given the very small percentage improvement that weight reduction provides for vocational vehicles.  And finally, for driver management and coaching  -  while we recognize that there could be significant benefits to this, the difficulty in establishing a baseline condition for driver behavior limits the agencies' ability to establish a reduction for this approach at this time.
The agencies have decided not to change the proposed list of technologies evaluated as advanced technologies, but are providing additional clarity in the advanced technology list.  The agencies proposed that Rankine cycle engines be included, but the agencies are adopting the wording of Rankine cycle waste heat recovery system attached to an engine.
The agencies received comments from Bendix, Bosch, MEMA, Navistar, Odyne, Green Truck Association, Eaton, ArvinMeritor and Calstart, which supported the 1.5 multiplier for advanced technology credits. MEMA argued that these added flexibilities are absolutely necessary to help advanced technologies penetrate the marketplace and are the primary impetus to integrate these technologies onto vehicles.  The agencies also received comments from several stakeholders, including ACEEE and Cummins opposing the 1.5 multiplier for advanced technology credits. ACEEE argued that multipliers should be avoided because they lessen the total emission reductions by allowing a greater increase in the emissions of other vehicles than they offset. After reviewing these comments, the agencies have determined that the relatively low volumes expected in this timeframe are likely to mitigate any potential adverse impact.  Further, the credit multiplier will provide enough added benefit to the potential hybrid community to help reduce barriers to market entry for these new technologies.  Therefore, the final rule includes a multiplier of 1.5 for advanced technology credits.  However, the agencies are also capping the amount of advanced credits that can be brought into any averaging set into any model year to prevent market distortions.
HD Pickup Truck and Van Hybrids and all Electric Vehicles
For HD pickup and van hybrids, the agencies proposed that testing would be done using adjustments to the test procedures developed for light-duty hybrids.  NHTSA and EPA also proposed that all-electric and other zero tailpipe emission vehicles produced in model years before 2014 be able to earn credits for use in the 2014 and later HD pickup and van compliance program, provided the vehicles are covered by an EPA certificate of conformity for criteria pollutants.  These credits would be calculated based on the 2014 diesel standard targets corresponding to the vehicle's work factor, and treated as though they were earned in 2014 for purposes of credit life.  Manufacturers would not have to early-certify their entire HD pickup and van fleet in a model year as for other early-complying vehicles.
NHTSA and EPA  also proposed that model year 2014 and later EVs and other zero tailpipe emission vehicles be factored into the fleet average GHG and fuel consumption calculations based on the diesel standards targets for their model year and work factor.  If advanced technology credits generated by pickups and vans are used in another HD vehicle category, these credits would, of course, be subtracted from the manufacturer's pickup and van category credit balance.  Commenters generally supported the introduction of hybrid and zero tailpipe emission vehicles, but did not comment on the specific provisions discussed above.  We are finalizing these provisions as proposed.
The proposal also solicited comment on the handling of upstream GHG emissions.  Some commenters argued that EPA should maintain its traditional focus in mobile source rulemakings on vehicle tailpipe emissions and leave the consideration of GHG emissions from upstream fuel production and distribution-related sources such as refineries and powerplants to EPA regulatory programs that focus specifically on those sources.  Others argued that, since EPA accounts for upstream GHG emissions in its benefits assessments, the agency should reflect upstream GHG emissions impacts in vehicle compliance values as well. After considering these comments, we have decided to maintain consistency with past practice for setting vehicle emissions standards under Clean Air Act section 202(a)(1), whereby we treat all vehicles equally, based on tailpipe-only emissions performance.  We also recognize that the ongoing EPA/NHTSA rulemaking to reduce GHGs and fuel consumption in MY 2017 and later light-duty vehicles is also further examining this issue, and may yield information and policy direction relevant to the planned follow-on rulemaking for the heavy-duty sector.
Vocational Vehicle and Tractor Hybrids
For vocational vehicles or combination tractors incorporating hybrid powertrains, we proposed two methods for establishing the number of credits generated  -  chassis dynamometer and engine dynamometer testing - each of which is discussed next.  As discussed in the NPRM the agencies are not aware of models that have been adequately peer reviewed with data that can assess this technology without the conclusion of a comparison test of the actual physical product.
Chassis Dynamometer Evaluation
For hybrid certification to generate credits we proposed to use chassis testing as an effective way to compare the CO2 emissions and fuel consumption performance of conventional and hybrid vehicles.  We proposed that heavy-duty hybrid vehicles be certified using "A to B" vehicle chassis dynamometer testing.  This concept allows a hybrid vocational vehicle manufacturer to directly quantify the benefit associated with use of its hybrid system on an application-specific basis.  The concept would entail testing the conventional vehicle, identified as "A", using the cycles as defined in Section V.  The "B" vehicle would be the hybrid version of vehicle "A".  The "B" vehicle would need to be the same exact vehicle model as the "A" vehicle.  As an alternative, if no specific "A" vehicle exists for the hybrid vehicle that is the exact vehicle model, the most similar vehicle model would need to be used for testing.  We proposed to define the "most similar vehicle" as a vehicle with the same footprint, same payload, same testing capacity, the same engine power system, the same intended service class, and the same coefficient of drag.
To determine the benefit associated with the hybrid system for GHG performance, the weighted CO2 emissions results from the chassis test of each vehicle would define the benefit as described below:
         1. (CO2_A  -  CO2_B)/ (CO2_A) = ______ (Improvement Factor)
         2. Improvement Factor x GEM CO2 Result_B = ___ (g/ton mile benefit)
Similarly, the benefit associated with the hybrid system for fuel consumption would be determined from the weighted fuel consumption results from the chassis tests of each vehicle as described below:
         3. (Fuel Consumption_A  -  Fuel Consumption_B)/ (Fuel Consumption_A)= ______ (Improvement Factor)
         4. Improvement Factor x GEM Fuel Consumption Result_B = ___ (gallon/1,000 ton-mile benefit)

The credits for the hybrid vehicle would be calculated as described in the ABT program except that the result from Equation 2 and Equation 4 above replaces the (Std-FEL) value.
The agencies proposed two sets of duty cycles to evaluate the benefit depending on the vehicle application to assess hybrid vehicle performance  -  without and with PTO systems.  The key difference between these two sets of vehicles is that one set (e.g., delivery trucks) does not operate a PTO while the other set (e.g., bucket and refuse trucks) does.
The first set of duty cycles would apply to the hybrid powertrains used to improve the motive performance of the vehicles without a PTO system (such as pickup and delivery trucks).  The typical operation of these vehicles is very similar to the overall drive cycles final in Section II.  Therefore, the agencies are finalizing to use the same vehicle drive cycle weightings for testing these vehicles, as shown in Table IV-1.
Table IV-1: Final Drive Cycle Weightings for Hybrid Vehicles Without PTO

Transient
55 mph
65 mph
Vocational Vehicles
75%
9%
16%
Day Cab Tractors
19%
7%
64%
Sleeper Cab Tractors
5%
9%
86%

The second set of duty cycles apply to testing hybrid vehicles used in applications such as utility and refuse trucks which tend to have additional benefits associated with use of stored energy, in terms of avoiding main engine operation and related CO2 emissions and fuel consumption during PTO operation.  To appropriately address benefits, exercising the conventional and hybrid vehicles using their PTO would help to quantify the benefit to GHG emissions and fuel consumption reductions.  The duty cycle to quantify the hybrid CO2 and fuel consumption impact over this broader set of operation would be the three primary drive cycles plus a PTO duty cycle.  Our proposed PTO cycle was based on consideration of using alternate, appropriate duty cycles with Administrator approval in a public process.  The PTO duty cycle takes into account the sales impact and population of utility trucks and refuse haulers.  As described in RIA Chapter 3, the agencies proposed to add an additional PTO cycle to measure the improvement achieved for this type of hybrid powertrain application.  The weightings for the hybrids with PTO are included in Table IV-2.
Table IV-2: Final Drive Cycle Weightings for Hybrid Vehicles with PTO

Transient
55 mph
65 mph
PTO
Vocational Vehicles with PTO
30%
15%
27%
28%

A number of comments were received on the proposed hybrid chassis testing approach.  The comments can be grouped into four main categories which are as follows: 1) a better definition is needed for what constitutes a hybrid; 2) improved test cycles are needed; 3) improved methods are needed for hybrid testing; and 4) parity between vehicle and engine cycles is needed to ensure a fair comparison of hybrids using the different approaches proposed by the agencies.
Comments were received from EMA/TMA, ACEEE, stating that the hybrid definition and test methodology needs to be more clearly defined.  Cummins and EMA/TMA asked that the control volumes for the chassis test procedure be specified.  Allison stated that the baseline configuration in A to B testing needs clarification  -  as an example they said it is not clear if the baseline vehicle needs to be the same model year as the hybrid configuration.  They added that it is unclear how to account for hotel or accessory loads.
EMA/TMA, Allison, Odyne, and American Trucking Association said that the hybrid drive cycles do not match real world hybrid applications, and as such, will result in an underestimation of benefits resulting from hybrid use.  Some or all of these commenters asked that a hybrid drive cycle be developed that consists mainly of transient cycle, increased idle time, low steady state operation, and high acceleration and deceleration rates.  EMA/TMA said the proposed cycle  -  the CARB heavy-heavy duty truck transient mode cycle, was developed as a composite cycle based on a wide range of medium and heavy duty vehicles but does not reflect the high acceleration and deceleration of vehicles used in urban applications and which is typical for hybrid vehicles and does not reflect the level of acceleration and deceleration typical of hybrids.  Eaton asked that the agencies establish four separate test cycles for hybrids rather than two that more closely match what actual hybrids do in use.  Hino said that energy recapture from regenerative braking needs to be built into the test cycle and as currently designed it is not.  Hino also urged the agencies to create test cycles that capture variations in different types of hybrids.  Cummins said that more representative vehicle test cycles should be developed based on the FTP and SET to ensure that the test cycles are functionally equivalent between vehicles and engines to ensure fair evaluation of the technology.  ICCT articulated the same point on the need for parity between engine and vehicle test cycles.
EMA/TMA, DTNA, and Cummins asked that manufacturers not be required to conduct coast down testing for hybrid vehicles to establish road loads for each type of vehicle.  Instead, they asked that the agencies define default road load values for manufacturers to use for hybrids.  EMA/TMA said that conducting coast down tests is expensive.  They also argued that road load is irrelevant to determining hybrid performance since the chassis dynamometer method requires a comparison of a vehicle that is identical in all respects except those factors directly relating to the hybrid powertrain.
Cummins, ICCT, and Center for Clean Air Policy expressed general support for chassis dynamometer testing.  Allison said that the lack of dynamometer infrastructure could limit the ability of manufacturers to certify and get hybrids into the market place.  BAE said that hybrids should not have to be tested on a chassis dynamometer.
Given the options available for certification of hybrid systems, the constraints on available infrastructure for traditional chassis testing and coastdown testing has been mitigated.  Should a manufacturer contemplate chassis testing or powerpack testing to assess hybrid vehicle performance, coast down testing will still be needed for vocational applications to develop the road load values.
Engine Dynamometer Evaluation
The engine test procedure proposed in the NPRM for hybrid evaluation involved exercising the conventional engine and hybrid-engine system based on an engine testing strategy.  The basis for the system control volume, which serves to determine the valid test article, would need to be the most accurate representation of real world functionality.  An engine test methodology would be considered valid to the extent the test is performed on a test article that does not mischaracterize criteria pollutant performance or actual system performance.  Energy inputs should not be based on simulation data which is not an accurate reflection of actual real world operation.  Pre-transmission test protocols will include both the engine and the hybrid system for assessing GHG performance, however EPA is not changing criteria pollutant certification at this time for engines.  In effect, the engine will need to be certified for criteria pollutant performance, while the engine and hybrid system in combination may be certified for GHG performance.  It is clearly important to be sure credits are generated based on known physical systems.  This includes testing using the appropriate recovered vehicle kinetic energy.  Additionally, the duty cycle over which this engine-hybrid system would be exercised would need to reflect the use of the application, while not promoting a proliferation of duty cycles which prevent a standardized basis for comparing hybrid system performance.  The agencies proposed the use of the Heavy-duty FTP cycle for evaluation of hybrid vehicles, which is the same test cycle final for engines used in vocational vehicles.  For powerpack testing, which includes the engine and hybrid systems in a pre-transmission format, the engine based testing is applicable for determination of brake-specific emissions benefit versus the engine standard.  For post-transmission powertrain systems and vehicles, the comparison evaluation based on the Improvement Factor and the GEM result based on a vehicle drive trace in a powertrain test cell or chassis dynamometer test cell seem to accurately reflect the performance improvements associated with these test configurations.  It is important that introduction of clean technology be incentivized without compromising the program intent of real world improvements in GHG and fuel consumption performance. The agencies asked for comments on the most appropriate test procedures to accurately reflect the performance improvement associated with hybrid systems tested using these or other protocols.
 A number of comments were received on the proposed engine testing approaches.  Comments were received from EMA/TMA, Cummins, Allison, Hino, and ICCT, stating that the hybrid test methodology needs to be more clearly defined.  EMA/TMA, Cummins, and Allison stated that the agencies have not defined what they will accept as a "complete hybrid system" and a clearer definition for hybrids needs to be developed.  For example, Allison stated that the DRIA says that a "complete hybrid system" can exclude the transmission.  They added that a hybrid system must include a transmission.  EMA/TMA stated that simulated chassis dynamometer testing should include hybrid components.  EMA/TMA stated that the agencies proposal that part 1065 may be amended, but did not provide specifics on how it might be amended.  They suggested the following changes to part 1065: 1) all engine and hybrid components capable of providing or recovering traction power be included in the control volume; 2) use of hybrid system torque curves rather than engine torque curves; 3) reference to J2711 for management of energy storage devices; 4) adhere to conventional calculation of emissions with only positive work counted; and 5) provide an estimate of maximum available kinetic energy in 1065 to ensure that energy capture is consistent with real world operation of hybrids.
Hino said that energy recapture from regenerative braking needs to be built into the test cycle and as currently designed it is not.  Regenerative braking provides fuel consumption and GHG reduction benefits.  Eaton said that the proposed powerpack testing does not capture true performance of hybrid vehicles. As noted above, ICCT commented on the need for parity between engine and vehicle test cycles.  They supported hardware-in-the-loop post-transmission testing, but only if an equivalent cycle is used as is used for chassis testing.
 In response to the concerns detailed above and raised by engine manufacturers, hybrid system manufacturers, environmental groups, and NGOs regarding the lack of transient operation in the hybrid cycles, the agencies are finalizing a change in the weighting of the hybrid vehicle cycles.  The weighting factors will be changed such that a greater emphasis on the type of transient activity seen as more characteristic of hybrid applications will be evident.  The new weighting factors between duty cycles for hybrid certification will be 75% for the transient, 9% for the 55 mph cruise cycle, and 16% for the 65 mph cruise cycle.  The basis for this change may be seen in the memorandum to OAR Docket EPA-HQ-OAR- 2010-0162 which describes the data set used to describe real world vehicle performance.
Concerns were raised by hybrid system manufacturers that the potential for a competitive advantage could exist for hybrids using different methods for certification based solely on the test method chosen. For determination of the allowable brake energy that may be used for the test cycle with hybrid engines, it is important to provide consistency between test methods.  For that reason EPA is setting a brake energy fraction limit based on the engine FTP duty cycle which would apply to the pre-transmission hybrid and defining that as the limit for the post-transmission maximum available brake energy as well.  The brake energy fraction will need to be determined based on the engine performance and the brake energy fraction limit will apply for all powertrain test cell (powerpack) testing.  This limit on the brake energy fraction will be ratio of negative work to positive work as a function of engine rated power.
The agencies are also adopting the proposed duty cycles.  The agencies proposed a transient duty cycle, a 55 mile-per-hour steady state cruise and a 65 mile-per-hour steady state cruise.  The transient duty cycle, which has been corrected to address a concern related to shift events, is essentially the same transient cycle proposed in the NPRM with the exception that it minimizes inappropriate shift events.  Additionally, the steady state cycles proposed by the agencies remain essentially unchanged.  The modification being adopted with today's final action is to address the distribution of the emissions impact associated with each duty cycle.
In addition, the agencies are finalizing to allow manufacturers that want to certify a hybrid on a different test cycle than the cycles described above for chassis and engine dynamometer testing can follow the procedure outlined below in the Innovative Technology Credit section.  Likewise, a manufacturer seeking to certify a hybrid using an alternative approach, such as simulation modeling, would need to follow the procedure described in the Innovative Technology Credit section.  Manufacturers whose alternative hybrid testing procedure is approved through the Innovative Technology Credit Program would receive credits through the Advanced Technology Credit Program.
EMA/TMA also asked that in addition to the above-described engine, chassis, and powerpack testing, other yet-to-be-defined methods should be allowed so that a novel applications of hybrids can be evaluated for credit.  They included hydraulic, kinetic, electro-mechanical, and genset hybrids as examples of additional configurations that should be accommodated by additional test cycles.  Allison asked how emissions and fuel consumption changes associated with ageing of hybrid systems will be accounted for.  ACEEE encouraged the agencies to finalize the three approaches outlined in the NPRM for hybrid testing in the final rule.
Cummins supported three proposed options for evaluating hybrids.  ICCT supported option 1 and 3, but not 2.  EMA/TMA commented that the proposed post-transmission powerpack testing does not provide sufficient detail and control volume should be defined for manufacturers so that they understand which components to include in the test.  ICCT stated that EPA and NHTSA need to ensure that: 1) each hybrid test method/test cycle combination requires the same amount of total energy to run the cycle (for a specific vehicle weight), 2) each test method/test cycle combination has the same amount of total energy available for capture as regeneration by a hybrid system, and 3) that this available regeneration energy appears in similar increments in each test method/test cycle combination.
In allowing for three options for certification of hybrids, two of those options require the use of a baseline vehicle.  The post-transmission hybrid certification and the chassis dynamometer certification options are designed to allow for an assessment of the improvement offered by incorporating a hybrid system into the vehicle.  Determination of an improvement factor for hybrid vehicle performance is significantly influenced by the selection of the baseline vehicle, test article "A".  The agencies received comments from engine and hybrid system manufacturers that the options for selection of the baseline should be carefully considered to avoid an unintended consequence of limited real world improvement due to selection of a baseline that was inappropriate.  Several concerns regarding an inappropriate baseline were broached including selection of technology that is not actually available in the market, selection of baseline technology that is not representative of the application(s) either by sales volume or use, or selection of a baseline that in other ways provides an advantage to a manufacturer which creates an unfair competitive advantage.  To address the concern of improvement factors that have a basis in reality and demonstrate real world improvements, as well as to continue to incentivize the introduction of new technology the agencies are addressing the issue of the baseline selection, as well as the determination of a "most similar" vehicle basis in the case where there may not be an existing production vehicle upon which the hybrid vehicle was based.
In making the determination of an appropriate baseline, four options were considered by the agencies.  These options included a fixed baseline weight and definition by vehicle class, a non-hybrid baseline intended for production vehicle and transmission system, a best in class conventional application, or vehicle based on highest sales volume.  Each of these options has benefits and each raises potential concerns.  The determination based solely on a single vehicle by class has the advantage of providing a fixed baseline the entire industry may easily target for assessing improvements.  It raises concerns regarding the suitability of the vehicle selection for all applications in the weight class, as well as the appropriateness of the selection based on performance across the full range of vehicles and weights in the weight class.  The "intended for production" conventional vehicle baseline ensures the baseline and hybrid vehicle pair will represent a real improvement for the specific application.  The challenge exists when the conventional vehicle version of the hybrid may not exist.  Another issue would exist if the conventional vehicle in the pair had performance characteristics such that the hybrid version does not represent significant improvements beyond other conventional vehicles.  The best in class baseline vehicle approach provides some assurance that the improvement factor generated by the hybrid vehicle or system would in fact represent introduction of advanced technology with improvements beyond existing conventional technology.  The opportunity for confusion that exists with a best in class determination includes matching all of the appropriate performance metrics with the appropriate applications in a way that is consistent with how the market values those improvements.  This can become a moving target which could represent an ever evolving design target and eventually prove difficult for the agencies to implement in a way that ensured a level playing field.  The last option attempts to include the benefits of the previous options, while maintaining the clarity needed for manufacturers to design and build with a clear understanding of design targets.  The highest sales volume application by weight class for the previous model year ensures benefits are measured based on how the market values performance.  This has the potential to avoid ambiguity regarding which vehicle technology should serve as the baseline and it addresses a concern raised by some commenters regarding the use of a baseline vehicle that clearly is not a class leader.  The presumption being that the market will value the conventional technology that provides the best value over the lifetime of the vehicle for its intended service class and application.  This approach is intended to be used in conjunction with the basic premise that the "A" vehicle will be the vehicle most similar to the hybrid "B" vehicle.
Should no apparent baseline be available, the vehicle being displaced by the hybrid may be determined based on several characteristics including but not limited to vehicle class, vehicle application, and complete power system rated power (e.g. engine rated power for the base vehicle versus combined rated power for the engine-hybrid system).  The agencies will continue to use the primary method of highest sales volume, by application and vehicle weight class in its assessment of the manufacturers selection of a baseline, however should there be a new application introduced with no apparent existing baseline, the closest baseline vehicle may be selected by the manufacturer and will be evaluated by the agencies.
Innovative Technology Credits
The agencies proposed a credit opportunity intended to apply to new and innovative technologies that reduce fuel consumption and CO2 emissions, but for which the reduction benefits are not captured over the test procedure used to determine compliance with the standards (i.e., the benefits are "off-cycle").  See 75 FR 25438-25440 where EPA adopted a similar credit program for MY 2012-2016 light-duty vehicles.  The agencies explained in the NPRM that EPA and NHTSA are aware of some emerging and innovative technologies and concepts in various stages of development with CO2 emissions and fuel consumption reduction potential that might not be adequately captured on the final certification test cycles, and that some of these technologies might merit some additional CO2 and fuel consumption credit generating potential for the manufacturer.  Eligible innovative technologies are those technologies that are newly introduced in one or more vehicle models or engines, but that are not yet widely implemented in the heavy-duty fleet.  Examples of such technologies mentioned in the NPRM include predictive cruise control, gear-down protection, active aerodynamic features, and adjustable ride height. This would include known technologies if they are not yet widely utilized in a particular subcategory.  Further, any credits for these technologies would need to be based on real-world fuel consumption and GHG reductions that can be measured with verifiable test methods using representative driving conditions typical of the engine or vehicle application.
In the NPRM, the agencies stated that we would not consider technologies to be eligible for these credits if the technology has a significant impact on CO2 emissions and fuel consumption over the primary test cycles, or it is one of the technologies on whose performance the various vehicle and engine standards are premised.  The agencies believe it is appropriate to provide an incentive to encourage the introduction of these types of technologies and that a credit mechanism is an effective way to do so. The agencies proposed that this optional credit opportunity would be available through the 2018 model year reflecting that technologies may be common by then, but the agencies sought comment on the need to extend beyond model year 2018.
EPA and NHTSA also proposed that credits generated using innovative technologies be restricted within the subcategory averaging set where the credit was generated but requested comments on whether these innovative technology credits should be fungible across vehicle and engine categories.
The agencies also proposed that manufacturers quantify CO2 and fuel consumption reductions associated with the use of the off-cycle technologies such that the credits could be applied based on the metrics (such as g/mile and gal/100 mile for pickup trucks, g/ton-mile and gal/1,000 ton-mile for tractors and vocational vehicles, and g/bhp-hr and gal/100 bhp-hr for engines).  Credits would have to be based on real additional reductions of CO2 emissions and fuel consumption and would need to be quantifiable and verifiable with a repeatable methodology.  Such data would be submitted to EPA and NHTSA, and would be subject to a public evaluation process in which the public would have opportunity for comment.  See 75 FR 25440.  We proposed that the technologies upon which the credits are based would be subject to full useful life compliance provisions, as with other emissions controls.  Unless the manufacturer can demonstrate that the technology would not be subject to in-use deterioration over the useful life of the vehicle, the manufacturer would have to account for deterioration in the estimation of the credits in order to ensure that the credits are based on real in-use emissions reductions over the life of the vehicle.
In cases where the benefit of a technological approach to reducing CO2 emissions and fuel consumption cannot be adequately represented using existing test cycles, it was proposed that EPA and NHTSA would review and approve as appropriate test procedures and analytical approaches to estimate the effectiveness of the technology for the purpose of generating credits.  The demonstration program would have to be robust, verifiable, and capable of demonstrating the real-world emissions benefit of the technology with strong statistical significance.  See 75 FR 25440.
Finally, the agencies also explained in the NPRM that the CO2 and fuel consumption benefit of some technologies may have to be demonstrated with a modeling approach.  In other cases manufacturers might have to design on-road test programs that are statistically robust and based on real world driving conditions.  As with the similar procedure for alternative off-cycle credits under the 2012-2016 MY light-duty vehicle program, the agencies would include an opportunity for public comment as part of any approval process.
The agencies requested comments on the proposed approach for off-cycle emissions credits, including comments on how best to structure the program.  EPA and NHTSA particularly requested comments on how the case-by-case approach to assessing off-cycle innovative technology credits could best be designed, including ways to ensure the verification of real-world emissions benefits and to ensure transparency in the process of reviewing manufacturer's proposed test methods.
In response to the NPRM, the agencies received numerous comments relating to all aspects of the innovative technology credit flexibility provision.  The vast majority of the commenters supported this provision as proposed, but have requested further clarification, so the agencies are adopting the full provision as proposed and providing further discussion that addresses and clarifies the provision in response to the comments solicited and the comments received.
A number of organizations, including DTNA, MEMA, Navistar, Green Truck Association, Eaton, ACEEE, and NESCAUM, commented that technologies such as advanced transmissions, engine cooling strategies, idle reduction, light-weight components (including light-weight engines), and advanced drivelines should be able to receive credit through the innovative technology program. The agencies agree with these commenters.  The NPRM did not provide a specific list of technologies that the agencies would consider "innovative" because the agencies intended that a innovative technology could be any technology that can be proven to reduce CO2emissions and fuel consumption but for which the benefits are not captured utilizing the FTP procedures, SET procedures and GEM methodology used to determine compliance with the emission and fuel consumption standards.  Any of the suggested technologies could be considered as an innovative technology if the associated emission and fuel consumption benefit has not already been considered, if the associated emission and fuel savings can be measured and validated, and if the technology and measurement methodology have been approved by the agencies.
A number of commenters, including Bendix, Bosch, Cummins, EMA/TMA, Eaton, DTNA, Navistar, Volvo, ArvinMeritor and USC requested that the innovative technology process and procedures be more clearly structured and defined.  Bendix requested that the agencies prescribe specific processes and procedures in the final rule by which innovative technologies can be submitted for review and approval.   EMA/TMA requested that the agencies provide guidance on the certification process, and suggested that existing fuel consumption test procedures developed jointly by the Society of Automotive Engineers (SAE) and the Technology & Maintenance Council (TMC), specifically that the Type II and Type III procedures be used.  Eaton requested that the agencies identify test methods that can be used for certification in order to provide transparency and certainty, and promote early technology introduction.  In response to these comments, the agencies are further defining the process for the final rule.
In cases where the benefit of a technological approach to reducing CO2 emissions and fuel consumption cannot be adequately represented using existing test cycles, EPA and NHTSA will review and approve test procedures and analytical approaches as appropriate to estimate the effectiveness of the technology for the purpose of generating credits.  The innovative technologies will be evaluated in an A-to-B comparison.  The baseline engine and/or vehicle configuration must represent a configuration which is equivalent to the engine and/or vehicle with the innovative technology in terms of the other aspects of the engine and/or vehicle to prevent double counting of emissions reductions or gaming.
Since innovative credits will be available for use within the same averaging set as the engine or vehicle which employ the innovative technology, the agencies are defining innovative credit approaches by regulatory category.
Heavy-Duty Pickup Truck and Van Innovative Technology Credits
For HD pickups and vans, EPA and NHTSA proposed that they would review and approve manufacturer-provided test preocedures and analytical approaches to estimate the effectiveness of a technology for the purpose of generating credits.  The proposal also expressed the view that the 5-cycle approach currently used in EPA's fuel economy labeling program for light-duty vehicles may provide a suitable test regime, provided it can be reliably conducted on the dynamometer and can capture the impact of the off-cycle technology (see 71 FR 77872, December 27, 2006).  EPA established the 5-cycle test methods to better represent real-world factors impacting fuel economy, including higher speeds and more aggressive driving, colder temperature operation, and the use of air conditioning.  Because we have not firmly established the suitability of the 5-cycle approach for HD pickups and vans at this time, and we received no comments or data helping to establish it, we are not adopting provisions to specify its use.  However, it remains a candidate approach that manufacturers may pursue in making their demonstrations for innovative technology credits, described below.
Manufacturer data submitted to the agencies in pursuit of innovative technology credits would be subject to a public evaluation process in which the public would have opportunity for comment.  Whether the approach involves on-road testing, modeling, or some other analytical approach, the manufacturer would be required to present a final methodology to EPA and NHTSA.  EPA and NHTSA would approve the methodology and credits only if certain criteria were met.  Baseline emissions and control emissions would need to be clearly demonstrated over a wide range of real world driving conditions and over a sufficient number of vehicles to address issues of uncertainty with the data.  Data would need to be on a vehicle model-specific basis unless a manufacturer demonstrated model-specific data was not necessary.  The agencies would publish a notice of availability in the Federal Register notifying the public of a manufacturer's proposed alternative off-cycle credit calculation methodology and provide opportunity for comment.  The notice will include details regarding the methodology, but not include any Confidential Business Information.
The agencies did not receive any adverse comments on using the proposed approach for HD pickup trucks and vans.  Consistent with the proposal, the agencies are adopting the proposed innovative technology credit provisions for HD pickup trucks and vans.
Heavy-Duty Engine, Combination Tractor, and Vocational Vehicle Innovative Technology Credits
Innovative technology credits developed in the HD engine, combination tractor, and vocational vehicle categories will need to be applied to the subcategory in which they were generated.  The agencies are adopting provisions to determine the separation of engine credits and vehicle credits based on the method which is selected by the manufacturer to determine the effectiveness of the innovative technology.  For example, improvements to the engine that are demonstrated in either the engine dynamometer test or powerpack test will clearly be engine credits.  Improvements that are demonstrated using chassis dynamometer or on-road test will be considered vehicle credits.  However, the agencies recognize that there may be exceptions to this approach, and will allow for the manufacturer to request an alternate classification of credits.  A change in credit allocation will require approval from the agencies and would be subject to a public evaluation process.
Furthermore, the agencies adopting an approach for HD engines and vehicles which provides two paths for approval of the test procedure to measure the CO2 emissions and fuel consumption reductions of an innovative off-cycle technology, used in the HD engine or vehicle, that is similar to the light-duty process to address the concerns of some commenters mentioned above.  The first path would not require a public approval process of the test method.  The "pre-approved" test methods for HD engines and vehicles would include the A-to-B chassis testing, powerpack testing, and on-road testing.  The agencies are also adopting as proposed a second test method approval path which provides a manufacturer the ability to submit an alternative evaluation approach to EPA and NHTSA which must be approved by the agencies prior to the demonstration program.  As with HD pickup trucks and vans, such submissions of data should be submitted to the agencies and would be subject to a public evaluation process in which the public would have opportunity for comment.  Baseline emissions and control emissions would need to be clearly demonstrated over a wide range of real world driving conditions and over a sufficient number of vehicles to address issues of uncertainty with the data.  The agencies will publish a notice of availability in the Federal Register notifying the public of a manufacturer's proposed alternative off-cycle credit calculation methodology and provide opportunity for comment.  The notice will include details regarding the methodology, but not include any Confidential Business Information. Approval of the approach to determining a CO2 and fuel consumption benefit would not imply approval of the results of the program or methodology; when the testing, modeling, or analyses are complete the results would likewise be subject to EPA and NHTSA review and approval.
The pre-approved test procedures include engine dynamometer, powerpack, chassis dynamometer, and on-road testing.  Each of the test procedures require the evaluation of a baseline and control engine or vehicle (A vs. B testing) to quantify the improvement.  Manufacturers may use the engine dynamometer test procedures using the HD engine FTP or SET cycle.  The chassis testing and powerpack testing would be conducted the same as described above for HD vocational vehicle and tractor hybrid testing in Section IV.B.2.b. using the drive cycles and weightings finalized in this action for the primary program.  If a manufacturer requires the use of an alternate duty cycle, then it will require prior approval from the agencies.
The on-road testing would be tested according to SAE J1321 Joint TMC/SAE Fuel Consumption Test Procedure Type II Reaffirmed 1986-10 or SAE J1526 Joint TMC/SAE Fuel Consumption In-Service Test Procedure Type III Issues 1987-06, with additional constraints to improve the test repeatability.  The first constraint requires that the minimum route distance be set at 100 miles.  In addition, the route selected must be representative in terms grade.  The agencies will take into account published and relevant research in determining whether the grade is representative.  Similarly, the speed of the route must be representative of the drive cycle weighting adopted for each regulatory subcategory.  For example, if the route selected for an evaluation of a combination tractor with a sleeper cab contains only interstate driving, then the improvement factor would only apply to 86 percent of the weighted result.  Lastly, the ambient air temperature must be between 5 and 35°C.  The agencies also would allow the use of a Portable Emissions Measurement (PEMS) device for the measurement of CO2 emissions during the on-road testing.  The agencies are not pre-approving any routes for the on-road testing.  Manufacturers will be required to submit the proposed route prior to testing for approval.
As discussed in Section II.B.2, e the agencies are finalizing aerodynamic drag values which represent zero degree yaw (i.e., representing wind from directly in front of the vehicle, not from the side).  We recognize that wind conditions, most notably wind direction, have a greater impact on real world CO2 emissions and fuel consumption of heavy-duty trucks than of light-duty vehicles.  To provide additional incentive for manufacturers using innovative aerodynamic techniques (i.e., techniques that use assessment at yaw angles more or less than zero degrees to capture the influence of side winds and calculate wind average drag coefficient), the agencies are defining an approach to allow manufacturers to gain credit for developing technologies which improve the aerodynamic performance in crosswind conditions, similar to those experienced by vehicles in use.  This approach allows a manufacturer to demonstrate that the wind average drag coefficient for a particular model shows an improvement under conditions other than zero degree yaw.  If a manufacturer can demonstrate that the wind average drag coefficient for an aerodynamic configuration is lower than the wind average drag coefficient for the non-aerodynamic configuration, then the manufacturer may take the delta between the aerodynamic and non-aerodynamic wind average drag coefficient (CdA), discount by 25 percent, and subtract this difference from the zero degree yaw Cd A value for that configuration, and use this reduced CdA value to determine the aerodynamic bin for that configuration.  The manufacturer would use the Cd value associated with appropriate bin to determine the Cd value which will be used in GEM for all tractors using this aerodynamic package.
The agencies requested comments on whether credits generated using innovative technologies should be fungible across vehicle and engine categories and received comments both supporting and opposing the limited fungibility of these credits. Cummins did not support the fungibility of innovative technology credits across subcategories, arguing that it is not advisable given the large number and variability of different technology types and the uncertainty in this provision. DTNA stated that the credits should be fungible across engine and vehicle classes to be treated the same as advanced technology and ABT credits.  EPA and NHTSA acknowledge that the HD program is a new program and though the agencies continue to believe the credit provision is an important flexibility, the agencies also believe it is reasonable to proceed with some caution at this time due to the uncertainty that exists about the credits to be acquired.  Therefore, the final rule includes the restriction on the innovative technology credits.
The NPRM proposed that this optional credit opportunity be available through the 2018 model year, reflecting that technologies may be common by then, but sought comment on the need to extend beyond model year 2018.  The agencies received comments from DTNA, Navistar, Eaton, Cummins and Bosch supporting the extension of this provision beyond model year 2018.  Eaton stated that though some technologies will be more common in 2018, new technologies will evolve facing the same difficulties concerning implementation and would benefit from this provision.  Bosch explained that extension of the provision past 2018 is important because at the time of the final rules the GEM will not incorporate any newer technology until it is updated in phase two of the program, and manufactures will therefore continue to need the innovative technology provision for receiving credits for technologies not accounted for in GEM.  The agencies have reviewed these concerns and believe that they are valid.  Therefore, the final rules do not state that this provision ends in model year 2018.

N2O Credit
EPA received a comment from an industry stakeholder requesting a provision to provide allow manufacturers of heavy-duty engines manufacturers to gain credit for redesigning aftertreatment systems to reduce N2O emissions.  It can be argued that such credits would be necessary where the N2O reductions are achieved at the expense of slightly higher CO2 emissions, since both are greenhouse gas emissions.  The agency agrees that it is appropriate to consider all greenhouse gas emissions together for such situations where trade-offs among the emissions exist due to technology selections.  Thus, EPA is adopting an interim provision which allows engine manufacturers to generate CO2 credits for very low N2O emissions.  Specifically, manufacturers that certify engines with full useful life N2O FEL emissions which are less than 0.04 g/hp-hr could generate 2.98 grams of CO2 credit for 0.01 grams of N2O reduced (consistent with the relative global warming potentials of CO2 and N2O).  For example, where a manufacturer certifies an engine family to have low per-brake horsepower hour N2O emissions of 0.01 g/hp-hr and applies the 0.02 g/hp-hr assigned deterioration factor, it could certify the engine family to a 0.03 g/hp-hr N2O FEL and generate enough CO2 credits to offset CO2 emissions 2.98 g/hp-hr above the standard.  The agency is limiting this provision to model years 2014 through 2016, the same years that NHTSA's program is voluntary, to maintain alignment between the CO2 emissions and fuel consumption standards.
NHTSA and EPA Compliance, Certification, and Enforcement Provisions
Overview
     (1) 	  Compliance Approach
This section describes EPA's and NHTSA's final program to ensure compliance with EPA's final emission standards for CO2, N2O, and CH4 and NHTSA's final fuel consumption standards, as described in Section II.  To achieve the goals projected in the proposal to this rule, it is important for the agencies to have an effective and coordinated compliance program for our respective standards.  As is the case with the Light-Duty GHG and CAFE program, the final compliance program for heavy-duty vehicles and engines has two central priorities:  (1) to address the agencies' respective statutory requirements; and (2) to streamline the compliance process for both manufacturers and the agencies by building on existing practice wherever possible, and by structuring the program such that manufacturers can use a single data set to satisfy the requirements of both agencies.  It is also important to consider the provisions of EPA's existing criteria pollutant program in the development of the approach used for heavy-duty certification and compliance.  The existing EPA heavy-duty highway engine emissions program has an established infrastructure and methodology that will allow for an effective integration with this final GHG and fuel consumption program, without needing to create new unique processes in many instances.  The compliance program will address the importance of the impact of new control methods for heavy-duty vehicles as well as other control systems and strategies that may extend beyond the traditional purview of the criteria pollutant program.
The heavy-duty compliance program uses a variety of mechanisms to conduct compliance assessments, including preproduction certification and postproduction testing and in-use monitoring once vehicles enter customer service. Specifically, the agencies are establishing a compliance program that utilizes existing EPA testing protocols and certification procedures.  Under the provisions of this program, manufacturers will have significant opportunity to exercise implementation flexibility, based on the program schedule and design, as well as the credit provisions in the program for advanced technologies.  This rule includes a process to foster the use of innovative technologies, not yet contemplated in the current certification process.  EPA will continue to conduct compliance preview meetings which provide the agency an opportunity to review a manufacturer's new product plans and ABT projections.  Given the nature of the final compliance program that involves both engine and vehicle compliance for some categories, it is necessary for manufacturers to begin pre-certification meetings with EPA early enough to address issues of certification and compliance for both integrated and non-integrated product offerings.
Based on feedback EPA and NHTSA received during the light-duty GHG comment period, both agencies are seeking to ensure transparency in the compliance process of this program.  In addition to providing information in published reports annually regarding the status of credit balances and compliance on an industry basis, EPA and NHTSA sought comments in the NPRM on additional strategies for providing information useful to the public regarding industry's progress toward reducing GHG emissions and fuel consumption from this sector while protecting sensitive business information.  In response, commenters (Sierra Club and UCS) also had strong interests for the agencies to ensure that any collected data is made available to the public with an interest especially for providing details on the credit balances for each manufacturer and for data on specific vehicle configuration information data to better understand the market and help with the development of future programs.  Additional requests (ALA and EDF) were also made for the agencies to expand consumer education and outreach for medium and heavy duty vehicles thereby empowering fleet purchasers to make better informed choices.  Another commenter (ACEEE) specifically requested that the agencies publish a heavy duty truck trend report describing vehicles and engines sold, including fuel efficiency and GHG performance and the use of advanced technology.  It was further recommended (by ALA and EDF) that the agencies should create consumer education and outreach programs for medium and heavy duty vehicles such as fuel consumption and GHG emissions information for all vehicles and engines covered by the rule, in buyers guide similar to the fuel economy guides that EPA and NHTSA provide for the light duty CAFE program.  An interest in having a consumer based label for 2b-3 pickup trucks and vans providing fuel economy and emission information like in the light duty CAFE program was also expressed (ICCT and UCS).
ACEEE, ICCT and UCS requested that the agencies publish annual reports describing the vehicles and engines sold, fuel efficiency and GHG performance results and the technologies used to comply with standards.  Another commenter (ACEEE) specifically requested that the agencies should publish a heavy duty truck trend report describing vehicles and engines sold, including fuel efficiency and GHG performance and the use of advanced technology.  This same commenter requested that the agencies should collect and publicly disseminate existing vehicle performance data and data generated in future model years.  The agencies agree that there is a need for sharing heavy-duty emissions and fuel consumption information and therefore will make information publically available under this program.
Heavy-Duty Pickup Trucks and Vans
The final compliance regulations (for certification, testing, reporting, and associated compliance activities) for heavy-duty pickup trucks and vans closely track both current practices and the recently adopted greenhouse gas regulations for light-duty vehicles and trucks.  Thus they are familiar to manufacturers. EPA already oversees testing, collects and processes test data, and performs calculations to determine compliance with both CAFE and CAA standards for Light-Duty. For Heavy-Duty products that closely parallel light-duty pick-ups and vans, under a coordinated approach, the compliance mechanisms for both programs for NHTSA and EPA would be consistent and non-duplicative for GHG pollutant standards and fuel consumption requirements. Vehicle emission standards established under the CAA apply throughout a vehicle's full useful life.
Under EPA existing criteria pollutant emission standard program for heavy-duty pickup trucks and vans, vehicle manufacturers certify a group of vehicles called a test group. A test group typically includes multiple vehicle lines and model types that share critical emissions-related features. The manufacturer generally selects and tests a single vehicle, typically considered "worst case" for criteria pollutant emissions, which is allowed to represent the entire test group for certification purposes. The test vehicle is the one expected to be the worst case for the emission standard at issue.  Emissions from the test vehicle are assigned as the value for the entire test group.  However, the compliance program in the recent GHG regulations for light-duty vehicles, which is essentially the well established CAFE compliance program, allows and may require manufacturers to perform additional testing at finer levels of vehicle models and configurations in order to get more precise model-level fuel economy and CO2 emission levels.  This same approach would be applied to heavy-duty pickups and vans.  Additionally, like the light-duty program, approved use of analytically derived fuel economy (ADFE) will be allowed to predict the fuel efficiency and CO2 levels of some vehicles in lieu of testing when deemed appropriate by the agencies.  The degree to which analytically derived fuel economy is allowed and the design of the adjustment factors is covered in this rule.
Heavy-duty Engines
Heavy-duty engine certification and compliance for traditional criteria pollutants has been established by EPA in its current general form since 1985.  In developing a program to address GHG pollutants, it is important to build upon the infrastructure for certification and compliance that exists today.  At the same time, it is necessary to develop additional tools to address compliance with GHG emissions requirements, since the final standard reflect control strategies that extend beyond those of traditional criteria pollutants.  In so doing, the agencies are finalizing use of EPA's current engine test based strategy  -  currently used for criteria pollutant compliance -- to also measure compliance for GHG emissions.  The agencies are also finalizing to add new strategies to address vehicle specific designs and hardware which impact GHG emissions.  The traditional engine approach would largely match the existing criteria pollutant control strategy.  This would allow the basic tools for certification and compliance, which have already been developed and implemented, to be expanded for carbon dioxide, methane, and nitrous oxide.  Engines with similar emissions control technology may be certified in engine families, as with criteria pollutants.
For EPA, the final approach for certification would follow the current process, which would require manufacturer submission of certification applications, approval of the application, and receipt of the certificate of conformity prior to introduction into commerce of any engines.  EPA proposes the certificate of conformity be a single document that would be applicable for both criteria pollutants and greenhouse gas pollutants.  NHTSA would assess compliance with its fuel consumption standards based on the results of the EPA GHG emissions compliance process for each engine family.
 Class 7 and 8 Combination Tractors and Class 2b-8 Vocational Vehicles
Currently, except for HD pickups and vans, EPA does not directly regulate exhaust emissions from heavy-duty vehicles as a complete entity.   Instead, a compliance assessment of the engine is undertaken as described above.  Vehicle manufacturers installing certified engines are required to do so in a manner that maintains all functionality of the emission control system.  While no process exists for certifying these heavy-duty vehicles, the agencies believe that a process similar to the one we propose for used for heavy-duty engines can be applied to the vehicles.
 The agencies are finalizing related certification programs for heavy-duty vehicles.  Manufacturers would divide their vehicles into families and submit applications to each agency for certification for each family.  However, the demonstration of compliance would not require emission testing of the complete vehicle, but would instead involve a computer simulation model, GEM.  This modeling tool uses a combination of manufacturer-specified and agency-defined vehicle parameters to estimate vehicle emissions and fuel consumption.  This model is then exercised over certain drive cycles. EPA and NHTSA are finalizing the duty cycles over which Class 7 and 8 combination tractors would be exercised to be:  65 mile per hour steady state cruise cycle, the 55 mile per hour steady state cruise cycle, and the California ARB transient cycle.  Additional details regarding these duty cycles will be addressed in Section V.D(1)(b) below.  Over each duty cycle, the simulation tool would return the expected CO2 emissions, in g/ton-mile, and fuel consumption, gal/1,000 ton-mile, which would then be compared to the standards.
Heavy-duty Pickup Trucks and Vans
Compliance Approach
EPA and NHTSA are finalizing, largely as proposed, new emission standards to control greenhouse gases (GHGs) and reduce fuel consumption from heavy-duty trucks between a gross vehicle weight rating between 8,500 and 14,000 pounds that are not already covered under the MY 2012-2016 light-duty truck and medium-duty passenger vehicle GHG standards. In this section "trucks" refers to heavy-duty pickup trucks and vans between 8,500 and 14,000 pounds not already covered under the light-duty rule.
First, EPA is finalizing fleet average emission standards for CO2 on a gram per mile (g/mile) basis and NHTSA is finalizing fuel consumption standards on a gal/100 mile basis that would apply to a manufacturer's fleet of  heavy-duty trucks and vans  with a GVWR from 8,500 pounds to14,000 pounds (Class 2b and 3).  CO2 is the primary pollutant resulting from the combustion of vehicular fuels, and the amount of CO2 emitted is highly correlated to the amount of fuel consumed.  In addition, the EPA is finalizing separate emissions standards for three other GHG pollutants: CH4, N2O, and HFC.  CH4 and N2O emissions relate closely to the design and efficient use of emission control hardware (i.e., catalytic converters).  The standards for CH4 and N2O would be set as caps that would limit emissions increases and prevent backsliding from current emission levels.  In lieu of meeting the caps, EPA is allowing manufacturers the option of offsetting any N2O emissions or any CH4 emissions above the cap by taking steps to further reduce CO2.  Separately, EPA is finalizing to set standards to control the leakage of HFCs from air conditioning systems.