[Federal Register Volume 83, Number 165 (Friday, August 24, 2018)]
[Proposed Rules]
[Pages 42986-43500]
[FR Doc No: 2018-16820]

Vol. 83

Friday,

No. 165

August 24, 2018

Part II

Book 2 of 2 Books

Pages 42985-43500

Department of Transportation

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National Highway Traffic Safety Administration

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49 CFR Parts 523, 531, 533, et al.

Environmental Protection Agency

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40 CFR Parts 85 and 86

The Safer Affordable Fuel-Efficient (SAFE) Vehicles Rule for Model
Years 2021-2026 Passenger Cars and Light Trucks; Proposed Rule

Federal Register / Vol. 83 , No. 165 / Friday, August 24, 2018 /
Proposed Rules

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DEPARTMENT OF TRANSPORTATION

National Highway Traffic Safety Administration

49 CFR Parts 523, 531, 533, 536, and 537

ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 85 and 86

[NHTSA-2018-0067; EPA-HQ-OAR-2018-0283; FRL-9981-74-OAR]
RIN 2127-AL76; RIN 2060-AU09

The Safer Affordable Fuel-Efficient (SAFE) Vehicles Rule for
Model Years 2021-2026 Passenger Cars and Light Trucks

AGENCY: Environmental Protection Agency and National Highway Traffic
Safety Administration.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The National Highway Traffic Safety Administration (NHTSA) and
the Environmental Protection Agency (EPA) are proposing the ``Safer
Affordable Fuel-Efficient (SAFE) Vehicles Rule for Model Years 2021-
2026 Passenger Cars and Light Trucks'' (SAFE Vehicles Rule). The SAFE
Vehicles Rule, if finalized, would amend certain existing Corporate
Average Fuel Economy (CAFE) and tailpipe carbon dioxide emissions
standards for passenger cars and light trucks and establish new
standards, all covering model years 2021 through 2026. More
specifically, NHTSA is proposing new CAFE standards for model years
2022 through 2026 and amending its 2021 model year CAFE standards
because they are no longer maximum feasible standards, and EPA is
proposing to amend its carbon dioxide emissions standards for model
years 2021 through 2025 because they are no longer appropriate and
reasonable in addition to establishing new standards for model year
2026. The preferred alternative is to retain the model year 2020
standards (specifically, the footprint target curves for passenger cars
and light trucks) for both programs through model year 2026, but
comment is sought on a range of alternatives discussed throughout this
document. Compared to maintaining the post-2020 standards set forth in
2012, current estimates indicate that the proposed SAFE Vehicles Rule
would save over 500 billion dollars in societal costs and reduce
highway fatalities by 12,700 lives (over the lifetimes of vehicles
through MY 2029). U.S. fuel consumption would increase by about half a
million barrels per day (2-3 percent of total daily consumption,
according to the Energy Information Administration) and would impact
the global climate by 3/1000th of one degree Celsius by 2100, also when
compared to the standards set forth in 2012.

DATES: Comments: Comments are requested on or before October 23, 2018.
Under the Paperwork Reduction Act, comments on the information
collection provisions must be received by the Office of Management and
Budget (OMB) on or before October 23, 2018. See the SUPPLEMENTARY
INFORMATION section on ``Public Participation,'' below, for more
information about written comments.
    Public Hearings: NHTSA and EPA will jointly hold three public
hearings in Washington, DC; the Detroit, MI area; and in the Los
Angeles, CA area. The agencies will announce the specific dates and
addresses for each hearing location in a supplemental Federal Register
notice. The agencies will accept oral and written comments to the
rulemaking documents, and NHTSA will also accept comments to the Draft
Environmental Impact Statement (DEIS) at these hearings. The hearings
will start at 10 a.m. local time and continue until everyone has had a
chance to speak. See the SUPPLEMENTARY INFORMATION section on ``Public
Participation,'' below, for more information about the public hearings.

ADDRESSES: You may send comments, identified by Docket No. EPA-HQ-OAR-
2018-0283 and/or NHTSA-2018-0067, by any of the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for sending comments.
     Fax: EPA:<PHONE_NUMBER>; NHTSA:<PHONE_NUMBER>.
     Mail:
    [cir] EPA: Environmental Protection Agency, EPA Docket Center (EPA/
DC), Air and Radiation Docket, Mail Code 28221T, 1200 Pennsylvania
Avenue NW, Washington, DC 20460, Attention Docket ID No. EPA-HQ-OAR-
2018-0283. In addition, please mail a copy of your comments on the
information collection provisions for the EPA proposal to the Office of
Information and Regulatory Affairs, Office of Management and Budget
(OMB), Attn: Desk Officer for EPA, 725 17th St. NW, Washington, DC
20503.
    [cir] NHTSA: Docket Management Facility, M-30, U.S. Department of
Transportation, West Building, Ground Floor, Rm. W12-140, 1200 New
Jersey Avenue SE, Washington, DC 20590.
     Hand Delivery:
    [cir] EPA: Docket Center (EPA/DC), EPA West, Room B102, 1301
Constitution Avenue NW, Washington, DC, Attention Docket ID No. EPA-HQ-
OAR-2018-0283. Such deliveries are only accepted during the Docket's
normal hours of operation, and special arrangements should be made for
deliveries of boxed information.
    [cir] NHTSA: West Building, Ground Floor, Rm. W12-140, 1200 New
Jersey Avenue SE, Washington, DC 20590, between 9 a.m. and 4 p.m.
Eastern Time, Monday through Friday, except Federal holidays.
    Instructions: All submissions received must include the agency name
and docket number or Regulatory Information Number (RIN) for this
rulemaking. All comments received will be posted without change to
http://www.regulations.gov, including any personal information
provided. For detailed instructions on sending comments and additional
information on the rulemaking process, see the ``Public Participation''
heading of the SUPPLEMENTARY INFORMATION section of this document.
    Docket: For access to the dockets to read background documents or
comments received, go to http://www.regulations.gov, and/or:
     For EPA: EPA Docket Center (EPA/DC), EPA West, Room 3334,
1301 Constitution Avenue NW, Washington, DC 20460. The Public Reading
Room is open from 8:30 a.m. to 4:30 p.m., Monday through Friday,
excluding legal holidays. The telephone number for the Public Reading
Room is<PHONE_NUMBER>.
     For NHTSA: Docket Management Facility, M-30, U.S.
Department of Transportation, West Building, Ground Floor, Rm. W12-140,
1200 New Jersey Avenue SE, Washington, DC 20590. The Docket Management
Facility is open between 9 a.m. and 4 p.m. Eastern Time, Monday through
Friday, except Federal holidays.

FOR FURTHER INFORMATION CONTACT: EPA: Christopher Lieske, Office of
Transportation and Air Quality, Assessment and Standards Division,
Environmental Protection Agency, 2000 Traverwood Drive, Ann Arbor, MI
48105; telephone number:<PHONE_NUMBER>; fax number:<PHONE_NUMBER>;
email address: [email protected], or contact the Assessment
and Standards Division, email address: [email protected]. NHTSA:
James Tamm, Office of Rulemaking, Fuel Economy Division, National
Highway Traffic Safety Administration, 1200 New Jersey Avenue SE,
Washington, DC 20590; telephone number:<PHONE_NUMBER>.

SUPPLEMENTARY INFORMATION:

I. Overview of Joint NHTSA/EPA Proposal
II. Technical Foundation for NPRM Analysis
III. Proposed CAFE and CO2 Standards for MYs 2021-2026
IV. Alternative CAFE and GHG Standards Considered for MYs 2021/22-
2026
V. Proposed Standards, the Agencies' Statutory Obligations, and Why
the Agencies Propose To Choose Them Over the Alternatives
VI. Preemption of State and Local Laws
VII. Impacts of the Proposed CAFE and CO2 Standards
VIII. Impacts of Alternative CAFE and CO2 Standards
Considered for MYs 2021/22-2026
IX. Vehicle Classification
X. Compliance and Enforcement
XI. Public Participation
XII. Regulatory Notices and Analyses

I. Overview of Joint NHTSA/EPA Proposal

A. Executive Summary

    In this notice, the National Highway Traffic Safety Administration
(NHTSA) and the Environmental Protection Agency (EPA) (collectively,
``the agencies'') are proposing the ``Safer Affordable Fuel-Efficient
(SAFE) Vehicles Rule for Model Years 2021-2026 Passenger Cars and Light
Trucks'' (SAFE Vehicles Rule). The proposed SAFE Vehicles Rule would
set Corporate Average Fuel Economy (CAFE) and carbon dioxide
(CO2) emissions standards, respectively, for passenger cars
and light trucks manufactured for sale in the United States in model
years (MYs) 2021 through 2026.\1\ CAFE and CO2 standards
have the power to transform the vehicle fleet and affect Americans'
lives in significant, if not always immediately obvious, ways. The
proposed SAFE Vehicles Rule seeks to ensure that government action on
these standards is appropriate, reasonable, consistent with law,
consistent with current and foreseeable future economic realities, and
supported by a transparent assessment of current facts and data.
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    \1\ NHTSA sets CAFE standards under the Energy Policy and
Conservation Act of 1975 (EPCA), as amended by the Energy
Independence and Security Act of 2007 (EISA). EPA sets
CO2 standards under the Clean Air Act (CAA).
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    The agencies must act to propose and finalize these standards and
do not have discretion to decline to regulate. Congress requires NHTSA
to set CAFE standards for each model year.\2\ Congress also requires
EPA to set emissions standards for light-duty vehicles if EPA has made
an ``endangerment finding'' that the pollutant in question--in this
case, CO2--``cause[s] or contribute[s] to air pollution
which may reasonably be anticipated to endanger public health or
welfare.'' \3\ NHTSA and EPA are proposing these standards concurrently
because tailpipe CO2 emissions standards are directly and
inherently related to fuel economy standards,\4\ and if finalized,
these rules would apply concurrently to the same fleet of vehicles. By
working together to develop these proposals, the agencies reduce
regulatory burden on industry and improve administrative efficiency.
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    \2\ 49 U.S.C. 32902.
    \3\ 42 U.S.C. 7521, see also 74 FR 66495 (Dec. 15, 2009)
(``Endangerment and Cause or Contribute Findings for Greenhouse
Gases under Section 202(a) of the Clean Air Act'').
    \4\ See, e.g., 75 FR 25324, at 25327 (May 7, 2010) (``The
National Program is both needed and possible because the
relationship between improving fuel economy and reducing tailpipe
CO2 emissions is a very direct and close one. The amount
of those CO2 emissions is essentially constant per gallon
combusted of a given type of fuel. Thus, the more fuel efficient a
vehicle is, the less fuel it burns to travel a given distance. The
less fuel it burns, the less CO2 it emits in traveling
that distance. [citation omitted] While there are emission control
technologies that reduce the pollutants (e.g., carbon monoxide)
produced by imperfect combustion of fuel by capturing or converting
them to other compounds, there is no such technology for
CO2. Further, while some of those pollutants can also be
reduced by achieving a more complete combustion of fuel, doing so
only increases the tailpipe emissions of CO2. Thus, there
is a single pool of technologies for addressing these twin problems,
i.e., those that reduce fuel consumption and thereby reduce
CO2 emissions as well.'')
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    Consistent with both agencies' statutes, this proposal is entirely
de novo, based on an entirely new analysis reflecting the best and most
up-to-date information available to the agencies at the time of this
rulemaking. The agencies worked together in 2012 to develop CAFE and
CO2 standards for MYs 2017 and beyond; in that rulemaking
action, EPA set CO2 standards for MYs 2017-2025, while NHTSA
set final CAFE standards for MYs 2017-2021 and also put forth
``augural'' CAFE standards for MYs 2022-2025, consistent with EPA's
CO2 standards for those model years. EPA's CO2
standards for MYs 2022-2025 were subject to a ``mid-term evaluation,''
by which EPA bound itself through regulation to re-evaluate the
CO2 standards for those model years and to undertake to
develop new CO2 standards through a regulatory process if it
concluded that the previously finalized standards were no longer
appropriate. EPA regulations on the mid-term evaluation process
required EPA to issue a Final Determination no later than April 1, 2018
on whether the GHG standards for MY 2022-2025 light-duty vehicles
remain appropriate under section 202(a) of the Clean Air Act.\5\ The
regulations also required the issuance of a draft Technical Assessment
Report (TAR) by November 15, 2017, an opportunity for public comment on
the draft TAR, and, before making a Final Determination, an opportunity
for public comment on whether the GHG standards for MY 2022-2025 remain
appropriate. In July 2016, the draft TAR was issued for public comment
jointly by the EPA, NHTSA, and the California Air Resources Board
(CARB).\6\ Following the draft TAR, EPA published a Proposed
Determination for public comment on December 6, 2016 and provided less
than 30 days for public comments over major holidays.\7\ EPA published
the January 2017 Determination on EPA's website and regulations.gov
finding that the MY 2022-2025 standards remained appropriate.\8\
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    \5\ 40 CFR 86.1818-12(h)(1); see also 77 FR 62624 (Oct. 15,
2012).
    \6\ 81 FR 49217 (Jul. 27, 2016).
    \7\ 81 FR 87927 (Dec. 6, 2016).
    \8\ Docket item EPA-HQ-OAR-2015-0827-6270 (EPA-420-R-17-001).
This conclusion generated a significant amount of public concern.
See, e.g., Letter from Auto Alliance to Scott Pruitt, Administrator,
Environmental Protection Agency (Feb. 21, 2017); Letter from Global
Automakers to Scott Pruitt, Administrator, Environmental Protection
Agency (Feb. 21, 2017).
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    On March 15, 2017, President Trump announced a restoration of the
original mid-term review timeline. The President made clear in his
remarks, ``[i]f the standards threatened auto jobs, then commonsense
changes'' would be made in order to protect the economic viability of
the U.S. automotive industry.'' \9\ In response to the President's
direction, EPA announced in a March 22, 2017, Federal Register notice,
its intention to reconsider the Final Determination of the mid-term
evaluation of GHGs emissions standards for MY 2022-2025 light-duty
vehicles.\10\ The Administrator stated that EPA would coordinate its
reconsideration with the rulemaking process to be undertaken by NHTSA
regarding CAFE standards for cars and light trucks for the same model
years.
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    \9\ See https://www.whitehouse.gov/briefings-statements/remarks-president-trump-american-center-mobility-detroit-mi/.
    \10\ 82 FR 14671 (Mar. 22, 2017).
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    On August 21, 2017, EPA published a notice in the Federal Register
announcing the opening of a 45-day public comment period and inviting
stakeholders to submit any additional comments, data, and information
they believed were relevant to the Administrator's reconsideration of
the

January 2017 Determination.\11\ EPA held a public hearing in Washington
DC on September 6, 2017.\12\ EPA received more than 290,000 comments in
response to the August 21, 2017 notice.\13\
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    \11\ 82 FR 39551 (Aug. 21, 2017).
    \12\ 82 FR 39976 (Aug. 23, 2017).
    \13\ The public comments, public hearing transcript, and other
information relevant to the Mid-term Evaluation are available in
docket EPA-HQ-OAR-2015-0827.
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    EPA has since concluded, based on more recent information, that
those standards are no longer appropriate.\14\ NHTSA's ``augural'' CAFE
standards for MYs 2022-2025 were not final in 2012 because Congress
prohibits NHTSA from finalizing new CAFE standards for more than five
model years in a single rulemaking.\15\ NHTSA was therefore obligated
from the beginning to undertake a new rulemaking to set CAFE standards
for MYs 2022-2025.
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    \14\ 83 FR 16077 (Apr. 2, 2018).
    \15\ 49 U.S.C. 32902.
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    The proposed SAFE Vehicles Rule begins the rulemaking process for
both agencies to establish new standards for MYs 2022-2025 passenger
cars and light trucks. Standards are concurrently being proposed for MY
2026 in order to provide regulatory stability for as many years as is
legally permissible for both agencies together.
    Separately, the proposed SAFE Vehicles Rule includes revised
standards for MY 2021 passenger cars and light trucks. The information
now available and the current analysis suggest that the CAFE standards
previously set for MY 2021 are no longer maximum feasible, and the
CO2 standards previously set for MY 2021 are no longer
appropriate. Agencies always have authority under the Administrative
Procedure Act to revisit previous decisions in light of new facts, as
long as they provide notice and an opportunity for comment, and it is
plainly the best practice to do so when changed circumstances so
warrant.\16\
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    \16\ See FCC v. Fox Television, 556 U.S. 502 (2009).
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    Thus, the proposed SAFE Vehicles Rule would maintain the CAFE and
CO2 standards applicable in MY 2020 for MYs 2021-2026, while
taking comment on a wide range of alternatives, including different
stringencies and retaining existing CO2 standards and the
augural CAFE standards.\17\ Table I-4 below presents those
alternatives. We note further that prior to MY 2021, CO2
targets include adjustments reflecting the use of automotive
refrigerants with reduced global warming potential (GWP) and/or the use
of technologies that reduce the refrigerant leaks, and optionally
offsets for nitrous oxide and methane emissions. In the interests of
harmonizing with the CAFE program, EPA is proposing to exclude air
conditioning refrigerants and leakage, and nitrous oxide and methane
emissions for compliance with CO2 standards after model year
2020 but seeks comment on whether to retain these element, and reinsert
A/C leakage offsets, and remain disharmonized with the CAFE program.
EPA also seeks comment on whether to change existing methane and
nitrous oxide standards that were finalized in the 2012 rule.
Specifically, EPA seeks information from the public on whether those
existing standards are appropriate, or whether they should be revised
to be less stringent or more stringent based on any updated data.
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    \17\ Note: This does not mean that the miles per gallon and
grams per mile levels that were estimated for the MY 2020 fleet in
2012 would be the ``standards'' going forward into MYs 2021-2026.
Both NHTSA and EPA set CAFE and CO2 standards,
respectively, as mathematical functions based on vehicle footprint.
These mathematical functions that are the actual standards are
defined as ``curves'' that are separate for passenger cars and light
trucks, under which each vehicle manufacturer's compliance
obligation varies depending on the footprints of the cars and trucks
that it ultimately produces for sale in a given model year. It is
the MY 2020 CAFE and CO2 curves which we propose would
continue to apply to the passenger car and light truck fleets for
MYs 2021-2026. The mpg and g/mi values which those curves would
eventually require of the fleets in those model years would be known
for certain only at the ends of each of those model years. While it
is convenient to discuss CAFE and CO2 standards as a set
``mpg,'' ``g/mi,'' or ``mpg-e'' number, attempting to define those
values today will end up being inaccurate.
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    While actual requirements will ultimately vary for automakers
depending upon their individual fleet mix of vehicles, many
stakeholders will likely be interested in the current estimate of what
the MY 2020 CAFE and CO2 curves would translate to, in terms
of miles per gallon (mpg) and grams per mile (g/mi), in MYs 2021-2026.
These estimates are shown in the following tables.
BILLING CODE 4910-59-P

[GRAPHIC] [TIFF OMITTED] TP24AU18.000

[GRAPHIC] [TIFF OMITTED] TP24AU18.001

BILLING CODE 4910-59-C
    In the tables above, estimated required CO2 increases
between MY 2020 and MY 2021 because, again, EPA is proposing to exclude
CO2-equivalent emission improvements associated with air
conditioning refrigerants and leakage (and, optionally, offsets for
nitrous oxide and methane emissions) after model year 2020.
    As explained above, the agencies are taking comment on a wide range
of alternatives and have specifically modeled eight alternatives
(including the proposed alternative) and the current requirements
(i.e., baseline/no-action). The modeled alternatives are provided
below:
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    \18\ Carbon dioxide equivalent of air conditioning refrigerant
leakage, nitrous oxide and methane emissions are included for
compliance with the EPA standards for all MYs under the baseline/no
action alternative. Carbon dioxide equivalent is calculated using
the Global Warming Potential (GWP) of each of the emissions.
    \19\ Beginning in MY 2021, the proposal provides that the GWP
equivalents of air conditioning refrigerant leakage, nitrous oxide
and methane emissions would no longer be able to be included with
the tailpipe CO2 for compliance with tailpipe
CO2 standards.
[GRAPHIC] [TIFF OMITTED] TP24AU18.002

Summary of Rationale
    Since finalizing the agencies' previous joint rulemaking in 2012
titled ``Final Rule for Model Year 2017 and Later Light-Duty Vehicle
Greenhouse Gas Emission and Corporate Average Fuel Economy Standards,''
and even since EPA's 2016 and early 2017 ``mid-term evaluation''
process, the agencies have gathered new information, and have performed
new analysis. That new information and analysis has led the

agencies to the tentative conclusion that holding standards constant at
MY 2020 levels through MY 2026 is maximum feasible, for CAFE purposes,
and appropriate, for CO2 purposes.
    Technologies have played out differently in the fleet from what the
agencies assumed in 2012.
    The technology to improve fuel economy and reduce CO2
emissions has not changed dramatically since prior analyses were
conducted: A wide variety of technologies are still available to
accomplish the goals of the programs, and a wide variety of
technologies would likely be used by industry to accomplish these
goals. There remains no single technology that the majority of vehicles
made by the majority of manufacturers can implement at low cost without
affecting other vehicle attributes that consumers value more than fuel
economy and CO2 emissions. Even when used in combination,
technologies that can improve fuel economy and reduce CO2
emissions still need to (1) actually work together and (2) be
acceptable to consumers and avoid sacrificing other vehicle attributes
while also avoiding undue increases in vehicle cost. Optimism about the
costs and effectiveness of many individual technologies, as compared to
recent prior rounds of rulemaking, is somewhat tempered; a clearer
understanding of what technologies are already on vehicles in the fleet
and how they are being used, again as compared to recent prior rounds
of rulemaking, means that technologies that previously appeared to
offer significant ``bang for the buck'' may no longer do so.
Additionally, in light of the reality that vehicle manufacturers may
choose the relatively cost-effective technology option of vehicle
lightweighting for a wide array of vehicles and not just the largest
and heaviest, it is now recognized that as the stringency of standards
increases, so does the likelihood that higher stringency will increase
on-road fatalities. As it turns out, there is no such thing as a free
lunch.\20\
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    \20\ Mankiw, N. Gregory, Principles of Macroeconomics, Sixth
Edition, 2012, at 4.
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    Technology that can improve both fuel economy and/or performance
may not be dedicated solely to fuel economy.
    As fleet-wide fuel efficiency has improved over time, additional
improvements have become both more complicated and more costly. There
are two primary reasons for this phenomenon. First, as discussed, there
is a known pool of technologies for improving fuel economy and reducing
CO2 emissions. Many of these technologies, when actually
implemented on vehicles, can be used to improve other vehicle
attributes such as ``zero to 60'' performance, towing, and hauling,
etc., either instead of or in addition to improving fuel economy and
reducing CO2 emissions. As one example, a V6 engine can be
turbocharged and downsized so that it consumes only as much fuel as an
inline 4-cylinder engine, or it can be turbocharged and downsized so
that it consumes less fuel than it would originally have consumed (but
more than the inline 4-cylinder would) while also providing more low-
end torque. As another example, a vehicle can be lightweighted so that
it consumes less fuel than it would originally have consumed, or so
that it consumes the same amount of fuel it would originally have
consumed but can carry more content, like additional safety or
infotainment equipment. Manufacturers employing ``fuel-saving/
emissions-reducing'' technologies in the real world make decisions
regarding how to employ that technology such that fewer than 100% of
the possible fuel-saving/emissions-reducing benefits result. They do
this because this is what consumers want, and more so than exclusively
fuel economy improvements.
    This makes actual fuel economy gains more expensive.
    Thus, even though the technologies may be largely the same,
previous assumptions about how much fuel can be saved or how much
emissions can be reduced by employing various technologies may not have
played out as prior analyses suggested, meaning that previous
assumptions about how much it would cost to save that much fuel or
reduce that much in emissions fall correspondingly short. For example,
the agencies assumed in the 2010 final rule that dual clutch
transmissions would be widely used to improve fuel economy due to
expectations of strong effectiveness and very low cost: In practice,
dual clutch transmissions had significant customer acceptance issues,
and few manufacturers employ them in the U.S. market today.\21\ The
agencies included some ``technologies'' in the 2012 final rule analysis
that were defined ambiguously and/or in ways that precluded observation
in the known (MYs 2008 and 2010) fleets, likely leading to double
counting in cases where the known vehicles already reflected the
assumed efficiency improvement. For example, the agencies assumed that
transmission ``shift optimizers'' would be available and fairly widely
used in MYs 2017-2025, but involving software controls, a
``technology'' not defined in a way that would be observed in the fleet
(unlike, for example, a dual clutch transmission).
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    \21\ In fact, one manufacturer saw enough customer pushback that
it launched a buyback program. See, e.g., Steve Lehto, ``What you
need to know about the settlement for Ford Powershift owners,'' Road
and Track, Oct. 19, 2017. Available at https://www.roadandtrack.com/car-culture/a10316276/what-you-need-to-know-about-the-proposed-settlement-for-ford-powershift-owners/ (last accessed Jul. 2, 2018).
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    To be clear, this is no one's ``fault''--the CAFE and
CO2 standards do not require manufacturers to use particular
technologies in particular ways, and both agencies' past analyses
generally sought to illustrate technology paths to compliance that were
assumed to be as cost-effective as possible. If manufacturers choose
different paths for reasons not accounted for in regulatory analysis,
or choose to use technologies differently from what the agencies
previously assumed, it does not necessarily mean that the analyses were
unreasonable when performed. It does mean, however, that the fleet
ought to be reflected as it stands today, with the technology it has
and as that technology has been used, and consider what technology
remains on the table at this point, whether and when it can
realistically be available for widespread use in production, and how
much it would cost to implement.
    Incremental additional fuel economy benefits are subject to
diminishing returns.
    As fleet-wide fuel efficiency improves and CO2 emissions
are reduced, the incremental benefit of continuing to improve/reduce
inevitably decreases. This is because, as the base level of fuel
economy improves, fewer gallons are saved from subsequent incremental
improvements. Put simply, a one mpg increase for vehicles with low fuel
economy will result in far greater savings than an identical 1 mpg
increase for vehicles with higher fuel economy, and the cost for
achieving a one-mpg increase for low fuel economy vehicles is far less
than for higher fuel economy vehicles. This means that improving fuel
economy is subject to diminishing returns. Annual fuel consumption can
be calculated as follows:

[GRAPHIC] [TIFF OMITTED] TP24AU18.003

    For purposes of illustration, assume a vehicle owner who drives a
light vehicle 15,000 miles per year (a typical assumption for
analytical purposes).\22\ If that owner trades in a vehicle with fuel
economy of 15 mpg for one with fuel economy of 20 mpg, the owner's
annual fuel consumption would drop from 1,000 gallons to 750 gallons--
saving 250 gallons annually. If, however, that owner were to trade in a
vehicle with fuel economy of 30 mpg for one with fuel economy of 40
mpg, the owner's annual gasoline consumption would drop from 500
gallons/year to 375 gallons/year--only 125 gallons even though the mpg
improvement is twice as large. Going from 40 to 50 mpg would save only
75 gallons/year. Yet, each additional fuel economy improvement becomes
much more expensive as the low-hanging fruit of low-cost technological
improvement options are picked.\23\ Automakers, who must nonetheless
continue adding technology to improve fuel economy and reduce
CO2 emissions, will either sacrifice other performance
attributes or raise the price of vehicles--neither of which is
attractive to most consumers.
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    \22\ A different vehicle-miles-traveled (VMT) assumption would
change the absolute numbers in the example, but would not change the
mathematical principles. Today's analysis uses mileage accumulation
schedules that average about 15,000 miles annually over the first
six years of vehicle operation.
    \23\ The examples in the text above are presented in mpg because
that is a metric which should be readily understandable to most
readers, but the example would hold true for grams of CO2
per mile as well. If a vehicle emits 300 g/mi CO2, a 20
percent improvement is 60 g/mi, so that the vehicle would emit 240
g/mi. At 180 g/mi, a 20% improvement is 36 g/mi, so the vehicle
would get 144 g/mi. In order to continue achieving similarly large
(on an absolute basis) emissions reductions, mathematics require the
percentage reduction to continue increasing.
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    If fuel prices are high, the value of those gallons may be enough
to offset the cost of further fuel economy improvements, but (1) the
most recent reference case projections in the Energy Information
Administration's (EIA's) Annual Energy Outlook (AEO 2017 and AEO 2018)
do not indicate particularly high fuel prices in the foreseeable
future, given underlying assumptions,\24\ and (2) as the baseline level
of fuel economy continues to increase, the marginal cost of the next
gallon saved similarly increases with the cost of the technologies
required to meet the savings. The following figure illustrates the fact
that fuel savings and corresponding avoided costs diminish with
increasing fuel economy, showing the same basic pattern as a 2014
illustration developed by EIA.\25\
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    \24\ The U.S. Energy Information Administration (EIA) is the
statistical and analytical agency within the U.S. Department of
Energy (DOE). EIA is the nation's premiere source of energy
information, and every fuel economy rulemaking since 2002 (and every
joint CAFE and CO2 rulemaking since 2009) has applied
fuel price projections from EIA's Annual Energy Outlook (AEO). AEO
projections, documentation, and underlying data and estimates are
available at https://www.eia.gov/outlooks/aeo/.
    \25\ Today in Energy: Fuel economy improvements show diminishing
returns in fuel savings, U.S. Energy Information Administration
(Jul. 11, 2014), https://www.eia.gov/todayinenergy/detail.php?id=17071.
[GRAPHIC] [TIFF OMITTED] TP24AU18.004

    This effect is mathematical in nature and long-established, but
when combined with relatively low fuel prices potentially through 2050,
and the likelihood that a large majority of American consumers could
consequently continue to place a higher value on vehicle attributes
other than fuel economy, it makes manufacturers' ability to sell light
vehicles with ever-higher fuel economy and ever-lower carbon dioxide
emissions increasingly difficult. Put more simply, if gas is cheap and
each additional improvement saves less gas anyway, most consumers would
rather spend their money on attributes other than fuel economy when
they are considering a new vehicle purchase, whether that is more
safety technology, a better infotainment package, a more powerful
powertrain, or other features (or, indeed, they may prefer to spend the
savings on something other than automobiles). Manufacturers trying to
sell consumers more fuel economy in such circumstances may convince
consumers who place weight on efficiency and reduced carbon emissions,
but consumers decide for themselves what attributes are worth to them.
And while some contend that consumers do not sufficiently consider or
value future fuel savings when making vehicle purchasing decisions,\26\
information regarding the benefits of higher fuel economy has never
been made more readily available than today, with a host of online
tools and mandatory prominent disclosures on new vehicles on the
Monroney label showing fuel savings compared to average vehicles. This
is not a question of ``if you build it, they will come.'' Despite the
widespread availability of fuel economy information, and despite
manufacturers building and marketing vehicles with higher fuel economy
and increasing their offerings of hybrid and electric vehicles, in the
past several years as gas prices have remained low, consumer
preferences have shifted markedly away from higher-fuel-economy smaller
and midsize passenger vehicles toward crossovers and truck-based
utility vehicles.\27\ Some consumers plainly value fuel economy and low
CO2 emissions above other attributes, and thanks in part to
CAFE and CO2 standards, they have a plentiful selection of
high-fuel economy and low CO2-emitting vehicles to choose
from, but those consumers represent a relatively small percentage of
buyers.
---------------------------------------------------------------------------

    \26\ In docket numbers EPA-HQ-OAR-2015-0827 and NHTSA-2016-0068,
see comments submitted by, e.g., Consumer Federation of America
(NHTSA-2016-0068-0054, at p. 57, et seq.) and the Environmental
Defense Fund (EPA-HQ-OAR-2015-0827-4086, at p. 18, et seq.).
    \27\ Carey, N. Lured by rising SUV sales, automakers flood
market with models, Reuters (Mar. 29, 2018), available at https://www.reuters.com/article/us-autoshow-new-york-suvs/lured-by-rising-suv-sales-automakers-flood-market-with-models-idUSKBN1H50KI (last
accessed Jun. 13, 2018). Many commentators have recently argued that
manufacturers are deliberately increasing vehicle footprint size in
order to get ``easier'' CAFE and CO2 standards. This
misunderstands, somewhat, how the footprint-based standards work.
While it is correct that larger-footprint vehicles have less
stringent ``targets,'' the difficulty of compliance rests in how far
above or below those vehicles are as compared to their targets, and
more specifically, whether the manufacturer is selling so many
vehicles that are far short of their targets that they cannot
average out to compliant levels through other vehicles sold that
beat their targets. For example, under the CAFE program, a
manufacturer building a fleet of larger-footprint vehicles may have
an objectively lower mpg-value compliance obligation than a
manufacturer building a more mixed fleet, but it may still be more
challenging for the first manufacturer to reach its compliance
obligation if it is selling only very-low-mpg variants at any given
footprint. There is only so much that increasing footprint makes it
``easier'' for a manufacturer to reach compliance.
---------------------------------------------------------------------------

    Changed petroleum market has supported a shift in consumer
preferences.
    In 2012, the agencies projected fuel prices would rise
significantly, and the United States would continue to rely heavily
upon imports of oil, subjecting the country to heightened risk of price
shocks.\28\ Things have changed significantly since 2012, with fuel
prices significantly lower than anticipated, and projected to remain
low through 2050. Furthermore, the global petroleum market has shifted
dramatically with the United States taking advantage of its own oil
supplies through technological advances that allow for cost-effective
extraction of shale oil. The U.S. is now the world's largest oil
producer and expected to become a net petroleum exporter in the next
decade.\29\
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    \28\ The 2012 final rule analysis relied on the Energy
Information Administration's Annual Energy Outlook 2012 Early
Release, which assumed significantly higher fuel prices than the AEO
2017 (or AEO 2018) currently available. See 77 FR 62624, 62715 (Oct.
15, 2012) for the 2012 final rule's description of the fuel price
estimates used.
    \29\ Annual Energy Outlook 2018, U.S. Energy Information
Administration, at 53 (Feb. 6, 2018), https://www.eia.gov/outlooks/aeo/pdf/AEO2018.pdf.
---------------------------------------------------------------------------

    At least partially in response to lower fuel prices, consumers have
moved more heavily into crossovers, sport utility vehicles and pickup
trucks, than anticipated at the time of the last rulemaking. Because
standards are based on footprint and specified separately for passenger
cars and light trucks, these shifts do not necessarily pose compliance
challenges by themselves, but they tend to reduce the overall average
fuel economy rates and increase the overall average CO2
emission rates of the new vehicle fleet. Consumers are also
demonstrating a preference for more powerful engines and vehicles with
higher seating positions and ride height (and accompanying mass
increase relative to footprint) \30\--all of which present challenges
for achieving increased fuel economy levels and lower CO2
emission rates.
---------------------------------------------------------------------------

    \30\ See id.
---------------------------------------------------------------------------

    The Consequence of Unreasonable Fuel Economy and CO2 Standards:
Increased vehicle prices keep consumers in older, dirtier, and less
safe vehicles.
    Consumers tend to avoid purchasing things that they neither want or
need. The analysis in today's proposal moves closer to being able to
represent this fact through an improved model for vehicle scrappage
rates. While neither this nor a sales response model, also included in
today's analysis, nor the combination of the two, are consumer choice
models, today's analysis illustrates market-wide impacts on the sale of
new vehicles and the retention of used vehicles. Higher vehicle prices,
which result from more-stringent fuel economy standards, have an effect
on consumer purchasing decisions. As prices increase, the market-wide
incentive to extract additional travel from used vehicles increases.
The average age of the in-service fleet has been increasing, and when
fleet turnover slows, not only does it take longer for fleet-wide fuel
economy and CO2 emissions to improve, but also safety
improvements, criteria pollutant emissions improvements, many other
vehicle attributes that also provide societal benefits take longer to
be reflected in the overall U.S. fleet as well because of reduced
turnover. Raising vehicle prices too far, too fast, such as through
very stringent fuel economy and CO2 emissions standards
(especially considering that, on a fleet-wide basis, new vehicle sales
and turnover do not appear strongly responsive to fuel economy), has
effects beyond simply a slowdown in sales. Improvements over time have
better longer-term effects simply by not alienating consumers, as
compared to great leaps forward that drive people out of the new car
market or into vehicles that do not meet their needs. The industry has
achieved tremendous gains in fuel economy over the past decade, and
these increases will continue at least through 2020.
    Along with these gains, there have also been tremendous increases
in vehicle prices, as new vehicles become increasingly unaffordable--
with the average new vehicle transaction price

recently exceeding $36,000--up by more than $3,000 since 2014
alone.\31\ In fact, a recent independent study indicated that the
average new car price is unaffordable to median-income families in
every metropolitan region in the United States except one: Washington,
DC.\32\ That analysis used the historically accepted approach that
consumers should make a down-payment of at least 20% of a vehicle's
purchase price, finance for no longer than four years, and make
payments of 10% or less of the consumer's annual income to car payments
and insurance. But the market looks nothing like that these days, with
average financing terms of 68 months, and an increasing proportion
exceeding 72 or even 84 months.\33\ Longer financing terms may allow a
consumer to keep their monthly payment affordable but can have serious
potential financial consequences. Longer-term financing leads
(generally) to higher interest rates, larger finance charges and total
consumer costs, and a longer period of time with negative equity. In
2012, the agencies expected prices to increase under the standards
announced at that time. The agencies estimated that, compared to a
continuation of the model year 2016 standards, the standards issued
through model year 2025 would eventually increase average prices by
about $1,500-$1,800.\34\ \35\ \36\ Circumstances have changed, the
analytical methods and inputs have been updated (including updates to
address issues still present in analyses published in 2016, 2017, and
early 2018), and today, the analysis suggests that, compared to the
proposed standards today, the previously-issued standards would
increase average vehicle prices by about $2,100. While today's estimate
is similar in magnitude to the 2012 estimate, it is relative to a
baseline that includes increases in stringency between MY 2016 and MY
2020. Compared to leaving vehicle technology at MY 2016 levels, today's
analysis shows the previously-issued standards through model year 2025
could eventually increase average vehicle prices by approximately
$2,700. A pause in continued increases in fuel economy standards, and
cost increases attributable thereto, is appropriate.
---------------------------------------------------------------------------

    \31\ See, e.g., Average New-Car Prices Rise Nearly 4 Percent for
January 2018 On Shifting Sales Mix, According To Kelley Blue Book,
Kelley Blue Book, https://mediaroom.kbb.com/2018-02-01-Average-New-Car-Prices-Rise-Nearly-4-Percent-For-January-2018-On-Shifting-Sales-Mix-According-To-Kelley-Blue-Book (last accessed Jun. 15, 2018).
    \32\ Bell, C. What's an `affordable' car where you live? The
answer may surprise you, Bankrate.com (Jun. 28, 2017), available at
https://www.bankrate.com/auto/new-car-affordability-survey/ (last
accessed Jun. 15, 2018).
    \33\ Average Auto Loan Interest Rates: 2018 Facts and Figures,
ValuePenguin, available at https://www.valuepenguin.com/auto-loans/average-auto-loan-interest-rates (last accessed Jun. 15, 2018).
    \34\ 77 FR 62624, 62666 (Oct. 15, 2012).
    \35\ The $1,500 figure reported in 2012 by NHTSA reflected
application of carried-forward credits in model year 2025, rather
than an achieved CAFE level that could be sustainably compliant
beyond 2025 (with standards remaining at 2025 levels). As for the
2016 draft TAR, NHTSA has since updated its modeling approach to
extend far enough into the future that any unsustainable credit
deficits are eliminated. Like analyses published by EPA in 2016,
2017, and early 2018, the $1,800 figure reported in 2012 by EPA did
not reflect either simulation of manufacturers' multiyear plans to
progress from the initial MY 2008 fleet to the MY 2025 fleet or any
accounting for manufacturers' potential application of banked
credits. Today's analysis of both CAFE and CO2 standards
accounts explicitly for multiyear planning and credit banking.
    \36\ While EPA did not refer to the reported $1,800 as an
estimate of the increase in average prices, because EPA did not
assume that manufacturers would reduce profit margins, the $1,800
estimate is appropriately interpreted as an estimate of the average
increase in vehicle prices.

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[GRAPHIC] [TIFF OMITTED] TP24AU18.005

Preferred Alternative
    For all of these reasons, the agencies are proposing to maintain
the MY 2020 fuel economy and CO2 emissions standards for MYs
2021-2026. Our goal is to establish standards that promote both energy
conservation and safety, in light of what is technologically feasible
and economically practicable, as directed by Congress.
---------------------------------------------------------------------------

    \37\ Data on new vehicle prices are from U.S. Bureau of Economic
Analysis, National Income and Product Accounts, Supplemental Table
7.2.5S, Auto and Truck Unit Sales, Production, Inventories,
Expenditures, and Price (https://www.bea.gov/iTable/iTable.cfm?reqid=19&step=2#reqid=19&step=3&isuri=1&1921=underlying&1903=2055, last accessed Jul. 20, 2018). Median Household Income data
are from U.S. Census Bureau, Table A-1, Households by Total Money
Income, Race, and Hispanic Origin of Householder: 1967 to 2016
(https://www.census.gov/data/tables/2017/demo/income-poverty/p60-259.html, last accessed Jul. 20, 2018).
---------------------------------------------------------------------------

Energy Conservation
    EPCA requires that NHTSA, when determining the maximum feasible
levels of CAFE standards, consider the need of the Nation to conserve
energy. However, EPCA also requires that NHTSA consider other factors,
such as technological feasibility and economic practicability. The
analysis suggests that, compared to the standards issued previously for
MYs 2021-2025, today's proposed rule will eventually (by the early
2030s) increase U.S. petroleum consumption by about 0.5 million barrels
per day--about two to three percent of projected total U.S.
consumption. While significant, this additional petroleum consumption
is, from an economic perspective, dwarfed by the cost savings also
projected to result from today's proposal, as indicated by the
consideration of net benefits appearing below.
Safety Benefits From Preferred Alternative
    Today's proposed rule is anticipated to prevent more than 12,700
on-road fatalities \38\ and significantly more injuries as compared to
the standards set forth in the 2012 final rule over the lifetimes of
vehicles as more new, safer vehicles are purchased than the current
(and augural) standards. A large portion of these safety benefits will
come from improved fleet turnover as more consumers will be able to
afford newer and safer vehicles.
---------------------------------------------------------------------------

    \38\ Over the lifetime of vehicles through MY 2029.
---------------------------------------------------------------------------

    Recent NHTSA analysis shows that the proportion of passengers
killed in a vehicle 18 or more model years old is nearly double that of
a vehicle three model years old or newer.\39\ As the average car on the
road is approaching 12 years old, apparently the oldest in our
history,\40\ major safety benefits will occur by reducing fleet age.
Other safety benefits will occur from other areas such as avoiding the
increased driving

that would otherwise result from higher fuel efficiency (known as the
rebound effect) and avoiding the mass reductions in passenger cars that
might otherwise be required to meet the standards established in
2012.\41\ Together these and other factors lead to estimated annual
fatalities under the proposed standards that are significantly reduced
\42\ relative to those that would occur under current (and augural)
standards.
---------------------------------------------------------------------------

    \39\ Passenger Vehicle Occupant Injury Severity by Vehicle Age
and Model Year in Fatal Crashes, Traffic Safety Facts Research Note,
DOT HS 812 528. Washington, DC: National Highway Traffic Safety
Administration. April 2018.
    \40\ See, e.g., IHS Markit, Vehicles Getting Older: Average Age
of Light Cars and Trucks in U.S. Rises Again in 2016 to 11.5 years,
IHS Markit Says, IHS Markit (Nov. 22, 2016), http://news.ihsmarkit.com/press-release/automotive/vehicles-getting-older-average-age-light-cars-and-trucks-us-rises-again-201 (``. . .
consumers are continuing the trend of holding onto their vehicles
longer than ever. As of the end of 2015, the average length of
ownership measured a record 79.3 months, more than 1.5 months longer
than reported in the previous year. For used vehicles, it is nearly
66 months. Both are significantly longer lengths of ownership since
the same measure a decade ago.'').
    \41\ The agencies are specifically requesting comment on the
appropriateness and level of the effects of the rebound effect. The
agencies also seek comment on changes as compared to the 2012
modeling relating to mass reduction assumptions. During that
rulemaking, the analysis limited the amount of mass reduction
assumed for certain vehicles, which impacted the results regarding
potential for adverse safety effects, even while acknowledging that
manufacturers would not necessarily choose to avoid mass reductions
in the ways that the agencies assumed. See, 77 FR 623624, 62763
(Oct. 15, 2012). By choosing where and how to limit assumed mass
reduction, the 2012 rule's safety analysis reduced the projected
apparent risk to safety associated with aggressive fuel economy and
CO2 targets. That specific assumption has been removed
for today's analysis.
    \42\ The reduction in annual fatalities varies each calendar
year, averaging 894 fewer fatalities annually for the CAFE program
and 1,150 fewer fatalities for the CO2 program over
calendar years 2036-2045.
---------------------------------------------------------------------------

The Preferred Alternative Would Have Negligible Environmental Impacts
on Air Quality
    Improving fleet turnover will result in consumers getting into
newer and cleaner vehicles, accelerating the rate at which older, more-
polluting vehicles are removed from the roadways. Also, reducing fuel
economy (relative to levels that would occur under previously-issued
standards) would increase the marginal cost of driving newer vehicles,
reducing mileage accumulated by those vehicles, and reducing
corresponding emissions. On the other hand, increasing fuel consumption
would increase emissions resulting from petroleum refining and related
``upstream'' processes. Our analysis shows that none of the regulatory
alternatives considered in this proposal would noticeably impact net
emissions of smog-forming or other ``criteria'' or toxic air
pollutants, as illustrated by the following graph. That said, the
resultant tailpipe emissions reductions should be especially beneficial
to highly trafficked corridors.
[GRAPHIC] [TIFF OMITTED] TP24AU18.006

Climate Change Impacts From Preferred Alternative
    The estimated effects of this proposal in terms of fuel savings and
CO2 emissions, again perhaps somewhat counter-intuitively,
is relatively small as compared to the 2012 final rule.\43\ NHTSA's
Environmental Impact Statement performed for this rulemaking shows that
the preferred alternative would result in 3/1,000ths of a degree
Celsius increase in global average temperatures by 2100, relative to
the standards finalized in 2012. On a net CO2 basis, the
results are similarly minimal. The following graph compares the
estimated atmospheric CO2 concentration (789.76 ppm) in 2100
under the proposed standards to the estimated level (789.11 ppm) under
the standards set forth in 2012--or an 8/100ths of a percentage
increase:
---------------------------------------------------------------------------

    \43\ Counter-intuitiveness is relative, however. The estimated
effects of the 2012 final rule on climate were similarly small in
magnitude, as shown in the Final EIS accompanying that rule and
available on NHTSA's website.

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[GRAPHIC] [TIFF OMITTED] TP24AU18.007

Net Benefits From Preferred Alternative
    Maintaining the MY 2020 curves for MYs 2021-2026 will save American
consumers, the auto industry, and the public a considerable amount of
money as compared to if EPA retained the previously-set CO2
standards and NHTSA finalized the augural standards. This was
identified as the preferred alternative, in part, because it maximizes
net benefits compared to the other alternatives analyzed, recognizing
the statutory considerations for both agencies. Comment is sought on
whether this is an appropriate basis for selection.

[GRAPHIC] [TIFF OMITTED] TP24AU18.008

    These estimates, reported as changes relative to impacts under the
standards issued in 2012, account for impacts on vehicles produced
during model years 2016-2029, as well as (through changes in
utilization) vehicles produced in earlier model years, throughout those
vehicles' useful lives. Reported values are in 2016 dollars, and
reflect three-percent and seven-percent discount rates. Under CAFE
standards, costs are estimated to decrease by $502 billion overall at a
three-percent discount rate ($335 billion at a seven-percent discount
rate); benefits are estimated to decrease by $326 billion at a three-
percent discount rate ($204 billion at a seven-percent discount rate).
Thus, net benefits are estimated to increase by $176 billion at a
three-percent discount rate and $132 billion at a seven-percent
discount rate. The estimated impacts under CO2 standards are
similar, with net benefits estimated to increase by $201 billion at a
three-percent discount rate and $141 billion at a seven-percent
discount rate.
Compliance Flexibilities
    This proposal also seeks comment on a variety of changes to NHTSA's
and EPA's compliance programs for CAFE and CO2 as well as
related programs. Compliance flexibilities can generally be grouped
into two categories. The first category are those compliance
flexibilities that reduce unnecessary compliance costs and provide for
a more efficient program. The second category of compliance
flexibilities are those that distort the market--such as by
incentivizing the implementation of one type of technology by providing
credit for compliance in excess of real-world fuel savings.
    Both programs provide for the generation of credits based upon
fleet-wide over-compliance, provide for adjustments to the test
measured value of each individual vehicle based upon the implementation
of certain fuel saving technologies, and provide additional incentives
for the implementation of certain preferred technologies (regardless of
actual fuel savings). Auto manufacturers and others have petitioned for
a host of additional adjustment- and incentive-type flexibilities,
where there is not always consumer interest in the technologies to be
incentivized nor is there necessarily clear fuel-saving and emissions-
reducing benefit to be derived from that incentivization. The agencies
seek comment on all of those requests as part of this proposal.
    Over-compliance credits, which can be built up in part through use
of the above-described per-vehicle adjustments and incentives, can be
saved and either applied retroactively to accounts for previous non-
compliance, or carried forward to mitigate future non-compliance. Such
credits can also be traded to other automakers for cash or for other
credits for different fleets. But such trading is not pursued openly.
Under the CAFE program, the public is not made aware of inter-automaker
trades, nor are shareholders. And even the agencies are not informed of
the price of credits. With the exception of statutorily-mandated
credits, the agencies seek comment on all aspects of the current
system. The agencies are particularly interested in comments on
flexibilities that may distort the market.

The agencies seek comment as to whether some adjustments and non-
statutory incentives and other provisions should be eliminated and
stringency levels adjusted accordingly. In general, well-functioning
banking and trading provisions increase market efficiency and reduce
the overall costs of compliance with regulatory objectives. The
agencies request comment on whether the current system as implemented
might need improvements to achieve greater efficiencies. We seek
comment on specific programmatic changes that could improve compliance
with current standards in the most efficient way, ranging from
requiring public disclosure of some or all aspects of credit trades, to
potentially eliminating credit trading in the CAFE program. We request
commenters to provide any data, evidence, or existing literature to
help agency decision-making.
One National Standard
    Setting appropriate and maximum feasible fuel economy and tailpipe
CO2 emissions standards requires regulatory efficiency. This
proposal addresses a fundamental and unnecessary complication in the
currently-existing regulatory framework, which is the regulation of GHG
emissions from passenger cars and light trucks by the State of
California through its GHG standards and Zero Emission Vehicle (ZEV)
mandate and subsequent adoption of these standards by other States.
Both EPCA and the CAA preempt State regulation of motor vehicle
emissions (in EPCA's case, standards that are related to fuel economy
standards). The CAA gives EPA the authority to waive preemption for
California under certain circumstances. EPCA does not provide for a
waiver of preemption under any circumstances. In short, the agencies
propose to maintain one national standard--a standard that is set
exclusively by the Federal government.
Proposed Withdrawal of California's Clean Air Act Preemption Waiver
    EPA granted a waiver of preemption to California in 2013 for its
``Advanced Clean Car'' regulations, composed of its GHG standards, its
``Low Emission Vehicle (LEV)'' program and the ZEV program,\44\ and, as
allowed under the CAA, a number of other States adopted California's
standards.\45\ The CAA states that EPA shall not grant a waiver of
preemption if EPA finds that California's determination that its
standards are, in the aggregate, at least as protective of public
health and welfare as applicable Federal standards, is arbitrary and
capricious; that California does not need its own standards to meet
compelling or extraordinary conditions; or that such California
standards and accompanying enforcement procedures are not consistent
with Section 202(a) of the CAA. In this proposal, EPA is proposing to
withdraw the waiver granted to California in 2013 for the GHG and ZEV
requirements of its Advanced Clean Cars program, in light of all of
these factors.
---------------------------------------------------------------------------

    \44\ 78 FR 2112 (Jan. 9, 2013).
    \45\ CAA Section 177, 42 U.S.C. 7507.
---------------------------------------------------------------------------

    Attempting to solve climate change, even in part, through the
Section 209 waiver provision is fundamentally different from that
section's original purpose of addressing smog-related air quality
problems. When California was merely trying to solve its air quality
issues, there was a relatively-straightforward technology solution to
the problems, implementation of which did not affect how consumers
lived and drove. Section 209 allowed California to pursue additional
reductions to address its notorious smog problems by requiring more
stringent standards, and allowed California and other States that
failed to comply with Federal air quality standards to make progress
toward compliance. Trying to reduce carbon emissions from motor
vehicles in any significant way involves changes to the entire vehicle,
not simply the addition of a single or a handful of control
technologies. The greater the emissions reductions are sought, the
greater the likelihood that the characteristics and capabilities of the
vehicle currently sought by most American consumers will have to change
significantly. Yet, even decades later, California continues to be in
widespread non-attainment with Federal air quality standards.\46\ In
the past decade, California has disproportionately focused on GHG
emissions. Parts of California have a real and significant local air
pollution problem, but CO2 is not part of that local
problem.
---------------------------------------------------------------------------

    \46\ See California Nonattainment/Maintenance Status for Each
County by Year for All Criteria Pollutants, current as of May 31,
2018, at https://www3.epa.gov/airquality/greenbook/anayo_ca.html
(last accessed June 15, 2018).
---------------------------------------------------------------------------

California's Tailpipe CO2 Emissions Standards and ZEV
Mandate Conflict With EPCA
    Moreover, California regulation of tailpipe CO2
emissions, both through its GHG standards and ZEV program, conflicts
directly and indirectly with EPCA and the CAFE program. EPCA expressly
preempts State standards related to fuel economy. Tailpipe
CO2 standards, whether in the form of fleet-wide
CO2 limits or in the form of requirements that manufacturers
selling vehicles in California sell a certain number of low- and no-
tailpipe-CO2 emissions vehicles as part of their overall
sales, are unquestionably related to fuel economy standards. Standards
that control tailpipe CO2 emissions are de facto fuel
economy standards because CO2 is a direct and inevitable
byproduct of the combustion of carbon-based fuels to make energy, and
the vast majority of the energy that powers passenger cars and light
trucks comes from carbon-based fuels.
    Improving fuel economy means getting the vehicle to go farther on a
gallon of gas; a vehicle that goes farther on a gallon of gas produces
less CO2 per unit of distance; therefore, improving fuel
economy necessarily reduces tailpipe CO2 emissions, and
reducing CO2 emissions necessarily improves fuel economy.
EPCA therefore necessarily preempts California's Advanced Clean Cars
program to the extent that it regulates or prohibits tailpipe
CO2 emissions. Section VI of this proposal, below, discusses
the CAA waiver and EPCA preemption in more detail.
    Eliminating California's regulation of fuel economy pursuant to
Congressional direction will provide benefits to the American public.
The automotive industry will, appropriately, deal with fuel economy
standards on a national basis--eliminating duplicative regulatory
requirements. Further, elimination of California's ZEV program will
allow automakers to develop such vehicles in response to consumer
demand instead of regulatory mandate. This regulatory mandate has
required automakers to spend tens of billions of dollars to develop
products that a significant majority of consumers have not adopted, and
consequently to sell such products at a loss. All of this is paid for
through cross subsidization by increasing prices of other vehicles not
just in California and other States that have adopted California's ZEV
mandate, but throughout the country.
Request for Comment
    The agencies look forward to all comments on this proposal, and
wish to emphasize that obtaining public input is extremely important to
us in selecting from among the alternatives in a final rule. While the
agencies and the Administration met with a variety of stakeholders
prior to issuance of this proposal, those meetings have not resulted in
a predetermined final rule outcome. The Administrative Procedure Act
requires that agencies provide the

public with adequate notice of a proposed rule followed by a meaningful
opportunity to comment on the rule's content. The agencies are
committed to following that directive.

II. Technical Foundation for NPRM Analysis

A. Basics of CAFE and CO2 Standards Analysis

    The agencies' analysis of CAFE and CO2 standards
involves two basic elements: first, estimating ways each manufacturer
could potentially respond to a given set of standards in a manner that
considers potential consumer response; and second, estimating various
impacts of those responses. Estimating manufacturers' potential
responses involves simulating manufacturers' decision-making processes
regarding the year-by-year application of fuel-saving technologies to
specific vehicles. Estimating impacts involves calculating resultant
changes in new vehicle costs, estimating a variety of costs (e.g., for
fuel) and effects (e.g., CO2 emissions from fuel combustion)
occurring as vehicles are driven over their lifetimes before eventually
being scrapped, and estimating the monetary value of these effects.
Estimating impacts also involves consideration of the response of
consumers--e.g., whether consumers will purchase the vehicles and in
what quantities. Both of these basic analytical elements involve the
application of many analytical inputs.
    The agencies' analysis uses the CAFE model to estimate
manufacturers' potential responses to new CAFE and CO2
standards and to estimate various impacts of those responses. The model
makes use of many inputs, values of which are developed outside of the
model and not by the model. For example, the model applies fuel prices;
it does not estimate fuel prices. The model does not determine the form
or stringency of the standards; instead, the model applies inputs
specifying the form and stringency of standards to be analyzed and
produces outputs showing effects of manufacturers working to meet those
standards, which become the basis for comparing between different
potential stringencies.
    DOT's Volpe National Transportation Systems Center (often simply
referred to as the ``Volpe Center'') develops, maintains, and applies
the model for NHTSA. NHTSA has used the CAFE model to perform analyses
supporting every CAFE rulemaking since 2001, and the 2016 rulemaking
regarding heavy-duty pickup and van fuel consumption and GHG emissions
also used the CAFE model for analysis.\47\
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    \47\ While this rulemaking employed the CAFE model for analysis,
EPA and DOT used different versions of the CAFE model for
establishing their respective standards, and EPA also used the EPA
MOVES model. See 81 FR 73478, 73743 (Oct. 25, 2016).
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    DOT recently arranged for a formal peer review of the model. In
general, reviewers' comments strongly supported the model's conceptual
basis and implementation, and commenters provided several specific
recommendations. DOT staff agreed with many of these recommendations
and have worked to implement them wherever practicable. Implementing
some of them would require considerable further research, development,
and testing, and will be considered going forward. For a handful of
other recommendations, DOT staff disagreed, often finding the
recommendations involved considerations (e.g., other policies, such as
those involving fuel taxation) beyond the model itself or were based on
concerns with inputs rather than how the model itself functioned. A
report available in the docket for this rulemaking presents peer
reviewers' detailed comments and recommendations, and provides DOT's
detailed responses.\48\
---------------------------------------------------------------------------

    \48\ Docket No. NHTSA-2018-0067.
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    The agencies also use four DOE and DOE-sponsored models to develop
inputs to the CAFE model, including three developed and maintained by
DOE's Argonne National Laboratory. The agencies use the DOE Energy
Information Administration's (EIA's) National Energy Modeling System
(NEMS) to estimate fuel prices,\49\ and used Argonne's Greenhouse
gases, Regulated Emissions, and Energy use in Transportation (GREET)
model to estimate emissions rates from fuel production and distribution
processes.\50\ DOT also sponsored DOE/Argonne to use their Autonomie
full-vehicle simulation system to estimate the fuel economy impacts for
roughly a million combinations of technologies and vehicle types.\51\
\52\
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    \49\ See https://www.eia.gov/outlooks/aeo/info_nems_archive.php.
Today's notice uses fuel prices estimated using the Annual Energy
Outlook (AEO) 2017 version of NEMS (see https://www.eia.gov/outlooks/archive/aeo17/ and https://www.eia.gov/outlooks/aeo/data/browser/#/?id=3-AEO2017&cases=ref2017&sourcekey=0).
    \50\ Information regarding GREET is available at https://greet.es.anl.gov/index.php. Availability of NEMS is discussed at
https://www.eia.gov/outlooks/aeo/info_nems_archive.php. Today's
notice uses fuel prices estimated using the AEO 2017 version of
NEMS.
    \51\ As part of the Argonne simulation effort, individual
technology combinations simulated in Autonomie were paired with
Argonne's BatPAC model to estimate the battery cost associated with
each technology combination based on characteristics of the
simulated vehicle and its level of electrification. Information
regarding Argonne's BatPAC model is available at http://www.cse.anl.gov/batpac/.
    \52\ Additionally, the impact of engine technologies on fuel
consumption, torque, and other metrics was characterized using GT
POWER simulation modeling in combination with other engine modeling
that was conducted by IAV Automotive Engineering, Inc. (IAV). The
engine characterization ``maps'' resulting from this analysis were
used as inputs for the Autonomie full-vehicle simulation modeling.
Information regarding GT Power is available at https://www.gtisoft.com/gt-suite-applications/propulsion-systems/gt-power-engine-simulation-software.
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    EPA developed two models after 2009, referred to as the ``ALPHA''
and ``OMEGA'' models, which provide some of the same capabilities as
the Autonomie and CAFE models. EPA applied the OMEGA model to conduct
analysis of GHG standards promulgated in 2010 and 2012, and the ALPHA
and OMEGA models to conduct analysis discussed in the above-mentioned
2016 Draft TAR and Proposed and Final Determinations regarding
standards beyond 2021. In an August 2017 notice, the agencies requested
comments on, among other things, whether EPA should use alternative
methodologies and modeling, including DOE/Argonne's Autonomie full-
vehicle simulation tool and DOT's CAFE model.\53\
---------------------------------------------------------------------------

    \53\ 82 FR 39533 (Aug. 21, 2017).
---------------------------------------------------------------------------

    Having reviewed comments on the subject and having considered the
matter fully, the agencies have determined it is reasonable and
appropriate to use DOE/Argonne's model for full-vehicle simulation, and
to use DOT's CAFE model for analysis of regulatory alternatives. EPA
interprets Section 202(a) of the CAA as giving the agency broad
discretion in how it develops and sets GHG standards for light-duty
vehicles. Nothing in Section 202(a) mandates that EPA use any specific
model or set of models for analysis of potential CO2
standards for light-duty vehicles. EPA weighs many factors when
determining appropriate levels for CO2 standards, including
the cost of compliance (see Section 202(a)(2)), lead time necessary for
compliance (also Section 202(a)(2)), safety (see NRDC v. EPA, 655 F.2d
318, 336 n. 31 (D.C. Cir. 1981) and other impacts on consumers,\54\ and
energy impacts associated with use of the technology.\55\ Using the
CAFE model

allows consideration of the following factors: the CAFE model
explicitly evaluates the cost of compliance for each manufacturer, each
fleet, and each model year; it accounts for lead time necessary for
compliance by directly incorporating estimated manufacturer production
cycles for every vehicle in the fleet, ensuring that the analysis does
not assume vehicles can be redesigned to incorporate more technology
without regard to lead time considerations; it provides information on
safety effects associated with different levels of standards and
information about many other impacts on consumers, and it calculates
energy impacts (i.e., fuel saved or consumed) as a primary function,
besides being capable of providing information about many other factors
within EPA's broad CAA discretion to consider.
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    \54\ Since its earliest Title II regulations, EPA has considered
the safety of pollution control technologies. See 45 FR 14496, 14503
(1980).
    \55\ See George E. Warren Corp. v. EPA, 159 F.3d 616, 623-624
(D.C. Cir. 1998) (ordinarily permissible for EPA to consider factors
not specifically enumerated in the Act).
---------------------------------------------------------------------------

    Because the CAFE model simulates a wide range of actual constraints
and practices related to automotive engineering, planning, and
production, such as common vehicle platforms, sharing of engines among
different vehicle models, and timing of major vehicle redesigns, the
analysis produced by the CAFE model provides a transparent and
realistic basis to show pathways manufacturers could follow over time
in applying new technologies, which helps better assess impacts of
potential future standards. Furthermore, because the CAFE model also
accounts fully for regulatory compliance provisions (now including
CO2 compliance provisions), such as adjustments for reduced
refrigerant leakage, production ``multipliers'' for some specific types
of vehicles (e.g., PHEVs), and carried-forward (i.e., banked) credits,
the CAFE model provides a transparent and realistic basis to estimate
how such technologies might be applied over time in response to CAFE or
CO2 standards.
    There are sound reasons for the agencies to use the CAFE model
going forward in this rulemaking. First, the CAFE and CO2
fact analyses are inextricably linked. Furthermore, the analysis
produced by the CAFE model and DOE/Argonne's Autonomie addresses
several analytical needs. The CAFE model provides an explicit year-by-
year simulation of manufacturers' application of technology to their
products in response to a year-by-year progression of CAFE standards
and accounts for sharing of technologies and the implications for
timing, scope, and limits on the potential to optimize powertrains for
fuel economy. In the real world, standards actually are specified on a
year-by-year basis, not simply some single year well into the future,
and manufacturers' year-by-year plans involve some vehicles ``carrying
forward'' technology from prior model years and some other vehicles
possibly applying ``extra'' technology in anticipation of standards in
ensuing model years, and manufacturers' planning also involves applying
credits carried forward between model years. Furthermore, manufacturers
cannot optimize the powertrain for fuel economy on every vehicle model
configuration--for example, a given engine shared among multiple
vehicle models cannot practicably be split into different versions for
each configuration of each model, each with a slightly different
displacement. The CAFE model is designed to account for these real-
world factors.
    Considering the technological heterogeneity of manufacturers'
current product offerings, and the wide range of ways in which the many
fuel economy-improving/CO2 emissions-reducing technologies
included in the analysis can be combined, the CAFE model has been
designed to use inputs that provide an estimate of the fuel economy
achieved for many tens of thousands of different potential combinations
of fuel-saving technologies. Across the range of technology classes
encompassed by the analysis fleet, today's analysis involves more than
a million such estimates. While the CAFE model requires no specific
approach to developing these inputs, the National Academy of Sciences
(NAS) has recommended, and stakeholders have commented, that full-
vehicle simulation provides the best balance between realism and
practicality. DOE/Argonne has spent several years developing, applying,
and expanding means to use distributed computing to exercise its
Autonomie full-vehicle simulation tool over the scale necessary for
realistic analysis of CAFE or average CO2 standards. This
scalability and related flexibility (in terms of expanding the set of
technologies to be simulated) makes Autonomie well-suited for
developing inputs to the CAFE model.
    Additionally, DOE/Argonne's Autonomie also has a long history of
development and widespread application by a much wider range of users
in government, academia, and industry. Many of these users apply
Autonomie to inform funding and design decisions. These real-world
exercises have contributed significantly to aspects of Autonomie
important to producing realistic estimates of fuel economy levels and
CO2 emission rates, such as estimation and consideration of
performance, utility, and driveability metrics (e.g., towing
capability, shift business, frequency of engine on/off transitions).
This steadily increasing realism has, in turn, steadily increased
confidence in the appropriateness of using Autonomie to make
significant investment decisions. Notably, DOE uses Autonomie for
analysis supporting budget priorities and plans for programs managed by
its Vehicle Technologies Office (VTO). Considering the advantages of
DOE/Argonne's Autonomie model, it is reasonable and appropriate to use
Autonomie to estimate fuel economy levels and CO2 emission
rates for different combinations of technologies as applied to
different types of vehicles.
    Commenters have also suggested that the CAFE model's graphical user
interface (GUI) facilitates others' ability to use the model quickly--
and without specialized knowledge or training--and to comment
accordingly.\56\ For today's proposal, DOT has significantly expanded
and refined this GUI, providing the ability to observe the model's
real-time progress much more closely as it simulates year-by-year
compliance with either CAFE or CO2 standards.\57\ Although
the model's ability to produce realistic results is independent of the
model's GUI, it is anticipated the CAFE model's GUI will facilitate
stakeholders' meaningful review and comment during the comment period.
---------------------------------------------------------------------------

    \56\ From Docket Number EPA-HQ-OAR-2015-0827, see Comment by
Global Automakers, Docket ID EPA-HQ-OAR-2015-0827-9728, at 34.
    \57\ The updated GUI provides a range of graphs updated in real
time as the model operates. These graphs can be used to monitor fuel
economy or CO2 ratings of vehicles in manufacturers'
fleets and to monitor year-by-year CAFE (or average CO2
ratings), costs, avoided fuel outlays, and avoided CO2-
related damages for specific manufacturers and/or specific fleets
(e.g., domestic passenger car, light truck). Because these graphs
update as the model progresses, they should greatly increase users'
understanding of the model's approach to considerations such as
multiyear planning, payment of civil penalties, and credit use.
---------------------------------------------------------------------------

    Beyond these general considerations, several specific related
technical comments and considerations underlie the agencies' decision
in this area, as discussed, where applicable, in the remainder of this
Section.
    Other commenters expressed a number of concerns with whether DOT's
CAFE model could be used for CAA analysis. Many of these concerns
focused on inputs used by the CAFE model for prior rulemaking
analyses.\58\ \59\ \60\ Because inputs are

exogenous to any model, they do not determine whether it would be
reasonable and appropriate for EPA to use DOT's model for analysis.
Other concerns focused on characteristics of the CAFE model that were
developed to better align the model with EPCA and EISA; the model has
been revised to accommodate both EPCA/EISA and CAA analysis, as
explained further below. Some commenters also argued that use of any
models other than ALPHA and OMEGA for CAA analysis would constitute an
arbitrary and capricious delegation of EPA's decision-making authority
to DOT, if DOT models are used for analysis instead. These comments
were made prior to the development of the CAA analysis function in the
CAFE model, and, moreover, appear to conflate the analytical tool used
to inform decision-making with the action of making the decision. As
explained elsewhere in this document and as made repeatedly clear over
the past several rulemakings, the CAFE model neither sets standards nor
dictates where and how to set standards; it simply informs as to the
effects of setting different levels of standards. In this rulemaking,
EPA will be making its own decisions regarding what CO2
standards would be appropriate under the CAA. The CAA does not require
EPA to create a specific model or use a specific model of its own
creation in setting GHG standards. The fact EPA's decision may be
informed by non-EPA-created models does not, in any way, constitute a
delegation of its statutory power to set standards or decision-making
authority.\61\ Arguing to the contrary would suggest, for example, that
EPA's decision would be invalid because it relied on EIA's Annual
Energy Outlook for fuel prices rather than developing its own model for
estimating future trends in fuel prices. Yet, all Federal agencies that
have occasion to use forecasts of future fuel prices regularly (and
appropriately) defer to EIA's expertise in this area and rely on EIA's
NEMS-based analysis in the AEO, even when those same agencies are using
EIA's forecasts to inform their own decision-making.
---------------------------------------------------------------------------

    \58\ For example, EDF's recent comments (EDF at 12, Docket ID.
EPA-HQ-OAR-2015-0827-9203) stated ``the data that NHTSA needs to
input into its model is sensitive confidential business information
that is not transparent and cannot be independently verified . . .''
and claimed ``the OMEGA model's focus on direct technological inputs
and costs--as opposed to industry self-reported data--ensures the
model more accurately characterizes the true feasibility and cost
effectiveness of deploying greenhouse gas reducing technologies.''
Neither statement is correct, as nothing about either the CAFE or
OMEGA model either obviates or necessitates the use of CBI to
develop inputs.
    \59\ In recent comments (CARB at 28, Docket ID. EPA-HQ-OAR-2015-
0827-9197), CARB stated ``another promising technology entering the
market was not even included in the NHTSA compliance modeling'' and
that EPA assumes a five-year redesign cycle, whereas NHTSA assumes a
six to seven-year cycle.'' Though presented as criticisms of the
models, these comments--at least with respect to the CAFE model--
actually concern model inputs. NHTSA did not agree with CARB about
the commercialization potential of the engine technology in question
(``Atkinson 2'') and applied model inputs accordingly. Also, rather
than applying a one-size-fits-all assumption regarding redesign
cadence, NHTSA developed estimates specific to each vehicle model
and applied these as model inputs.
    \60\ NRDC's recent comments (NRDC at 37, Docket ID. EPA-HQ-OAR-
2015-0827-9826) state EPA should not use the CAFE model because it
``allows manufacturers to pay civil penalties in lieu of meeting the
standards, an alternative compliance pathway currently allowed under
EISA and EPCA.'' While the CAFE model can simulate civil penalty
payment, NRDC's comment appears to overlook the fact that this
result depends on model inputs; the inputs can easily be specified
such that the CAFE model will set aside civil penalty payment as an
alternative to compliance.
    \61\ ``[A] federal agency may turn to an outside entity for
advice and policy recommendations, provided the agency makes the
final decisions itself.'' U.S. Telecom. Ass'n v. FCC, 359 F.3d 554,
565-66 (D.C. Cir. 2004). To the extent commenters meant to suggest
outside parties have a reliance interest in EPA using ALPHA and
OMEGA to set standards, EPA does not agree a reliance interest is
properly placed on an analytical methodology (as opposed to on the
standards themselves). Even if it were, all parties that closely
examined ALPHA and OMEGA-based analyses in the past either also
simultaneously closely examined CAFE and Autonomie-based analyses in
the past, or were fully capable of doing so, and thus, should face
no additional difficulty now they have only one set of models and
inputs/outputs to examine.
---------------------------------------------------------------------------

    Moreover, DOT's CAFE model with inputs from DOE/Argonne's Autonomie
model has produced analysis supporting rulemaking under the CAA. In
2015, EPA proposed new GHG standards for MY 2021-2027 heavy-duty
pickups and vans, finalizing standards in 2016. Supporting the NPRM and
final rule, EPA relied on analysis implemented by DOT using DOT's CAFE
model, and DOT used inputs developed by DOE/Argonne using DOE/Argonne's
Autonomie model.
    The following sections provide a brief technical overview of the
CAFE model, including changes NHTSA made to the model since 2012,
before discussing inputs to the model and then diving more deeply into
how the model works. For more information on the latter topic, see the
CAFE model documentation July 2018 draft, available in the docket for
this rulemaking and on NHTSA's website.
1. Brief Technical Overview of the Model
    The CAFE model is designed to simulate compliance with a given set
of CAFE or CO2 standards for each manufacturer selling
vehicles in the United States. The model begins with a representation
of the current (for today's analysis, model year 2016) vehicle model
offerings for each manufacturer that includes the specific engines and
transmissions on each model variant, observed sales volumes, and all
fuel economy improvement technology that is already present on those
vehicles. From there it adds technology, in response to the standards
being considered, in a way that minimizes the cost of compliance and
reflects many real-world constraints faced by automobile manufacturers.
After simulating compliance, the model calculates impacts of the
simulated standard: technology costs, fuel savings (both in gallons and
dollars), CO2 reductions, social costs and benefits, and
safety impacts.
    Today's analysis reflects several changes made to the CAFE model
since 2012, when NHTSA used the model to estimate the effects, costs,
and benefits of final CAFE standards for light-duty vehicles produced
during MYs 2017-2021 and augural standards for MYs 2022-2025. Key
changes relevant to this analysis include the following:
     Expansion of model inputs, procedures, and outputs to
accommodate technologies not included in prior analyses,
     Updated approach to estimating the combined effect of
fuel-saving technologies using large scale simulation modeling,
     Modules that dynamically estimate new vehicle sales and
existing vehicle scrappage in response to changes to new vehicle prices
that result from manufacturers' compliance actions,
     A safety module that estimates the changes in light-duty
traffic fatalities resulting from changes to vehicle exposure, vehicle
retirement rates, and reductions in vehicle mass to improve fuel
economy,
     Disaggregation of each manufacturer's fleet into separate
``domestic'' passenger car and ``import'' passenger car fleets to
better represent the statutory requirements of the CAFE program,
     Changes to the algorithm used to apply technologies,
enabling more explicit accounting of shared vehicle components
(engines, transmissions, platforms) and ``inheritance'' of major
technology within or across powertrains and/or platforms over time,
     An industry labor quantity module, which estimates net
changes in the amount of U.S. automobile labor for dealerships, Tier 1
and 2 supplier companies, and original equipment manufacturers (OEMs),
     Cost estimation of batteries for electrification
technologies incorporates an updated version of Argonne National
Laboratory's BatPAC (battery) model for hybrid electric vehicles
(HEVs), plug-in

hybrid electric vehicles (PHEVs), and battery electric vehicles (BEVs),
consistent with how we estimate effectiveness for those values,
     Expanded accounting for CAFE credits carried over from
years prior to those included in the analysis (a.k.a. ``banked''
credits) and application to future CAFE deficits to better evaluate
anticipated manufacturer responses to proposed standards,\62\
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    \62\ While EPCA/EISA precludes NHTSA from considering
manufacturers' potential use of credits in model years for which the
agency is establishing new standards, NHTSA considers credit use in
earlier model years. Also, as allowed by NEPA, NHTSA's EISs present
results of analysis that considers manufacturers' potential use of
credits in all model years, including those for which the agency is
establishing new standards.
---------------------------------------------------------------------------

     The ability to represent a manufacturer's preference for
fine payment (rather than achieving full compliance exclusively through
fuel economy improvements) on a year-by-year basis,
     Year-by-year simulation of how manufacturers could comply
with EPA's CO2 standards, including
    [cir] Calculation of vehicle models' CO2 emission rates
before and after application of fuel-saving (and, therefore,
CO2-reducing) technologies,
    [cir] Calculation of manufacturers' fleet average CO2
emission rates,
    [cir] Calculation of manufacturers' fleet average CO2
emission rates under attribute-based CO2 standards,
    [cir] Accounting for adjustments to average CO2 emission
rates reflecting reduction of air conditioner refrigerant leakage,
    [cir] Accounting for the treatment of alternative fuel vehicles for
CO2 compliance,
    [cir] Accounting for production ``multipliers'' for PHEVs, BEVs,
compressed natural gas (CNG) vehicles, and fuel cell vehicles (FCVs),
    [cir] Accounting for transfer of CO2 credits between
regulated fleets,
    [cir] Accounting for carried-forward (a.k.a. ``banked'')
CO2 credits, including credits from model years earlier than
modeled explicitly.
2. Sensitivity Cases and Why We Examine Them
    Today's notice presents estimated impacts of the proposed CAFE and
CO2 standards defining the proposals, relative to a baseline
``no action'' regulatory alternative under which the standards
announced in 2012 remain in place through MY 2025 and continue
unchanged thereafter. Relative to this same baseline, today's notice
also presents analysis estimating impacts under a range of other
regulatory alternatives the agencies are considering. All but one
involve different standards, and three involve a gradual
discontinuation of CAFE and GHG adjustments reflecting the application
of technologies that improve air conditioner efficiency or, in other
ways, improve fuel economy under conditions not represented by long-
standing fuel economy test procedures. Like the baseline no action
alternative, all of these alternatives are more stringent than the
preferred alternative. Section III and Section IV describe the
preferred and other regulatory alternatives, respectively.
    These alternatives were examined because they will be considered as
options for the final rule. The agencies seek comment on these
alternatives, seek any relevant data and information, and will review
responses. That review could lead to the selection of one of the other
regulatory alternatives for the final rule or some combination of the
other regulatory alternatives (e.g., combining passenger cars standards
from one alternative with light truck standards from a different
alternative).
    Because outputs depend on inputs (e.g., the results of the analysis
in terms of quantities and kinds of technologies required to meet
different levels of standards, and the societal and private benefits
associated with manufacturers meeting different levels of standards
depend on input data, estimates, and assumptions), the analysis also
explores the sensitivity of results to many of these inputs. For
example, the net benefits of any regulatory alternative will depend
strongly on fuel prices well beyond 2025. Fuel prices a decade and more
from now are not knowable with certainty. The sensitivity analysis
involves repeating the ``central'' or ``reference case'' analysis under
alternative inputs (e.g., higher fuel prices in one case, lower fuel
prices in another case), and exploring changes in analytical results,
which is discussed further in the agencies' Preliminary Regulatory
Impact Analysis (PRIA) accompanying today's notice.

B. Developing the Analysis Fleet for Assessing Costs, Benefits, and
Effects of Alternative CAFE Standards

    The following sections describe what the analysis fleet is and why
it is used, how it was developed for this NPRM, and the analysis-fleet-
related topics on which comment is sought.
1. Purpose of Developing and Using an Analysis Fleet
    The starting point for the evaluation of the potential feasibility
of different stringency levels for future CAFE and CO2
standards is the analysis fleet, which is a snapshot of the recent
vehicle market. The analysis fleet provides a snapshot to project what
vehicles will exist in future model years covered by the standards and
what technologies they will have, and then evaluate what additional
technologies can feasibly be applied to those vehicles in a cost-
effective way to raise their fuel economy and lower their
CO2 emission levels.\63\
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    \63\ The CAFE model does not generate compliance paths a
manufacturer should, must, or will deploy. It is intended as a tool
to demonstrate a compliance pathway a manufacturer could choose. It
is almost certain all manufacturers will make compliance choices
differing from those projected in the CAFE model.
---------------------------------------------------------------------------

    Part of reflecting what vehicles will exist in future model years
is knowing which vehicles are produced by which manufacturers, how many
of each are sold, and whether they are passenger cars or light trucks.
This is important because it improves our understanding of the overall
impacts of different levels of CAFE and CO2 standards;
overall impacts result from industry's response to standards, and
industry's response is made up of individual manufacturer responses to
the standards in light of the overall market and their individual
assessment of consumer acceptance. Having an accurate picture of
manufacturers' existing fleets (and the vehicle models in them) that
will be subject to future standards helps us better understand
individual manufacturer responses to those future standards in addition
to potential changes in those standards.
    Another part of reflecting what vehicles will exist in future model
years is knowing what technologies are already on those vehicles.
Accounting for technologies already being on vehicles helps avoid
``double-counting'' the value of those technologies, by assuming they
are still available to be applied to improve fuel economy and reduce
CO2 emissions. It also promotes more realistic
determinations of what additional technologies can feasibly be applied
to those vehicles: if a manufacturer has already started down a
technological path to fuel economy or performance improvements, we do
not assume it will completely abandon that path because that would be
unrealistic and would not accurately represent manufacturer responses
to standards. Each vehicle model (and configurations of each model) in
the analysis fleet, therefore, has a comprehensive list of its
technologies, which is important because different configurations may
have different technologies applied to

them.\64\ Additionally, the analysis accounts for platforms within
manufacturers' fleets, recognizing platforms will share technologies,
and the vehicles that make up that platform should receive (or not
receive) additional technological improvements together. The specific
engineering characteristics of each model/configuration are available
in the aforementioned input file.\65\ For the regulatory alternatives
considered in today's proposal, estimates of rates at which various
technologies might be expected to penetrate manufacturers' fleets (and
the overall market) are summarized below in Sections VI and VII, and in
Chapter 6 of the accompanying PRIA and in detailed model output files
available at NHTSA's website. A solid characterization of a recent
model year as an analytical starting point helps to realistically
estimate ways manufacturers could potentially respond to different
levels of standards, and the modeling strives to realistically simulate
how manufacturers could progress from that starting point.
Nevertheless, manufacturers can respond in many ways beyond those
represented in the analysis (e.g., applying other technologies,
shifting production volumes, changing vehicle footprint), such that it
is impossible to predict with any certainty exactly how each
manufacturer will respond. Therefore, recent trends in manufacturer
performance and technology application, although of interest in terms
of understanding manufacturers' current compliance positions, are not
in themselves innately indicative of future potential.
---------------------------------------------------------------------------

    \64\ Considering each vehicle model/configuration also improves
the ability to consider the differential impacts of different levels
of potential standards on different manufacturers, since all vehicle
model/configurations ``start'' at different places, in terms of the
technologies they already have and how those technologies are used.
    \65\ Available with the model and other input files supporting
today's announcement at https://www.nhtsa.gov/corporate-average-fuel-economy/compliance-and-effects-modeling-system.
---------------------------------------------------------------------------

    Yet, another part of reflecting what vehicles will exist in future
model years is having reasonable real-world assumptions about when
certain technologies can be applied to vehicles. Each vehicle model/
configuration in the analysis fleet also has information about its
redesign schedule, i.e., the last year it was redesigned and when the
agencies expect it to be redesigned again. Redesign schedules are a key
part of manufacturers' business plans, as each new product can cost
more than $1.0B and involve a significant portion of a manufacturer's
scarce research, development, and manufacturing and equipment budgets
and resources.\66\ Manufacturers have repeatedly told the agencies that
sustainable business plans require careful management of resources and
capital spending, and that the length of time each product remains in
production is crucial to recouping the upfront product development and
plant/equipment costs, as well as the capital needed to fund the
development and manufacturing equipment needed for future products.
Because the production volume of any given vehicle model varies within
a manufacturer's product line and also varies among different
manufacturers, redesign schedules typically vary for each model and
manufacturer. Some (relatively few) technological improvements are
small enough they can be applied in any model year; others are major
enough they can only be cost-effectively applied at a vehicle redesign,
when many other things about the vehicle are already changing. Ensuring
the CAFE model makes technological improvements to vehicles only when
it is feasible to do so also helps the analysis better represent
manufacturer responses to different levels of standards.
---------------------------------------------------------------------------

    \66\ Shea, T. Why Does It Cost So Much For Automakers To Develop
New Models?, Autoblog (Jul. 27, 2010), https://www.autoblog.com/2010/07/27/why-does-it-cost-so-much-for-automakers-to-develop-new-models/.
---------------------------------------------------------------------------

    A final important aspect of reflecting what vehicles will exist in
future model years and potential manufacturer responses to standards is
estimating how future sales might change in response to different
potential standards. If potential future standards appear likely to
have major effects in terms of shifting production from cars to trucks
(or vice versa), or in terms of shifting sales between manufacturers or
groups of manufacturers, that is important for the agencies to
consider. For previous analyses, the CAFE model used a static forecast
contained in the analysis fleet input file, which specified changes in
production volumes over time for each vehicle model/configuration. This
approach yielded results that, in terms of production volumes, did not
change between scenarios or with changes in important model inputs. For
example, very stringent standards with very high technology costs would
result in the same estimated production volumes as less stringent
standards with very low technology costs.
    New for today's proposal, the CAFE model begins with the first-year
production volumes (i.e., MY 2016 for today's analysis) and adjusts
ensuing sales mix year by year (between cars and trucks, and between
manufacturers) endogenously as part of the analysis, rather than using
external forecasts of future car/truck split and future manufacturer
sales volumes. This leads the model to produce different estimates of
future production volumes under different standards and in response to
different inputs, reflecting the expectation that regulatory standards
and other external factors will, in fact, impact the market.
    The input file for the CAFE model characterizing the analysis fleet
\67\ includes a large amount of data about vehicle models/
configurations, their technological characteristics, the manufacturers
and fleets to which they belong, and initial prices and production
volumes which provide the starting points for projection (by the sales
model) to ensuing model years. The following sections discuss aspects
of how the analysis fleet was built for this proposal and seek comment
on those topics.
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    \67\ Available with the model and other input files supporting
today's announcement at https://www.nhtsa.gov/corporate-average-fuel-economy/compliance-and-effects-modeling-system.
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2. Source Data for Building the Analysis Fleet
    The source data for the vehicle models/configurations in the
analysis fleet and their technologies is a central input for the
analysis. The sections below discuss pros and cons of different
potential sources and what was used for this proposal.
(a) Use of Confidential Business Information Versus Publicly-Releasable
Sources
    Since 2001, CAFE analysis has used either confidential, forward-
estimating product plans from manufacturers, or publicly available data
on vehicles already sold, as a starting point for determining what
technologies can be applied to what vehicles in response to potential
different levels of standards. These two sources present a tradeoff.
Confidential product plans comprehensively represent what vehicles a
manufacturer expects to produce in coming years, accounting for plans
to introduce new vehicles and fuel-saving technologies and, for
example, plans to discontinue other vehicles and even brands. This
information can be very thorough and can improve the accuracy of the
analysis, but for competitive reasons, most of this information must be
redacted prior to publication with rulemaking documentation. This makes
it difficult for public commenters to reproduce the analysis for
themselves as

they develop their comments. Some non-industry commenters have also
expressed concern manufacturers would have an incentive in the
submitted plans to (deliberately or not) underestimate their future
fuel economy capabilities and overstate their expectations about, for
example, the levels of performance of future vehicle models in order to
affect the analysis. Since 2010, EPA and NHTSA have based analysis
fleets almost exclusively on information from commercial and public
sources, starting with CAFE compliance data and adding information from
other sources.
    An analysis fleet based primarily on public sources can be released
to the public, solving the issue of commenters being unable to
reproduce the overall analysis when they want to. However, industry
commenters have argued such an analysis fleet cannot accurately reflect
manufacturers actual plans to apply fuel-saving technologies (e.g.,
manufacturers may apply turbocharging to improve not just fuel economy,
but also to improve vehicle performance) or manufacturers' plans to
change product offerings by introducing some vehicles and brands and
discontinuing other vehicles and brands, precisely because that
information is typically confidential business information (CBI). A
fully-publicly-releasable analysis fleet holds vehicle characteristics
unchanged over time and arguably lacks some level of accuracy when
projected into the future. For example, over time, manufacturers
introduce new products and even entire brands. On the other hand, plans
announced in press releases do not always ultimately bear out, nor do
commercially-available third-party forecasts. Assumptions could be made
about these issues to improve the accuracy of a publicly-releasable
analysis fleet, but concerns include that this information would either
be largely incorrect, or information would be released that
manufacturers would consider CBI. We seek comment on how to address
this issue going forward, recognizing the competing interests involved
and also recognizing typical timeframes for CAFE and CO2
standards rulemakings.
(b) Use of MY 2016 CAFE Compliance Data Versus Other Starting Points
    Based on the assumption that a publicly-available analysis fleet
continues to be desirable, for this NPRM, an analysis fleet was
constructed starting with CAFE compliance information from
manufacturers.\68\ Information from MY 2016 was chosen as the
foundation for today's analysis fleet because, at the time the
rulemaking analysis was initiated, the 2016 fleet represented the most
up-to-date information available in terms of individual vehicle models
and configurations, production technology levels, and production
volumes. If MY 2017 data had been used while this analysis was being
developed, the agencies would have needed to use product planning
information that could not be made available to the public until a
later date.
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    \68\ CO2 emissions rates are directly related to fuel
economy levels, and the CAFE model uses the latter to calculate the
former.
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    The analysis fleet was initially developed with 2016 mid-model year
compliance data because final compliance data was not available at that
time, and the timing provided manufacturers the opportunity to review
and comment on the characterization of their vehicles in the fleet.
With a view toward developing an accurate characterization of the 2016
fleet to serve as an analytical starting point, corrections and updates
to mid-year data (e.g., to production estimates) were sought, in
addition to corroboration or correction of technical information
obtained from commercial and other sources (to the extent that
information was not included in compliance data), although future
product planning information from manufacturers (e.g., future product
offerings, products to be discontinued) was not requested, as most
manufacturers view such information as CBI. Manufacturers offered a
range of corrections to indicate engineering characteristics (e.g.,
footprint, curb weight, transmission type) of specific vehicle model/
configurations, as well as updates to fuel economy and production
volume estimates in mid-year reporting. After following up on a case-
by-case basis to investigate significant differences, the analysis
fleet was updated.
    Sales, footprint, and fuel economy values with final compliance
data were also updated if that data was available. In a few cases,
final production and fuel economy values may be slightly different for
specific model year 2016 vehicle models and configurations than are
indicated in today's analysis; however, other vehicle characteristics
(e.g., footprint, curb weight, technology content) important to the
analysis should be accurate. While some commenters have, in the past,
raised concerns that non-final CAFE compliance data is subject to
change, the potential for change is likely not significant enough to
merit using final data from an earlier model year reflecting a more
outdated fleet. Moreover, even ostensibly final CAFE compliance data
can sometimes be subject to later revision (e.g., if errors in fuel
economy tests are discovered), and the purpose of today's analysis is
not to support enforcement actions but rather to provide a realistic
assessment of manufacturers' potential responses to future standards.
    Manufacturers integrated a significant amount of new technology in
the MY 2016 fleet, and this was especially true for newly-designed
vehicles launched in MY 2016. While subsequent fleets will involve even
further application of technology, using available data for MY 2016
provides the most realistic detailed foundation for analysis that can
be made available publicly in full detail, allowing stakeholders to
independently reproduce the analysis presented in this proposal.
Insofar as future product offerings are likely to be more similar to
vehicles produced in 2016 than to vehicles produced in earlier model
years, using available data regarding the 2016 model year provides the
most realistic, publicly releasable foundation for constructing a
forecast of the future vehicle market for this proposal.
    A number of comments to the Draft TAR, EPA's Proposed
Determination, and EPA's 2017 Request for Comment \69\ stated that the
most up-to-date analysis fleet possible should be used, because a more
up-to-date analysis fleet will better capture how manufacturers apply
technology and will account better for vehicle model/configuration
introductions and deletions.\70\ On the other hand, some commenters
suggested that because manufacturers continue improving vehicle
performance and utility over time, an older analysis fleet should be
used to estimate how the fleet could have evolved had manufacturers
applied all technological potential to

fuel economy rather than continuing to improve vehicle performance and
utility.\71\ Because manufacturers change and improve product offerings
over time, conducting analysis with an older analysis fleet (or with a
fleet using fuel economy levels and CO2 emissions rates that
have been adjusted to reflect an assumed return to levels of
performance and utility typical of some past model year) would miss
this real-world trend. While such an analysis could demonstrate what
industry could do if, for example, manufacturers devoted all
technological improvements toward raising fuel economy and reducing
CO2 emissions (and if consumers decided to purchase these
vehicles), we do not believe it would be consistent with a transparent
examination of what effects different levels of standards would have on
individual manufacturers and the fleet as a whole.
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    \69\ 82 FR 39551 (Aug. 21, 2017).
    \70\ For example, in 2016 comments to dockets EPA-HQ-OAR-2015-
0827 and NHTSA-2016-0068, the Alliance of Automobile Manufacturers
commented that ``the Alliance supports the use of the most recent
data available in establishing the baseline fleet, and therefore
believes that NHTSA's selection [of, at the time, model year 2015]
was more appropriate for the Draft TAR.'' (Alliance at 82, Docket
ID. EPA-HQ-OAR-2015-0827-4089) Global Automakers commented that ``a
one-year difference constitutes a technology change-over for up to
20% of a manufacturer's fleet. It was also generally understood by
industry and the agencies that several new, and potentially
significant, technologies would be implemented in MY 2015. The use
of an older, outdated baseline can have significant impacts on the
modeling of subsequent Reference Case and Control Case
technologies.'' (Global Automakers at A-10, Docket ID. EPA-HQ-OAR-
2015-0827-4009).
    \71\ For example, in 2016 comments to dockets EPA-HQ-OAR-2015-
0827 and NHTSA-2016-0068, UCS stated ``in modeling technology
effectiveness and use, the agencies should use 2010 levels of
performance as the baseline.'' (UCS at 4, Docket ID. EPA-HQ-OAR-
2015-0827-4016).
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    Generally, all else being equal, using a newer analysis fleet will
produce more realistic estimates of impacts of potential new standards
than using an outdated analysis fleet. However, among relatively
current options, a balance must be struck between, on one hand, inputs'
freshness, and on the other, inputs' completeness and accuracy.\72\
During assembly of the inputs for today's analysis, final compliance
data was available for the MY 2015 model year but not in a few cases
for MY 2016. However, between mid-year compliance information and
manufacturers' specific updates discussed above, a robust and detailed
characterization of the MY 2016 fleet was developed. However, while
information continued to develop regarding the MY 2017 and, to a lesser
extent MY 2018 and even MY 2019 fleets, this information was--even in
mid-2017--too incomplete and inconsistent to be assembled with
confidence into an analysis fleet for modeling supporting deliberations
regarding today's proposal.
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    \72\ Comments provided through a recent peer review of the CAFE
model recognize the need for this balance. For example, referring to
NHTSA's 2016 analysis documented in the draft TAR, one of the peer
reviewers commented as follows: ``The NHTSA decision to use MY 2015
data is wise. In the TAR they point out that a MY 2016 foundation
would require the use of confidential data, which is less desirable.
Clearly they would also have a qualitative vision of the MY 2016
landscape while employing MY 2015 as a foundation. Although MY 2015
data may still be subject to minor revision, this is unlikely to
impact the predictive ability of the model . . . A more complex
alternative approach might be to employ some 2016 changes in
technology, and attempt a blend of MY 2015 and MY 2016, while
relying of estimation gained from only MY 2015 for sales. This
approach may add some relevancy in terms of technology, but might
introduce substantial error in terms of sales.''
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    In short, the 2016 fleet was, in fact, the most up-to-date fleet
that could be produced for this NPRM. Moreover, during late 2016 and
early 2017, nearly all manufacturers provided comments on the
characterization of their vehicles in the analysis fleet, and many
provided specific feedback about their vehicles, including aerodynamic
drag coefficients, tire rolling resistance values, transmission
efficiencies, and other information used in the analysis. NHTSA worked
with manufacturers to clarify and correct some information and
integrated the information into a single input file for use in the CAFE
model. Accordingly, the current analysis fleet is reasonable to use for
purposes of the NPRM analysis.
    As always, however, ways to improve the analysis fleet used for
subsequent modeling to evaluate potential new CAFE and CO2
standards will undergo continuous consideration. As described above,
the compliance data is only the starting point for developing the
analysis fleet; much additional information comes directly from
manufacturers (such as details about technologies, platforms, engines,
transmissions, and other vehicle information, that may not be present
in compliance data), and other information must come from commercial
and public sources (for example, fleet-wide information like market
share, because individual manufacturers do not provide this kind of
information). If newer compliance data (i.e., MY 2017) becomes
available and can be analyzed during the pendency of this rulemaking,
and if all of the other necessary steps can be performed, the analysis
fleet will be updated, as feasible, and made publicly available. The
agencies seek comment on the option used today and any other options,
as well as on the tradeoffs between, on one hand, fidelity with
manufacturers' actual plans and, on the other, the ability to make
detailed analysis inputs and outputs publicly available.
(c) Observed Technology Content of 2016 Fleet
    As explained above, the analysis fleet is defined not only by the
vehicle models/configurations it contains but also by the technologies
on those vehicles. Each vehicle model/configuration in the analysis
fleet has an associated list of observed technologies and equipment
that can improve fuel economy and reduce CO2 emissions.\73\
With a portfolio of descriptive technologies arranged by manufacturer
and model, the analysis fleet can be summarized and project how
vehicles in that fleet may improve over time via the application of
additional technology.
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    \73\ These technologies are generally grouped into the following
categories: Vehicle technologies include mass reduction, aerodynamic
drag reduction, low rolling resistance tires, and others. Engine
technologies include engine attributes describing fuel type, engine
aspiration, valvetrain configuration, compression ratio, number of
cylinders, size of displacement, and others. Transmission
technologies include different transmission arrangements like
manual, 6-speed automatic, 8-speed automatic, continuously variable
transmission, and dual-clutch transmissions. Hybrid and electric
powertrains may complement traditional engine and transmission
designs or replace them entirely.
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    In many cases, vehicle technology is clearly observable from the
2016 compliance data (e.g., compliance data indicates clearly which
vehicles have turbochargers and which have continuously variable
transmissions), but in some cases technology levels are less
observable. For the latter, like levels of mass reduction, the analysis
categorized levels of technology already used in a given vehicle.
Similarly, engineering judgment was used to determine if higher mass
reduction levels may be used practicably and safely in a given vehicle.
    Either in mid-year compliance data for MY 2016 or, separately and
at the agencies' invitation (as discussed above), most manufacturers
identified most of the technology already present in each of their MY
2016 vehicle model/configurations. This information was not as complete
for all manufacturers' products as needed for today's analysis, so in
some cases, information was supplemented with publicly available data,
typically from manufacturer media sites. In limited cases,
manufacturers did not supply information, and information from
commercial and publicly available sources was used.
(d) Mapping Technology Content of 2016 Fleet to Argonne Technology
Effectiveness Simulation Work
    While each vehicle model/configuration in the analysis fleet has
its list of observed technologies and equipment, the ways in which
manufacturers apply technologies and equipment do not always coincide
perfectly with how the analysis characterizes the various technologies
that improve fuel economy and reduce CO2 emissions. To
improve how the observed vehicle fleet ``fits into'' the analysis, each
vehicle model/configuration is ``mapped'' to the full-

vehicle simulation modeling \74\ by Argonne National Laboratory that is
used to estimate the effectiveness of the fuel economy-improving/
CO2 emissions-reducing technologies considered. Argonne
produces full-vehicle simulation modeling for many combinations of
technologies, on many types of vehicles, but it did not simulate
literally every single vehicle model/configuration in the analysis
fleet because it would be impractical to assemble the requisite
detailed information--much of which would likely only be provided on a
confidential basis--specific to each vehicle model/configuration and
because the scale of the simulation effort would correspondingly
increase by at least two orders of magnitude. Instead, Argonne
simulated 10 different vehicle types, corresponding to the ``technology
classes'' generally used in CAFE analysis over the past several
rulemakings (e.g., small car, small performance car, pickup truck,
etc.). Each of those 10 different vehicle types was assigned a set of
``baseline characteristics,'' to which Argonne added combinations of
fuel-saving technologies and then ran simulations to determine the fuel
economy achieved when applying each combination of technologies to that
vehicle type given its baseline characteristics. These inputs,
discussed at greater length in Sections II.D and II.G, provide the
basis for the CAFE model's estimation of fuel economy levels and
CO2 emission rates.
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    \74\ Full-vehicle simulation modeling uses software and physics
models to compute and estimate energy use of a vehicle during
explicit driving conditions. Section II.D below contains more
information on the Argonne work for this analysis.
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    In the analysis fleet, inputs assign each specific vehicle model/
configuration to a technology class, and once there, map to the
simulation within that technology class most closely matching the
combination of observed technologies and equipment on that vehicle.\75\
This mapping to a specific simulation result most closely representing
a given vehicle model/configuration's initial technology ``state''
enables the CAFE model to estimate the same vehicle model/
configuration's fuel economy after application of some other
combination of technologies, leading to an alternative technology
state.
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