credit larger than the default value. The default values for these off-
cycle credits were largely determined from research, analysis, and
simulations, rather than from full vehicle testing, which would have
been both cost and time prohibitive. EPA generally used conservative
predefined estimates to avoid any potential credit windfall.\543\
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    \540\ See 40 CFR 86.1869-12(b). The first approach requires some
technologies to derive their pre-determined credit values through
EPA's established testing. For example, waste heat recovery
technologies require manufacturers to use 5-cycle testing to
determine the electrical load reduction of the waste heat recovery
system.
    \541\ EPA implemented its off-cycle GHG program starting in MY
2012.
    \542\ The Technical Support Document (TSD) for the 2012 final
rule for MYs 2017 and beyond provides technology examples and
guidance with respect to the potential pathways to achieve the
desired physical impact of a specific off-cycle technology from the
menu and provides the foundation for the analysis justifying the
credits provided by the menu. The expectation is that manufacturers
will use the information in the TSD to design and implement off-
cycle technologies that meet or exceed those expectations in order
to achieve the real-world benefits of off-cycle technologies from
the menu.
    \543\ While many of the assumptions made for the analysis were
conservative, others were ``central.'' For example, in some cases,
an average vehicle was selected on which the analysis was conducted.
In that case, a smaller vehicle may presumably deserve fewer credits
whereas a larger vehicle may deserve more. Where the estimates are
central, it would be inappropriate for the agencies to grant greater
credit for larger vehicles, since this value is already balanced by
smaller vehicles in the fleet. The agencies take these matters into
consideration when applications are submitted for credits beyond
those provided on the menu.
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    For off-cycle technologies not on the pre-defined technology list,
EPA created a second pathway which allows manufacturers to use 5-cycle
testing to demonstrate off-cycle improvements.\544\ Starting in MY
2008, EPA developed the ``five-cycle'' test methodology to measure fuel
economy for the purpose of improving new car window stickers (labels)
and giving consumers better information about the fuel economy they
could expect under real-world driving conditions.\545\ As learned
through development of the ``five-cycle'' methodology and prior
rulemakings, there are technologies that provide real-world fuel
consumption improvements,

but those improvements are not fully reflected on the ``two-cycle''
test. EPA established this alternative for a manufacturer to
demonstrate the benefits of off-cycle technologies using 5-cycle
testing. The additional emissions test allows emission benefits to be
demonstrated over some elements of real-world driving not captured by
the two-cycle CO2 compliance tests including high speeds,
rapid accelerations, hot temperatures, and cold temperatures. Under
this pathway, manufacturers submit test data to EPA, and EPA determines
whether there is sufficient technical basis to approve the off-cycle
credits. No public comment period is required for manufacturers seeking
credits using the EPA menu or using 5-cycle testing.
---------------------------------------------------------------------------

    \544\ See 40 CFR 86.1869-12(c). EPA proposed a correction for
the 5-cycle pathway in a separate technical amendments rulemaking.
See 83 FR 49344 (Oct. 1, 2019). EPA is not approving credits based
on the 5-cycle pathway pending the finalization of the technical
amendments rule.
    \545\ https://www.epa.gov/vehicle-and-fuel-emissions-testing/dynamometer-drive-schedules.
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    The third pathway allows manufacturers to seek EPA review, through
a notice and comment process, to use an alternative methodology other
than the menu or 5-cycle methodology for determining the off-cycle
technology CO2 credits.\546\ Manufacturers must provide
supporting data on a case-by-case basis demonstrating the benefits of
the off-cycle technology on their vehicle models. Manufacturers may
also use the third pathway to apply for credits and FCIVs for menu
technologies where the manufacturer is able to demonstrate credits and
FCIVs greater than those provided by the menu.
---------------------------------------------------------------------------

    \546\ See 40 CFR 86.1869-12(d).
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(a) The Off-Cycle Process
    In meetings with EPA and manufacturers, NHTSA examined the
processes for bringing off-cycle technologies into market. Two distinct
processes were identified: (1) The manufacturer's off-cycle pre-
production process, and; (2) the manufacturer's regulatory compliance
process. During the pre-production process, the off-cycle program for
most manufacturers begins as early as four to 6 years in advance of the
given model year. Manufacturers' design teams or suppliers identify
technologies to develop capable of qualifying for off-cycle credits
after careful considering of the possible benefits. Manufacturer then
identify the opportunities for the technologies finding the most
optimal condition for equipping the technology given the availability
in the production cycle of either new or multiple platforms
capitalizing on any commonalities to increase sales volumes and reduce
costs. After establishing their new or series platform development
plans, manufacturers have two processes for off-cycle technologies on
the pre-defined menu list or using 5-cycle testing and for those for
which benefits are sought using the alternative approval methodology.
For those on the menu list or 5-cycle testing, technologies whose
credit amounts are defined by EPA regulation, manufacturers confirm
that: (1) New candidate technologies meet regulatory definitions; and
(2) for qualifying technologies, there is real fuel economy (FE)
benefit based on good engineering judgement and/or testing. For these
technologies, manufacturers conduct research and testing independently
without communicating with EPA or NHTSA. For non-menu technologies,
those not defined by regulation, manufacturers pre-production processes
include: (1) Determining the credit amounts based on the effectiveness
of the technologies; (2) developing suitable test procedures; (3)
identifying any necessary studies to support effectiveness; (4) and
identifying the necessary equipment or vehicle testing using good
engineer judgement to confirm the vehicle platform benefits of the
technology.
    While for the regulatory compliance process, the first step for
manufacturers begins by providing EPA with early notification in their
pre-model year GHG reports (e.g., 2025MY Pre-GHG are due in 2023CY) of
their intention to generate any off-cycle credits in accordance with 40
CFR 600.514-12. Next, manufacturers present a brief overview of the
technology concept and planned model types for their off-cycle
technologies as a part of annual pre-certification meetings with EPA.
Manufacturers typical hold their pre-certification meetings with EPA
somewhere between September through November two years in advance of
each model year. These meetings are designed to give EPA a holistic
overview of manufacturers planned product offerings for the upcoming
compliance model year and since 2012 information on the A/C and off-
cycle programs. Thus, a manufacturer complying in the 2023 compliance
model year would arrange its pre-certification meeting with EPA in
September 2021 and would be required to share information on the A/C
and off-cycle technologies its plans to equip during the model year.
After this, manufacturers report projected information on off-cycle
technologies as a part of their CAFE reports to NHTSA in accordance
with 49 CFR part 537 CAFE due by December 31st before the end of the
model year.
    According to EPA and NHTSA regulations, eligibility to gain
benefits for off-cycle technologies only require manufacturers to
reporting information in advance of the model year notifying the
agencies of a manufacturer's intent to claim credits. More
specifically, manufacturers must notify EPA in their pre-model year
reports, and in their applications for certification, of their
intention to generate any A/C and off-cycle credits before the model
year, regardless of the methodology for generating credits. Similarly,
for NHTSA, manufacturers are also required to provide data in their
pre-model year reports required by 49 CFR part 537 including projected
information on A/C, off-cycle, and full-size pickup truck incentives.
These regulations require manufacturers to report information on
factors such as the approach for determining the benefit of the
technology, projected production information and the planned model
types for equipping the off-cycle technology.
    If a manufacturer is pursuing credits for a non-menu off-cycle
technology, EPA also encourages manufacturers to seek early reviews for
the eligibility of a technology, the test procedure, and the model
types for testing in advance of the model year. EPA emphasizes the
critical importance for manufacturers to seek these reviews prior to
conducting testing or any analytical work. Yet, some manufacturers have
decided not to seek EPA's early reviews which resulted in significant
delays in the process as EPA has had to identify and correct multiple
testing and analytical errors after the fact. Consequently, EPA's goal
is to provide approvals for manufacturers as early as possible to
ensure timely processing of their credit requests. NHTSA shares the
same goals and views as EPA for manufacturers submissions but to-date
neither agency has created any required deadlines for these reviews.
For NHTSA, its only requirement is for manufacturers to submit copies
of all information sent to EPA at the same time.
    The next step in the credit review process is for manufacturers to
submit an analytical plan defining the required testing to derive the
exact benefit of a non-menu off-cycle technology before the model year
begins and then to start testing. It is noted that some manufacturers
failed to seek EPA's early reviews which delayed finalizing their
analytical plans and then the start of their testing. These delays had
greater impacts depending upon the required testing for the technology.
For example, some manufacturers were required to conduct a four-season
testing methodology lasting almost a year to evaluate the performance
of a technology during all environmental conditions.

    After completing testing, manufacturers are required to prepare an
official application requesting a certain amount of off-cycle credits
for the technology. In accordance with EPA regulations, the official
application request must include final testing data, details on the
methodology used to determine the off-cycle credit value, and the
official benefit value requested. EPA anticipated that these
submissions would be made prior to the end of the model year where the
off-cycle technology was applied.
    Each manufacturers' application to EPA must then undergo a public
notice and comment process if the manufacturer uses a methodology to
derive the benefit of a technology not previously approved by EPA. Once
a methodology for a specific off-cycle technology has gone through the
public notice and comment process and is approved for one manufacturer,
other manufacturers may follow the same methodology to collect data on
which to base their off-cycle credits. Other manufacturers are only
required to submit applications citing the approved methodology, but
those manufacturers must provide their own necessary test data,
modeling, and calculations of credit value specific to their vehicles,
and any other vehicle-specific details pursuant to that methodology, to
assess an appropriate credit value. This is similar to what occurred
with the advanced A/C compressor, where one manufacturer applied for
credits with data collected through bench testing and vehicle testing,
and subsequent to the first manufacturer being approved, other
manufacturers applied for credits following the same methodology by
submitting test data specific for their vehicle models. Consequently,
as long as the testing is conducted using the previously-approved
methodology, EPA will evaluate the credit application and issue a
decision with no additional notice and comment, since the first
application that established the methodology was subject to notice and
comment. EPA issues a decision document regarding the manufacturer's
official application upon resolution of any public comments to the its
Federal Register notice and after consultation with NHTSA. Finally,
manufacturers submit information after the model year ends on off-cycle
technologies and the equipped vehicles in their final CAFE reports due
by March 30th and then in their final GHG Averaging, Banking, and
Trading (AB&T) reports due to EPA by April 30th.
    During the 2020 rulemaking, the agencies and manufacturers both
agreed that responding to petitions before the end of a model year is
beneficial to manufacturers and the government. It allows manufacturers
to have a better idea of what credits they will earn, and for the
government, a timely and less burdensome completion of manufacturers'
end-of-the-year final compliance processes. EPA structured the A/C and
off-cycle programs to make it possible to complete the processes by the
end of the model year so manufacturers could submit their final reports
within the required deadline--90 days after the calendar year, when
CAFE final reports are due from manufacturers.\547\
---------------------------------------------------------------------------

    \547\ 40 CFR 600.512(12).
---------------------------------------------------------------------------

    However, at the time of the previous rulemaking, manufacturers were
submitting retroactive off-cycle petitions for review causing
significant delays to review and approval of novel technologies and
issuances of Federal Register notices seeking public comments, where
applicable. As a result, the agencies set a one-time allowance that
ended in May 2020 for manufacturers to ask for retroactive credits or
FCIVs for off-cycle technologies equipped on previously-manufactured
vehicles after the model year had ended. After that time, the agencies
denied manufacturers' late submissions requesting retroactive credits.
However, manufacturers who properly submitted information ahead of time
were allowed to make corrections to resolve inadvertent errors during
or after the model year.
    Both EPA and NHTSA regulations fail to include specific deadlines
for manufacturers to meet in finalizing their off-cycle analytical
plans or the official applications to the agencies. The agencies
believed that enforcing the existing submission requirements would be
the most efficient approach to expedite approvals and set aside adding
any new regulatory deadlines or additional requirements in the previous
rulemaking. There were also concerns to provide manufacturers with
maximum flexibility and due to the uncertainties existing with the non-
menu off-cycle process. However, the agencies anticipated that any
timeliness problems would resolve themselves as the off-cycle program
reached maturity and more manufacturers began requesting benefits for
previously approved off-cycle technologies.
    Despite the agencies expectations, the lack of deadlines for test
results or the official application has significantly delayed approvals
for non-menu off-cycle requests. In many cases, EPA has received off-
cycle non-menu application requests either late in the model year or
after the model year. This falls outside the agencies planned strategy
for the off-cycle non-menu review process whereas manufacturers would
seek approval and submit their official application requests either in
advance of the model year or early enough in the model year to allow
the agency to approve a manufacturer's credits before the end of the
model year.
(b) Proposed Changes to the Off-Cycle Program
(i) Review Process
    The current review process for off-cycle technologies is causing
significant challenges in finalizing end-of-the-year compliance
processes for the agencies. The backlog of retro-active and pending
late off-cycle requests have delayed EPA from recalculating NHTSA's MY
2017 finals and from completing those for MYs 2018 and 2019. Fifty-four
off-cycle non-menu requests have been submitted to EPA to date.
Nineteen of the requests were submitted late and another seven apply
retroactively to previous model years starting as early as model year
2015. Since these requests represent potential credits or adjustments
that will influence compliance figures, CAFE final results cannot be
finalized until all off-cycle requests have been disposed. These
factors have so far delayed MY 2017 final CAFE compliance by 28 months,
MY 2018 by 15 months, and MY 2019 by 4 months.
    These late reports amount to more than just a mere accounting
nuisance for the agencies; they are actively chilling the credit
market. Until EPA verifies final compliance numbers, manufacturers are
uncertain about either how many credits they have available to trade
or, conversely, how many credits are necessary for them to cover any
shortfalls.
    For MY 2017, NHTSA will void manufacturers previous credit trades
pending the revised final calculations. Second, until late requests are
approved, credit sellers are unable to make trades with buyers having
pending approvals or credits are sold whereas the final balance of
credits is unknown. Because credit trades and transfers must be
adjusted for fuel savings anytime a change occurs in a manufacturer's
CAFE values, the resulting earned or purchased credits must be
recalculated. These recalculations are significantly burdensome on the
government to administer and places an undue risk on manufacturers
involved in CAFE credit trade transactions.
    NHTSA met with EPA and manufacturers to better understand the
process for reviewing off-cycle non-menu technologies. From these

discussions, NHTSA identified several issues that may be influencing
late submissions. First, non-menu requests are becoming more complex
and are requiring unique reviews. Previously approved technologies are
also becoming more complex and are requiring either new testing, test
procedures or have evolved beyond the definitions which at one time
previously qualified them. Next, manufacturers identified the lack of
standardized test procedures approved by EPA or certainty from EPA on
which model types need to be tested as major sources for delays in
submitting their analytical plans. In addition, manufacturers claimed
there is significant uncertainty surrounding the necessary data sources
to substantiate the benefit of the technology. For example, the data
sources necessary to substantiate the usage rates certain technologies
in the market. Testing or extrapolating test results for variations in
model types can also be difficult and a source of delay. Manufacturers
are typically uncertain as to what configurations within a model type
must be tested and believe further guidance may be needed by EPA.
Manufacturers further claim that it is challenging to coordinate the
required testing identified by EPA for off-cycle in coordination with
other required certification and emissions testing. Several of these
issues were addressed in the 2020 final rule. In that rulemaking, the
agencies stated that developing a standardized test procedure
``toolbox'' may not be possible due to the development of new and
emerging technologies, and manufacturers' different approaches for
evaluating the benefits of the technologies. However, the agencies
committed to considering additional guidance, if feasible, as the
programs further matures in the review process of technologies and, if
possible, identify consistent methodologies that may help manufacturers
analyze off-cycle technologies.
    Part of the issue is that the review process begins significantly
later than the development of technology. Typically, EPA only learns
about a new off-cycle technology during manufacturers' precertification
meetings, months or even years after manufacturers started to develop
the technology. NHTSA seeks comments on whether opportunities exist
during the initial development of off-cycle technologies for
manufacturers to start discussions with the agencies to identify
suitable test procedures or approval of the initial concept of a new
technology. After certification meetings, NHTSA also identified that in
many cases, manufacturers do not communicate with EPA seeking approvals
for their test procedures, test vehicles or credit calculations until
anywhere from 3-6 months after the initial development of the
technology. Delays in approving a suitable test procedure extends the
manufacturers ability to perform testing or to submit its formal
request for benefits until after the model year has ended. As
mentioned, testing can take up to 12 months after a suitable test
procedure and identifying which subconfigurations must be tested.
    One manufacturer also stated that set submission deadlines are
impossible, agency approvals are variable based on OEM need and reply
timing is driven by the EPA. When questioned whether any deadlines
could be imposed manufacturers responded believing any deadlines would
need to be negotiated between the manufacturer and the government.
Please comment on any drawbacks associated with negotiating and
enforcing off-cycle process deadlines with manufacturers.
    NHTSA is proposing to modify the eligibility requirements for non-
menu off-cycle technologies in the CAFE program starting in model year
2024. Manufacturers will be required to finalize their analytical plans
by December before the model years and their final official technology
credit requests by September during the model year. Manufacturers will
also be required to meet the proposed deadlines or be subject an
enforcement action. Unless an extension is granted by NHTSA for good
cause, a manufacturer will be precluded from claiming any off-menu
items not timely submitted. Failure to request extensions or meet
negotiated deadlines will be subject to enforcement action in
compliance with 49 U.S.C. 32912(a).
    To further streamline the process of reviews, NHTSA also proposes
to work with EPA to create a quicker process for adding off-cycle
technologies to the predetermined menu list if widely approved for
multiple manufacturers. For example, the agencies added high-efficiency
alternators and advanced A/C compressors to the menu allowing
manufacturers to select the menu credit rather than continuing to seek
credits through the public approval process. High-efficiency
alternators were added to the off-cycle credits menu, and advanced A/C
compressors with a variable crankcase valve were added to the menu for
A/C efficiency credits. The credit levels are based on data previously
submitted by multiple manufacturers through the off-cycle credits
application process. The high efficiency alternator credit is scalable
with efficiency, providing an increasing credit value of 0.16 grams/
mile CO2 per percent improvement as the efficiency of the
alternator increases above a baseline level of 67 percent efficiency.
The advanced A/C compressor credit value is 1.1 grams/mile for both
cars and light trucks.\548\
---------------------------------------------------------------------------

    \548\ For additional details regarding the derivation of these
credits, see EPA's Memorandum to Docket EPA-HQ-OAR-2018-0283
(``Potential Off-cycle Menu Credit Levels and Definitions for High
Efficiency Alternators and Advanced Air Conditioning Compressors'').
---------------------------------------------------------------------------

(ii) Safety Assessment
    In the 2016 heavy-duty fuel economy rule (81 FR 73478, October 25,
2016), NHTSA adopted provisions preventing manufacturers from receiving
credits for technology that impair safety--whether due to a defect,
negatively affecting a FMVSS, or other safety reasons.\549\
Additionally, NHTSA clarified that technologies that do not provide
fuel savings as intended will also be stripped of credits. To harmonize
the light-duty and heavy-duty off-cycle programs, NHTSA is proposing to
adopt these provisions for the light-duty CAFE program. While the
agency encourages fuel economy innovations, safety remains NHTSA's
primary mission and any technology applied for CAFE-purposes should not
impair safety. Furthermore, adopting these requirements for the light-
duty fleet will harmonize it with the heavy-duty regulations.
---------------------------------------------------------------------------

    \549\ See 49 CFR 535.7(f)(2)(iii).
---------------------------------------------------------------------------

(iii) Menu Credit Cap
    Due to the uncertainties associated with combining menu
technologies and the fact that some uncertainty is introduced because
off-cycle credits are provided based on a general assessment of off-
cycle performance, as opposed to testing on the individual vehicle
models, EPA established caps that limit the amount of credits a
manufacturer may generate using the EPA menu list. Off-cycle technology
is capped at 10 grams/mile per year on a combined car and truck fleet-
wide average basis. In its concurrent proposal for MYs 2023-2026 GHG
standards (86 FR 43726, August 10, 2021), EPA is proposing to increase
the off-cycle menu cap from 10 grams CO2/mile to 15 grams
CO2/mile beginning with MY 2023. EPA also proposes to revise
the definitions for passive cabin ventilation and active engine and
transmission warm-up beginning in MY 2023, as discussed in the next
following sections. Furthermore, EPA is proposing, for MYs

2020-2022, to allow manufacturers to use the cap of 15 g/mi if the
revised definitions are met for these technologies. NHTSA is proposing
to adopt these same provisions for the CAFE programs as a part of this
rulemaking. No caps were established for technologies gaining credits
through the petitioning or 5-cycle approval methodologies and the
agency are not proposing to add caps in these areas.
(iv) Proposal To Update the Menu Technology Definitions
(a) Passive Cabin Ventilation
    Some manufacturers have claimed off-cycle credits for passive
ventilation cabin technologies based on the addition of software logic
to their HVAC system that sets the dash vent to the open position when
the power to vehicle is turned off at higher ambient temperatures. The
manufacturers have indicated that the opening of the vent allows for
the flow of ambient temperature air into the cabin. While ensuring that
the interior of the vehicle is open for flow into the cabin, by only
opening the dash vent no other action is taken to improve the flow of
heated air out of the vehicle. This technology relies on the pressure
in the cabin to reach a sufficient level for the heated air in the
interior to flow out through body leaks or the body exhausters open and
vent heated air out of the cabin.
    The credits for passive cabin ventilation were determined based on
an National Renewable Energy Laboratory (NREL) study that strategically
opened a sunroof to allow for the unrestricted flow of heated air to
exit the interior of the vehicle while combined with additional floor
openings to provide a minimally restricted entry for cooler ambient air
to enter the cabin.\550\ The modifications NREL performed on the
vehicle reduced the flow restrictions for both heated cabin air to exit
the vehicle and cooler ambient air to enter the vehicle, creating a
convective airflow path through the vehicle cabin.
---------------------------------------------------------------------------

    \550\ Rugh, J., Chaney, L., Lustbader, J., and Meyer, J.,
``Reduction in Vehicle Temperatures and Fuel Use from Cabin
Ventilation, Solar-Reflective Paint, and a New Solar-Reflective
Glazing,'' SAE Technical Paper 2007-01-1194, 2007.
---------------------------------------------------------------------------

    Analytical studies performed by manufacturers to evaluate the
performance of the open dash vent demonstrate that while the dash vent
may allow for additional airflow of ambient temperature air entering
the cabin, it does not reduce the existing restrictions on heated cabin
air exiting the vehicle. Opening the dash vent primarily relies on body
leaks and occasional venting of the heated cabin air through the body
exhausters for the higher temperature cabin air to be vented from the
vehicle. While this does provide some reduction in cabin temperatures
this technology is not as effective as the combination of vents used by
the NREL researchers to allow additional ambient temperature air to
enter the cabin and also to reduce the restriction of heated air
exiting the cabin.
    As noted in the Joint Technical Support Document: Final Rulemaking
for 2017-2025 Light-Duty Vehicle Greenhouse Gas Emission Standards and
Corporate Average Fuel Economy Standards,\551\ pg. 584, ``For passive
ventilation technologies, such as opening of windows and/or sunroofs
and use of floor vents to supply fresh air to the cabin (which enhances
convective airflow), (1.7 grams/mile for LDVs and 2.3 grams/mile for
LDTs) a cabin air temperature reduction of 5.7 [deg]C can be
realized.'' The passive cabin ventilation credit values were based on
achieving the 5.7 [deg]C cabin temperature reduction.
---------------------------------------------------------------------------

    \551\ ``Final Rulemaking for 2017-2025 Light-Duty Vehicle
Greenhouse Gas Emission Standards and Corporate Average Fuel Economy
Standards'' August 2012. NHTSA and EPA. https://www.nhtsa.gov/sites/nhtsa.gov/files/joint_final_tsd.pdf. Last Accessed June 6, 2021.
---------------------------------------------------------------------------

    EPA and NHTSA have decided to revise the passive cabin ventilation
definition to make it consistent with the technology used to generate
the credit value. NHTSA supports EPA's proposal to revise the
definition of passive cabin ventilation to only include methods which
create and maintain convective airflow through the body's cabin by
opening windows or a sunroof, or equivalent means of creating and
maintaining convective airflow, when the vehicle is parked outside in
direct sunlight.
    Current systems claiming the passive ventilation credit by opening
the dash vent would no longer meet the updated definition.
Manufacturers seeking to claim credits for the open dash vent system
will be eligible to petition the agency for credits for this technology
using the alternative EPA approved method outlined in Sec.  86.1869-
12(d).
(b) Active Engine and Transmission Warmup
    NHTSA, in coordination with EPA, is proposing to revise the menu
definitions of active engine and transmission warm-up to no longer
allow systems that capture heat from the coolant circulating in the
engine block prior to the opening of the thermostat to qualify for the
Active Engine and Active Transmission warm-up menu credits. The agency
would allow credit for coolant systems that capture heat from a liquid-
cooled exhaust manifold if the system is segregated from the coolant
loop in the engine block. The agency would also allow system design
that captures and routes waste heat from the exhaust to the engine or
transmission as this was the basis for these two credits as originally
proposed in the NPRM to the 2017 to 2025 GHG rulemaking (76 FR 74854,
Dec. 1, 2011).
    Manufacturers seeking to utilize their existing systems that
capture coolant heat before the engine is fully warmed-up and transfer
this heat to the engine oil and transmission fluid would remain
eligible to seek credits through the alternative method application
process outlined in Sec.  86.1869-12(d). These technologies may provide
some benefit, however, as noted above as these system designs remove
heat that is needed to warmup the engine may be less effective than
those that capture and utilize exhaust waste heat.

VIII. Public Participation

    NHTSA requests comments on all aspects of this NPRM. This section
describes how you can participate in this process.

How do I prepare and submit comments?

    Your comments must be written and in English.\552\ To ensure that
your comments are correctly filed in the docket, please include the
docket number NHTSA-2021-0053 in your comments. Your comments must not
be more than 15 pages long.\553\ NHTSA established this limit to
encourage you to write your primary comments in a concise fashion.
However, you may attach necessary additional documents to your
comments, and there is no limit on the length of the attachments. If
you are submitting comments electronically as a PDF (Adobe) file, we
ask that the documents please be scanned using the Optical Character
Recognition (OCR) process, thus allowing NHTSA to search and copy
certain portions of your submissions.\554\ Please note that pursuant to
the Data Quality Act, in order for substantive data to be relied upon
and used by the agency, it must meet the information quality standards
set forth in the OMB and DOT Data Quality Act guidelines. Accordingly,
we encourage you to consult the guidelines in preparing your comments.
OMB's

guidelines may be accessed at https://www.gpo.gov/fdsys/pkg/FR-2002-02-22/pdf/R2-59.pdf. DOT's guidelines may be accessed at https://www.transportation.gov/dot-information-dissemination-quality-guidelines.
---------------------------------------------------------------------------

    \552\ 49 CFR 553.21.
    \553\ Id.
    \554\ Optical character recognition (OCR) is the process of
converting an image of text, such as a scanned paper document or
electronic fax file, into computer-editable text.
---------------------------------------------------------------------------

Tips for Preparing Your Comments

    When submitting comments, please remember to:
     Identify the rulemaking by docket number and other
identifying information (subject heading, Federal Register date and
page number).
     Explain why you agree or disagree, suggest alternatives,
and substitute language for your requested changes.
     Describe any assumptions and provide any technical
information and/or data that you used.
     If you estimate potential costs or burdens, explain how
you arrived at your estimate in sufficient detail to allow for it to be
reproduced.
     Provide specific examples to illustrate your concerns and
suggest alternatives.
     Explain your views as clearly as possible, avoiding the
use of profanity or personal threats.
     Make sure to submit your comments by the comment period
deadline identified in the DATES section above.

How can I be sure that my comments were received?

    If you submit your comments to NHTSA's docket by mail and wish DOT
Docket Management to notify you upon receipt of your comments, please
enclose a self-addressed, stamped postcard in the envelope containing
your comments. Upon receiving your comments, Docket Management will
return the postcard by mail.

How do I submit confidential business information?

    If you wish to submit any information any information under a claim
of confidentiality, you should submit three copies of your complete
submission, including the information you claim to be confidential
business information, to the Chief Counsel, NHTSA, at the address given
above under FOR FURTHER INFORMATION CONTACT. When you send a comment
containing confidential business information, you should include a
cover letter setting forth the information specified in 49 CFR part
512.
    In addition, you should submit a copy from which you have deleted
the claimed confidential business information to the Docket by one of
the methods set forth above.

Will NHTSA consider late comments?

    NHTSA will consider all comments received before the close of
business on the comment closing date indicated above under DATES. To
the extent practicable, we will also consider comments received after
that date. If interested persons believe that any information that the
agency places in the docket after the issuance of the NPRM affects
their comments, they may submit comments after the closing date
concerning how the agency should consider that information for the
final rule. However, the agency's ability to consider any such late
comments in this rulemaking will be limited due to the time frame for
issuing a final rule.
    If a comment is received too late for us to practicably consider in
developing a final rule, we will consider that comment as an informal
suggestion for future rulemaking action.

How can I read the comments submitted by other people?

    You may read the materials placed in the dockets for this document
(e.g., the comments submitted in response to this document by other
interested persons) at any time by going to https://www.regulations.gov. Follow the online instructions for accessing the
dockets. You may also read the materials at the DOT Docket Management
Facility by going to the street address given above under ADDRESSES.

How do I participate in the public hearings?

    NHTSA will hold one virtual public hearing during the public
comment period. The agency will announce the specific date and web
address for the hearing in a supplemental Federal Register
notification. The agency will accept oral and written comments to the
rulemaking documents and will also accept comments to the Supplemental
Environmental Impact Statement (SEIS) at this hearing. The hearing will
start at 9 a.m. Eastern standard time and continue until everyone has
had a chance to speak.
    NHTSA will conduct the hearing informally, and technical rules of
evidence will not apply. We will arrange for a written transcript of
each hearing to be posted in the dockets as soon as it is available and
keep the official record of the hearing open for 30 days following the
hearing to allow you to submit supplementary information.
    The Draft Supplemental Environmental Impact Statement (SEIS)
associated with this proposal has a unique public docket number and is
available in Docket No. NHTSA-2021-0054.
    Comments on the Draft SEIS can be submitted electronically at
http://www.regulations.gov, in Docket No. NHTSA-2021-0054. You may also
mail or hand deliver comments to Docket Management, U.S. Department of
Transportation, 1200 New Jersey Avenue SE, Room W12-140, Washington, DC
20590 (referencing Docket No. NHTSA-2021-0054), between 9 a.m. and 5
p.m., Monday through Friday, except on Federal holidays. To be sure
someone is there to help you, please call<PHONE_NUMBER> before coming.
All comments and materials received, including the names and addresses
of the commenters who submit them, will become part of the
administrative record and will be posted on the web at http://www.regulations.gov.

IX. Regulatory Notices and Analyses

A. Executive Order 12866, Executive Order 13563

    Executive Order 12866, ``Regulatory Planning and Review'' (58 FR
51735, Oct. 4, 1993), as amended by Executive Order 13563, ``Improving
Regulation and Regulatory Review'' (76 FR 3821, Jan. 21, 2011),
provides for making determinations whether a regulatory action is
``significant'' and therefore subject to the Office of Management and
Budget (OMB) review process and to the requirements of the Executive
Order. Under these Executive orders, this action is an ``economically
significant regulatory action'' because it is likely to have an annual
effect on the economy of $100 million or more. Accordingly, NHTSA
submitted this action to OMB for review and any changes made in
response to OMB recommendations have been documented in the docket for
this action. The benefits and costs of this proposal are described
above and in the Preliminary Regulatory Impact Analysis (PRIA), which
is located in the docket and on NHTSA's website.

B. DOT Regulatory Policies and Procedures

    This proposal is also significant within the meaning of the
Department of Transportation's Regulatory Policies and Procedures. The
benefits and costs of the proposal are described above and in the PRIA,
which is located in the docket and on NHTSA's website.

C. Executive Order 13990

    Executive Order 13990, ``Protecting Public Health and the
Environment and Restoring Science to Tackle the Climate Crisis'' (86 FR
7037, Jan. 25, 2021), directed the immediate review of ``The Safer
Affordable Fuel-Efficient (SAFE)

Vehicles Rule for Model Years 2021-2026 Passenger Cars and Light
Trucks'' (the 2020 final rule) by July 2021. The Executive order
directed that ``In considering whether to propose suspending, revising,
or rescinding that rule, the agency [i.e., NHTSA] should consider the
views of representatives from labor unions, States, and industry.''
    This proposal follows the review directed in this Executive order.
Promulgated under NHTSA's statutory authorities, it proposes new CAFE
standards for the model years covered by the 2020 final rule for which
there is still available lead time to change, and it accounts for the
views provided by labor unions, States, and industry.

D. Environmental Considerations

1. National Environmental Policy Act (NEPA)
    Concurrently with this NPRM, NHTSA is issuing a Supplemental
Environmental Impact Statement (SEIS), pursuant to the National
Environmental Policy Act, 42 U.S.C. 4321-4347, and implementing
regulations issued by the Council on Environmental Quality (CEQ), 40
CFR part 1500, and NHTSA, 49 CFR part 520. NHTSA prepared the SEIS to
analyze and disclose the potential environmental impacts of the
proposed CAFE standards and a range of alternatives. The SEIS analyzes
direct, indirect, and cumulative impacts and analyzes impacts in
proportion to their significance.
    The SEIS describes potential environmental impacts to a variety of
resources, including fuel and energy use, air quality, climate, land
use and development, hazardous materials and regulated wastes,
historical and cultural resources, noise, and environmental justice.
The SEIS also describes how climate change resulting from global carbon
dioxide emissions (including CO2 emissions attributable to
the U.S. light-duty transportation sector under the alternatives
considered) could affect certain key natural and human resources.
Resource areas are assessed qualitatively and quantitatively, as
appropriate, in the SEIS.
    NHTSA has considered the information contained in the SEIS as part
of developing this proposal. The SEIS is available for public comment;
instructions for the submission of comments are included inside the
document. NHTSA will simultaneously issue the Final Environmental
Impact Statement and Record of Decision, pursuant to 49 U.S.C. 304a(b),
unless it is determined that statutory criteria or practicability
considerations preclude simultaneous issuance. For additional
information on NHTSA's NEPA analysis, please see the SEIS.
2. Clean Air Act (CAA) as Applied to NHTSA's Proposal
    The CAA (42 U.S.C. 7401 et seq.) is the primary Federal legislation
that addresses air quality. Under the authority of the CAA and
subsequent amendments, EPA has established National Ambient Air Quality
Standards (NAAQS) for six criteria pollutants, which are relatively
commonplace pollutants that can accumulate in the atmosphere as a
result of human activity. EPA is required to review each NAAQS every
five years and to revise those standards as may be appropriate
considering new scientific information.
    The air quality of a geographic region is usually assessed by
comparing the levels of criteria air pollutants found in the ambient
air to the levels established by the NAAQS (taking into account, as
well, the other elements of a NAAQS: Averaging time, form, and
indicator). Concentrations of criteria pollutants within the air mass
of a region are measured in parts of a pollutant per million parts
(ppm) of air or in micrograms of a pollutant per cubic meter ([micro]g/
m\3\) of air present in repeated air samples taken at designated
monitoring locations using specified types of monitors. These ambient
concentrations of each criteria pollutant are compared to the levels,
averaging time, and form specified by the NAAQS in order to assess
whether the region's air quality is in attainment with the NAAQS.
    When the measured concentrations of a criteria pollutant within a
geographic region are below those permitted by the NAAQS, EPA
designates the region as an attainment area for that pollutant, while
regions where concentrations of criteria pollutants exceed Federal
standards are called nonattainment areas. Former nonattainment areas
that are now in compliance with the NAAQS are designated as maintenance
areas. Each State with a nonattainment area is required to develop and
implement a State Implementation Plan (SIP) documenting how the region
will reach attainment levels within time periods specified in the CAA.
For maintenance areas, the SIP must document how the State intends to
maintain compliance with the NAAQS. When EPA revises a NAAQS, each
State must revise its SIP to address how it plans to attain the new
standard.
    No Federal agency may ``engage in, support in any way or provide
financial assistance for, license or permit, or approve'' any activity
that does not ``conform'' to a SIP or Federal Implementation Plan after
EPA has approved or promulgated it.\555\ Further, no Federal agency may
``approve, accept, or fund'' any transportation plan, program, or
project developed pursuant to title 23 or chapter 53 of title 49,
U.S.C., unless the plan, program or project has been found to
``conform'' to any applicable implementation plan in effect.\556\ The
purpose of these conformity requirements is to ensure that Federally
sponsored or conducted activities do not interfere with meeting the
emissions targets in SIPs, do not cause or contribute to new violations
of the NAAQS, and do not impede the ability of a State to attain or
maintain the NAAQS or delay any interim milestones. EPA has issued two
sets of regulations to implement the conformity requirements:
---------------------------------------------------------------------------

    \555\ 42 U.S.C.7506(c)(1).
    \556\ 42 U.S.C. 7506(c)(2).
---------------------------------------------------------------------------

    (1) The Transportation Conformity Rule \557\ applies to
transportation plans, programs, and projects that are developed,
funded, or approved under title 23 or chapter 53 of title 49, U.S.C.
---------------------------------------------------------------------------

    \557\ 40 CFR part 51, subpart T, and part 93, subpart A.
---------------------------------------------------------------------------

    (2) The General Conformity Rule \558\ applies to all other Federal
actions not covered under transportation conformity. The General
Conformity Rule establishes emissions thresholds, or de minimis levels,
for use in evaluating the conformity of an action that results in
emissions increases.\559\ If the net increases of direct and indirect
emissions exceed any of these thresholds, and the action is not
otherwise exempt, then a conformity determination is required. The
conformity determination can entail air quality modeling studies,
consultation with EPA and State air quality agencies, and commitments
to revise the SIP or to implement measures to mitigate air quality
impacts.
---------------------------------------------------------------------------

    \558\ 40 CFR part 51, subpart W, and part 93, subpart B.
    \559\ 40 CFR 93.153(b).
---------------------------------------------------------------------------

    The proposed CAFE standards and associated program activities are
not developed, funded, or approved under title 23 or chapter 53 of
title 49, U.S.C. Accordingly, this action and associated program
activities are not subject to transportation conformity. Under the
General Conformity Rule, a conformity determination is required where a
Federal action would result in total direct and indirect emissions of a
criteria pollutant or precursor originating in nonattainment or
maintenance areas equaling or exceeding the rates specified in 40 CFR
93.153(b)(1) and (2). As explained

below, NHTSA's proposed action results in neither direct nor indirect
emissions as defined in 40 CFR 93.152.
    The General Conformity Rule defines direct emissions as ``those
emissions of a criteria pollutant or its precursors that are caused or
initiated by the Federal action and originate in a nonattainment area
and occur at the same time and place as the action and are reasonably
foreseeable.'' \560\ NHTSA's proposed action would set fuel economy
standards for light-duty vehicles. It therefore would not cause or
initiate direct emissions consistent with the meaning of the General
Conformity Rule.\561\ Indeed, the proposal in aggregate reduces
emissions, and to the degree the model predicts small (and time-
limited) increases, these increases are based on a theoretical response
by individuals to fuel economy prices and savings, which are at best
indirect.
---------------------------------------------------------------------------

    \560\ 40 CFR 93.152.
    \561\ Dep't of Transp. v. Pub. Citizen, 541 U.S. at 772 (``[T]he
emissions from the Mexican trucks are not `direct' because they will
not occur at the same time or at the same place as the promulgation
of the regulations.'') NHTSA's action is to establish fuel economy
standards for MYs 2024-2026 passenger cars and light trucks; an
emissions increase, if any, would occur in a different place and
well after promulgation of an eventual final rule.
---------------------------------------------------------------------------

    Indirect emissions under the General Conformity Rule are those
emissions of a criteria pollutant or its precursors: That are caused or
initiated by the Federal action and originate in the same nonattainment
or maintenance area but occur at a different time or place as the
action; that are reasonably foreseeable; that the agency can
practically control; and for which the agency has continuing program
responsibility.\562\ Each element of the definition must be met to
qualify as indirect emissions. NHTSA has determined that, for purposes
of general conformity, emissions (if any) that may result from the
proposed fuel economy standards would not be caused by NHTSA's action,
but rather would occur because of subsequent activities the agency
cannot practically control. ``[E]ven if a Federal licensing,
rulemaking, or other approving action is a required initial step for a
subsequent activity that causes emissions, such initial steps do not
mean that a Federal agency can practically control any resulting
emissions.'' \563\
---------------------------------------------------------------------------

    \562\ 40 CFR 93.152.
    \563\ Id.
---------------------------------------------------------------------------

    As the CAFE program uses performance-based standards, NHTSA cannot
control the technologies vehicle manufacturers use to improve the fuel
economy of passenger cars and light trucks. Furthermore, NHTSA cannot
control consumer purchasing (which affects average achieved fleetwide
fuel economy) and driving behavior (i.e., operation of motor vehicles,
as measured by VMT). It is the combination of fuel economy
technologies, consumer purchasing, and driving behavior that results in
criteria pollutant or precursor emissions. For purposes of analyzing
the environmental impacts of the proposal and alternatives under NEPA,
NHTSA has made assumptions and estimates regarding all of these
factors. The agency's SEIS projects that increases in air toxics and
criteria pollutants would occur in some nonattainment areas under
certain alternatives in the near term, although over the longer term,
all action alternatives see improvements. However, the proposed
standards and alternatives do not mandate specific manufacturer
decisions, consumer purchasing, or driver behavior, and NHTSA cannot
practically control any of them.\564\
---------------------------------------------------------------------------

    \564\ See, e.g., Dep't of Transp. v. Pub. Citizen, 541 U.S. 752,
772-73 (2004); South Coast Air Quality Management District v.
Federal Energy Regulatory Commission, 621 F.3d 1085, 1101 (9th Cir.
2010).
---------------------------------------------------------------------------

    In addition, NHTSA does not have the statutory authority to control
the actual VMT by drivers. As the extent of emissions depends directly
on the operation of motor vehicles, changes in any emissions that could
result from NHTSA's proposed standards are not changes the agency can
practically control or for which the agency has continuing program
responsibility. Therefore, the proposed standards and alternative
standards considered by NHTSA would not cause indirect emissions under
the General Conformity Rule, and a general conformity determination is
not required.
3. National Historic Preservation Act (NHPA)
    The NHPA (54 U.S.C. 300101 et seq.) sets forth Government policies
and procedures regarding ``historic properties''--that is, districts,
sites, buildings, structures, and objects included on or eligible for
the National Register of Historic Places. Section 106 of the NHPA
requires Federal agencies to ``take into account'' the effects of their
actions on historic properties.\565\ NHTSA concludes that the NHPA is
not applicable to this proposal because the promulgation of CAFE
standards for light-duty vehicles is not the type of activity that has
the potential to cause effects on historic properties. However, NHTSA
includes a brief, qualitative discussion of the impacts of the
alternatives on historical and cultural resources in the SEIS.
---------------------------------------------------------------------------

    \565\ Section 106 is codified at 54 U.S.C. 306108. Implementing
regulations for the Section 106 process are located at 36 CFR part
800.
---------------------------------------------------------------------------

4. Fish and Wildlife Conservation Act (FWCA)
    The FWCA (16 U.S.C. 2901 et seq.) provides financial and technical
assistance to States for the development, revision, and implementation
of conservation plans and programs for nongame fish and wildlife. In
addition, the Act encourages all Federal departments and agencies to
utilize their statutory and administrative authorities to conserve and
to promote conservation of nongame fish and wildlife and their
habitats. NHTSA concludes that the FWCA does not apply to this proposal
because it does not involve the conservation of nongame fish and
wildlife and their habitats.
5. Coastal Zone Management Act (CZMA)
    The Coastal Zone Management Act (16 U.S.C. 1451 et seq.) provides
for the presentation, protection, development, and (where possible)
restoration and enhancement of the Nation's coastal zone resources.
Under the statute, States are provided with funds and technical
assistance in developing coastal zone management programs. Each
participating State must submit its program to the Secretary of
Commerce for approval. Once the program has been approved, any activity
of a Federal agency, either within or outside of the coastal zone, that
affects any land or water use or natural resource of the coastal zone
must be carried out in a manner that is consistent, to the maximum
extent practicable, with the enforceable policies of the State's
program.\566\
---------------------------------------------------------------------------

    \566\ 16 U.S.C. 1456(c)(1)(A).
---------------------------------------------------------------------------

    NHTSA concludes that the CZMA does not apply to this proposal
because it does not involve an activity within, or outside of, the
Nation's coastal zones that affects any land or water use or natural
resource of the coastal zone. NHTSA has, however, conducted a
qualitative review in its SEIS of the related direct, indirect, and
cumulative impacts, positive or negative, of all the alternatives on
potentially affected resources, including coastal zones.
6. Endangered Species Act (ESA)
    Under Section 7(a)(2) of the ESA, Federal agencies must ensure that
actions they authorize, fund, or carry out are ``not likely to
jeopardize the continued existence'' of any federally listed threatened
or endangered species or result in the destruction or adverse

modification of the designated critical habitat of these species.\567\
If a Federal agency determines that an agency action may affect a
listed species or designated critical habitat, it must initiate
consultation with the appropriate Service--the U.S. Fish and Wildlife
Service of the Department of the Interior and/or the National Oceanic
and Atmospheric Administration's National Marine Fisheries Service of
the Department of Commerce, depending on the species involved--in order
to ensure that the action is not likely to jeopardize the species or
destroy or adversely modify designated critical habitat.\568\ Under
this standard, the Federal agency taking action evaluates the possible
effects of its action and determines whether to initiate
consultation.\569\
---------------------------------------------------------------------------

    \567\ 16 U.S.C. 1536(a)(2).
    \568\ See 50 CFR 402.14.
    \569\ See 51 FR 9926, 19949 (Jun. 3, 1986).
---------------------------------------------------------------------------

    Pursuant to Section 7(a)(2) of the ESA, NHTSA has considered the
effects of the proposed standards and has reviewed applicable ESA
regulations, case law, and guidance to determine what, if any, impact
there might be to listed species or designated critical habitat. NHTSA
has considered issues related to emissions of CO2 and other
GHGs, and issues related to non-GHG emissions. Based on this
assessment, NHTSA determines that the action of setting CAFE standards
does not require consultation under Section 7(a)(2) of the ESA.
Accordingly, NHTSA has concluded its review of this action under
Section 7 of the ESA.
7. Floodplain Management (Executive Order 11988 and DOT Order 5650.2)
    These orders require Federal agencies to avoid the long- and short-
term adverse impacts associated with the occupancy and modification of
floodplains, and to restore and preserve the natural and beneficial
values served by floodplains. Executive Order 11988 also directs
agencies to minimize the impacts of floods on human safety, health and
welfare, and to restore and preserve the natural and beneficial values
served by floodplains through evaluating the potential effects of any
actions the agency may take in a floodplain and ensuring that its
program planning and budget requests reflect consideration of flood
hazards and floodplain management. DOT Order 5650.2 sets forth DOT
policies and procedures for implementing Executive Order 11988. The DOT
order requires that the agency determine if a proposed action is within
the limits of a base floodplain, meaning it is encroaching on the
floodplain, and whether this encroachment is significant. If
significant, the agency is required to conduct further analysis of the
proposed action and any practicable alternatives. If a practicable
alternative avoids floodplain encroachment, then the agency is required
to implement it.
    In this proposal, NHTSA is not occupying, modifying, and/or
encroaching on floodplains. NHTSA therefore concludes that the orders
do not apply to this proposal. NHTSA has, however, conducted a review
of the alternatives on potentially affected resources, including
floodplains, in its SEIS.
8. Preservation of the Nation's Wetlands (Executive Order 11990 and DOT
Order 5660.1a)
    These orders require Federal agencies to avoid, to the extent
possible, undertaking or providing assistance for new construction
located in wetlands unless the agency head finds that there is no
practicable alternative to such construction and that the proposed
action includes all practicable measures to minimize harms to wetlands
that may result from such use. Executive Order 11990 also directs
agencies to take action to minimize the destruction, loss, or
degradation of wetlands in ``conducting Federal activities and programs
affecting land use, including but not limited to water and related land
resources planning, regulating, and licensing activities.'' DOT Order
5660.1a sets forth DOT policy for interpreting Executive Order 11990
and requires that transportation projects ``located in or having an
impact on wetlands'' should be conducted to assure protection of the
Nation's wetlands. If a project does have a significant impact on
wetlands, an EIS must be prepared.
    NHTSA is not undertaking or providing assistance for new
construction located in wetlands. NHTSA therefore concludes that these
orders do not apply to this proposal. NHTSA has, however, conducted a
review of the alternatives on potentially affected resources, including
wetlands, in its SEIS.
9. Migratory Bird Treaty Act (MTBA), Bald and Golden Eagle Protection
Act (BGEPA), Executive Order 13186
    The MTBA (16 U.S.C. 703-712) provides for the protection of certain
migratory birds by making it illegal for anyone to ``pursue, hunt,
take, capture, kill, attempt to take, capture, or kill, possess, offer
for sale, sell, offer for barter, barter, offer to purchase, purchase,
deliver for shipment, ship, export, import, cause to be shipped,
exported, or imported, deliver for transportation, carry or cause to be
carried, or receive for shipment, transportation, carriage, or export''
any migratory bird covered under the statute.\570\
---------------------------------------------------------------------------

    \570\ 16 U.S.C. 703(a).
---------------------------------------------------------------------------

    The BGEPA (16 U.S.C. 668-668d) makes it illegal to ``take, possess,
sell, purchase, barter, offer to sell, purchase or barter, transport,
export or import'' any bald or golden eagles.\571\ Executive Order
13186, ``Responsibilities of Federal Agencies to Protect Migratory
Birds,'' helps to further the purposes of the MBTA by requiring a
Federal agency to develop a Memorandum of Understanding (MOU) with the
Fish and Wildlife Service when it is taking an action that has (or is
likely to have) a measurable negative impact on migratory bird
populations.
---------------------------------------------------------------------------

    \571\ 16 U.S.C. 668(a).
---------------------------------------------------------------------------

    NHTSA concludes that the MBTA, BGEPA, and Executive Order 13186 do
not apply to this proposal because there is no disturbance, take,
measurable negative impact, or other covered activity involving
migratory birds or bald or golden eagles involved in this rulemaking.
10. Department of Transportation Act (Section 4(f))
    Section 4(f) of the Department of Transportation Act of 1966 (49
U.S.C. 303), as amended, is designed to preserve publicly owned park
and recreation lands, waterfowl and wildlife refuges, and historic
sites. Specifically, Section 4(f) provides that DOT agencies cannot
approve a transportation program or project that requires the use of
any publicly owned land from a public park, recreation area, or
wildlife or waterfowl refuge of national, State, or local significance,
unless a determination is made that:
    (1) There is no feasible and prudent alternative to the use of
land, and
    (2) The program or project includes all possible planning to
minimize harm to the property resulting from the use.
    These requirements may be satisfied if the transportation use of a
Section 4(f) property results in a de minimis impact on the area.
    NHTSA concludes that Section 4(f) does not apply to this proposal
because this rulemaking is not an approval of a transportation program
nor project that requires the use of any publicly owned land.

11. Executive Order 12898: ``Federal Actions To Address Environmental
Justice in Minority Populations and Low-Income Populations''
    Executive Order 12898, ``Federal Actions to Address Environmental
Justice in Minority Populations and Low-Income Populations'' (Feb. 16,
1994), directs Federal agencies to ``promote nondiscrimination in
federal programs substantially affecting human health and the
environment, and provide minority and low-income communities access to
public information on, and an opportunity for public participation in,
matters relating to human health or the environment.'' E.O. 12898 also
directs agencies to identify and consider any disproportionately high
and adverse human health or environmental effects that their actions
might have on minority and low-income communities and provide
opportunities for community input in the NEPA process. CEQ has provided
agencies with general guidance on how to meet the requirements of the
E.O. as it relates to NEPA. A White House Environmental Justice
Interagency Council established under E.O. 14008, ``Tackling the
Climate Crisis at Home and Abroad,'' is expected to advise CEQ on ways
to update E.O. 12898, including the expansion of environmental justice
advice and recommendations. The White House Environmental Justice
Interagency Council will advise on increasing environmental justice
monitoring and enforcement.
    Additionally, the 2021 DOT Order 5610.2(c), ``U.S. Department of
Transportation Actions to Address Environmental Justice in Minority
Populations and Low-Income Populations'' (May 14, 2021), describes the
process for DOT agencies to incorporate environmental justice
principles in programs, policies, and activities. The DOT's
Environmental Justice Strategy specifies that environmental justice and
fair treatment of all people means that no population be forced to bear
a disproportionate burden due to transportation decisions, programs,
and policies. It also defines the term minority and low-income in the
context of DOT's environmental justice analyses. Minority is defined as
a person who is Black, Hispanic or Latino, Asian American, American
Indian or Alaskan Native, or Native Hawaiian or other Pacific Islander.
Low-income is defined as a person whose household income is at or below
the Department of Health and Human Services poverty guidelines. Low-
income and minority populations may live in geographic proximity or be
geographically dispersed/transient. In 2021, DOT reviewed and updated
its environmental justice strategy to ensure that it continues to
reflect its commitment to environmental justice principles and
integrating those principles into DOT programs, policies, and
activities.
    Section VI and the SEIS discuss NHTSA's consideration of
environmental justice issues associated with this proposal.
12. Executive Order 13045: ``Protection of Children From Environmental
Health Risks and Safety Risks''
    This action is subject to Executive Order 13045 (62 FR 19885, Apr.
23, 1997) because it is an economically significant regulatory action
as defined by E.O. 12866, and NHTSA has reason to believe that the
environmental health and safety risks related to this action, although
small, may have a disproportionate effect on children. Specifically,
children are more vulnerable to adverse health effects related to
mobile source emissions, as well as to the potential long-term impacts
of climate change. Pursuant to E.O. 13045, NHTSA must prepare an
evaluation of the environmental health or safety effects of the planned
regulation on children and an explanation of why the planned regulation
is preferable to other potentially effect and reasonably feasible
alternatives considered by NHTSA. Further, this analysis may be
included as part of any other required analysis.
    All of the action alternatives would reduce CO2
emissions relative to the baseline and thus have positive effects on
mitigating global climate change, and thus environmental and health
effects associated with climate change. While environmental and health
effects associated with criteria pollutant and toxic air pollutant
emissions vary over time and across alternatives, negative effects,
when estimated, are extremely small. This preamble and the SEIS discuss
air quality, climate change, and their related environmental and health
effects, noting where these would disproportionately affect children.
In addition, Section VI of this preamble explains why NHTSA believes
that the proposed standards are preferable to other alternatives
considered.

E. Regulatory Flexibility Act

    Pursuant to the Regulatory Flexibility Act (5 U.S.C. 601 et seq.,
as amended by the Small Business Regulatory Enforcement Fairness Act
(SBREFA) of 1996), whenever an agency is required to publish a notice
of proposed rulemaking or final rule, it must prepare and make
available for public comment a regulatory flexibility analysis that
describes the effect of the rule on small entities (i.e., small
businesses, small organizations, and small governmental jurisdictions).
No regulatory flexibility analysis is required if the head of an agency
certifies the rule will not have a significant economic impact on a
substantial number of small entities. SBREFA amended the Regulatory
Flexibility Act to require Federal agencies to provide a statement of
the factual basis for certifying that a rule will not have a
significant economic impact on a substantial number of small entities.
    NHTSA has considered the impacts of this proposed rule under the
Regulatory Flexibility Act and certifies that this proposed rule would
not have a significant economic impact on a substantial number of small
entities. The following is NHTSA's statement providing the factual
basis for this certification pursuant to 5 U.S.C. 605(b).
    Small businesses are defined based on the North American Industry
Classification System (NAICS) code.\572\ One of the criteria for
determining size is the number of employees in the firm. For
establishments primarily engaged in manufacturing or assembling
automobiles, as well as light duty trucks, the firm must have less than
1,500 employees to be classified as a small business. This rule would
affect motor vehicle manufacturers. As shown in Table IX-1, the agency
have identified 13 small manufacturers of passenger cars, light trucks,
and SUVs of electric, hybrid, and internal combustion engines. NHTSA
acknowledges that some newer manufacturers may not be listed. However,
those new manufacturers tend to have transportation products that are
not part of the light-duty vehicle fleet and have yet to start
production of light-duty vehicles. Moreover, NHTSA does not believe
that there are a ``substantial number'' of these newer companies.\573\
---------------------------------------------------------------------------

    \572\ Classified in NAICS under Subsector 336--Transportation
Equipment Manufacturing for Automobile Manufacturing (336111), Light
Truck (336112), and Heavy Duty Truck Manufacturing (336120). https://www.sba.gov/document/support--table-size-standards.
    \573\ 5 U.S.C. 605(b).

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[GRAPHIC] [TIFF OMITTED] TP03SE21.204

    NHTSA believes that the proposed rulemaking would not have a
significant economic impact on the small vehicle manufacturers because
under 49 CFR part 525, passenger car manufacturers building fewer than
10,000 vehicles per year can petition NHTSA to have alternative
standards set for those manufacturers. Listed manufacturers producing
ICE vehicles do not currently meet the standard and must already
petition the agency for relief. If the standard is raised, it has no
meaningful impact on these manufacturers--they still must go through
the same process and petition for relief. Given there already is a
mechanism for relieving burden on small businesses, which is the
purpose of the Regulatory Flexibility Act, a regulatory flexibility
analysis was not prepared.
---------------------------------------------------------------------------

    \574\ Estimated number of employees as of June 2021, source:
Linkedin.com and other websites reporting company profiles.
    \575\ Rough estimate of light duty vehicle production for model
year 2020.
---------------------------------------------------------------------------

    Further, small manufacturers of electric vehicles would not face a
significant economic impact. The method for earning credits applies
equally across manufacturers and does not place small entities at a
significant competitive disadvantage. In any event, even if the rule
had a ``significant economic impact'' on these small EV manufacturers,
the amount of these companies is not ``a substantial number.'' \576\
For these reasons, their existence does not alter the agency's analysis
of the applicability of the Regulatory Flexibility Act.
---------------------------------------------------------------------------

    \576\ 5 U.S.C. 605.
---------------------------------------------------------------------------

F. Executive Order 13132 (Federalism)

    Executive Order 13132 requires Federal agencies to develop an
accountable process to ensure ``meaningful and timely input by State
and local officials in the development of regulatory policies that have
federalism implications. The order defines the term ``[p]olicies that
have federalism implications'' to include regulations that have
``substantial direct effects on the States, on the relationship between
the national government and the States, or on the distribution of power
and responsibilities among the various levels of government.'' Under
the order, agencies may not issue a regulation that has federalism
implications, that imposes substantial direct compliance costs, unless
the Federal Government provides the funds necessary to pay the direct
compliance costs incurred by the State and local governments, or the
agencies consult with State and local officials early in the process of
developing the proposed regulation. NHTSA has complied with the order's
requirements and consulted directly with the California Air Resources
Board in developing a number of elements of this proposal. This
proposal would not impose direct compliance costs on State or local
governments, because the only entities directly subject to the proposal
are vehicle manufacturers.
    With regard to the federalism implications of the proposal, NHTSA
has spoken to this issue separately at 86 FR 25980 (May 12, 2021),
``Corporate Average Fuel Economy (CAFE) Preemption,'' notice of
proposed rulemaking. Comments on preemption of State and local laws
related to fuel economy standards that are received to this NPRM will
be deemed late comments to that NPRM (the comment period for which has
closed) and will be considered as time permits.

G. Executive Order 12988 (Civil Justice Reform)

    Pursuant to Executive Order 12988, ``Civil Justice Reform'' (61 FR
4729, Feb. 7, 1996), NHTSA has considered whether this rulemaking would
have any retroactive effect. This proposal does not have any
retroactive effect.

H. Executive Order 13175 (Consultation and Coordination With Indian
Tribal Governments)

    This proposal does not have tribal implications, as specified in
Executive Order 13175 (65 FR 67249, Nov. 9, 2000). This proposal, if
finalized, would be implemented at the Federal level and would impose
compliance costs only on vehicle manufacturers. Thus, Executive Order
13175, which requires consultation with Tribal officials when agencies
are developing policies that have ``substantial direct effects'' on
Tribes and Tribal interests, should not apply to this proposal.

I. Unfunded Mandates Reform Act

    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA)
requires Federal agencies to prepare a written assessment of the costs,
benefits, and other effects of a proposed or final rule that includes a
Federal mandate likely to result in the expenditure by State, local, or
Tribal governments, in the aggregate, or by the private sector, of

more than $100 million in any one year (adjusted for inflation with
base year of 1995). Adjusting this amount by the implicit gross
domestic product price deflator for 2018 results in $153 million
(110.296/71.868 = 1.53).\577\ Before promulgating a rule for which a
written statement is needed, section 205 of UMRA generally requires
NHTSA to identify and consider a reasonable number of regulatory
alternatives and adopt the least costly, most cost-effective, or least
burdensome alternative that achieves the objective of the rule. The
provisions of section 205 do not apply when they are inconsistent with
applicable law. Moreover, section 205 allows NHTSA to adopt an
alternative other than the least costly, most cost-effective, or least
burdensome alternative if the agency publishes with the rule an
explanation of why that alternative was not adopted.
---------------------------------------------------------------------------

    \577\ Bureau of Economic Analysis, National Income and Product
Accounts (NIPA), Table 1.1.9 Implicit Price Deflators for Gross
Domestic Product. https://bea.gov/iTable/index_nipa.cfm.
---------------------------------------------------------------------------

    This proposal would not result in the expenditure by State, local,
or Tribal governments, in the aggregate, of more than $153 million
annually, but it will result in the expenditure of that magnitude by
vehicle manufacturers and/or their suppliers. In developing this
proposal, NHTSA considered alternative fuel economy standards both
lower and higher than the preferred alternative. NHTSA tentatively
concludes that the preferred alternative represents the least costly,
most cost-effective, and least burdensome alternative that achieves the
objectives of the proposal.

J. Regulation Identifier Number

    The Department of Transportation assigns a regulation identifier
number (RIN) to each regulatory action listed in the Unified Agenda of
Federal Regulations. The Regulatory Information Service Center
publishes the Unified Agenda in April and October of each year. The RIN
contained in the heading at the beginning of this document may be used
to find this action in the Unified Agenda.

K. National Technology Transfer and Advancement Act

    Section 12(d) of the National Technology Transfer and Advancement
Act (NTTAA) requires NHTSA and EPA to evaluate and use existing
voluntary consensus standards in its regulatory activities unless doing
so would be inconsistent with applicable law (e.g., the statutory
provisions regarding NHTSA's vehicle safety authority) or otherwise
impractical.\578\
---------------------------------------------------------------------------

    \578\ 15 U.S.C. 272.
---------------------------------------------------------------------------

    Voluntary consensus standards are technical standards developed or
adopted by voluntary consensus standards bodies. Technical standards
are defined by the NTTAA as ``performance-based or design-specific
technical specification and related management systems practices.''
They pertain to ``products and processes, such as size, strength, or
technical performance of a product, process or material.''
    Examples of organizations generally regarded as voluntary consensus
standards bodies include the American Society for Testing and Materials
(ASTM), the Society of Automotive Engineers (SAE), and the American
National Standards Institute (ANSI). If NHTSA does not use available
and potentially applicable voluntary consensus standards, it is
required by the Act to provide Congress, through OMB, an explanation of
the reasons for not using such standards. There are currently no
consensus standards that NHTSA administers relevant to this proposed
CAFE standards.

L. Department of Energy Review

    In accordance with 49 U.S.C. 32902(j)(1), NHTSA submitted this rule
to the Department of Energy for review. The Department of Energy
concluded that the standard would not adversely affect its conservation
goals.

M. Paperwork Reduction Act

    Under the procedures established by the Paperwork Reduction Act of
1995 (PRA) (44 U.S.C. 3501, et seq.), Federal agencies must obtain
approval from the OMB for each collection of information they conduct,
sponsor, or require through regulations. A person is not required to
respond to a collection of information by a Federal agency unless the
collection displays a valid OMB control number.
    NHTSA is seeking OMB's approval for a revision to NHTSA's existing
information collection for its reporting requirements under the
Corporate Average Fuel Economy (CAFE) program (OMB control number 2127-
0019). These reporting requirements are necessary to ensure compliance
with its CAFE program. As described in this NPRM, NHTSA is proposing
changes to the CAFE program's standardized reporting templates for
manufacturers to submit information to NHTSA on their vehicle
production and CAFE credits used to comply with the CAFE standards.
These changes, if adopted, will result in additional burden to
respondents.
    The Information Collection Request (ICR) for a revision of an
existing information collection described below has been forwarded to
OMB for review and comment. In compliance with the requirements of the
PRA, NHTSA asks for public comments on the following proposed
collection of information for which the agency is seeking approval from
OMB.
    Title: Corporate Average Fuel Economy.
    OMB Control Number: 2127-0019.
    Form Numbers: NHTSA Form 1474 (CAFE Projections Reporting
Template), NHTSA Form 1475 (CAFE Credit Template) and NHTSA Form 1621
(CAFE Credit Trade Template).
    Type of Request: Revision of a currently approved collection.
    Type of Review Requested: Regular.
    Requested Expiration Date of Approval: Three years from date of
approval.
    Summary of the Collection of Information: As established by
Congress under EPCA, and later amended by EISA, and implemented through
NHTSA's regulations for automobile manufacturers complying with CAFE
standards prescribed in 49 U.S.C. 32902, many types of reporting
provisions exist as a part of the CAFE program. These reporting
provisions are necessary for NHTSA to ensure manufacturers comply with
CAFE standards and other CAFE requirements. Manufacturers are required
to submit information on CAFE standards, exemptions, vehicles,
technologies, and submit CAFE compliance test results. Manufacturers
also provide information on any of the flexibilities and incentives
they use during the model year to comply with CAFE standards.
    More specifically, the current collection includes burden hours for
small volume manufacturers to request exemptions allowing them to
comply with lower alternative CAFE standards to accommodate mainly the
sale of exotic sportscars. It also includes hours for manufacturers
reporting information on corporate mergers and splits. Other required
reporting includes manufacturers submitting information to NHTSA on
CAFE credit transactions, plans and other documents associated with the
costs of credit trades. In the April 30, 2020, final rule, to help
manufacturers better organize credit information, NHTSA also issued a
new standardized template for manufacturers to report credit
transactions and to prepare credit trade documents. The template could
generate the necessary documents that both parties would sign

to facilitate credit trades as well as simplified the organization of
other types of credit transactions in addition to correctly performing
the necessary mathematical calculations. Finally, the current
collection also includes hours for manufacturers to provide pre-model
year (PMY) and mid-model year (MMY) CAFE reports to NHTSA and a
standardized reporting template adopted in the April 30, 2020, final
rule to help manufacturer submit these reports. PMY and MMY reports
contain early projections of manufacturers' vehicle and fleet level
data demonstrating how they intend to comply with CAFE standards.
    As part of this rulemaking, NHTSA is amending its previously
approved collection for CAFE-related collections of information. NHTSA
is proposing making changes to its reporting template for PMY and MMY
reports and adding a new template for reporting the cost of credit
trades and is proposing to add the burden hours for these changes to
this collection.
    Manufacturers identified several changes that were needed to the
CAFE reporting template to accommodate different types of vehicles
which NHTSA incorporated along with other functional changes.
    Manufacturers have also expressed concern that disclosing trading
terms may not be as simple as a spot purchase at a given price. As
discussed in the April 30, 2020, final rule, manufacturers contend that
a number of transactions for both CAFE and CO2 credits
involve a range of complexity due to numerous factors that are
reflective of the marketplace, such as the volume of credits,
compliance category, credit expiration date, a seller's compliance
strategy, and even the CAFE penalty rate in effect at that time. In
addition, manufacturers have a range of partnerships and cooperative
agreements with their own competitors. Credit transactions can be an
offshoot of these broader relationships, and difficult to price
separately and independently. Thus, manufacturers argue that there may
not be a reasonable, or even meaningful, presentation of market
information in a transaction price. Therefore, NHTSA has developed a
new template for capturing the price of credit trades that includes
certain monetary and non-monetary terms of credit trading contracts.
NHTSA proposes that manufacturers start using the new template starting
September 1, 2022.
    Description of the Need for the Information and the Proposed Use of
the Information: Regulated entities are required to respond to
inquiries covered by this collection. 49 U.S.C. 32907. 49 CFR parts
525, 534, 536, and 537.
    Affected Public: Respondents are manufacturers of engines and
vehicles within the North American Industry Classification System
(NAICS) and use the coding structure as defined by NAICS including
codes 33611, 336111, 336112, 33631, 33631, 33632, 336320, 33635, and
336350 for motor vehicle and parts manufacturing.
    Frequency of response: Variable, based on compliance obligation.
Please see PRA supporting documentation in the docket for more detailed
information.
    Average burden time per response: Variable, based on compliance
obligation. Please see PRA supporting documentation in the docket for
more detailed information.
    Number of respondents: 23.
1. Estimated Total Annual Burden Hours and Costs
[GRAPHIC] [TIFF OMITTED] TP03SE21.205

    Public Comments Invited: You are asked to comment on any aspects of
this information collection, including (a) whether the proposed
collection of information is necessary for the proper performance of
the functions of the Department, including whether the information will
have practical utility; (b) the accuracy of the Department's estimate
of the burden of the proposed information collection; (c) ways to
enhance the quality, utility and clarity of the information to be
collected; and (d) ways to minimize the burden of the collection of
information on respondents, including the use of automated collection
techniques or other forms of information technology.
    Please submit any comments, identified by the docket number in the
heading of this document, by the methods described in the ADDRESSES
section of this document to NHTSA and OMB. Although comments may be
submitted during the entire comment period, comments received within 30
days of publication are most useful.

N. Privacy Act

    In accordance with 5 U.S.C. 553(c), NHTSA is soliciting comments
from the public to inform the rulemaking process better. These comments
will post, without edit, to www.regulations.gov, as described in DOT's
systems of records notice, DOT/ALL-14 FDMS, accessible through https://www.transportation.gov/individuals/privacy/privacy-act-system-records-notices. In order to facilitate comment tracking and response, NHTSA
encourages commenters to provide their names or the names of their
organizations; however, submission of names is completely optional.

List of Subjects in 49 CFR Parts 531, 533, 536, and 537

    Fuel economy, Reporting and recordkeeping requirements.
Regulatory Text
    For the reasons discussed in the preamble, the National Highway
Traffic Safety Administration proposes to amend 49 CFR chapter V as
follows:

0
1. Revise part 531 to read as follows:

PART 531--PASSENGER AUTOMOBILE AVERAGE FUEL ECONOMY STANDARDS

Sec.
531.1 Scope.
531.2 Purpose.
531.3 Applicability.
531.4 Definitions.
531.5 Fuel economy standards.
531.6 Measurement and calculation procedures.

Appendix A to Part 531--Example of Calculating Compliance Under
Sec.  531.5(c)

    Authority:  49 U.S.C. 32902; delegation of authority at 49 CFR
1.95.

Sec.  531.1  Scope.

    This part establishes average fuel economy standards pursuant to
section 502 (a) and (c) of the Motor Vehicle Information and Cost
Savings Act, as amended, for passenger automobiles.

Sec.  531.2   Purpose.

    The purpose of this part is to increase the fuel economy of
passenger automobiles by establishing minimum levels of average fuel
economy for those vehicles.

Sec.  531.3  Applicability.

    This part applies to manufacturers of passenger automobiles.

Sec.  531.4  Definitions.

    (a) Statutory terms. (1) The terms average fuel economy,
manufacture, manufacturer, and model year are used as defined in
section 501 of the Act.
    (2) The terms automobile and passenger automobile are used as
defined in section 501 of the Act and in accordance with the
determination in part 523 of this chapter.
    (b) Other terms. As used in this part, unless otherwise required by
the context--
    (1) Act means the Motor Vehicle Information and Cost Savings Act,
as amended by Pub. L. 94-163.
    (2) [Reserved]

Sec.  531.5   Fuel economy standards.

    (a) Except as provided in paragraph (f) of this section, each
manufacturer of passenger automobiles shall comply with the fleet
average fuel economy standards in Table 1 to this paragraph (a),
expressed in miles per gallon, in the model year specified as
applicable:
[GRAPHIC] [TIFF OMITTED] TP03SE21.206

    (b) For model year 2011, a manufacturer's passenger automobile
fleet shall comply with the fleet average fuel economy level calculated
for that model year according to Figure 1 to this

paragraph (b) and the appropriate values in Table 2 to this paragraph
(b).
[GRAPHIC] [TIFF OMITTED] TP03SE21.207

Where:

N is the total number (sum) of passenger automobiles produced by a
manufacturer;
Ni is the number (sum) of the ith passenger automobile model
produced by the manufacturer; and
Ti is the fuel economy target of the ith model passenger automobile,
which is determined according to the following formula, rounded to
the nearest hundredth:
[GRAPHIC] [TIFF OMITTED] TP03SE21.208

Where:

Parameters a, b, c, and d are defined in Table 2 of this paragraph
(b);
e = 2.718; and
x = footprint (in square feet, rounded to the nearest tenth) of the
vehicle model.
[GRAPHIC] [TIFF OMITTED] TP03SE21.209

    (c) For model years 2012-2026, a manufacturer's passenger
automobile fleet shall comply with the fleet average fuel economy level
calculated for that model year according to Figure 2 to this paragraph
(c) and the appropriate values in Table 3 to this paragraph (c).
[GRAPHIC] [TIFF OMITTED] TP03SE21.210

Where:

CAFErequired is the fleet average fuel economy standard for a given
fleet (domestic passenger automobiles or import passenger
automobiles);
Subscript i is a designation of multiple groups of automobiles,
where each group's designation, i.e., i = 1, 2, 3, etc., represents
automobiles that share a unique model type and footprint within the
applicable fleet, either domestic passenger automobiles or import
passenger automobiles;
Productioni is the number of passenger automobiles produced for sale
in the United States within each ith designation, i.e., which share
the same model type and footprint; and
TARGETi is the fuel economy target in miles per gallon
(mpg) applicable to the footprint of passenger automobiles within
each ith designation, i.e., which share the same model type and
footprint, calculated according to Figure 3 to this paragraph (c)
and rounded to the nearest hundredth of a mpg, i.e., 35.455 = 35.46
mpg, and the summations in the numerator and denominator are both
performed over all models in the fleet in question.

[GRAPHIC] [TIFF OMITTED] TP03SE21.211

Where:

TARGET is the fuel economy target (in mpg) applicable to vehicles of
a given footprint (FOOTPRINT, in square feet);
Parameters a, b, c, and d are defined in Table 3 to this paragraph
(c); and
The MIN and MAX functions take the minimum and maximum,
respectively, of the included values.

[GRAPHIC] [TIFF OMITTED] TP03SE21.212

    (d) In addition to the requirements of paragraphs (b) and (c) of
this section, each manufacturer shall also meet the minimum fleet
standard for domestically manufactured passenger automobiles expressed
in Table 4 to this paragraph (d):

[GRAPHIC] [TIFF OMITTED] TP03SE21.213

    (e) The following manufacturers shall comply with the standards
indicated in paragraphs (e)(1) through (15) of this section for the
specified model years:
    (1) Avanti Motor Corporation.

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    (2) Rolls-Royce Motors, Inc.
    [GRAPHIC] [TIFF OMITTED] TP03SE21.215

[GRAPHIC] [TIFF OMITTED] TP03SE21.216

    (3) Checker Motors Corporation.
    [GRAPHIC] [TIFF OMITTED] TP03SE21.217

    (4) Aston Martin Lagonda, Inc.
    [GRAPHIC] [TIFF OMITTED] TP03SE21.218

    (5) Excalibur Automobile Corporation.
    [GRAPHIC] [TIFF OMITTED] TP03SE21.219

    (6) Lotus Cars Ltd.
    [GRAPHIC] [TIFF OMITTED] TP03SE21.220

    (7) Officine Alfieri Maserati, S.p.A.
    [GRAPHIC] [TIFF OMITTED] TP03SE21.221

    (8) Lamborghini of North America.
    [GRAPHIC] [TIFF OMITTED] TP03SE21.223

    (9) LondonCoach Co., Inc.
    [GRAPHIC] [TIFF OMITTED] TP03SE21.224

    (10) Automobili Lamborghini S.p.A./Vector Aeromotive Corporation.
    [GRAPHIC] [TIFF OMITTED] TP03SE21.225

    (11) Dutcher Motors, Inc.
    [GRAPHIC] [TIFF OMITTED] TP03SE21.226

    (12) MedNet, Inc.
    [GRAPHIC] [TIFF OMITTED] TP03SE21.227

    (13) Vector Aeromotive Corporation.
    [GRAPHIC] [TIFF OMITTED] TP03SE21.228

    (14) Qvale Automotive Group Srl.
    [GRAPHIC] [TIFF OMITTED] TP03SE21.229

    (15) Spyker Automobielen B.V.
    [GRAPHIC] [TIFF OMITTED] TP03SE21.230

Sec.  531.6   Measurement and calculation procedures.

    (a) The fleet average fuel economy performance of all passenger
automobiles that are manufactured by a manufacturer in a model year
shall be determined in accordance with procedures established by the
Administrator of the Environmental Protection Agency (EPA) under 49
U.S.C. 32904 and set forth in 40 CFR part 600.
    (b) For model years 2017 and later, a manufacturer is eligible to
increase the fuel economy performance of passenger cars in accordance
with procedures established by the EPA set forth in 40 CFR part 600,
subpart F, including any adjustments to fuel economy the EPA allows,
such as for fuel consumption improvements related to air conditioning
efficiency and off-cycle technologies. Manufacturers must provide
reporting on these technologies as specified in 49 CFR 537.7 by the
required deadlines.
    (1) Efficient air conditioning technologies. A manufacturer that
seeks to increase its fleet average fuel economy performance through
the use of technologies that improve the efficiency of air conditioning
systems must follow the requirements in 40 CFR 86.1868-12. Fuel
consumption improvement values resulting from the use of those air
conditioning systems must be determined in accordance with 40 CFR
600.510-12(c)(3)(i).
    (2) Off-cycle technologies on EPA's predefined list or using 5-
cycle testing. A manufacturer that seeks to increase its fleet average
fuel economy performance through the use of off-cycle technologies must
follow the requirements in 40 CFR 86.1869-12. A manufacturer is
eligible to gain fuel consumption improvements for predefined off-cycle
technologies in accordance with 40 CFR 86.1869-12(b) or for
technologies tested using the EPA's 5-cycle methodology in accordance
with 40 CFR 86.1869-12(c). The fuel consumption improvement is
determined in accordance with 40 CFR 600.510-12(c)(3)(ii).
    (3) Off-cycle technologies using the alternative EPA-approved
methodology. A manufacturer is eligible to increase its fuel economy
performance through use of an off-cycle technology requiring an
application request made to the EPA in accordance with 40 CFR 86.1869-
12(d).
    (i) Eligibility under the corporate average fuel economy (CAFE)
program requires compliance with paragraphs (b)(3)(i)(A) through (C) of
this section. Paragraphs (b)(3)(i)(A), (B), and (D) of this section
apply starting in model year 2024.
    (A) A manufacturer seeking to increase its fuel economy performance
using the alternative methodology for an off-cycle technology, if prior
to the applicable model year, must submit to EPA a detailed analytical
plan and be approved (i.e., for its planned test procedure and model
types for demonstration) in accordance with 40 CFR 86.1869-12(d).
    (B) A manufacturer seeking to increase its fuel economy performance
using the alternative methodology for an off-cycle technology must also
submit an official credit application to EPA and obtain approval in
accordance with 40 CFR 86.1869-12(e) prior to September of the given
model year.
    (C) Manufacturer's plans, applications, and requests approved by
the EPA must be made in consultation with the National Highway Traffic
Safety Administration (NHTSA). To expedite NHTSA's consultation with
the EPA, a manufacturer must concurrently submit its application to
NHTSA if the manufacturer is seeking off-cycle fuel economy improvement
values under the CAFE program for those technologies. For off-cycle
technologies that are covered under 40 CFR 86.1869-12(d), NHTSA will
consult with the EPA regarding NHTSA's evaluation of the specific off-
cycle technology to ensure its impact on fuel economy and the
suitability of using the off-cycle

technology to adjust the fuel economy performance.
    (D) A manufacturer may request an extension from NHTSA for more
time to obtain an EPA approval. Manufacturers should submit their
requests 30 days before the deadlines in paragraphs (b)(3)(i)(A)
through (C) of this section. Requests should be submitted to NHTSA's
Director of the Office of Vehicle Safety Compliance at<EMAIL_ADDRESS>    (ii) Review and approval process. NHTSA will provide its views on
the suitability of using the off-cycle technology to adjust the fuel
economy performance to the EPA. NHTSA's evaluation and review will
consider:
    (A) Whether the technology has a direct impact upon improving fuel
economy performance;
    (B) Whether the technology is related to crash-avoidance
technologies, safety critical systems or systems affecting safety-
critical functions, or technologies designed for the purpose of
reducing the frequency of vehicle crashes;
    (C) Information from any assessments conducted by the EPA related
to the application, the technology and/or related technologies; and
    (D) Any other relevant factors.
    (iii) Safety. (A) Technologies found to be defective, or identified
as a part of NHTSA's safety defects program, and technologies that are
not performing as intended, will have the values of approved off-cycle
credits removed from the manufacturer's credit balance or adjusted if
the manufacturers can remedy the defective technology. NHTSA will
consult with the manufacturer to determine the amount of the
adjustment.
    (B) Approval granted for innovative and off-cycle technology
credits under NHTSA's fuel efficiency program does not affect or
relieve the obligation to comply with the Vehicle Safety Act (49 U.S.C.
Chapter 301), including the ``make inoperative'' prohibition (49 U.S.C.
30122), and all applicable Federal motor vehicle safety standards
issued thereunder (FMVSSs) (49 CFR part 571). In order to generate off-
cycle or innovative technology credits manufacturers must state--
    (1) That each vehicle equipped with the technology for which they
are seeking credits will comply with all applicable FMVSS(s); and
    (2) Whether or not the technology has a fail-safe provision. If no
fail-safe provision exists, the manufacturer must explain why not and
whether a failure of the innovative technology would affect the safety
of the vehicle.

Appendix A to Part 531--Example of Calculating Compliance Under Sec.
531.5(c)

    Assume a hypothetical manufacturer (Manufacturer X) produces a
fleet of domestic passenger automobiles in MY 2012 as follows:

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[GRAPHIC] [TIFF OMITTED] TP03SE21.235

    2. Revise part 533 to read as follows:

PART 533--LIGHT TRUCK FUEL ECONOMY STANDARDS

Sec.
533.1 Scope.
533.2 Purpose.
533.3 Applicability.
533.4 Definitions.
533.5 Requirements.
533.6 Measurement and calculation procedures.
Appendix A to Part 533--Example of Calculating Compliance Under
Sec.  533.5(i)

    Authority:  49 U.S.C. 32902; delegation of authority at 49 CFR
1.95.

Sec.  533.1   Scope.

    This part establishes average fuel economy standards pursuant to
section 502(b) of the Motor Vehicle Information and Cost Savings Act,
as amended, for light trucks.

Sec.  533.2   Purpose.

    The purpose of this part is to increase the fuel economy of light
trucks by establishing minimum levels of average fuel economy for those
vehicles.

Sec.  533.3   Applicability.

    This part applies to manufacturers of light trucks.

Sec.  533.4  Definitions.

    (a) Statutory terms. (1) The terms average fuel economy, average
fuel economy standard, fuel economy, import, manufacture, manufacturer,
and model year are used as defined in section 501 of the Act.
    (2) The term automobile is used as defined in section 501 of the
Act and in accordance with the determinations in part 523 of this
chapter.
    (3) The term domestically manufactured is used as defined in
section 503(b)(2)(E) of the Act.
    (b) Other terms. As used in this part, unless otherwise required by
the context--
    (1) Act means the Motor Vehicle Information Cost Savings Act, as
amended by Public Law 94-163.
    (2) Light truck is used in accordance with the determinations in
part 523 of this chapter.
    (3) Captive import means with respect to a light truck, one which
is not domestically manufactured but which is imported in the 1980
model year or thereafter by a manufacturer whose principal place of
business is in the United States.
    (4) 4-wheel drive, general utility vehicle means a 4-wheel drive,
general purpose automobile capable of off-highway operation that has a
wheelbase of not more than 280 centimeters, and that has a body shape
similar to 1977 Jeep CJ-5 or CJ-7, or the 1977 Toyota Land Cruiser.
    (5) Basic engine means a unique combination of manufacturer, engine
displacement, number of cylinders, fuel system (as distinguished by
number of carburetor barrels or use of fuel injection), and catalyst
usage.
    (6) Limited product line light truck means a light truck
manufactured by a manufacturer whose light truck fleet is powered
exclusively by basic engines which are not also used in passenger
automobiles.

Sec.  533.5  Requirements.

    (a) Each manufacturer of light trucks shall comply with the
following fleet average fuel economy standards, expressed in miles per
gallon, in the model year specified as applicable:
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Where:

N is the total number (sum) of light trucks produced by a
manufacturer;
Ni is the number (sum) of the ith light truck model type
produced by a manufacturer; and
Ti is the fuel economy target of the ith light truck
model type, which is determined according to the following formula,
rounded to the nearest hundredth:
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Where:

Parameters a, b, c, and d are defined in Table 5 to this paragraph
(a);
e = 2.718; and
x = footprint (in square feet, rounded to the nearest tenth) of the
model type.
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Where:

CAFErequired is the fleet average fuel economy standard
for a given light truck fleet;
Subscript i is a designation of multiple groups of light trucks,
where each group's designation, i.e., i = 1, 2, 3, etc., represents
light trucks that share a unique model type and footprint within the
applicable fleet;
Productioni is the number of light trucks produced for
sale in the United States within each ith designation,
i.e., which share the same model type and footprint; and
TARGETi is the fuel economy target in miles per gallon (mpg)
applicable to the footprint of light trucks within each ith
designation, i.e., which share the same model type and footprint,
calculated according to either Figure 3 or Figure 4 to this
paragraph (a), as appropriate, and rounded to the nearest hundredth
of a mpg, i.e., 35.455 = 35.46 mpg, and the summations in the
numerator and denominator are both performed over all models in the
fleet in question.
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Where:

TARGET is the fuel economy target (in mpg) applicable to vehicles of
a given footprint (FOOTPRINT, in square feet);
Parameters a, b, c, and d are defined in Table 6 to this paragraph
(a); and
The MIN and MAX functions take the minimum and maximum,
respectively, of the included values.

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Where:

TARGET is the fuel economy target (in mpg) applicable to vehicles of
a given footprint (FOOTPRINT, in square feet);
Parameters a, b, c, d, e, f, g, and h are defined in Table 7 to this
paragraph (a); and
The MIN and MAX functions take the minimum and maximum,
respectively, of the included values.

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    (b)(1) For model year 1979, each manufacturer may:
    (i) Combine its 2- and 4-wheel drive light trucks and comply with
the average fuel economy standard in paragraph (a) of this section for
2-wheel drive light trucks; or
    (ii) Comply separately with the two standards specified in
paragraph (a) of this section.
    (2) For model year 1979, the standard specified in paragraph (a) of
this section for 4-wheel drive light trucks applies only to 4-wheel
drive general utility vehicles. All other 4-wheel drive light trucks in
that model year shall be included in the 2-wheel drive category for
compliance purposes.
    (c) For model years 1980 and 1981, manufacturers of limited product
line light trucks may:
    (1) Comply with the separate standard for limited product line
light trucks; or
    (2) Comply with the other standards specified in paragraph (a) of
this section, as applicable.
    (d) For model years 1982-91, each manufacture may:
    (1) Combine its 2- and 4-wheel drive light trucks (segregating
captive import and other light trucks) and comply with the combined
average fuel economy standard specified in paragraph (a) of this
section; or
    (2) Comply separately with the 2-wheel drive standards and the 4-
wheel drive standards (segregating captive import and other light
trucks) specified in paragraph (a) of this section.
    (e) For model year 1992, each manufacturer shall comply with the
average fuel economy standard specified in paragraph (a) of this
section (segregating captive import and other light trucks).
    (f) For each model year 1996 and thereafter, each manufacturer
shall combine its captive imports with its other light trucks and
comply with the fleet average fuel economy standard in paragraph (a) of
this section.
    (g) For model years 2008-2010, at a manufacturer's option, a
manufacturer's light truck fleet may comply with the fuel economy
standard calculated for each model year according to Figure 1 to
paragraph (a) of this section and the

appropriate values in Table 5 to paragraph (a) of this section, with
said option being irrevocably chosen for that model year and reported
as specified in Sec.  537.8 of this chapter.
    (h) For model year 2011, a manufacturer's light truck fleet shall
comply with the fleet average fuel economy standard calculated for that
model year according to Figure 1 to paragraph (a) of this section and
the appropriate values in Table 5 to paragraph (a) of this section.
    (i) For model years 2012-2016, a manufacturer's light truck fleet
shall comply with the fleet average fuel economy standard calculated
for that model year according to Figures 2 and 3 to paragraph (a) of
this section and the appropriate values in Table 6 to paragraph (a) of
this section.
    (j) For model years 2017-2025, a manufacturer's light truck fleet
shall comply with the fleet average fuel economy standard calculated
for that model year according to Figures 2 and 4 to paragraph (a) of
this section and the appropriate values in Table 7 to paragraph (a) of
this section.

Sec.  533.6  Measurement and calculation procedures.

    (a) Any reference to a class of light trucks manufactured by a
manufacturer shall be deemed--
    (1) To include all light trucks in that class manufactured by
persons who control, are controlled by, or are under common control
with, such manufacturer; and
    (2) To include only light trucks which qualify as non-passenger
vehicles in accordance with 49 CFR 523.5 based upon the production
measurements of the vehicles as sold to dealerships; and
    (3) To exclude all light trucks in that class manufactured (within
the meaning of paragraph (a)(1) of this section) during a model year by
such manufacturer which are exported prior to the expiration of 30 days
following the end of such model year.
    (b) The fleet average fuel economy performance of all light trucks
that are manufactured by a manufacturer in a model year shall be
determined in accordance with procedures established by the
Administrator of the Environmental Protection Agency (EPA) under 49
U.S.C. 32904 and set forth in 40 CFR part 600.
    (c) For model years 2017 and later, a manufacturer is eligible to
increase the fuel economy performance of light trucks in accordance
with procedures established by the EPA set forth in 40 CFR part 600,
subpart F, including any adjustments to fuel economy the EPA allows,
such as for fuel consumption improvements related to air conditioning
efficiency, off-cycle technologies, and hybridization and other
performance-based technologies for full-size pickup trucks that meet
the requirements specified in 40 CFR 86.1803. Manufacturers must
provide reporting on these technologies as specified in 49 CFR 537.7 by
the required deadlines.
    (1) Efficient air conditioning technologies. A manufacturer that
seeks to increase its fleet average fuel economy performance through
the use of technologies that improve the efficiency of air conditioning
systems must follow the requirements in 40 CFR 86.1868-12. Fuel
consumption improvement values resulting from the use of those air
conditioning systems must be determined in accordance with 40 CFR
600.510-12(c)(3)(i).
    (2) Incentives for advanced full-size light-duty pickup trucks. The
eligibility of a manufacturer to increase its fuel economy using
hybridized and other performance-based technologies for full-size
pickup trucks must follow 40 CFR 86.1870-12 and the fuel consumption
improvement of these full-size pickup truck technologies must be
determined in accordance with 40 CFR 600.510-12(c)(3)(iii).
Manufacturers may also combine incentives for full size pickups and
dedicated alternative fueled vehicles when calculating fuel economy
performance values in 40 CFR 600.510-12.
    (3) Off-cycle technologies on EPA's predefined list or using 5-
cycle testing. A manufacturer that seeks to increase its fleet average
fuel economy performance through the use of off-cycle technologies must
follow the requirements in 40 CFR 86.1869-12. A manufacturer is
eligible to gain fuel consumption improvements for predefined off-cycle
technologies in accordance with 40 CFR 86.1869-12(b) or for
technologies tested using the EPA's 5-cycle methodology in accordance
with 40 CFR 86.1869-12(c). The fuel consumption improvement is
determined in accordance with 40 CFR 600.510-12(c)(3)(ii).
    (4) Off-cycle technologies using the alternative EPA-approved
methodology. A manufacturer is eligible to increase its fuel economy
performance through use of an off-cycle technology requiring an
application request made to the EPA in accordance with 40 CFR 86.1869-
12(d).
    (i) Eligibility under the corporate average fuel economy (CAFE)
program requires compliance with paragraphs (c)(4)(i)(A) through (C) of
this section. Paragraphs (c)(4)(i)(A) through (C) of this section apply
starting in model year 2024.
    (A) A manufacturer seeking to increase its fuel economy performance
using the alternative methodology for an off-cycle technology, if prior
to the applicable model year, must submit to EPA a detailed analytical
plan and be approved (i.e., for its planned test procedure and model
types for demonstration) in accordance with 40 CFR 86.1869-12(d).
    (B) A manufacturer seeking to increase its fuel economy performance
using the alternative methodology for an off-cycle technology must also
submit an official credit application to EPA and obtain approval in
accordance with 40 CFR 86.1869-12(e) prior to September of the given
model year.
    (C) Manufacturer's plans, applications and requests approved by the
EPA must be made in consultation with the National Highway Traffic
Safety Administration (NHTSA). To expedite NHTSA's consultation with
the EPA, a manufacturer must concurrently submit its application to
NHTSA if the manufacturer is seeking off-cycle fuel economy improvement
values under the CAFE program for those technologies. For off-cycle
technologies that are covered under 40 CFR 86.1869-12(d), NHTSA will
consult with the EPA regarding NHTSA's evaluation of the specific off-
cycle technology to ensure its impact on fuel economy and the
suitability of using the off-cycle technology to adjust the fuel
economy performance.
    (ii) Review and approval process. NHTSA will provide its views on
the suitability of using the off-cycle technology to adjust the fuel
economy performance to the EPA. NHTSA's evaluation and review will
consider:
    (A) Whether the technology has a direct impact upon improving fuel
economy performance;
    (B) Whether the technology is related to crash-avoidance
technologies, safety critical systems or systems affecting safety-
critical functions, or technologies designed for the purpose of
reducing the frequency of vehicle crashes;
    (C) Information from any assessments conducted by the EPA related
to the application, the technology and/or related technologies; and
    (D) Any other relevant factors.
    (E) NHTSA will collaborate to host annual meetings with EPA at
least once by July 30th before the model year begins to provide general
guidance to the industry on past off-cycle approvals.
    (iii) Safety. (A) Technologies found to be defective, or identified
as a part of NHTSA's safety defects program, and technologies that are
not performing as intended, will have the values of approved off-cycle
credits removed from

the manufacturer's credit balance or adjusted if the manufacturers can
remedy the defective technology. NHTSA will consult with the
manufacturer to determine the amount of the adjustment.
    (B) Approval granted for innovative and off-cycle technology
credits under NHTSA's fuel efficiency program does not affect or
relieve the obligation to comply with the Vehicle Safety Act (49 U.S.C.
Chapter 301), including the ``make inoperative'' prohibition (49 U.S.C.
30122), and all applicable Federal motor vehicle safety standards
issued thereunder (FMVSSs) (49 CFR part 571). In order to generate off-
cycle or innovative technology credits manufacturers must state--
    (1) That each vehicle equipped with the technology for which they
are seeking credits will comply with all applicable FMVSS(s); and
    (2) Whether or not the technology has a fail-safe provision. If no
fail-safe provision exists, the manufacturer must explain why not and
whether a failure of the innovative technology would affect the safety
of the vehicle.

Appendix A to Part 533--Example of Calculating Compliance Under Sec.
533.5(i)

    Assume a hypothetical manufacturer (Manufacturer X) produces a
fleet of light trucks in MY 2012 as follows:
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0
3. Revise part 536 to read as follows:

PART 536--TRANSFER AND TRADING OF FUEL ECONOMY CREDITS

Sec.
536.1 Scope.
536.2 Application.
536.3 Definitions.
536.4 Credits.
536.5 Trading infrastructure.
536.6 Treatment of credits earned prior to model year 2011.
536.7 Treatment of carryback credits.
536.8 Conditions for trading of credits.
536.9 Use of credits with regard to the domestically manufactured
passenger automobile minimum standard.
536.10 Treatment of dual-fuel and alternative fuel vehicles--
consistency with 49 CFR part 538.

    Authority: 49 U.S.C. 32903; delegation of authority at 49 CFR
1.95.

Sec.  536.1   Scope.

    This part establishes regulations governing the use and application
of corporate average fuel economy (CAFE) credits up to three model
years before and five model years after the model year in which the
credit was earned. It also specifies requirements for manufacturers
wishing to transfer fuel economy credits between their fleets and for
manufacturers and other persons wishing to trade fuel economy credits
to achieve compliance with prescribed fuel economy standards.

Sec.  536.2  Application.

    This part applies to all credits earned (and transferable and
tradable) for exceeding applicable average fuel economy standards in a
given model year for domestically manufactured passenger cars, imported
passenger cars, and light trucks.

Sec.  536.3   Definitions.

    (a) Statutory terms. All terms defined in 49 U.S.C. 32901(a) are
used pursuant to their statutory meaning.
    (b) Other terms. As used in the part:
    Above standard fuel economy means, with respect to a compliance
category, that the automobiles manufactured by a manufacturer in that
compliance category in a particular model year have greater average
fuel economy (calculated in a manner that reflects the incentives for
alternative fuel automobiles per 49 U.S.C. 32905) than that
manufacturer's fuel economy standard for that compliance category and
model year.
    Adjustment factor means a factor used to adjust the value of a
traded or transferred credit for compliance purposes to ensure that the
compliance value of the credit when used reflects the total volume of
oil saved when the credit was earned.
    Below standard fuel economy means, with respect to a compliance
category, that the automobiles manufactured by a manufacturer in that
compliance category in a particular model year have lower average fuel
economy (calculated in a manner that reflects the incentives for
alternative fuel automobiles per 49 U.S.C. 32905) than that
manufacturer's fuel economy standard for that compliance category and
model year.
    Compliance means a manufacturer achieves compliance in a particular
compliance category when:
    (1)(i) The average fuel economy of the vehicles in that category
exceed or meet the fuel economy standard for that category; or
    (ii) The average fuel economy of the vehicles in that category do
not meet the fuel economy standard for that category, but the
manufacturer proffers a sufficient number of valid credits, adjusted
for total oil savings, to cover the gap between the average fuel
economy of the vehicles in that category and the required average fuel
economy.
    (2) A manufacturer achieves compliance for its fleet if the
conditions in paragraph (1)(i) or (ii) of this definition are
simultaneously met for all compliance categories.
    Compliance category means any of three categories of automobiles
subject to Federal fuel economy regulations. The three compliance
categories recognized by 49 U.S.C. 32903(g)(6) are domestically
manufactured passenger automobiles, imported passenger automobiles, and
non-passenger automobiles (``light trucks'').
    Credit holder (or holder) means a legal person that has valid
possession of credits, either because they are a manufacturer who has
earned credits by exceeding an applicable fuel economy standard, or
because they are a designated recipient who has received credits from
another holder. Credit holders need not be manufacturers, although all
manufacturers may be credit holders.
    Credits (or fuel economy credits) means an earned or purchased
allowance recognizing that the average fuel economy of a particular
manufacturer's vehicles within a particular compliance category and
model year exceeds that manufacturer's fuel economy standard for that
compliance category and model year. One credit is equal to \1/10\ of a
mile per gallon above the fuel economy standard per one vehicle within
a compliance category. Credits are denominated according to model year
in which they are earned (vintage), originating manufacturer, and
compliance category.
    Expiry date means the model year after which fuel economy credits
may no longer be used to achieve compliance with fuel economy
regulations. Expiry dates are calculated in terms of model years: For
example, if a manufacturer earns credits for model year 2011, these
credits may be used for compliance in model years 2008-2016.
    Fleet means all automobiles that are manufactured by a manufacturer
in a particular model year and are subject to fuel economy standards
under 49 CFR parts 531 and 533. For the purposes of this part, a
manufacturer's fleet means all domestically manufactured and imported
passenger automobiles and non-passenger automobiles (``light trucks'').
``Work trucks'' and medium and heavy trucks are not included in this
definition for purposes of this part.
    Light truck means the same as ``non-passenger automobile,'' as that
term is defined in 49 U.S.C. 32901(a)(17), and as ``light truck,'' as
that term is defined at 49 CFR 523.5.
    Originating manufacturer means the manufacturer that originally
earned a particular credit. Each credit earned will be identified with
the name of the originating manufacturer.
    Trade means the receipt by the National Highway Traffic Safety
Administration (NHTSA) of an instruction from a credit holder to place
one of its credits in the account of another credit holder. A credit
that has been traded can be identified because the originating
manufacturer will be a different party than the current credit holder.
Traded credits are moved from one credit holder to the recipient credit
holder within the same compliance category for which the credits were
originally earned. If a credit has been traded to another credit holder
and is subsequently traded back to the originating manufacturer, it
will be deemed not to have been traded for compliance purposes.
    Transfer means the application by a manufacturer of credits earned
by that manufacturer in one compliance category or credits acquired be
trade (and originally earned by another manufacturer in that category)
to achieve compliance with fuel economy standards with respect to a
different compliance category. For example, a manufacturer may purchase
light truck credits from another manufacturer, and transfer them to
achieve compliance in the manufacturer's domestically manufactured
passenger car fleet. Subject to the credit transfer limitations of 49
U.S.C. 32903(g)(3), credits can also be transferred across compliance
categories and banked or saved in that category to be carried forward
or

backwards later to address a credit shortfall.
    Vintage means, with respect to a credit, the model year in which
the credit was earned.

Sec.  536.4   Credits.

    (a) Type and vintage. All credits are identified and distinguished
in the accounts by originating manufacturer, compliance category, and
model year of origin (vintage).
    (b) Application of credits. All credits earned and applied are
calculated, per 49 U.S.C. 32903(c), in tenths of a mile per gallon by
which the average fuel economy of vehicles in a particular compliance
category manufactured by a manufacturer in the model year in which the
credits are earned exceeds the applicable average fuel economy
standard, multiplied by the number of vehicles sold in that compliance
category. However, credits that have been traded between credit holders
or transferred between compliance categories are valued for compliance
purposes using the adjustment factor specified in paragraph (c) of this
section, pursuant to the ``total oil savings'' requirement of 49 U.S.C.
32903(f)(1).
    (c) Adjustment factor. When traded or transferred and used, fuel
economy credits are adjusted to ensure fuel oil savings is preserved.