----------------------------------------------------------------------------------------------------------------

    The results are similar for Alternatives 3 and 4, where the truck
standard stays at the final rule level and the car stringency varies,
+20 g/mile and -20 g/mile respectively. Table III-39 presents our
projected per-vehicle cost for the average car, truck and for the fleet
in model years 2021 and 2025 for the final rule and for Alternatives 3
and 4. Compared to the final rule, Alternative 3 (with a MYs 2021 and
2025 car target 20 g/mile less stringent then the final rule) is
considerably less costly on average than the final rule in MY 2021 and
in 2025. Alternative 4 (with a MYs 2021 and 2025 car target 20 g/mile
more stringent then the final rule) is considerably more costly on
average than the final rule in MY 2021 and in MY 2025. The differences
for these alternatives relative to the final rule are even more
pronounced than the differences for Alternatives 1 and 2. As in the
analysis above, the cost increases are greater for more stringent
alternatives than the reduced costs from the less stringent
alternatives.

 Table III-39--MYs 2021 and 2025 Fleet Average Projected Per-Vehicle Costs for Final Rule and Alternatives 3 and
                                                        4
                                                 [2010$/vehicle]
----------------------------------------------------------------------------------------------------------------
                                                                       Cars           Trucks           Fleet
----------------------------------------------------------------------------------------------------------------
2021 Final rule.................................................            $767            $763            $766
Alternative 3: 2021 Cars + 20...................................             298             388             330
Alternative 4: 2021 Cars-20.....................................           1,422           1,261           1,365
2025 Final rule.................................................           1,726           2,059           1,836
Alternative 3: 2025 Cars + 20...................................           1,151           1,448           1,249
Alternative 4: 2025 Cars-20.....................................           2,556           2,612           2,574
----------------------------------------------------------------------------------------------------------------

    Table III-40 presents the per-vehicle cost estimates in MY 2021 by
company for the final rule, Alternative 3, and Alternative 4. In
general, for most of the companies our projected results show the same
trends as for the industry as a whole, with Alternative 3 being several
hundred dollars per vehicle less expensive then the final rule, and
Alternative 4 being several hundred dollars per vehicle more expensive
(with larger increment for the more stringent alternative than the less
stringent alternative). In some cases the differences exceed $1,000
(e.g. BMW, Daimler, Geely/Volvo, Spyker/Saab, Suzuki and Tata).

      Table III-40--MY 2021 Projected Per-Vehicle Costs for Final Rule and Alternatives 3 and 4 by Company
                                     [Cars & trucks combined, 2010$/vehicle]
----------------------------------------------------------------------------------------------------------------
                                                                                Alt. 3 (cars +   Alt. 4 (cars-
                                                                    Final rule          20)             20)
----------------------------------------------------------------------------------------------------------------
BMW.............................................................            $852            -$65          $2,075
Chrysler/Fiat...................................................             733             377           1,206
Daimler.........................................................           1,655             673           3,181
Ferrari.........................................................           6,712           6,712           6,712
Ford............................................................             746             254           1,403
Geely-Volvo.....................................................           1,698             623           3,151
GM..............................................................             619             313           1,015
Honda...........................................................             624             327           1,083
Hyundai.........................................................             794             351           1,426
Kia.............................................................             689             353           1,249
Mazda...........................................................           1,010             412           1,920
Mitsubishi......................................................             791             263           1,562
Nissan..........................................................             725             282           1,292
Porsche.........................................................           3,871           2,663           4,788
Spyker-Saab.....................................................           2,674           1,308           4,324
Subaru..........................................................           1,128             474           1,950
Suzuki..........................................................           1,064             356           2,039
Tata-JLR........................................................           2,495           1,365           3,723

Toyota..........................................................             532             312             857
VW..............................................................           1,293             215           2,734
Fleet...........................................................             766             330           1,365
----------------------------------------------------------------------------------------------------------------

    Table III-41 presents the per-vehicle cost estimates in MY 2025 by
company for the final rule, Alternative 3 and Alternative 4. In
general, for most of the companies our projected results show the same
trends as for the industry as a whole, with Alternative 3 less costly
than the final rule, and Alternative 4 more costly. Again these
differences are more pronounced for the car alternatives than the truck
alternatives.

      Table III-41--MY 2025 Projected Per-Vehicle Costs for Final Rule and Alternatives 3 and 4 by Company
                                         [Cars & trucks, 2010$/vehicle]
----------------------------------------------------------------------------------------------------------------
                                                                                Alt. 3 (cars +   Alt. 4 (cars-
                                                                    Final rule          20)             20)
----------------------------------------------------------------------------------------------------------------
BMW.............................................................          $1,910          $1,102          $3,041
Chrysler/Fiat...................................................           1,950           1,419           2,556
Daimler.........................................................           2,616           1,622           3,826
Ferrari.........................................................           7,864           7,416           7,864
Ford............................................................           2,025           1,302           2,800
Geely-Volvo.....................................................           2,681           1,647           3,998
GM..............................................................           1,861           1,400           2,417
Honda...........................................................           1,642           1,105           2,293
Hyundai.........................................................           1,792           1,138           2,666
Kia.............................................................           1,658           1,040           2,452
Mazda...........................................................           2,057           1,284           3,064
Mitsubishi......................................................           2,015           1,307           2,782
Nissan..........................................................           1,847           1,244           2,583
Porsche.........................................................           4,044           2,997           5,296
Spyker-Saab.....................................................           3,238           2,059           4,507
Subaru..........................................................           2,054           1,405           2,893
Suzuki..........................................................           2,066           1,379           3,070
Tata-JLR........................................................           3,390           2,264           4,815
Toyota..........................................................           1,407           1,020           1,971
VW..............................................................           2,181           1,281           3,471
Fleet...........................................................           1,836           1,249           2,574
----------------------------------------------------------------------------------------------------------------

    Table III-42 shows that in MY 2021, for several technologies
Alternative 3 leads to lower levels of technology penetration for cars
as well as for trucks compared to the final rule. For example, on cars
there is a decrease in the 18 bar turbo-charged/downsized engines, a
decrease in the penetration of cooled EGR, and a decrease in the
penetration of gasoline direct injection fuel systems. We also see that
due to credit transfer between cars and trucks, the lower level of
stringency considered for cars in alternative 3 also impacts the
penetration of technology to the truck fleet--with alternative 3
leading to a decrease in penetration of 24 bar turbo-downsized engines,
a decrease in penetration of cooled EGR, and a decrease in penetration
of gasoline direct injection fuel systems in the car fleet. For the
more stringent alternative 4, we see increases in the penetration of
many of these technologies projected for MY 2021, for the truck fleet
as well as for the car fleet. Table III-43 shows these same overall
trends but at the sales weighted fleet level in MY 2021.

                 Table III-42--MY 2021 Projected Technology Penetrations for Final Rule and Alternatives 3 and 4 for all Cars and Trucks
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                               Cars                                           Trucks
                                                         -----------------------------------------------------------------------------------------------
                       Technology                           Final rule        Alt. 3          Alt. 4        Final rule        Alt. 3          Alt. 4
                                                             (percent)       (percent)       (percent)       (percent)       (percent)       (percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Turbo-downsize (18 bar).................................              43              37              55              53              50              57
Turbo-downsize (24 bar).................................              14               7              22              16              10              25
8 speed DCT.............................................              61              60              63               7               6               7
Cooled EGR..............................................              11               5              19              16               8              24
Hybrid Electric Vehicle.................................               4               4               7               2               1               3
LRRT2...................................................              72              72              72              74              74              74
IACC2...................................................              71              48              67              64              52              60

GDI.....................................................              60              45              84              73              63              87
MHEV....................................................               5               3               7              11               5              19
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Table III-43--MY 2021 Projected Technology Penetrations for Final Rule and Alternatives 3 and 4 for Fleet
----------------------------------------------------------------------------------------------------------------
                                                                    Final rule        Alt. 3          Alt. 4
                           Technologies                              (percent)       (percent)       (percent)
----------------------------------------------------------------------------------------------------------------
Turbo-downsize (18 bar).........................................              46              41              56
Turbo-downsize (24 bar).........................................              15               8              23
8 speed DCT.....................................................              42              41              43
Cooled EGR......................................................              12               6              21
Hybrid Electric Vehicle.........................................               4               3               6
LRRT2...........................................................              73              73              73
IACC2...........................................................              68              49              65
GDI.............................................................              65              51              85
----------------------------------------------------------------------------------------------------------------

    Table III-44 shows that in MY 2025, there are significant
differences in technology penetration rates when comparing the final
rule to alternative 3 for cars, and additional change shows up in the
truck fleet. As compared to the final rule, Alternative 3 would require
approximately half the number of MHEVs, HEVs, and EVs As in MY 2021, we
see that due to credit transfer between cars and trucks, the lower
level of stringency considered for cars in alternative 3 also impacts
the truck fleet penetration--with alternative 3 leading to a
significant decrease in penetration of HEVs and MHEVs. For the more
stringent alternative 4, we see a significant increase in the
penetration of EVs, MHEVs and HEVs for cars compared to the final
rule., Further, we see a sharp increase (a tripling) in the penetration
of HEVs for trucks compared to the final rule.

                 Table III-44--MY 2025 Projected Technology Penetrations for Final Rule and Alternatives 3 and 4 for all Cars and Trucks
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                               Cars                                           Trucks
                                                         -----------------------------------------------------------------------------------------------
                      Technologies                          Final rule        Alt. 3          Alt. 4        Final rule         Alt.3          Alt. 4
                                                             (percent)       (percent)       (percent)       (percent)       (percent)       (percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Turbo-downsize (18 bar).................................              25              20              16              19              19              19
Turbo-downsize (24 bar).................................              63              52              67              67              62              67
8 speed DCT.............................................              79              79              77               9               9               8
Cooled EGR..............................................              65              44              70              74              71              73
Hybrid Electric Vehicle.................................               4               4               6               5               2              15
EV......................................................               3             1.5             6.5               0             0.0             1.1
LRRT2...................................................              96              96              97              99              98              99
IACC2...................................................              73              86              49              55              76              48
GDI.....................................................              93              76              90              97              92              98
MHEV....................................................              20               9              45              39              23              35
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Table III-45--MY 2025 Projected Technology Penetrations for Final Rule and Alternatives 3 and 4 for Fleet
----------------------------------------------------------------------------------------------------------------
                                                                    Final rule        Alt. 3          Alt. 4
                           Technologies                              (percent)       (percent)       (percent)
----------------------------------------------------------------------------------------------------------------
Turbo-downsize (18 bar).........................................              23              20              16
Turbo-downsize (24 bar).........................................              64              56              67
8 speed DCT.....................................................              56              56              55
Cooled EGR......................................................              68              53              71
Hybrid Electric Vehicle.........................................               5               3               9
EV..............................................................               2             1.0             4.7
LRRT2...........................................................              97              97              98
IACC2...........................................................              67              83              49
GDI.............................................................              94              81              93
MHEV............................................................              26              13              36
----------------------------------------------------------------------------------------------------------------

    As stated above, EPA's analysis indicates that there is a
technology pathway for all manufacturers to build vehicles that would
meet their final standards as well as the alternative standards.\616\
The differences between the final standards and these analyzed
alternatives lie in the per-vehicle costs and the associated technology
penetrations. We have also shown that the relative rate of increase in
the stringencies of cars and trucks is appropriate such that there is
greater balance among the manufacturers where the distribution of the
burden is relatively evenly spread between cars and trucks, and that
neither standard is disproportionately stringent relative to the other
since the modeled flow of credits between cars and trucks is relatively
equal. By MY 2025, the final rule standards are projected to result in
MHEV or stronger battery technology on 33% of the new vehicle fleet.
Our modeling shows that this level of technology is feasible and cost
effective. In Section I.C of the Preamble, we also showed that the
benefits of the program are significant, and that vehicle purchasers
can recover this cost within the first four years of vehicle ownership.
---------------------------------------------------------------------------

    \616\ Except Ferrari.
---------------------------------------------------------------------------

    EPA's analysis of the four alternatives indicates that under all of
the alternatives the projected response of the manufacturers is to
apply technology to both their car and truck fleets. Whether the car or
truck standard is being changed, and whether it is being made more or
less stringent, the response of the manufacturers is to make changes
across their fleet, in light of their ability to transfer credits
between cars and trucks. For example, Alternatives 1 and 3 make either
car or truck standards less stringent, and keep the other standard as
is. For both alternatives, manufacturers' car and truck fleets each
increase their projected CO2 g/mile level. Similarly, for
alternatives 2 and 4, where either the truck or car fleet standard is
made more stringent, and the other standard is kept as is,
manufacturers reduce the projected CO2 g/mile level achieved
by both their car and trucks fleets, in a generally comparable fashion.
This is summarized in Table III-46 for MY 2025.

  Table III-46--A Comparison of the Achieved CO[ihel2] levels in Relation to the Final Achieved Levels for all
                                        Alternative Scenarios in MY 2025
----------------------------------------------------------------------------------------------------------------
                                                                                Change in truck
                                                                 Change in car achieved  achieved level compared
                          Alternative                           level compared to final   to final rule achieved
                                                                  rule achieved level             level
----------------------------------------------------------------------------------------------------------------
1: truck + 20.................................................                       +6                      +10
2: truck -20..................................................                       -8                       -6
3: car + 20...................................................                      +12                      +13
4: car -20....................................................                      -15                       -9
----------------------------------------------------------------------------------------------------------------

    This demonstrates that the four alternatives are indicative of what
would happen if EPA increased the stringency of both the car and truck
fleet at the same time, or decreased the stringency of the car and
truck fleet at the same time. E.g., Alternative 4 would be comparable
to an alternative where EPA made the car standard more stringent by 14
g/mile and the truck standard more stringent by 9 g/mile. Under such an
alternative, there would logically be little if any net transfer of
credits between cars and trucks. Similarly, the results from
alternatives 1 and 3 indicate what would be expected if EPA decreased
the stringency of both the car and truck standards, and alternatives 2
and 4 indicate what would happen if EPA increased the stringency of
both the car and truck standards. In general, it appears that
decreasing the stringency of the standards would lead the manufacturers
to comparably increase the CO2 g/mile of both cars and
trucks (alternatives 1 and 3). Increasing the stringency of the car and
truck standards would also generally lead to comparable decreases in g/
mile for both cars and trucks. Again, these analyses (which were
presented at proposal and not directly controverted in any of the
comments) support the relative stringency of the car and truck curves
and their relation to each other. This is because there is not a
disproportionate shift of projected compliance paths from car to truck
improvements, or vice versa, under the final standards or the
alternatives.\617\
---------------------------------------------------------------------------

    \617\ As also noted above, this analysis serves as a response to
those commenters claiming that the truck standard was insufficiently
stringent or created inherent incentives to upsize the light duty
vehicle fleet. The analysis shows no indication that either the
truck or car standards will encourage manufacturers to choose
technology paths that lead to significant over or under compliance
for cars or trucks, on an industry wide level.
---------------------------------------------------------------------------

    EPA is not selecting either alternative 1 or 3 as a final standard.
Under these less stringent alternatives, there would be significantly
less emission reductions (as shown in section III.F.1), and would
therefore forego important benefits that the final standards achieve at
reasonable costs and penetrations of technology. EPA judges that there
is not a good reason to forego such benefits, and is not adopting less
stringent standards such as alternatives 1 and 3. Indeed, although a
handful of commenters urged EPA not to establish MYs 2017-2025
standards at all, no commenters endorsed these specific standard
stringencies.
    Alternatives 2 and 4 increase the per vehicle estimates by roughly
$300 and $600, respectively, in MY 2021 and $400 and $700,
respectively, in MY2025. This increase in cost relative to the costs of
the final rule standards stems from the increases in the costlier
electrification technologies, such as HEVs and EVs that we project
these standards would effectively force. The following tables and
charts show the technology penetrations by manufacturer in greater
detail.
    Table III-47 and later tables describe the projected penetration
rates for the OEMs of some key technologies in MY 2021 and MY2025 under
the final standards. TDS27, HEV, MHEV, and PHEV+EV technologies
represent the most costly technologies added in the package generation
process, and the OMEGA model generally adds them as one of the last
technology choices for compliance. They are therefore an indicator of
the extent to which the stringency of the standard is pushing the
manufacturers to utilize the most costly technology. Cost (as shown
above) is a similar indicator.
    Table III-47 describes technology penetration for MY2021 under the
final rule.

                             Table III-47--Percent Projected Penetration of Technologies in MY 2021 for the Final Standards
                                                       [Ferrari has been removed from this table]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                         2021 Car                            2021 Truck                           2021 Fleet
                                          --------------------------------------------------------------------------------------------------------------
                                           TDS24  TDS27   HEV    MHEV  PHEV+EV  TDS24  TDS27   HEV    MHEV  PHEV+EV  TDS24  TDS27   HEV    MHEV  PHEV+EV
                                             (%)    (%)    (%)    (%)     (%)     (%)    (%)    (%)    (%)     (%)     (%)    (%)    (%)    (%)     (%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
BMW......................................     28      6      9     21       4      30      5      0     30       0      29      6      7     23       3
Chrysler/Fiat............................     21      1      0      0       0      19      3      0     11       0      20      2      0      5       0
Daimler..................................     29     12      7     22       9      28     10      0     30       0      29     11      5     24       7
Ford.....................................     17      1      2      6       0      21      6      2     21       0      19      3      2     11       0
Geely/Volvo..............................     30     13     13     17       9      30      6      0     30       0      30     11      9     21       6
GM.......................................     15      1      0      0       0      15      5      0     10       0      15      3      0      5       0
Honda....................................      5      0      3      0       0      18      0      0      4       0       9      0      2      1       0
Hyundai..................................     14      0      0      1       0      25      0      0      5       0      17      0      0      2       0
Kia......................................      5      0      0      0       0      25      0      0      5       0      10      0      0      1       0
Mazda....................................     28      0      0      4       0      28      0      0     14       0      28      0      0      6       0
Mitsubishi...............................     29      0      0      6       0      30      0      3     26       0      29      0      1     13       0
Nissan...................................     19      0      1      0       0      17      3      0     15       0      18      1      1      5       0
Porsche..................................     28     15     25      5      27      30     11      2     28       0      29     14     20     10      21
Spyker/Saab..............................     30     15     22      8      14      30      9      2     28       0      30     14     19     11      12
Subaru...................................     29      0      0     19       0      30      0     20     10       0      30      0      5     17       0
Suzuki...................................     30      0      0     25       0      30      0      0     30       0      30      0      0     26       0
Tata/JLR.................................     30     15     25      5      17      30     12     22      8       0      30     13     23      7       9
Toyota...................................      0      0     15      0       0       2      3      5      0       0       1      1     12      0       0
VW.......................................     30     12      1     29       8      30      7      0     30       0      30     11      1     29       6
Fleet....................................     14      2      4      5       1      16      4      2     11       0      15      3      4      7       1
--------------------------------------------------------------------------------------------------------------------------------------------------------
TDS24 = 24 bar bmep Turbo downsized GDI Engines, where most of these are EGR boosted, TDS27 = EGR boosted turbo downsized GDI 24 bar bmep, HEV = Hybrid
  Electric Vehicle, MHEV = Mild HEV, EV = Electric Vehicle, PHEV = Plug-in Hybrid Electric Vehicle.

    It can be seen from this table that the larger volume manufacturers
have levels of the most advanced technologies, such as plug-in and
electric vehicles, 27 bar BMEP engines, and hybridization that are
significantly below the modeled maximum penetration rates (i.e. the
phase-in caps, described in the next table). On the other hand, some of
the ``luxury'' manufacturers tend to require higher levels of these
technologies than do the broader market manufacturers.\618\ Together
these seven ``luxury'' vehicle manufacturers represent 12% of vehicle
sales and, as shown in Table III-48, their estimated cost of compliance
is considerably higher than for broader market manufacturers in both
MYs 2021 and 2025 regardless of the standard level.
---------------------------------------------------------------------------

    \618\ These ``luxury'' manufacturers are BMW, Daimler, Volvo,
Porsche, Saab, Jaguar/LandRover, and VW. Note that we group these
manufacturers here only for sake of differentiation in the analysis
presented in this Section III.D.6. The term ``luxury'' manufacturer,
as used here, carries no regulatory meaning and the use here should
not be confused with any of our compliance flexibilities.

        Table III-48--Costs by Alternative for ``Luxury'' Manufacturers vs. Broader Market Manufacturers
                                         [Cars & trucks, 2010$/vehicle]
----------------------------------------------------------------------------------------------------------------
                                                               2021                            2025
                                                 ---------------------------------------------------------------
                                                      Luxury       Broad market       Luxury       Broad market
----------------------------------------------------------------------------------------------------------------
Primary.........................................          $1,438            $672          $2,364          $1,763
Alternative 1...................................           1,002             423           2,000           1,430
Alternative 2...................................           1,943             979           2,797           2,165
Alternative 3...................................             410             316           1,439           1,222
Alternative 4...................................           2,819           1,166           3,604           2,432
----------------------------------------------------------------------------------------------------------------
Note: Several of the luxury manufacturers, including Porsche and Tata (Jaguar/Land Rover) are eligible for
  compliance flexibility based on their sales volumes; therefore, their costs would be lower than the sales
  weighted results used to generate the ``luxury'' manufacturer costs presented here.

    The caps or limits on the technology phase in rates described in
Chapter 3.4.2 of the joint TSD relate to the remainder of this
discussion. As a modeling tool, EPA imposes upper limits on the
penetration rates allowed under our modeling. These maximum penetration
rates may reflect technical judgments about technology feasibility and
availability, consumer acceptance, lead time, supplier capacity, up-
front investment capital requirements, manufacturability, and other
reasons as detailed in Chapter 3 of the Joint TSD. The maximum
penetration rates are not a judgment that rates below that cap are
practical or reasonable.\619\ Table III-49 summarizes the caps on the
phase in rates of some of the key technologies. A projected penetration
rate that approaches the caps for these technologies for a given
manufacturer is an indication of how much that manufacturer is being
``pushed'' to the limits of available technology by the standards.
---------------------------------------------------------------------------

    \619\ For example, in MY 2010, there were 3% HEVs in the new
vehicle fleet. In MYs 2016, 2021 and 2025 we project that the cap on
this technology penetration rate increases to 15%, 30% and 50%
respectively. In MY 2010, there were practically no PH/EVs. In MYs
2016, 2021, and 2025 we project that this cap on technology
penetration rate increases to approximately 5%, 10%, and 15%
respectively for EVs and PHEVs separately. These highly complex
technologies also have the slowest penetration phase-in rates to
reflect the relatively long lead time required to implement into
substantial fractions of the fleet subject to the manufacturers'
product redesign schedules. In contrast, an advanced technology for
improved engine design still under development, TDS27, has a cap on
penetration phase in rate in MYs 2016, 2021, and 2025 of 0%, 15%,
and 50%, indicative of a longer lead time to develop the technology,
but a relatively faster phase in rate once the technology is
``ready'' (consistent with other ``conventional'' evolutionary
improvements).

                         Table III-49--Phase-in Rates for Some Key Advanced Technologies
----------------------------------------------------------------------------------------------------------------
                                                                       2016            2021            2025
                           Technology                                (percent)       (percent)       (percent)
----------------------------------------------------------------------------------------------------------------
Turbocharging & downsizing with EGR Level 1 (w/cooled EGR, 24                 15              30              75
 bar)...........................................................
Turbocharging & downsizing with EGR Level 2 (w/cooled EGR, 27                  0              15              50
 bar)...........................................................
Mild and StrongHybrid...........................................              15              30              50
Plug-in Hybrid..................................................               5              10              14
Electric Vehicle................................................               6              11              15
----------------------------------------------------------------------------------------------------------------

    Table III-50 shows the technology penetrations for Alternative 2.
In MY2021, penetration rates of truck mild and strong HEVs doubles in
comparison to the final rule. The Ford truck fleet increases the MHEV
penetration significantly relative to the final rule in Alternative 2.
    There are other significant increases in the larger manufacturers
and even more dramatic increases in the HEV penetration in smaller
manufacturers' fleets. There are also now six manufacturers with total
fleet PH/EV penetration rates equal to 9% or greater.
    The broader market manufacturers have an estimated per vehicle cost
of compliance with 2021 alternative 2 standards of roughly $1,000 which
is roughly $300 more than under the final standards (see Table III-48,
above). The seven ``luxury'' vehicle manufacturers now have estimated
costs in 2021 of roughly $1,950, which is roughly $500 higher than the
final standards (See Table III-48, above).

                                     Table III-50--Percent Penetration of Technologies in MY 2021 for Alternative 2
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                         2021 Car                            2021 Truck                           2021 Fleet
                                          --------------------------------------------------------------------------------------------------------------
                                           TDS24  TDS27   HEV    MHEV  PHEV+EV  TDS24  TDS27   HEV    MHEV  PHEV+EV  TDS24  TDS27   HEV    MHEV  PHEV+EV
                                             (%)    (%)    (%)    (%)     (%)     (%)    (%)    (%)    (%)     (%)     (%)    (%)    (%)    (%)     (%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
BMW......................................     28      6     12     18       7      30      9      0     30       0      29      7      9     21       5
Chrysler/Fiat............................     28      1      0      3       0      27      3      0     21       0      28      2      0     11       0
Daimler..................................     30     13     16     14      13      28     10      0     30       0      29     13     12     18      10
Ford.....................................     26      1      2     12       0      29      6      2     27       0      27      3      2     17       0
Geely/Volvo..............................     30     14     21      9      14      30      6      4     26       0      30     11     16     14      10
GM.......................................     25      1      0      2       0      24      5      0     23       0      25      3      0     12       0
Honda....................................     10      0      3      0       0      18      0      0      6       0      12      0      2      2       0
Hyundai..................................     17      0      0      1       0      25      0      0      5       0      18      0      0      2       0
Kia......................................     12      0      0      0       0      25      0      0      5       0      15      0      0      1       0
Mazda....................................     30      0      0     11       0      29      0      1     21       0      30      0      0     12       0
Mitsubishi...............................     30      0      3     26       0      30      0      4     26       1      30      0      4     26       1
Nissan...................................     21      0      1      0       0      25      3      0     18       0      22      1      1      6       0
Porsche..................................     28     15     25      5      30      30     11     13     17       0      29     14     23      7      23
Spyker/Saab..............................     30     15     22      8      17      30      9      2     28       0      30     14     19     11      14
Subaru...................................     29      0     14     15       0      30      0     20     10       0      30      0     15     14       0
Suzuki...................................     30      0     19      7       0      30      0      0     30       0      30      0     15     11       0
Tata/JLR.................................     25     15     26      4      30      30     12     22      8       0      27     13     24      6      15
Toyota...................................      4      0     15      0       0      19      3      5      8       0      10      1     11      3       0
VW.......................................     30     15      1     29      11      30      7      0     30       0      30     13      1     29       9
Fleet....................................     19      2      5      6       2      24      4      2     18       0      21      3      4     10       1
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Table III-51 shows the technology penetrations for Alternative 4
for MY 2021. The large volume manufacturer, Ford now has a significant
increase compared to the final standards of truck MHEVs and the fleet
MHEV penetration has gone up significantly for this company in
comparison to the final standards.
    Cars for several manufacturers now reach closer to the maximum
technology penetration cap of 30% for HEVs. Also, there are now six
manufacturers with fleet PH/EV penetration rates greater than 10%.
    The broader market manufacturers now have an estimated per vehicle
cost of compliance with 2021 alternative 4 standards of roughly $1,200,
which is approximately $600 higher than the final standards. The seven
``luxury'' vehicle manufacturers now have estimated costs of roughly
$2,800, which is approximately $1,100 higher than the final standard
(See Table III-48, above). For the seven luxury manufacturers, this per
vehicle cost in MY 2021 exceeds the full fleet costs under the final
rule for complying with the considerably more stringent 2025 standards.

[GRAPHIC] [TIFF OMITTED] TR15OC12.021

    Table III-52 shows the technology penetrations for the final
standards in MY 2025. The larger volume manufacturers have levels of
advanced technologies that are below the maximum penetration rates
though there are some notably high penetration rates for truck HEVs for
Ford and Nissan. For the fleet in general, we note a 2% penetration
rate of PHEVs and EVs, which coincidentally is similar to the current
penetration rate of HEVs. It has taken approximately 10 years for HEV
penetration to reach this level, without an increase in the stringency
of passenger car CAFE standards. Therefore, EPA believes that there is
sufficient lead time for PHEVs and EVs to reach this level of
penetration by 2025.

[GRAPHIC] [TIFF OMITTED] TR15OC12.022

    All of the luxury manufacturers have significant MHEV penetrations.
Several luxury manufacturers reach the maximum MHEV penetration cap on
their truck portion of their fleet. 6 of the 7 luxury vehicle
manufacturers also have greater than 10% penetration of PH/EVs (which
has a total cap of 29%). Several companies have large penetration rates
(>15%) of TDS27, such as Jaguar/LandRover, BMW, and Geely.
    The estimated per vehicle cost of compliance with 2025 final
standards is roughly $1,800 for the broader market manufacturers and
roughly $2,400 for the seven ``luxury'' vehicle manufacturers.
    Table III-53 shows the technology penetrations for Alternative 2 in
MY 2025. In this alternative, Chrysler trucks increase their
penetration of HEVs. GM has a large increase in truck HEVs, and
PHEVs+EVs as well. Toyota also has an increased number of HEVs. In this
alternative there are many more companies with a significant number of
HEVs. As we noted at proposal when presenting this type of analysis,
these penetration rates may well be overly aggressive in the face of
uncertain consumer acceptance of both the added costs and the
technologies themselves. 76 FR 75082. EPA continues to believe

that these technology penetration rates are inappropriate given the
concerns just voiced.\620\ The estimated per vehicle cost of compliance
with 2025 alternative 2 standards is roughly $2,200, which is roughly
$400 higher than the final standards. The seven luxury vehicle
manufacturers now have costs of roughly $2,800, which is roughly $400
higher than the final standards. See Table III-48 above.
---------------------------------------------------------------------------

    \620\ ACEEE stated that the more stringent alternative was
preferable because ``[t]hese alternatives adhere to technology
penetration rates that fall within the caps set by EPA to ensure
feasibility.'' ACEEE Comments p. 8. However, the technology caps
reflect the physical limits of technical capability, as explained
above. That so many manufacturers are pushing up against those
limits in this analysis raises legitimate issues of not only lead
time and cost, but consumer acceptance as well. ACEEE's further
comment that the truck standards should be more stringent in light
of the incentives for advanced technologies for pickup trucks (ACEEE
Comments p. 8) simply questions the agencies' policy judgment that
it is more appropriate to encourage introduction of these advanced
technologies into the large pickup truck sector by means of
incentives, rather than to try and compel the technologies'
penetration through more stringent standards, with the attendant
issues just noted of rejection due to cost and consumer acceptance.
Moreover, for the final rule, EPA modeled the incentives for large
pickup trucks in its cost analysis and the results strongly support
the decision not to adopt the more stringent alternative standards.
See section d below. In addition, the agencies' policy choice is
further appropriate as not creating an incentive to reduce pickup
truck utility as a compliance strategy, as noted in section II.C
above.

                                     Table III-53--Percent Penetration of Technologies in MY 2025 for Alternative 2
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                           Car                                 Truck                                Fleet
                                          --------------------------------------------------------------------------------------------------------------
                                           TDS24  TDS27   HEV    MHEV  PHEV+EV  TDS24  TDS27   HEV    MHEV  PHEV+EV  TDS24  TDS27   HEV    MHEV  PHEV+EV
                                             (%)    (%)    (%)    (%)     (%)     (%)    (%)    (%)    (%)     (%)     (%)    (%)    (%)    (%)     (%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
BMW......................................     51     20      7     43      16      65     19      0     50       0      55     20      5     45      12
Chrysler/Fiat............................     73      3      3     45       4      70      8      9     41       1      72      5      5     44       2
Daimler..................................     56     14      4     46      21      58     23      0     50       0      56     16      3     47      16
Ford.....................................     70      4      6     37       5      64     20     28     23       1      68      9     13     33       4
Geely/Volvo..............................     44     24      5     45      24      72      6      0     50       0      53     18      3     47      17
GM.......................................     72      3      1     41       4      67     15     15     35       0      70      9      8     38       2
Honda....................................     73      0      3     14       0      75      0      2     41       0      73      0      3     22       0
Hyundai..................................     75      0      0     23       0      75      0      0     50       0      75      0      0     28       0
Kia......................................     75      0      0      9       0      75      0      0     50       0      75      0      0     17       0
Mazda....................................     75      0      4     45       2      75      0      5     45       2      75      0      4     45       2
Mitsubishi...............................     74      0      3     46       8      70      0      7     43       2      73      0      4     45       6
Nissan...................................     74      0      0     41       2      70      9     17     33       2      73      3      5     38       2
Porsche..................................     52      9      2     48      37      61     28      0     50       0      54     13      1     49      29
Spyker/Saab..............................     65      8      2     48      22      65     19      0     50       0      65     10      1     49      19
Subaru...................................     75      0     11     35       6      75      0     12     38       5      75      0     12     36       6
Suzuki...................................     75      0     16     34       7      75      0      0     50       0      75      0     13     37       6
Tata/JLR.................................     13     22     20     30      45      59     33     33     17       0      34     27     26     24      24
Toyota...................................     63      1     15     13       0      68      8      6     43       0      65      4     12     24       0
VW.......................................     70      2      1     49      18      69     11      0     50       0      70      4      1     49      14
Fleet....................................     69      3      5     31       5      69     11     11     38       1      69      6      7     33       3
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Table III-54 shows the technology penetrations for Alternative 4 in
2025. In this alternative every company has a significant fraction of
MHEVS and HEVs. Many of the large volume manufacturers have even more
dramatic increases in the volumes of P/H/EVs than in Alternative 2.
    The estimated per vehicle cost of compliance with 2025 alternative
4 standards is roughly $2,600, which is approximately $700 higher than
the final standards. The seven luxury vehicle manufacturers now have
costs of roughly $3,600, which is approximately $1,200 higher than the
final standards. Much of this non-linear increase in cost is due to
increased penetration of PHEVs and EVs (more so than HEVs).

                                     Table III-54--Percent Penetration of Technologies in MY 2025 for Alternative 4
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                           Car                                 Truck                                Fleet
                                          --------------------------------------------------------------------------------------------------------------
                                           TDS24  TDS27   HEV    MHEV  PHEV+EV  TDS24  TDS27   HEV    MHEV  PHEV+EV  TDS24  TDS27   HEV    MHEV  PHEV+EV
                                             (%)    (%)    (%)    (%)     (%)     (%)    (%)    (%)    (%)     (%)     (%)    (%)    (%)    (%)     (%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
BMW......................................     48     20      7     43      22      65     19      0     50       0      52     20      5     45      16
Chrysler/Fiat............................     72      3      3     47       4      69      8     10     40       1      71      5      6     44       2
Daimler..................................     52     14      4     46      29      58     23      0     50       0      54     16      3     47      23
Ford.....................................     70      4      6     43       8      62     20     30     21       2      68      9     13     37       6
Geely/Volvo..............................     30     23     14     36      30      72      6      0     50       0      42     18     10     40      21
GM.......................................     72      3      1     41       2      67     15     15     35       0      70      9      8     38       1
Honda....................................     73      0      4     29       2      75      0      8     42       2      73      0      5     33       2
Hyundai..................................     75      0      5     45       3      75      0      0     50       0      75      0      4     46       3
Kia......................................     75      0      2     36       3      75      0      0     50       0      75      0      1     39       3
Mazda....................................     66      0     11     39       9      63      0     15     35       5      65      0     11     39       9
Mitsubishi...............................     71      0     10     40      12      70      0      7     43       2      70      0      9     41       9
Nissan...................................     74      0      4     46       5      62      9     23     27       3      71      3      9     40       4
Porsche..................................     46      5      5     45      45      50     50     39     11       0      47     15     12     38      35
Spyker/Saab..............................     56      8      2     48      34      65     19      0     50       0      57     10      1     49      30
Subaru...................................     74      0     11     39      10      48      0     34     16      10      68      0     16     33      10
Suzuki...................................     44      0     40     10      14      75      0      0     50       0      50      0     33     17      12
Tata/JLR.................................     13     22     20     30      45      59     41     50      0       0      34     31     34     16      24
Toyota...................................     63      1     14     21       0      68      8     16     37       1      65      4     15     27       0
VW.......................................     65      2      1     49      26      69     11      0     50       0      66      3      1     49      21
Fleet....................................     67      3      6     37       7      67     11     15     35       1      67      6      9     36       5
--------------------------------------------------------------------------------------------------------------------------------------------------------

d. Summary of the Technology Penetration Rates and Costs From the
Alternative Scenarios in Relation to the Final Standards
    As described above, alternatives 2 and 4 would lead to significant
increases in the penetration of advanced technologies into the fleet
during the time frame of these standards. In general, both alternatives
would lead to an increase in the average penetration rate for advanced
technologies in MY 2021, in effect accelerating some of the technology
penetration that would otherwise occur in the MYs 2022-2025 timeframe.
As discussed above, EPA maintains lead time concerns about requiring
aggressive technology penetration early in this time period subsequent
to the advances in stringency during the MYs 2012-2016. In MY 2025,
these alternatives would dramatically affect penetration rates of
MHEVs, HEVs, EVs, and PHEVs, in each case leading to significant
increases on average for the fleet. Again, Alternative 4 would lead to
greater penetration rates than Alternative 2. When one considers the
technology penetration rates for individual manufacturers, in MY 2021
the alternatives lead to much higher increases than average for some
individual large volume manufacturers. Smaller volume manufacturers
start out with higher penetration rates and are pushed to even higher
levels. This result is even more pronounced in MY 2025.
    This increase in technology penetration rates raises serious
concerns about the ability and likelihood manufacturers can smoothly
implement the increased technology penetration in a fleet that has so
far seen limited usage of these technologies, especially for trucks--
and for towing trucks in particular. While this is more pronounced for
2025, the lead time issues discussed previously remain for MY 2021 and
earlier years.. Although EPA believes that these penetration rates are,
in the narrow sense, technically achievable, it is more a question of
judgment whether we are confident at this time that these increased
rates of advanced technology usage can be practically and smoothly
implemented into the fleet. This concern is one reason the agencies are
attempting to encourage more utilization of these advanced technologies
with the advanced technology incentive programs but being reasonably
prudent in not adopting standards that could as a practical matter
force high degrees of penetration of these technologies on towing
trucks.\621\
---------------------------------------------------------------------------

    \621\ See 76 FR 57220 discussing a similar issue in the context
of the standards for heavy duty pickups and vans: ``Hybrid electric
technology likewise could be applied to heavy-duty vehicles, and in
fact has already been so applied on a limited basis. However, the
development, design, and tooling effort needed to apply this
technology to a vehicle model is quite large, and seems less likely
to prove cost-effective in this time frame, due to the small sales
volumes relative to the light-duty sector. Here again, potential
customer acceptance would need to be better understood because the
smaller engines that facilitate much of a hybrid's benefit are
typically at odds with the importance pickup truck buyers place on
engine horsepower and torque, whatever the vehicle's real
performance''.
---------------------------------------------------------------------------

    EPA notes that the same concerns support the final decision to
steepen the slope of the truck curve in acknowledgement of the special
challenges these larger footprint trucks (which in many instances are
towing vehicles) would face. Without the steepening, the penetration
rates of these challenging technologies would have been even greater.
    From a cost point of view, the impacts on cost track fairly closely
with the technology penetration rates discussed above. The average cost
increases under Alternatives 2 and 4 are significant for 2021
(approximately $300 and $600), and for some manufacturers they result
in very large cost increases. For 2025 the cost increases are even
higher (approximately $400 and $700). Alternative 4, as expected, is
significantly more costly than alternative 2. From another perspective,
the average cost of compliance to the industry on average is $12 and
$31 billion for the MYs 2021 and 2025 final standards, respectively.
Alternative 2 will cost the industry on average $5 and $7 billion in
excess, while Alternative 4 will cost the industry on average $9 and
$13 billion in excess of the costs for the final standards. These are
large increases in percentage terms, ranging from approximately 40% to
70% in MY 2021, and from approximately 20% to 40% in MY 2025.
    Under the more stringent alternatives, per vehicle costs would also
increase dramatically, including for some of the largest, full-line
manufacturers. Under Alternative 2, per vehicle costs for the large
volume manufacturers increase roughly 50% to meet the 2021 standards
and roughly 20% to meet the 2025 standards (see Table III-48, above).
The per-vehicle costs to meet Alternative 4 for these manufacturers are
roughly 75% in MY 2021 and 40% in MY 2025 (see Table III-48, above).
    As noted, these cost increases are associated especially with
increased utilization of advanced technologies. As shown in Figure III-
3 below, HEV+PHEV+EV penetration are projected to increase in MY 2025
from 6% in the final standards, to 11% and nearly 13% under
Alternatives 2 and 4, respectively, for manufacturers with annual sales
above 500,000 vehicles (including Chrysler, Ford, GM, Honda, Hyundai,
Nissan, Toyota, and VW). The differences are less pronounced for MY
2021, but still (in alternative 4) over double the penetration level of
the final rule. EPA regards these differences as significant, given the
factors of expense, consumer cost, consumer acceptance, and potentially
(for MY 2021) lead time.
    The figures below also do not show the significant penetration of
mild hybrid technology into the fleet. Under the primary scenario, we
project mild hybrid penetration of approximately 26% for the larger
manufacturers, which rises to 33% and 37% under the two more stringent
alternatives.

[GRAPHIC] [TIFF OMITTED] TR15OC12.023

    Figure III-4 below shows the HEV+PHEV+EV penetration for
manufacturers with sales below 500,000 but exceeding 30,000 (including
BMW, Daimler, Volvo, Kia, Mazda, Mitsubishi, Porsche, Subaru, Suzuki,
and Jaguar/LandRover while excluding Aston Martin, Ferrari, Lotus,
Saab, and Tesla). While the penetration rates of these advanced
technologies also increase, the distribution within these are shifting
to the higher cost EVs and PHEVs as noted above.
[GRAPHIC] [TIFF OMITTED] TR15OC12.024

    EPA modeled a number of flexibilities when conducting the analysis
for the FRM. Unlike in the proposal, where PHEV, EV, and fuel cell
vehicle incentive multipliers for 2017-2021, full size pickup truck HEV
incentive credits, full size pickup truck performance based incentive
credits, and off-cycle credits, were not modeled, we have included the
full size pickup truck incentive credits and some off-cycle credits in
our cost analysis.\622\ These credits reduce the estimated costs of the
program for most manufacturers relative to the proposal. The average
(non A/C) projected credit usage by manufacturer is approximately 2.7
grams (Table III-3). From an industry wide perspective, the overall
impact on costs, technology penetration, and emissions reductions and
other benefits is limited, as seen in projected costs and technology

penetrations that are largely similar to those from the proposal. The
new analysis demonstrates that these credits provide important
flexibility in achieving the final levels and promoting more advanced
technology and supports the reasonableness of the final standards. As
shown in the previously presented technology projections, the standards
and off-cycle credits appropriately encourage technologies that will
yield real benefit that is not reflected on the two cycle compliance
test. Relative to the NPRM modeling, which did not consider the off-
cycle credits, there is a significant increase in the modeled
projections of start-stop technology. In the proposal, only 15% of the
MY 2025 control case fleet was projected to receive start stop
technology.\623\ By contrast, in the analysis presented here,
approximately 45% of vehicles have technologies that shut off engine at
stop.\624\
---------------------------------------------------------------------------

    \622\ We did not model the manufacturer minimums as a
requirement for the pick-up truck credits. See section III.C for a
discussion of these minimums, and EPA RIA Chapter 3 for a table of
credits by company.
    \623\ 76 FR 75050. Of this 15%, nearly all are HEVs.
    \624\ These vehicles are a mixture of MHEVS (26%), HEVs (5%) and
start-stop (15%).
---------------------------------------------------------------------------

    Overall, EPA believes that the characteristics and impacts of these
and other alternative standards generally reflect a continuum in terms
of technical feasibility, cost, lead time, consumer impacts, emissions
reductions and oil savings, and other factors evaluated under section
202(a). In determining the appropriate standard to adopt in this
context, EPA judges that the final standards are appropriate and
preferable to more stringent alternatives based largely on
consideration of cost--both to manufacturers and to consumers--and the
potential for overly aggressive penetration rates for advanced
technologies relative to the penetration rates seen in the final
standards, especially in the face of unknown degree of consumer
acceptance of both the increased costs and of the technologies
themselves. At the same time, the final rule helps to address these
issues by providing incentives to promote early and broader deployment
of advanced technologies, and so provides a means of encouraging their
further penetration while leaving manufacturers alternative technology
choices. EPA thus judges that the increase in technology penetration
rates and the increase in costs under the increased stringency for the
car and truck fleets reflected in alternatives 2 and 4 are such that it
would not be appropriate to propose standards that would increase the
stringency of the car and truck fleets in this manner.
    The two tables below show the year on year costs as described in
greater detail in Chapter 5 of the RIA. These projections show a steady
increase in costs from 2017 thru 2025 (as interpolated).

                                            Table III-55--Costs by Manufacturer by MY--Combined Fleet (2010$)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                            Company                               2017      2018      2019      2020      2021      2022      2023      2024      2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
BMW...........................................................      $193      $386      $531      $673      $852    $1,283    $1,565    $1,826    $1,910
Chrysler/Fiat.................................................       180       314       416       521       733     1,092     1,454     1,799     1,950
Daimler.......................................................       349       723     1,014     1,305     1,655     2,242     2,460     2,652     2,616
Ferrari.......................................................     1,720     3,250     4,403     5,565     6,712     7,280     7,763     8,174     7,864
Ford..........................................................       133       291       412       517       746     1,102     1,491     1,860     2,025
Geely-Volvo...................................................       412       794     1,075     1,357     1,698     2,366     2,567     2,746     2,681
GM............................................................       125       241       333       418       619       940     1,322     1,684     1,861
Honda.........................................................       110       241       343       448       624       883     1,194     1,497     1,642
Hyundai.......................................................       166       343       477       611       794     1,105     1,400     1,679     1,792
Kia...........................................................       123       269       388       511       689       957     1,251     1,532     1,658
Mazda.........................................................       193       430       606       775     1,010     1,312     1,634     1,942     2,057
Mitsubishi....................................................       148       321       438       565       791     1,055     1,455     1,831     2,015
Nissan........................................................       136       290       411       531       725     1,022     1,369     1,697     1,847
Porsche.......................................................        39        62     1,734     2,447     3,871     4,790     4,672     4,534     4,044
Spyker-Saab...................................................       703     1,304     1,754     2,205     2,674     3,185     3,315     3,422     3,238
Subaru........................................................       262       505       673       854     1,128     1,337     1,655     1,951     2,054
Suzuki........................................................        50        66       477       651     1,064     1,377     1,686     1,972     2,066
Tata-JLR......................................................        31        61     1,057     1,486     2,495     3,891     3,832     3,756     3,390
Toyota........................................................        94       210       299       380       532       780     1,043     1,291     1,407
Volkswagen....................................................       311       602       825     1,044     1,293     1,749     1,972     2,176     2,181
Fleet.........................................................       154       311       438       557       766     1,115     1,425     1,718     1,836
--------------------------------------------------------------------------------------------------------------------------------------------------------

                                Table III-56--Industry Average Vehicle Costs Associated With the Final Standards (2009$)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                          Model Year                              2017      2018      2019      2020      2021      2022      2023      2024      2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
$/car.........................................................      $206      $374      $510      $634      $767    $1,079    $1,357    $1,622    $1,726
$/truck.......................................................        57       196       304       415       763     1,186     1,562     1,914     2,059
Combined......................................................       154       311       438       557       766     1,115     1,425     1,718     1,836
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Figure III-5 below shows graphically the year on year average costs
presented in Table III-56 with the per vehicle costs on the left axis
and the projected CO2 target standards on the right axis. It
is quite evident and intuitive that as the stringency of the standard
gets tighter, the average per vehicle costs increase. It is also clear
that the costs for cars exceed that of trucks for the early years of
the program, but then truck costs exceed car costs for the years 2022
through 2025. It is interesting to note that the slower rate of
progression of the standards for trucks seems to result in a slower
rate of increase in costs for both cars and trucks. This initial slower
rate of stringency for trucks is appropriate due primarily to concerns
over lead time relative to the standards and disproportionately higher
costs for adding technologies to trucks than cars, as described in
Section III.D.6.b above. The figure below corroborates these

conclusions and further demonstrates that based on the smooth
progression of average costs (from MYs 2017-2025), the year on year
increase in stringency of the standards is also reasonable. Though
there are undoubtedly a range of minor modifications that could be made
to the progression of standards, EPA believes that the progression is
reasonable and appropriate. Also, EPA believes that any progression of
standards that significantly deviates from the final standards (such as
those in Alternatives 1 through 4) are much less appropriate for the
reasons provided in the discussion above.
[GRAPHIC] [TIFF OMITTED] TR15OC12.025

7. Comments Received on the Analysis of Technical Feasibility and
Appropriateness of the Standards
    Several comments were received on the feasibility of the standards.
These comments addressed the standards' technical feasibility, their
feasibility for small manufacturers, and the relative stringency of the
car and truck standards.
    In comments on the overall feasibility of the proposed standards,
some organizations, such as American Chemistry Council, Hyundai, Kia,
and NADA affirmed the technical feasibility of the proposed standards.
Other organizations, such as the Center for Biological Diversity,
International Council on Clean Transportation (ICCT), Northeast States
for Coordinated Air Use Management (NESCAUM), and the Union of
Concerned Scientists commented that more stringent standards would also
be technically feasible. Several comments were submitted that the
technological feasibility of the full program would not be known until
the mid-term evaluation (Mercedes-Benz, Nissan, Alliance, Global
Automakers). EPA agrees with commenters that this program is
technically feasible and cost-effective. As shown in the analysis
earlier in this section, significant reductions can be made in tailpipe
GHG emissions with technology that is either currently available, or
available in the near term.
    Lead time is a significant component of technical feasibility, and
several comments were received with regard to the appropriateness of
the lead time provided to meet the standards. Consumers' Union,
Hyundai, and Kia commented that the amount of lead time provided by
this rulemaking was appropriate. In contrast, Mitsubishi, Suzuki and
Chrysler commented on the difficulty of forecasting consumer
preferences into the future, and were therefore concerned as to the
number of model years covered by the rules, even though not questioning
that the rules provide sufficient lead time to meet the standards. The
ICCT and CBD both commented that the long lead time should virtually
eliminate costs of stranded capital. EPA agrees that the long lead time
in this rulemaking should provide additional certainty to manufacturers
in their product planning. EPA believes that there are several factors
that have quickened the pace with which new technologies are being
brought to market, and this will also facilitate regulatory compliance.
These factors are discussed in Technical

Support Document section 3.4. EPA plans to assess consumer acceptance
of vehicles produced under the MYs 2012-2016 rulemaking, as well as
under this rulemaking, during the mid-term evaluation. Indeed, the mid-
term evaluation is a chief mechanism for evaluating the assumptions on
which the standards are based, and so addresses comments such as those
of Mitsubishi, Suzuki, and Chrysler.
    EPA agrees with the commenters that the analyses supporting this
final rulemaking have demonstrated the feasibility of these standards,
particularly as further supported by the number of vehicles today which
meet the MY 2017 (and later) standards (see III.D.8 below). However, as
discussed earlier in Section III.D.6, our analyses have shown that
increasing the stringency beyond the promulgated levels would add
significant cost with diminishing additional benefit, and for light
trucks, potentially leading to overly aggressive penetration rates of
certain advanced technologies, raising issues of lead time, costs, and
consumer acceptance, as well as creating incentives to comply by
reducing vehicle utility. As such, EPA has not made changes to increase
or decrease the overall stringency across the car and truck fleets from
the levels proposed.
    Several comments addressed the feasibility of the standards for
smaller manufacturers. As an example, Jaguar/Land Rover, and Porsche
commented that the technology penetrations the agency projected for
their companies were too severe, disproportionate to improvements
needed for other companies to comply with the standards, and requested
additional lead time to meet the standards. EPA's analyses tend to
confirm the thrust of these comments. See, e.g. Table III-47 and Table
III-48 and accompanying text above. In light of the comments regarding
smaller manufacturers, EPA is finalizing provisions to allow
intermediate volume manufacturers some amount of additional lead time
out to MY 2021. Details of this alternative standard, and the rationale
for it, can be found in Section III.B.6.
    The comments on the relative car and truck stringency were largely
divided between NGOs and OEMs (typically manufacturers of smaller
trucks) that were concerned with the shape and relative rate of
increase of the truck curve, and OEMs (typically manufacturers of
larger trucks) who expressed concern about their ability to comply with
a large truck standard that continued to increase in stringency at the
rate of the MY 2016 standard. For example, Ford Motor Company
commented: ``Ford also believes that the relative stringency levels for
the car and truck fleets, as proposed by the agencies, are appropriate
* * *. In terms of the product actions necessary to comply, the
proposed car and truck standards are roughly equivalent in stringency.
This is attributable to the unique attributes expected from trucks--
particularly the larger work trucks that constitute a significant
portion of our full-line vehicle fleet offering--and also to the overly
stringent standards imposed on light duty trucks in the 2012-2016 model
year regulation.'' General Motors submitted comments that the company
``supports the target standard curve shapes, [and] the relative car and
truck stringency.'' Chrysler submitted similar comments. The UAW
commented that ``In particular the UAW supports the aspects of the
proposals that recognize the importance of balancing the challenges of
adding fuel-economy improving technologies to the largest light trucks
with the need to maintain the full functionality of these vehicles
across a wide range of applications.''
    As mentioned above, several commenters raised concerns about the
relative stringency between cars and trucks. ACEEE commented that
``[t]he weakness of the standards at the large footprint end of the
light truck spectrum not only will result in a direct loss in GHG
reductions relative to what would have been saved with a uniform five
percent annual emissions reduction across all classes, but also runs
the risk of pushing production towards that larger end.'' Honda
commented that it was ``concerned that the relative stringency between
small footprint light trucks and large footprint light trucks diverge
dramatically from one another, and that the stringency increases fall
disproportionately on the smaller foot-print light trucks. Consumer's
Union stated that ``[t]here are several strong indicators that the gap
between the curves is too large.'' The ICCT wrote: ``the 2017-2025 rule
increased the gap between cars and light trucks, providing stronger
incentives for manufacturers to reclassify cars as light trucks and
potentially undermining the benefits of the rule.'' The agencies
received similar comments from several mass comment campaigns (Union of
Concerned Scientists, NACAA, NRDC), and other NGOs. VW, Toyota, and
Nissan also expressed similar concerns, with Toyota stating ``we remain
concerned about two aspects of the proposed standards. First, the
targets for trucks require a lower average rate of improvement than for
cars. And second, the targets for larger trucks require a lower average
rate of improvement than smaller trucks.''
    EPA recognizes that significant differences in the year-to-year
stringency for cars and trucks could lead to the result of an
increasingly widening gap between the car and truck curves and increase
the incentives to reclassify cars as light trucks, thus undermining the
fuel economy and greenhouse gas reduction benefits of the standards.
However, even with reduced stringency of the truck standard in the
early model years of the rule, the trend of a gradually widening gap
during this period is reversed during the MY 2021-2025 period. As shown
in Table III-57, by MY 2025 the gap for larger footprint vehicles is at
levels similar to the MY 2012-2016 rule, while for smaller footprint
vehicles, the gap is less than during the MY 2012-2016 rule. EPA
believes that the increase in stringency for the truck standard in the
latter phase of the rule is a reasonable approach for avoiding a large
gap between car and truck curves while also taking account of the
challenges of implementing efficiency technologies in trucks during the
first phase of the rule as explained in Section III.D.6 above.

                                         Table III-57--Gap Between Car and Truck Curves, MYs 2012-2025 (g/mile)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                      Model Year                         2012   2013   2014   2015   2016   2017   2018   2019   2020   2021   2022   2023   2024   2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
Smaller Footprint Vehicles............................     50     47     47     44     41   43.4   41.9   44.2   45.8   38.2   35.5   33.1   30.8   28.6
(left car cutpoint = 41 sq. ft.)......................
Larger Footprint Vehicles \a\.........................   39.8   37.9   36.6   33.3   30.3   44.0   48.1   51.8   54.3   44.6   41.3   38.5   35.8   33.5
(right car cutpoint = 56 sq. ft.).....................
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ Vehicles with footprints of approximately 56 sq. ft. include the MY 2010 Lincoln Town Car, and Toyota Tacoma. Only a few MY 2010 cars have
  footprints greater than 56 sq. ft.

    EPA's determination of the standards was based on considerations of
the technical differences between the cars and trucks, as described in
Chapter 2 of the Joint TSD and Section II.C of the Preamble. As
compared to the MY 2016 standard, the gap between the MY 2025 car and
truck targets decreases in the smaller footprint range where these
regulatory classes share the most design attributes, and the target
curves appropriately reflect differences in the vehicle characteristics
at the larger footprint end (see discussion in TSD chapter 2.4.2) As a
result, the car and truck curves developed from this analysis exhibit
differences in both the relative level of the target at a given
footprint, and the overall stringency as standards increase year-to-
year. EPA believes that the final standards reasonably balance the
issues and address the concerns raised by commenters, resulting in
significant CO2 emissions reductions using technologies that
can be feasibly adopted over the rulemaking timeframe. It is important
to note that while it was not an express goal of the EPA's analysis or
standards to distribute compliance burdens equitably among
manufacturers and vehicle types, we believe that the promulgated
standards will do just that, by promoting emissions reductions across
the full range of vehicles. Furthermore, by considering the technical
features unique to cars and trucks at all footprint sizes, the
standards avoid the technically inappropriate result of the car and
truck curves converging at footprint levels at which cars and truck
properties are most different.
    With regard to the year-to-year increase in stringency, the
promulgated standards encourage manufacturers to apply additional
technologies throughout the rulemaking timeframe. The standards are
based on footprint, and increase in stringency at all vehicle
sizes.\625\ The year-to-year stringency for trucks is in general lower
than cars in the early years of the program, in consideration of the
technical challenges involved in applying efficiency technologies to
these vehicles as well as lead time concerns relative to the early
years of the programs. Moreover, EPA recognizes that trucks do not
uniformly face the same technical challenges,\626\ and the standards
reflect these differences. Thus, the promulgated standards promote
similar levels of emission reductions for smaller trucks and for cars
of the same size. For example, the average year-to-year increase in the
target level over the entire MY 2017-2025 period is identical for cars
and trucks at the 41 sq. ft. curve cutpoint (5.1 percent per year), and
is nearly the same over the initial MY 2017-2021 period (4.8 and 4.5
percent per year, for cars and trucks, respectively.) Some commenters
expressed concern that manufactures will use the initially lower truck
standards to delay implementation of efficient technologies, and then
use this circumstance to argue in the mid-term evaluation for relaxed
standards. EPA does not believe this concern in justified, since the
mid-term evaluation will occur before many of these vehicles are in
production. EPA will carefully monitor this issue during the mid-term
evaluation.
---------------------------------------------------------------------------

    \625\ This was achieved by applying a proportional year-to-year
increase (multiplicative) to the target at every footprint level,
unlike the MY 2012-2016 rule in which a constant-value (additive)
increase was applied by offsetting curves vertically.
    \626\ See preamble II.C for discussion of these technical
challenges.
---------------------------------------------------------------------------

8. To what extent do any of today's vehicles meet or surpass the final
MY 2017-2025 CO2 footprint-based targets with current
powertrain designs?
    In addition to the analysis discussed above regarding what
technologies could be added to vehicles in order to achieve the
projected CO2 obligation for each automotive company under
the final MY 2017 to 2025 standards, EPA performed an assessment of the
light-duty vehicles available in the market today to see how such
vehicles compare to the MY 2017-2025 footprint-based standard curves.
This analysis supports EPA's overall assessment that there are a broad
range of effective and available technologies that could be used to
achieve the standards, and illustrates the need for the leadtime
between today and MY 2017 to MY 2025 in order for continued refinement
of today's technologies and their broader penetration across the fleet
for the industry as a whole as well as individual companies. In
addition, this assessment supports EPA's view that the standards would
not interfere with consumer utility. Footprint-attribute standards
provide manufacturers with the ability to offer consumers a full range
of vehicles with the utility customers want, and do not require or
encourage companies to just produce small passenger cars with very low
CO2 emissions.
    Using publicly available data, EPA compiled a list of current
vehicles and their 2-cycle CO2 emissions performance (that
is, the performance over the city and highway test cycles that are used
for compliance with this rule). Data is currently available for all MY
2012 vehicles and some MY 2013 vehicles. EPA gathered vehicle footprint
data from EPA reports, manufacturer submitted CAFE reports, and
manufacturer Web sites.
    EPA evaluated these vehicles against the final CO2
footprint-based standard curves to determine which vehicles would meet
or exceed the final MY 2017-MY 2025 footprint-based CO2
targets assuming air conditioning credit generation consistent with
today's final rule, but no other changes. Under the final MY 2017-2025
greenhouse gas emissions standards, each vehicle will have a unique
CO2 target based on the vehicle's footprint. However, it is
important to note that the overall manufacturer obligation is a
company-specific, sales-weighted, fleet-wide CO2 standard
for each company's passenger cars and truck fleets calculated using the
final footprint-based standard curves. No individual vehicle is
required to achieve a specific CO2 target. In this analysis,
EPA assumed usage of air conditioner credits because air conditioner
improvements are considered to be among the cheapest and easiest
technologies to reduce greenhouse gas emissions, manufacturers are
already investing in air conditioner improvements, and air conditioner
changes do not impact engine, transmission, or aerodynamic designs so
assuming such credits does not affect consideration of cost and
leadtime for use of these other technologies. In this analysis, EPA
assumed increasing air conditioner efficiency and refrigerant credits
over time with a phase-in of alternative refrigerant for the generation
of HFC leakage reduction credits consistent with the assumed phase-in
schedule discussed in Section III.C.1. of this preamble. No adjustments
were made to vehicle CO2 performance other than this
assumption of air conditioning credit generation, although additional
credits may be available. The details regarding this assessment are in
Chapter 3 of the EPA RIA.
    This assessment shows that a significant number of vehicles models
sold today (over 100 models) have CO2 values at or below the
final MY 2017 footprint-based targets with current powertrain designs,
assuming air conditioning credit generation consistent with our final
rule. The list of vehicles meeting MY 2017 targets, with no technology
improvements other than air conditioning system upgrades, cover a full
suite of vehicle sizes and classes, including midsize cars, minivans,
sport utility vehicles, compact cars, small pickup trucks and full size
pickup trucks. These vehicles utilize a wide variety of powertrain

technologies and operate on a variety of different fuels including
gasoline, diesel, electricity, and compressed natural gas. Nearly every
major manufacturer currently produces vehicles that would meet or
exceed the MY 2017 footprint CO2 targets with only
improvements in air conditioning systems. For all of these vehicle
classes the MY 2017 targets are achieved with conventional gasoline
powertrains, with the exception of the full size (or ``standard'')
pickup trucks. In the case of full size pickups trucks, only HEV
versions of the Chevrolet Silverado and the GMC Sierra meet 2017
targets (though the HEV Silverado and Sierra's meet not just the MY
2017 footprint-based CO2 targets with A/C improvements, but
their respective targets through MY 2022). EPA also assessed the subset
of these vehicles that have emissions within 5% of the final
CO2 targets. As detailed in Chapter 3 of the EPA RIA, the
analysis shows that there are more than 66 additional vehicle models
(primarily with gasoline and diesel powertrains) that are within 5% of
the MY 2017 CO2 targets, including compact cars, midsize
cars, large cars, SUVs, station wagons, minivans, small and standard
pickup trucks. In total, nearly 175 current vehicle models (or about
15% of all models) meet or are within 5% of the final MY 2017 targets.
    The number of vehicles available that meet the final MY 2017
targets has already significantly increased since the proposal. In
particular, the number of vehicles with conventional gasoline
powertrains that meet or exceed the final MY 2017 targets has increased
from 27 at the time of proposal to 65 models currently. An additional
58 vehicles currently available with conventional gasoline powertrains
are within 5% of the final MY 2017 standards. As the CO2
targets become more stringent each model year, fewer MY 2012 and MY
2013 vehicles achieve or surpass the final CO2 targets, in
particular for gasoline powertrains. While approximately 65 unique
gasoline vehicle models achieve or surpass the MY 2017 targets, this
number falls to approximately 38 for the MY 2018 targets, 23 for the
model year 2019 targets, and 12 unique gasoline vehicle models can
achieve the MY 2020 final CO2 targets with A/C improvements.

                                             Table III-58--Number of Vehicles Compliant With MY2017 Targets
--------------------------------------------------------------------------------------------------------------------------------------------------------
                           Model year                              Gasoline    Diesel      CNG        HEV        PHEV        EV        FCV       Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
2011/2012.......................................................         27          1          1         27          1          3          0         60
2012/2013.......................................................         65          3          1         29          1          8          1        108
--------------------------------------------------------------------------------------------------------------------------------------------------------

                                            Table III-59--Number of Vehicles Within 5% of the MY2017 Targets
--------------------------------------------------------------------------------------------------------------------------------------------------------
                           Model year                              Gasoline    Diesel      CNG        HEV        PHEV        EV        FCV       Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
2011/2012.......................................................         38          6          0          3          0          0          0         47
2012/2013.......................................................         58          6          0          2          0          0          0         66
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Prior to each model year, EPA receives projected sales data from
each manufacturer. Based on this data, approximately 17% of MY 2012
sales will be vehicles that meet or are lower than their vehicle
specific MY 2017 targets, requiring only improvements in air
conditioning systems. This is more than double the 7% of MY 2011 sales
that EPA projected to meet the MY 2017 targets. An additional 12% of
projected MY 2012 sales will be within 5% of the MY 2017 footprint
CO2 target with only simple improvements to air conditioning
systems, five model years before the standard takes effect.
    With improvements to air conditioning systems, the most efficient
gasoline internal combustion engines would meet the MY 2022 footprint
targets. After MY 2022, the only current vehicles that continue to meet
the footprint-based CO2 targets (assuming improvements in
air conditioning) are hybrid-electric, plug-in hybrid-electric, and
fully electric vehicles, and CNG vehicles. However, the MY 2021
standards would not need to be met for another 8 years. Today's Toyota
Prius (three versions), Ford Fusion Hybrid, Chevrolet Volt, Nissan
Leaf, Honda Civic Hybrid, Camry Hybrid, Lexus CT 200h Hybrid, Lincoln
MKZ Hybrid, and Hyundai Sonata Hybrid all meet or surpass the
footprint-based CO2 targets through MY 2025. In fact, the
current Prius, Volt, and several EVs meet the 2025 CO2
targets without air conditioning credits.
    This assessment of MY 2012 and MY 2013 vehicles makes it clear that
HEV technology (and of course EVs and PHEVs) is capable of achieving
the MY 2025 standards. However, as discussed earlier in this section,
EPA's modeling projects that the MY 2017-2025 standards can primarily
be achieved by advanced gasoline vehicles--for example, in MY 2025, we
project more than 75 percent of the new vehicles could be advanced
gasoline powertrains. The assessment of MY 2012 and MY 2013 vehicles
available in the market today indicates advanced gasoline vehicles (as
well as diesels) can achieve the targets for the early model years of
the program (i.e., model years 2017-2022) with only improvements in air
conditioning systems. However, significant improvements in technologies
are needed and penetrations of those technologies must increase
substantially in order for individual manufacturers (and the fleet
overall) to achieve the standards for the early years of the program,
and certainly for the later years. These technology improvements are
the very technologies EPA and NHTSA describe in detail in Chapter 3 of
the Joint Technical Support Document and for which we project
penetration rates earlier in this section III.D. These technologies
include, for example: Gasoline direct injection fuel systems; downsized
and turbocharged gasoline engines (including in some cases with the
application of cooled exhaust gas recirculation); continued
improvements in engine friction reduction and low friction lubricants;
transmissions with an increased number of forward gears (e.g., 8
speeds); improvements in transmission shifting logic; improvements in
transmission gear box efficiency; vehicle mass reduction; lower rolling
resistance tires, and improved vehicle aerodynamics. In most cases,
these technologies are beginning to penetrate the U.S. light-duty
vehicle market.
    In general, these technologies must go through the automotive
product development cycle in order to be introduced into a vehicle. In
some cases additional research is needed before the technologies'
CO2 benefits can be fully

realized and large-scale manufacturing can be achieved. The subject of
technology penetration phase-in rates is discussed in more detail in
Chapter 3.4.2 of the Joint Technical Support Document. In that Chapter,
we explain that many CO2 reducing technologies should be
able to penetrate the new vehicle market at high levels between now and
MY 2016. These are also many of the key technologies we project as
being needed to achieve the MYs 2017-2025 standards which will only be
able to penetrate the market at relatively low levels (e.g., a maximum
level of 30% or less) by MY 2016, and even by MY 2021. These include
important powertrain technologies such as 8-speed transmissions and
second or third generation downsized engines with turbocharging.
    The majority of these technologies must be integrated into vehicles
during the product redesign schedule, which is typically on a 5-year
cycle. EPA discussed in the MY 2012-2016 rule the significant costs and
potential risks associated with requiring major technologies to be
added in-between the typical 5-year vehicle redesign schedule (see 75
FR 25467-68, May 7, 2010). In addition, engines and transmissions
generally have longer lifetimes than 5 years, typically on the order of
10 years. Thus, major powertrain technologies generally take longer to
penetrate the new vehicle fleet than can be done in a 5-year redesign
cycle. As detailed in Chapter 3.4 of the Joint TSD, EPA projects that
8-speed transmissions could increase their maximum penetration in the
fleet from 30% in MY 2016 to 80% in MY 2021 and to 100% in MY 2025.
Similarly, we project that second generation downsized and turbocharged
engines (represented in our assessment as engines with a brake-mean
effective pressure of 24 bars) could penetrate the new vehicle fleet at
a maximum level of 15% in MY 2016, 30% in MY 2021, and 75% in MY 2025.
When coupled with the typical 5-year vehicle redesign schedule, EPA
projects that it is not possible for all of the advanced gasoline
vehicle technologies we have assessed to penetrate the fleet in a
single 5-year vehicle redesign schedule.
    Given the status of the technologies we project to be used to
achieve the MY 2017-2025 standards and the product development and
introduction process which is fairly standard in the automotive
industry today, our assessment of the MY 2012 and MY 2013 vehicles in
comparison to the standards supports our overall feasibility
assessment, and reinforces our assessment of the lead time needed for
the industry to achieve the standards.

E. Certification, Compliance, and Enforcement

1. Compliance Program Overview
    This section summarizes EPA's comprehensive program to ensure
compliance with emission standards for carbon dioxide (CO2),
nitrous oxide (N2O), and methane (CH4), as
described in Section III.B. An effective compliance program is
essential to achieving the environmental and public health benefits
promised by these mobile source GHG standards. EPA's GHG compliance
program is designed around two overarching priorities: (1) To address
Clean Air Act (CAA) requirements and policy objectives; and (2) to
streamline the compliance process for both manufacturers and EPA by
building on existing practice wherever possible, and by structuring the
program such that manufacturers can use a single data set to satisfy
both GHG and Corporate Average Fuel Economy (CAFE) testing and
reporting requirements. EPA has had the statutorily-designated
responsibility for managing the testing, data collection, and
calculation procedures of the CAFE program since the 1970's, see 49
U.S.C. 32904(c) and EPA's experience with that program allowed EPA to
integrate the newer GHG requirements with the older CAFE requirements
such that little to no additional test data is required and data and
reporting requirements are largely synchronized. The EPA and NHTSA
programs for MYs 2017 and later replicate the compliance protocols
established in the MY 2012-2016 rule.\627\ The certification, testing,
reporting, and associated compliance activities track current practices
and are thus familiar to manufacturers. As is the case under the MYs
2012-2016 program, EPA and NHTSA have designed a coordinated compliance
approach for MY 2017 and later model years such that the compliance
mechanisms for both GHG and CAFE standards are consistent and non-
duplicative. Readers are encouraged to review the MYs 2012-2016 final
rule for background and a detailed description of these certification,
compliance, and enforcement requirements.\628\
---------------------------------------------------------------------------

    \627\ See 75 FR 25468, May 7, 2010.
    \628\ Also see current regulations at 40 CFR Part 86, Subpart S,
and 40 CFR Part 600.
---------------------------------------------------------------------------

    Vehicle emission standards established under the CAA apply
throughout a vehicle's full useful life. Today's rule establishes two
sets of EPA standards: fleet average greenhouse gas standards and in-
use standards. Compliance with the fleet average standard in a given
model year is determined based on testing performed prior to production
and on actual vehicle production in that model year, as with the
current CAFE standards. EPA is also establishing in-use standards that
apply throughout a vehicle's useful life, with the in-use standard
determined by adding an adjustment factor to the emission results used
to calculate the fleet average.\629\ EPA's program will thus not only
assess compliance with the fleet average standards described in Section
III.B, but will also assess compliance with the in-use standards. As it
does now, EPA will use a variety of compliance mechanisms to conduct
these assessments, including pre-production certification and post-
production in-use monitoring once vehicles enter customer service.
Under this compliance program manufacturers will also be afforded
numerous flexibilities to help achieve compliance, both stemming from
the program design itself in the form of a manufacturer-specific
CO2 fleet average standard, as well as in various credit
banking and trading opportunities, as described in Section III.C.
Because much of the compliance program was largely finalized with the
2012-2016 GHG standards, there were very few comments specifically
related to these elements of the 2017 and later GHG program. Comments
mostly addressed some of the newly proposed provisions, such as new
flexibilities for off-cycle credits, credits for certain pickup trucks,
small volume alternative standards, and others. These comments are
discussed in Sections III.B and III.C. The compliance program is
summarized in further detail below.
---------------------------------------------------------------------------

    \629\ Dual fuel vehicles (with the exception of plug-in hybrid
electric vehicles) are treated slightly differently. These vehicles
would be potentially tested in use on either or both fuels, and each
fuel would have an associated standard.
---------------------------------------------------------------------------

2. Compliance With Fleet-Average CO2 Standards
    Fleet average emission levels can only be determined when a
complete fleet profile becomes available at the close of the model
year. Therefore, EPA will determine compliance with the fleet average
CO2 standards when the model year closes out, based on
actual production figures for each model type \630\ and on emissions
data collected through testing over the course of the model year.
Manufacturers will submit this information to EPA in an end-of-year
report which is discussed in detail

in Section III.E.5.h of the MYs 2012-2016 final rule preamble (see 75
FR 25481). EPA received no significant comments on these general
compliance provisions, unless specifically noted below, and these
provisions are being finalized as they were proposed.
---------------------------------------------------------------------------

    \630\ A model type is ``a unique combination of car line, basic
engine, and transmission class'' (40 CFR 600.002).
---------------------------------------------------------------------------

a. Compliance Determinations
    As described in Section III.B above, the fleet average standards
will be determined on a manufacturer-by-manufacturer basis, separately
for cars and trucks, using the footprint attribute curves. EPA will
calculate the fleet average emission level using actual production
figures and CO2 emission test values generated at the time
of a manufacturer's CAFE testing. EPA will then compare the actual
fleet average to the manufacturer's footprint-based fleet standard to
determine compliance, taking into consideration use of averaging and
credits.
    Final determination of compliance with fleet average CO2
standards may not occur until several years after the close of the
model year due to the flexibilities allowing the carry-forward and
carry-back of credits and the remediation of deficits (see Section
III.B). A failure to meet the fleet average standard after credit
opportunities have been exhausted could ultimately result in penalties
and injunctive orders under the CAA as described in Section III.E.6
below.
b. Required Minimum Testing For Fleet Average CO2
    EPA will require and use the same test data to determine a
manufacturer's compliance with both the CAFE standard and the fleet
average CO2 emissions standard. Please see Section III.E.2.b
of the MYs 2012-2016 final rule preamble (75 FR 25469) for details.
3. Vehicle Certification
    CAA section 203(a)(1) prohibits manufacturers from introducing a
new motor vehicle into commerce unless the vehicle is covered by an
EPA-issued certificate of conformity. Section 206(a)(1) of the CAA
describes the requirements for EPA issuance of a certificate of
conformity, based on a demonstration of compliance with the emission
standards established by EPA under section 202 of the Act. The
certification demonstration requires emission testing, and must be done
for each model year.\631\
---------------------------------------------------------------------------

    \631\ CAA section 206(a)(1).
---------------------------------------------------------------------------

    Since compliance with a fleet average standard depends on actual
production volumes, it is not possible to determine compliance with the
fleet average at the time the manufacturer applies for and receives a
certificate of conformity for a test group. Instead, EPA will continue
to condition each certificate of conformity for the GHG program upon a
manufacturer's demonstration of compliance with the manufacturer's
fleet-wide average CO2 standard. Please see Section III.E.3
of the MYs 2012-2016 final rule preamble (75 FR 25470) for a discussion
of how EPA will certify vehicles under the GHG standards.
4. Useful Life Compliance
    Section 202(a)(1) of the CAA requires emission standards to apply
to vehicles throughout their statutory useful life, as further
described in Section III.A. The in-use CO2 standard under
the greenhouse gas program would apply to individual vehicles and is
separate from the fleet-average standard. The in-use CO2
standard for each model type would be the model-specific CO2
level used in calculating the fleet average, adjusted to be 10% higher
to account for test-to-test and production variability that might
affect in-use test results. Please see Section III.E.4 of the MYs 2012-
2016 final rule preamble (75 FR 25473) for a detailed discussion of the
in-use standard, in-use testing requirements, and use of deterioration
factors for CO2, N2O, and CH4.
5. Credit Program Implementation
    As described in Section III.C, several credit programs are
available under this rulemaking, including some new programs which are
not part of the MYs 2012-2016 rule (e.g., credits for certain pickup
trucks). Please see Section III.E.5 of the MYs 2012-2016 final rule
preamble (75 FR 25477) for a detailed explanation of credit program
implementation, sample credit and deficit calculations, and end-of-year
reporting requirements.
6. Enforcement
    The enforcement structure EPA promulgated under the MYs 2012-2016
rulemaking remains in place. Please see Section III.E.6 of the MYs
2012-2016 final rule preamble (75 FR 25482) for a discussion of these
provisions.
    Section 203 of the Clean Air Act describes acts that are prohibited
by law. This section and associated regulations apply equally to the
greenhouse gas standards as to any other regulated emissions. Acts that
are prohibited by section 203 of the Clean Air Act include the
introduction into commerce or the sale of a vehicle without a
certificate of conformity, removing or otherwise defeating emission
control equipment, the sale or installation of devices designed to
defeat emission controls, and other actions. EPA finalized language in
the 2012 greenhouse gas regulations that details the specific
prohibited acts under the Clean Air Act. While these regulations carry
no specific regulatory burden and essentially repeat the Clean Air Act
language, EPA believed that providing that language was helpful and
added clarity to our regulations. We proposed no changes to this
language in this rulemaking for the 2017 and later model years, no
comments were received, and thus the language will continue to apply to
the 2017 and later model years.
7. Other Certification Issues
a. Carryover/Carry Across Certification Test Data
    EPA's certification program for vehicles allows manufacturers to
carry certification test data over and across certification testing
from one model year to the next, when no significant changes to models
are made. EPA would continue to apply this policy to CO2,
N2O and CH4 certification test data and would
allow manufacturers to use carryover and carry across data to
demonstrate CO2 fleet average compliance if they have done
so for CAFE purposes. For test groups that are using carry-over data
for certification, EPA will allow those test groups to carry over the
N2O compliance statement (now allowed through the 2016 model
year) into the 2017 and 2018 model years.
b. Compliance Fees
    The CAA allows EPA to collect fees to cover the costs of issuing
certificates of conformity for the classes of vehicles covered by this
rule.
    At this time the extent of any added costs to EPA as a result of
this rule is not known. EPA will assess its compliance testing and
other activities associated with the rule and may amend its fees
regulations in the future to include any warranted new costs.
c. Small Entity Exemption
    As discussed in Section III.B.7, businesses meeting the Small
Business Administration (SBA) criterion of a small business as
described in 13 CFR 121.201 were entirely exempted from the MYs 2012-
2016 GHG requirements. However, based on comments from at least one
small business, we are including a provision in this final rule that
will provide these previously exempted manufacturers with the option of
voluntarily opting in to the program. Once opted in, however, such a
manufacturer would be fully subject to

all the GHG standards and requirements in the regulations.
    As discussed in detail in Section III.B.5, small volume
manufacturers with annual sales volumes of less than 5,000 vehicles
will be required to meet the primary GHG standards, with the option of
petitioning the Agency for alternative standards developed on a case-
by-case basis.
d. Onboard Diagnostics (OBD) and CO2 Regulations
    As under the current program, EPA will not require CO2,
N2O, and CH4 emissions as one of the applicable
standards required for the OBD monitoring threshold.
e. Applicability of Current High Altitude Provisions to Greenhouse
Gases
    As under the current program, vehicles covered by this rule would
be required to meet the CO2, N2O and
CH4 standard at altitude but would not normally be required
to submit vehicle CO2 test data for high altitude. Instead,
they would submit an engineering evaluation indicating that common
calibration approaches will be utilized at high altitude.
f. Applicability of Standards to Aftermarket Conversions
    With the exception of the small business exemption and the
conditional exemption for small volume manufacturers available through
the 2016 model year, EPA's emission standards, including greenhouse gas
standards, will continue to apply as stated in the applicability
sections of the relevant regulations. EPA expects that some aftermarket
conversion companies will qualify for and seek the small business
exemption, but those that do not qualify will be required to meet the
applicable emission standards, including the greenhouse gas standards,
to qualify for a tampering exemption under 40 CFR subpart F. Because
fuel converters are not required to meet a fleet average standard, the
new provisions allowing a small volume manufacturer to petition EPA for
alternative standards do not apply. Fleet average standards are not
generally appropriate for fuel conversion manufacturers because the
``fleet'' of vehicles to which a conversion system may be applied has
already been accounted for under the OEM's fleet average standard.
Therefore, EPA is retaining the process promulgated in 40 CFR part 85
subpart F anti-tampering regulations whereby conversion manufacturers
demonstrate compliance at the vehicle rather than the fleet level. Fuel
converters will continue to show compliance with greenhouse gas
standards by submitting data to demonstrate that the conversion
emission data vehicle N2O, CH4 and CREE results
are less than or equal to the OEM's in-use standard for that
subconfiguration. EPA is also continuing to allow conversion
manufacturers, on a test group basis, to convert CO2 over-
compliance into CO2 equivalents of N2O and/or
CH4 that can be subtracted from the CH4 and
N2O measured values to demonstrate compliance with
CH4 and/or N2O standards.
g. Geographical Location of Greenhouse Gas Fleet Vehicles
    EPA emission certification regulations require emission compliance
\632\ in the 50 states, the District of Columbia, the Puerto Rico, the
Virgin Islands, Guam, American Samoa and the Commonwealth of the
Northern Mariana Islands.
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    \632\ Section 216 of the Clean Air Act defines the term commerce
to mean ``(A) commerce between any place in any State and any place
outside thereof; and (B) commerce wholly within the District of
Columbia.'' Section 302(d) of the Clean Air Act reads ``The term
``State'' means a State, the District of Columbia, the Commonwealth
of Puerto Rico, the Virgin Islands, Guam, and American Samoa and
includes the Commonwealth of the Northern Mariana Islands.'' In
addition, 40 CFR 85.1502 (14) regarding the importation of motor
vehicles and motor vehicle engines defines the United States to
include ``the States, the District of Columbia, the Commonwealth of
Puerto Rico, the Commonwealth of the Northern Mariana Islands, Guam,
American Samoa, and the U.S. Virgin Islands.''
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h. Temporary Lead-time Allowance Alternative Standards (TLAAS)
Implementation
    EPA is also clarifying provisions of the MYs 2012-2016 light duty
vehicle GHG standards to address an inadvertent gap in those rules
dealing with situations of mergers between non-TLAAS manufacturers and
TLAAS manufacturers. By way of background, the TLAAS provisions provide
additional lead time for limited volume manufacturers, whereby a
specified number of vehicles are subject to a less stringent standard
in either MYs 2012-2015, or (for smaller volume manufacturers), MY
2016. See 75 FR 25414-419. Limited volume manufacturers may elect to
use the TLAAS provisions, but are not required to do so.
    The TLAAS rule provisions address situations where TLAAS
manufacturers merge with or are acquired by another manufacturer. See
section 86.1818-12(e)(1)(i)(B) and (C). These provisions address two
scenarios. The first is when companies merge and the new company
exceeds the 400,000 vehicle sale threshold (the eligibility threshold
for the base TLAAS program). In such cases, the manufacturer may use
TLAAS in the model year underway at the point of the merger, but loses
eligibility in the model year following the merger.\633\ For example,
if the merger takes place during MY 2013 (which began January 2, 2012),
beginning in MY 2014, the merged entity may not use TLAAS. The second
scenario addressed by the regulations is where the companies being
merged are both TLAAS manufacturers, and both participate in TLAAS, and
the merged company does not exceed the 400,000 vehicle threshold. In
such cases the allotments of the two companies under TLAAS are not
additive and the new (merged) company only receives a single TLAAS
allotment.
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    \633\ The model year following the merger is referred to as the
model year that is numerically two years greater than the calendar
year in which the merger/acquisition took place in the regulatory
text.
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    EPA received a comment from Volkswagen requesting clarification in
cases where the parent company, while eligible for TLAAS, has not
elected to use TLAAS and does not plan to use TLAAS for future years.
The commenter recommended that in such a case, the parent company
should have the option of being treated in the same manner as when the
company resulting from the merger exceeds the 400,000 vehicle threshold
(i.e., the first scenario described above). The company would no longer
be allowed to use TLAAS in the model year following the merger but
could use TLAAS for the company being acquired for the model years
already underway. EPA recognizes that this was not a scenario
specifically contemplated by the existing regulatory language, but we
believe that this is a reasonable approach since it brings parity to
the transitional merger provisions of a large (non-TLAAS eligible)
company compared to those of a TLAAS eligible company that chooses to
forgo its opportunity to participate in the TLAAS program. EPA is
adding this clarification to the MYs2012-2016 regulations. The revised
regulatory text clarifies that in cases where one manufacturer that is
eligible for TLAAS but nevertheless elects to forgo the use of TLAAS
acquires another company that is already using TLAAS, the parent
company is required to end the use of TLAAS for the acquired company in
the model year following the merger (whether or not the 400,000 sales
threshold is exceeded). The

manufacturer must notify EPA in writing prior to the end of the model
year in which the merger is effective of its decision to elect not to
use the TLAAS program in any year. As provided in the current rules,
the total cumulative allotment that may be used for the manufacturer
being acquired is limited to 100,000 vehicles (i.e., the lower level of
allotments available to companies with between 50,000-400,000 vehicle
sales).
    In addition to treating all non-TLAAS participants identically in
this situation, the clarified rule leads to environmental benefits
compared to the alternative. Consider the case of a merger between a
TLAAS-eligible TLAAS non-participant and a TLAAS manufacturer with
sales under 50,000, where the merged entity remains under the 400,000
sales threshold. Without today's clarified rule, the merged entity
would have a strong incentive to elect to use TLAAS, because the
present rules only provide all-or-nothing alternatives due to the lack
of explicit provisions allowing the additional model year of TLAAS for
the smaller merger partner. Thus, the merged entity could produce up to
100,000 vehicles (minus the TLAAS allotment already used by the smaller
company) through MY 2015 which would be subject to the more lenient
TLAAS standards. Under the clarified rule, the merged entity could use
the TLAAS allotment for the smaller company for one additional model
year, at which point the merged entity would be subject to the
principal GHG standards (i.e. just as if the merger exceeded the
400,000 sales threshold, as in present section 86.1818-12 (e)(1) (i)).
8. Warranty, Defect Reporting, and Other Emission-related Components
Provisions
    This rulemaking would retain warranty, defect reporting, and other
emission-related component provisions promulgated in the MY 2012-2016
rulemaking. Please see Section III.E.10 of the MYs 2012-2016 final rule
preamble (75 FR 25486) for a discussion of these provisions.
9. Miscellaneous Technical Amendments and Corrections
    EPA is including a number of noncontroversial amendments and
corrections to the existing regulations in this final rule. Because the
regulatory provisions for the EPA greenhouse gas program, NHTSA's CAFE
program, and the joint fuel economy and environment labeling program
are all intertwined in 40 CFR Part 600, this rule presents an
opportunity to make corrections and clarifications to all or any of
these programs. Consequently, EPA proposed and is now finalizing a
number of minor and non-substantive corrections to the regulations that
implement these programs. We note that certain provisions of the
existing model year 2012-2016 program are repeated in the final
regulations for readers' convenience. We are not reopening.
reconsidering. or otherwise reexamining those provisions.
    Amendments include the following:

In section 86.135-12, we have removed references to the model year
applicability of N2O measurement. This applicability is
covered elsewhere in the regulations, and we believe that--where
possible--testing regulations should be limited to the specifics of
testing and measurement.