market trend. Looking forward, as discussed further below,
manufacturers themselves may be improving this situation by offering
more and more higher-fuel-economy vehicles in a variety of segments. If
American consumers continue to seek out pickups, automakers are
increasingly responding with advanced technology, higher-fuel-economy
offerings, even in that segment. Moreover, recognizing that not all
consumers will want these specific technology vehicles, NHTSA still
believes that setting stringent attribute-based standards, as NHTSA is
doing in this rulemaking, will require manufacturers to keep improving
all their vehicles. NHTSA thus concludes that additional minimum
standards for imported passenger cars and light trucks, besides being
out of scope for this final rule, are not warranted at this time. If
evidence surfaces that manufacturers are, in fact, letting ICE vehicle
fuel economy languish while complying solely (or heavily) with BEV
technology, NHTSA would consider this an equity issue and would
reevaluate our position on additional minimum standards.
4. Number of Model Years for Which Standards May Be Set at a Time
    EISA also states that NHTSA shall ``issue regulations under this
title prescribing average fuel economy standards for at least 1, but
not more than 5, model years.'' \820\ In this rule, NHTSA is setting
CAFE standards for three model years, MYs 2024-2026. This action fits
squarely within the plain language of the statute. No comments were
received on this statutory requirement.
---------------------------------------------------------------------------

    \820\ 49 U.S.C. 32902(b)(3)(B) (2007).
---------------------------------------------------------------------------

5. Maximum Feasible Standards
    As discussed above, EPCA requires NHTSA to consider four factors in
determining what levels of CAFE standards would be maximum feasible.
NHTSA presents in the sections below its understanding of the meanings
of those four factors.
(a) Technological Feasibility
    ``Technological feasibility'' refers to whether a particular method
of improving fuel economy is available for deployment in commercial
application in the model year for which a standard is being
established. Thus, NHTSA is not limited in determining the level of new
standards to technology that is already being applied commercially at
the time of the rulemaking. For both the proposal and for this final
rule, NHTSA has considered a wide range of technologies that improve
fuel economy, while considering the need to account for which
technologies have already been applied to which vehicle model/
configuration, as well as the need to estimate realistically the cost
and fuel economy impacts of each technology as applied to different
vehicle models/configurations. NHTSA has not, however, attempted to
account for every technology that might conceivably be applied to
improve fuel economy, nor does NHTSA believe it is necessary to do so
given that many technologies address fuel economy in similar ways.\821\
---------------------------------------------------------------------------

    \821\ For example, NHTSA has not considered high-speed flywheels
as potential energy storage devices for hybrid vehicles; while such
flywheels have been demonstrated in the laboratory and even tested
in concept vehicles, commercially available hybrid vehicles
currently known to NHTSA use chemical batteries as energy storage
devices, and the agency has considered a range of hybrid vehicle
technologies that do so.
---------------------------------------------------------------------------

    NHTSA notes that the technological feasibility factor allows NHTSA
to set standards that force the development and application of new
fuel-efficient technologies, but this factor does not require NHTSA to
do so.\822\ In the 2012 final rule, NHTSA stated that ``[i]t is
important to remember that technological feasibility must also be
balanced with the other of the four statutory factors. Thus, while
`technological feasibility' can drive standards higher by assuming the
use of technologies that are not yet commercial, `maximum feasible' is
also defined in terms of economic practicability, for example, which
might caution the agency against basing standards (even fairly distant
standards) entirely on such technologies.'' \823\
---------------------------------------------------------------------------

    \822\ See 77 FR 63015 (Oct. 12, 2012).
    \823\ Id.
---------------------------------------------------------------------------

    NHTSA further stated that ``as the `maximum feasible' balancing may
vary depending on the circumstances at hand for the model year in which
the standards are set, the extent to which technological feasibility is
simply met or plays a more dynamic role may also shift.'' \824\ In the
proposal, NHTSA stated that for purposes of MYs 2024-2026, NHTSA was
certain that sufficient technology exists to meet the standards--even
for the most stringent regulatory alternative. NHTSA further explained
that for the proposal, the question was more likely rather, given that
the technology exists, how much of it should be required to be added to
new cars and trucks in order to conserve more energy, and how to
balance that objective against the additional cost of adding that
technology.
---------------------------------------------------------------------------

    \824\ Id.
---------------------------------------------------------------------------

    Most commenters addressing the question of technological
feasibility supported the agency's interpretation of the factor and
agreed that all of the regulatory alternatives considered in the
proposal were likely technologically feasible. Supplier organizations
such as Manufacturers of Emission Controls Association (MECA) and Motor
& Equipment Manufacturers Association (MEMA) agreed that the proposal
would encourage broad deployment of a variety of available technologies
for compliance, while encouraging innovation, with MEMA stating that
the proposed targets were achievable with currently available
technology resulting from long-term supplier commitments and
investments.\825\ CARB stated that Alternative 3 was technologically
feasible.\826\ EDF stated that ``more protective standards'' (i.e.,
than those set in the 2020 final rule) were technologically feasible
because NHTSA had previously found that more stringent alternatives
were technologically feasible, both in the 2012 final rule and in the
2016 Draft TAR, because the California Framework Agreements had
occurred, and ``[t]he technological feasibility of stronger standards
is also supported by the fact that many manufacturers, after the SAFE2
rule, did not change `significantly' from product plans

established in response to the 2012 standards.'' \827\
---------------------------------------------------------------------------

    \825\ MECA, Docket No. NHTSA-2021-0053-1113, at 2; MEMA, Docket
No. NHTSA-2021-0053-1528, at 3, 5.
    \826\ CARB, Docket No. NHTSA-2021-0053-1521, at 2.
    \827\ EDF, Docket No. NHTSA-2021-0053-1617, at 3-4.
---------------------------------------------------------------------------

    AFPM, in contrast, argued that the proposed standards were beyond
technologically feasible because OEMs are currently relying on credits
to meet the existing standards. AFPM argued that ``[r]ather than
presenting existing data in its Proposal, NHTSA apparently relies on
aspirational press releases from automakers . . . . Aspiration does not
equate to technological feasibility, not have previous aspirational
statements proved accurate. . . . NHTSA is relying on a major increase
in EVs in order for OEMs to comply, when it should be setting standards
that can feasibly be met with gasoline and diesel vehicles only.''
\828\ AFPM argued that because the proposed standards were beyond
technologically feasible, they were therefore contrary to law.\829\
---------------------------------------------------------------------------

    \828\ AFPM, Docket No. NHTSA-2021-0053-1530, at 4-5.
    \829\ Id., at 5.
---------------------------------------------------------------------------

    With regard to NHTSA's interpretation of the technological
feasibility factor, California Attorney General et al. agreed with
NHTSA's definition and analysis, stating that ``[t]he technology needed
to meet the Proposed Standards already exists, and those standards are
therefore achievable.'' South Coast AQMD commented that every
regulatory alternative was technologically feasible, and argued that by
reframing the technological feasibility factor in the context of the
other factors, NHTSA sought to ``double count'' ``the constraints
imposed by the economic practicability factor and ignore the
implications of how technology today supports even the most stringent
alternative standard in the most distant year.'' \830\ South Coast AQMD
concluded that ``[t]his factor should thus weigh in favor of more
stringent standards, given the Congressional purpose to conserve energy
even through forcing technology beyond what the market would derive
independently.'' \831\ EDF cited Center for Auto Safety in its comments
and stated that Congress intended for the technological feasibility
factor to be technology forcing when NHTSA was determining maximum
feasible standards, and that NHTSA was not limited by the technology
available at the time of the rulemaking.\832\ Tesla similarly commented
that because courts have described EPCA as technology forcing,
``[t]hus, NHTSA's evaluation of technological feasibility should
naturally include an evaluation of technology beyond those currently in
commercial use, including advanced or cutting-edge vehicle
technologies.'' \833\
---------------------------------------------------------------------------

    \830\ South Coast AQMD, Docket No. NHTSA-2021-0053-1477, at 4.
    \831\ Id., at 3-4.
    \832\ EDF, at 3.
    \833\ Tesla, Docket No. NHTSA-2021-0053-1480-A1, at 4.
---------------------------------------------------------------------------

    In response, NHTSA continues to believe, consistent with most
comments, that all of the regulatory alternatives considered in the
proposal and in this final rule are technologically feasible, because
the technology to meet them exists already. NHTSA agrees that the
technological feasibility factor can be technology-forcing, as NHTSA
has been saying since the 2012 final rule. To the extent that one
interprets ``technology-forcing'' as ``requiring the introduction of
more existing technology than consumers might otherwise request in the
absence of new standards,'' then NHTSA agrees that the final standards
are technology-forcing in that respect, but they do not compel the
introduction of yet-unproven technologies.
    Thus, technological feasibility is one factor considered in the
context of the others--as such, NHTSA does not agree with South Coast
AQMD that NHTSA is ``double-counting'' economic practicability. NHTSA
is simply balancing the factors together by concluding that ``if enough
technology exists to meet standards represented by each regulatory
alternative, then technological feasibility is not at issue; the next
question is one of economic practicability, and how much technology can
be applied before costs become too high for the market to bear?''
    With regard to the comments from AFPM, NHTSA first wishes to
clarify that the agency's decision of maximum feasible standards does
not rely on future manufacturer electrification, as the analysis
supporting this rule shows a path toward achieving compliance with the
final standards without increasing reliance on electrification. The
agency is simply noting that if companies want to choose a different
technology path from the one we present in our modeling, which they
seem to be indicating they are likely to do, then compliance with the
final standards may be even more cost-effective.
    The agency also disagrees that product announcements are poor
evidence of future manufacturer intent, particularly from established
manufacturers, and particularly given evidence that in addition to the
announcements, manufacturers have already introduced a number of new
highly fuel efficient models in addition to planned and announced
rollouts. And consumers are responding with increasing purchases of
these vehicles. If the announcements could not be trusted, then the
vehicles would not be appearing for reservation and sale--and yet the
vehicles are beginning to appear for reservation and sale.
Additionally, these vehicles are, for the most part, based on existing
fuel-economy-improving technologies, even if they represent
improvements on those technologies. Moreover, the stock market would
stop rewarding OEMs who backtrack repeatedly on announcements, which
would foreseeably discourage such backtracking. In short,
announcements, combined with emerging evidence from consumers and the
stock market confirming that most announcements, particularly from
major automakers, reflect reality, makes NHTSA comfortable that
reliance--in part--on the announcements is justified.
(b) Economic Practicability
    ``Economic practicability'' has consistently referred to whether a
standard is one ``within the financial capability of the industry, but
not so stringent as to'' lead to ``adverse economic consequences, such
as a significant loss of jobs or unreasonable elimination of consumer
choice.'' \834\ In evaluating economic practicability, NHTSA considers
the uncertainty surrounding future market conditions and consumer
demand for fuel economy alongside consumer demand for other vehicle
attributes. There is not necessarily a bright-line test for whether a
regulatory alternative is economically practicable, but there are
several metrics that we discuss below that we find can be useful for
making this assessment. In determining whether standards may or may not
be economically practicable, NHTSA considers:
---------------------------------------------------------------------------

    \834\ 67 FR 77015, 77021 (Dec. 16, 2002).
---------------------------------------------------------------------------

    Application rate of technologies--whether it appears that a
regulatory alternative would impose undue burden on manufacturers in
either or both the near and long term in terms of how much and which
technologies might be required. This metric connects to the next two
metrics, as well.
    Other technology-related considerations--related to the application
rate of technologies, whether it appears that the burden on several or
more manufacturers might cause them to respond to the standards in ways
that compromise, for example, vehicle safety, or other aspects of
performance that may be important to consumer acceptance of new
products.

    Cost of meeting the standards--even if the technology exists and it
appears that manufacturers can apply it consistent with their product
cadence, if meeting the standards will raise per-vehicle cost more than
we believe consumers are likely to accept, which could negatively
impact sales and employment in this sector, the standards may not be
economically practicable. While consumer acceptance of additional new
vehicle cost associated with more stringent CAFE standards is
uncertain, NHTSA still finds this metric useful for evaluating economic
practicability.
    Sales and employment responses--as discussed above, sales and
employment responses have historically been key to NHTSA's
understanding of economic practicability.
    Uncertainty and consumer acceptance \835\ of technologies--
considerations not accounted for expressly in our modeling analysis,
but important to an assessment of economic practicability given the
timeframe of this rulemaking. Consumer acceptance can involve
consideration of anticipated consumer responses not just to increased
vehicle cost and consumer valuation of fuel economy, but also the way
manufacturers may change vehicle models and vehicle sales mix in
response to CAFE standards.
---------------------------------------------------------------------------

    \835\ See, e.g., Center for Auto Safety v. NHTSA (CAS), 793 F.2d
1322 (D.C. Cir. 1986) (Administrator's consideration of market
demand as component of economic practicability found to be
reasonable).
---------------------------------------------------------------------------

    Over time, NHTSA has tried different methods to account for
economic practicability. Many years ago, prior to the MY 2005-2007
rulemaking (68 FR 16868, April 7, 2003) under the non-attribute-based
(fixed value) CAFE standards, NHTSA sought to ensure the economic
practicability of standards in part by setting them at or near the
capability of the ``least capable manufacturer'' with a significant
share of the market, i.e., typically the manufacturer whose fleet mix
was, on average, the largest and heaviest, generally having the highest
capacity and capability so as not to limit the availability of those
types of vehicles to consumers. NHTSA rejected the ``least capable
manufacturer'' approach several rulemakings ago and no longer believes
that it is consistent with our root interpretation of economic
practicability. Economic practicability focuses on the capability of
the industry and seeks to avoid adverse consequences such as (inter
alia) a significant loss of jobs or unreasonable elimination of
consumer choice. If the overarching purpose of EPCA is energy
conservation, NHTSA believes that it is reasonable to expect that
maximum feasible standards may be harder for some automakers than for
others, and that they need not be keyed to the capabilities of the
least capable manufacturer. Indeed, keying standards to the least
capable manufacturer may disincentivize innovation by rewarding laggard
performance.
    NHTSA has also sought to account for economic practicability by
applying marginal cost-benefit analysis since the first rulemakings
establishing attribute-based standards, considering both overall
societal impacts and overall consumer impacts. Whether the standards
maximize net benefits has thus been a significant, but not dispositive,
factor in the past for NHTSA's consideration of economic
practicability. Executive Order 12866, as amended by Executive Order
13563, states that agencies should ``select, in choosing among
alternative regulatory approaches, those approaches that maximize net
benefits . . .'' In practice, however, agencies, including NHTSA, must
acknowledge that the modeling of net benefits does not capture all
considerations relevant to economic practicability. Therefore, as in
past rulemakings, NHTSA is considering net societal impacts, net
consumer impacts, and other related elements in the consideration of
economic practicability. That said, it is well within the agency's
discretion to deviate from the level at which modeled net benefits are
maximized if the agency concludes that the level would not represent
the maximum feasible level for future CAFE standards. Economic
practicability is complex, and like the other factors must be
considered in the context of the overall balancing and EPCA's
overarching purpose of energy conservation.
    For purposes of this final rule, a way to organize the different
economic practicability considerations is as follows: CAFE standards
(represented by the different regulatory alternatives) require
automakers to add technology to their new vehicles:
     adding technology can potentially make those new vehicles
more expensive (and if that technology has to be added faster than or
outside of normal product cycles (i.e., the lead time consideration),
it can be even more expensive);
     U.S. consumers may potentially object to either higher
per-vehicle costs or to technology with which they are less familiar,
possibly affecting sales, but consumer benefits from fuel savings high
enough to offset these costs and even provide net savings may suggest
that per-vehicle costs, at least, are manageable for consumers and
automakers;
     changes in sales may affect employment in the auto sector,
but auto sector employment may also be affected by increasing
technology application on new vehicles.
    This causal chain is simpler than what occurs in real life, and as
we discuss the different considerations below, we highlight where we
believe it is reasonable to expect that real life may diverge from what
our analysis shows, although we will retain the limitations on the
agency's decision-making required by EPCA/EISA.
Application Rate of Technologies, Per-Vehicle Costs, and Lead Time
    On the topic of application rate of technologies, comments to the
proposal were, in many cases, different from comments received on
earlier rulemakings. Some commenters still focused on specific
application rates of specific technologies shown in the analysis for
the proposal, often suggesting that greater application of those
technologies was possible in the rulemaking time frame.\836\ Industry
commenters tended to comment about their extensive electrification
plans for the future, and then to argue that NHTSA cannot consider
electrification in setting maximum feasible CAFE standards (as will be
discussed further in Section VI.A.5.e)), and then to suggest that they
would prefer not to continue improving the fuel economy of their ICE
vehicles because they intend to focus instead on electrifying certain
vehicles in their fleets, and that effort will consume their available
capital resources.\837\
---------------------------------------------------------------------------

    \836\ Section III.D.1 contains examples of such comments and
NHTSA's responses.
    \837\ For example, Auto Innovators commented that NHTSA's
proposed standards would require more technology, which ``would
effectively negate EPA's proposed policy actions to incentivize
greater production of electric vehicles,'' and therefore NHTSA
should ``. . . adopt [less stringent] final standards that do not
require additional technology adoption beyond the pending GHG
standards and that preserve incentives intended to encourage the
production of EVs'' (emphasis added), Auto Innovators, Docket No.
NHTSA-2021-0053-1492, at 32; Stellantis commented that ``Stellantis
believes NHTSA has overestimated the potential for ICE improvements
on a [manufacturer] pathway that is focused on significant EV
growth. . . . So, even if manufacturers could achieve these proposed
MY 2024-2026 CAFE standards with conventional ICE technology, it
would make little economic sense to pursue a duplicate ICE
investment path only to abandon it a few short years later to meet
2030 electrification goals.'' Stellantis, Document No. NHTSA-2021-
0053-1527, at 12; Kia commented that ``[w]hile it is beneficial to
drive further improvements to ICEs to meet higher CAFE targets,
capital diversion away from electrification will delay cost parity
objectives that are critical'' to meeting future electrification
targets. Kia, Docket No. NHTSA-2021-0053-1525, at 10.

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

    In response, NHTSA again finds itself in a place of some cognitive
dissonance: Automakers are saying that NHTSA cannot consider the
technology on which they intend to focus their efforts in the coming
years, but that NHTSA must consider that they plan to focus all their
efforts on that technology and therefore intend to make no further
progress on the rest of their fleets. All available capital, according
to these commenters, is tied up by a technology that NHTSA cannot
consider--in which case, perhaps NHTSA cannot consider that that
technology is tying up that capital. These outcomes do not seem
reasonable. A different legal interpretation must be found, one that
allows us to continue to meet our statutory purpose while respecting
the restrictions Congress placed on us, in the most reasonable way
possible.
    Section VI.A.5.e) will discuss this in more detail below, but NHTSA
continues to believe that 49 U.S.C. 32902(h) can be reasonably read to
require NHTSA to exclude dedicated alternative fuel vehicles like BEVs
from application in the analysis during the rulemaking time frame, but
while still being aware of their existence in the world as a compliance
option. Moreover, while NHTSA absolutely agrees that capital
constraints are a relevant consideration in determining economic
practicability, NHTSA does not agree that CAFE standards for MYs 2024-
2026 could be maximum feasible if they required no investments to
improve the fuel economy of ICE vehicles. It does not require
``consider [ation of] the fuel economy of dedicated automobiles'' to
acknowledge that, even if automakers did make 50 percent of their
light-duty fleets BEV in a given model year, technologies would still
exist that could increase the fuel economy of the remaining ICE
vehicles. These vehicles will remain on the road for many years after
their purchase. If the overarching purpose of EPCA is energy
conservation, then it is neither a reasonable nor appropriate
interpretation of our statutory obligations to set standards for this
timeframe that require no further technology application on half or
more of the new vehicle fleet. Electrification is certainly a way to
reduce fuel use, but not at the expense of additional, feasible overall
energy conservation, and NHTSA's analysis for the final rule
demonstrates that compliance is achievable.
    That said, NHTSA recognizes that in the 2012 final rule, NHTSA
determined that enough technology application had been required for
compliance with the MY 2012-2016 standards, that a slightly slower rate
of increase in standard stringency was appropriate for MYs 2017-2021--
in effect, that available technology had been depleted somewhat, and
industry needed time to catch up.\838\ We know now that MYs 2017-2020
did turn out to be challenging for industry compliance, but NHTSA does
not believe that this was due to unavailability of technology, so much
as consumer demand over those model years for vehicles with lower fuel
economy than anticipated in the 2012 final rule. The technology remains
available, even if the vehicles sold during those model years had less
of it.
---------------------------------------------------------------------------

    \838\ 77 FR 63043 (Oct 15, 2012).
---------------------------------------------------------------------------

    NHTSA also continues to believe that the less-stringent-than-
originally-anticipated standards for MYs 2021-2023 will provide
automakers with at least a short grace period during which they have
the opportunity to shift their focus back to more rapidly increasing
stringency. Indeed, we are seeing that shift in focus in the frequent
announcements and rollouts of new high-fuel-economy models, as
discussed further in the NPRM and below.
    However, as NHTSA also said in the 2012 final rule, we realize that
automakers will likely be putting quite a lot of technology into
meeting the baseline during MYs 2024-2025 (and, implicitly, 2026), and
this understanding makes us cautious about choosing the most stringent
alternative.\839\ But at the same time, fuel economy-improving
technology was less developed in 2012, and NHTSA suggested in that rule
that there was a difference in terms of capital between adding
technology to a few vehicles and spreading it throughout a fleet.\840\
NHTSA continues to believe that that difference is important. The auto
industry has submitted comments expressing their preference to
concentrate their investments solely on electrification (which they say
NHTSA cannot consider), but our analysis does not suggest that the
additional investment that could be required by the final CAFE
standards would be, on average, economically impracticable. NHTSA
believes that improving the fuel efficiency of ICE vehicles will not
only result in additional energy conservation while automakers work
toward a fully electric future (as many have committed to doing), but
also is compelled by our statutory mandate. And if manufacturers
determine that electric vehicles are the most cost-effective path
toward achieving compliance, the CAFE program also accommodates that
approach, as the statute and regulations provide clear rules on how
electric and other alternative fuel vehicles are accounted for in
determining compliance even while we don't consider them in
establishing the standards.
---------------------------------------------------------------------------

    \839\ Id. at 63046.
    \840\ Id.
---------------------------------------------------------------------------

    On the topic of per-vehicle costs, Consumer Reports commented that
based on their regular purchases of new vehicles for testing, Consumer
Reports estimated that vehicle prices adjusted for inflation have not
increased significantly over the last decade.\841\ Consumer Reports
stated that given that CAFE standards have been increasing
concurrently, CAFE standards must not be adding significant cost to new
vehicles.\842\ MECA commented that ``the costs of the technologies
needed to comply with the proposed standards have remained
approximately consistent or have declined since . . . 2012.'' \843\
Ceres stated that strong standards would spur cost learning and
decrease manufacturer costs over time.\844\
---------------------------------------------------------------------------

    \841\ Consumer Reports, Docket No. NHTSA-2021-0053-1576-A9, at
10-15.
    \842\ Id.
    \843\ MECA, at 2.
    \844\ Ceres, Docket No. NHTSA-2021-0053-0076, at 2.
---------------------------------------------------------------------------

    AFPM argued that the proposal relied on electric vehicles, which
cost more than comparable ICE vehicles, and which could become even
more expensive if mineral supply chain issues are exacerbated.\845\
AFPM stated that NHTSA had not accounted for the extent to which
manufacturers cross-subsidize EVs by increasing the prices of ICE
vehicles.\846\ AFPM also stated that many sources show that lifetime
ownership costs for EVs are higher than for ICE vehicles.\847\
---------------------------------------------------------------------------

    \845\ AFPM, at 6-8.
    \846\ Id.
    \847\ Id., at 9.
---------------------------------------------------------------------------

    Auto Innovators commented that the differences between the EPA and
NHTSA programs ``. . . make[ ] compliance with the NHTSA CAFE program
more difficult and, at minimum, add complexity to product plans. These
differences add costs, and . . . [w]e recommend that NHTSA consider
these differences to the EPA program and their impacts on regulatory
costs as part of its evaluation of the economic practicability of CAFE
standards.'' \848\
---------------------------------------------------------------------------

    \848\ Auto Innovators, at 32.

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

    In response, NHTSA does not believe that per-vehicle costs
associated with any of the regulatory alternatives are significantly
greater than per-vehicle costs considered economically practicable over
the last several rulemakings. As compared to the baseline (i.e.,
retention of the SAFE rule and an indefinite extension of that rule's
MY 2026 standards), Alternative 1 would require, on average, an
additional $432 for MY 2029; Alternative 2, an additional $938 for MY
2029; Alternative 2.5, an additional $1,087 for MY 2029; and
Alternative 3, an additional $1,407 for MY 2029. Costs differ by
manufacturer and by fleet (all in 2018 dollars), but these averages are
illuminating.
    NHTSA is aware that cross-subsidization happens across models and
vehicle types, as AFPM noted, but assumes in this analysis (and all
those preceding it) that costs for all technology are passed directly
through to consumers. NHTSA lacks reliable information about cross-
subsidization to estimate those effects more precisely; but
nevertheless believes that the current approach is reasonable and
provides useful information about average effects to decision-makers.
Additional levels of detail would likely be necessary if NHTSA were
attempting to develop and run a consumer choice model, but by itself,
such a model would only address the potential demand-side response to
any cross-subsidization. Estimating cross-subsidization would likely
involve estimating manufacturers' respective approaches to vehicle
prices and incentives, and possibly even manufacturers' respective
approaches to distributing costs and earnings across global regions and
business units, and among customers, employees, and investors. NHTSA
currently lacks appropriate information that would be needed to account
for all of these degrees of freedom and corresponding highly
proprietary (and doubtlessly fluid) corporate strategies. Analogous to
considering the potential for manufacturers to apply technology in a
manner that holds vehicle performance and utility approximately
constant, the agency considers it reasonable and appropriate to
consider the potential that the industry could continue to follow long-
standing average practices in passing along additional costs.
    Some commenters have argued that the per-vehicle costs for all
alternatives are understated, because the analytical baseline for this
rulemaking includes more technology application, and thus cost accrues
in the baseline that NHTSA is effectively saying does not ``count'' for
purposes of the CAFE standards. NHTSA discusses in Sections IV.B and
VI.A.5.e) why NHTSA believes that it is reasonable and appropriate for
the analytical baseline to reflect several manufacturers' voluntary
commitment to higher (than finalized in 2020) GHG emissions reductions
during the rulemaking time frame, and all manufacturers' anticipated
compliance with ZEV mandates in California and the Section 177 states.
The inclusion of these measures in the baseline reflects the reality of
the market, a reality NHTSA is required to reflect in order to assess
the effects of its standards. NHTSA agrees that automakers will apply
technology in response to both of those, and that doing so will add
cost to new vehicles, and that some of that technology will ultimately
make CAFE compliance easier. However, the CAFE program is not the but-
for cause of that technology application and those costs. NHTSA
therefore disagrees that NHTSA must ``own'' those costs when
determining what CAFE standards would be economically practicable or
technologically feasible. NHTSA, like the automakers, is aware that the
automakers are making technology application decisions with reference
to many different things, including multiple regulatory regimes and
non-regulatory commitments. The additional costs that CAFE compliance
would require is the question that belongs to NHTSA.
    With that in mind, NHTSA acknowledges the comment from Auto
Innovators that compliance flexibility and other programmatic
differences between NHTSA and EPA can make compliance with NHTSA's
standards more binding (and thus, more costly) for some manufacturers
in some model years. We understand that manufacturers would rather
spend less money than more in complying with their various regulatory
obligations, but manufacturers who plan to meet the most binding
standards, whichever ones they are, will foreseeably be in a good
compliance position with all other application standards. Moreover, we
continue to believe that an additional average $1,087 per vehicle as
compared to the No-Action Alternative standards is economically
practicable, and we note that it is considerably less than the
additional $1,407 per vehicle estimated to be required under
Alternative 3. It is also considerably less than the additional per-
vehicle costs the agency considered to be economically practicable in
2012, when the industry was still recovering from the Great Recession.
Although today's supply chain issues pose a new challenge to the
industry, NHTSA considers it uncertain whether these will necessarily
persist through the rulemaking time frame, and believes that they are
uncertain enough that they should not be presumed. NHTSA also notes
that the industry is far healthier today financially than it was a
decade ago.
    Related to per-vehicle costs (and arguably to sales), Auto
Innovators commented that the payback period associated with many
technologies modeled for compliance with Alternatives 2 and 3 was
longer than NHTSA seemed to believe consumers would accept.\849\ Noting
that NHTSA uses a 30-month payback for manufacturers' voluntary
application of fuel-economy-improving technologies, Auto Innovators
stated that:
---------------------------------------------------------------------------

    \849\ Auto Innovators, at 15.

The Central Case NHTSA analysis forecasts that, for Alternative 2,
27.4 [percent] of MY 2026 vehicles adopt fuel-saving technologies
that take 8 or more years to pay back, and nearly 1 in 8 vehicles
adopts technology that will not pay back in 16 or more years (if at
all). For Alternative 3, with the Global Insight fuel price
projections, 1 in 4 vehicles will take at least 12 years to pay back
the cost of fuel-saving technologies, and over 40 [percent] of the
fleet will include fuel-saving technologies that do not return
investment until at least the 8th year of ownership and use. For
Alternative 3, with the Global Insight fuel price forecast, 1 in 5
vehicles built in MY 2026 includes technology that will not pay back
in the first 15 years of ownership and operation. If consumers are
reluctant to adopt these technologies, the policy objectives of the
higher stringency alternatives may not be fully realized.\850\
---------------------------------------------------------------------------

    \850\ Id., at 52.

    NHTSA fully agrees that if consumers are reluctant to adopt these
technologies, the policy objectives of the standards may not be fully
realized. Having updated some aspects of its analysis, NHTSA currently
estimates that fuel-saving technology added in response to the new CAFE
standards in MY 2026 could take 5.5-7.5 years to pay off (depending on
whether taxes, fees, financing, and insurance are accounted for), but
that by MY 2029, this technology could pay off in 4.5-5.5 years:

[GRAPHIC] [TIFF OMITTED] TR02MY22.227

    Setting aside taxes, fees, financing, and insurance, NHTSA finds
that under alternative 2.5, payback periods are all within the
estimated vehicle age (6 years) at which vehicles are first sold to
used vehicle buyers, and even within the estimated average new vehicle
loan term (5.75 years).
    That said, NHTSA disagrees that there is an inherent conflict
between NHTSA's analytical assumption for purposes of the baseline that
manufacturers can reasonably be expected to improve fuel economy
voluntarily if the technology pays for itself in 30 months, and the
possibility in the real world that consumers will still buy vehicles
with improved fuel economy that take considerably longer to pay back in
fuel savings. As we explained above, the assumption about voluntary
payback may be less valid when all vehicles are subject to fuel economy
regulations. Moreover, for decades, manufacturers have included
catalytic converters that offer owners no direct financial benefit at
all (and that, conversely, can be expensive to replace), and consumers
have continued to buy new vehicles. Manufacturers have made significant
quality improvements in new vehicles over the past decades, and
consumers are retaining vehicles longer than ever before, meaning that
many consumers will experience more of the lifetime fuel savings from
their new vehicles than they may have experienced previously, and be
more willing to shoulder additional up-front costs in order to obtain
those fuel savings over time. Although the payback periods shown above
are nearing (or somewhat exceeding, if taxes, fees, financing, and
insurance are considered) the term of the average new vehicle loan, the
current economic forecast informing NHTSA's analysis indicates buyers'
wealth will likely continue to increase over time, with per-capita real
disposable income increasing by 20 percent between 2022 and 2030. In
that case, buyers will be better able to afford the additional up-front
costs resulting from this rule, and drivers (if not necessarily initial
buyers) will continue to realize significant fuel savings long after
recouping those up-front costs. Finally, when new car buyers do get
ready to sell their cars into the used car market, they should be able
to recoup some of the cost of the fuel economy technologies.
    A number of commenters addressed lead time--the extent to which
standards may or may not be economically practicable based on how long
they give manufacturers to make necessary changes to their vehicles.
Tesla commented that lead time is not a problem for several reasons:
First, because credit trading and banking builds in flexibility;
second, because the majority of the industry signed on to the 2012
standards with commitment letters, so the industry has been on notice
of the possibility of more stringent standards; third, that because
manufacturers are following the California and Section 177 states' GHG
standards, they have had plenty of lead time to meet stricter CAFE
standards; and fourth, because Tesla has been selling EVs consistently
over the past several model years.\851\
---------------------------------------------------------------------------

    \851\ Tesla, A1, at 7-8.
---------------------------------------------------------------------------

    Securing America's Future Energy stated that their analysis showed
that ``each of the top 15 vehicle programs produced in the United
States are expected to transition to a new program before 2030. In
fact, . . . most of the conventional vehicles that will be produced in
the United States in 2030 are part of programs that are early enough in
their production cycles that the automakers can transition the program
to electric platforms without stranding investment.'' \852\
---------------------------------------------------------------------------

    \852\ Securing America's Future Energy, at 7-8.
    \853\ Our Children's Trust, Docket No. NHTSA-2021-0053-1587, at
1-2.
    \854\ South Coast AQMD, at 4.
---------------------------------------------------------------------------

    Our Children's Trust commented that 18 months (as required by
statute for new standards) was plenty of lead time, and NHTSA should
``[p]ut the industry on notice today that it needs to move to a 100
[percent] electric or clean fleet by 2030.'' \853\ South Coast AQMD
similarly cited EPCA's 18 month lead time requirement as adequate even
for Alternative 3, and like Tesla argued essentially that industry had
been on notice since the 2012 final rule that standards as stringent as
Alternative 3 were possible.\854\ South Coast AQMD further commented
that ``the technology to meet [Alternative 3] exists today, and the
current trend of manufacturers daily adding to the announcements of
increasing investment all allow NHTSA confidence that there is not a
lead time

concern with the ability to meet Alternative 3 standards.'' \855\
---------------------------------------------------------------------------

    \855\ Id.
---------------------------------------------------------------------------

    In contrast, Kia stated that ``[f]our years is a short time for
vehicle redesigns and extremely short for full engine and powertrain
redesigns. . . . it is unlikely that [more fuel-efficient engine/
powertrain architectures] would permeate our entire fleet at the levels
NHTSA suggests. Thus, the engineering burden would fall on a
combination of changes to the smaller set of vehicles that could be
redesigned in time, and potential fleet mix changes where those other
actions fall short.'' \856\ Stellantis similarly commented that ``[i]t
takes the automotive industry (and Stellantis) 2 to 4 years to
introduce a new product. . . . OEMs have historically justified
powertrain business cases over at least a ten-year time horizon. . . .
To achieve [zero emissions], focus must remain on transformational
electrification investments, starting now in order to minimize the time
and maximize the success of this transition.'' \857\ Stellantis noted
that the 2020 EPA Automotive Trends Report showed that ``11 of 14 major
manufacturers underperformed their MY2019 standard and relied on the
use of banked or purchased credits,'' stating that ``[t]his is a clear
indication that the additional time afforded in the proposed rule is
needed to grow the market demand for more efficient electric vehicles,
before even more stringent standards, requiring higher rates of
electrification, can be implemented.'' \858\
---------------------------------------------------------------------------

    \856\ Kia, at 3.
    \857\ Stellantis, at 15.
    \858\ Id., at 14.
---------------------------------------------------------------------------

    Auto Innovators disagreed with NHTSA's suggestion in the proposal
that the 1.5 percent increases in CAFE stringency over MYs 2021-2023
represented any kind of ``break,'' and commented that the proposal
showed Alternative 2 requiring ``significant technology additions as
soon as MY 2023 (including large numbers of EVs) to support compliance
in MYs 2024-2026, despite MY 2023 potentially beginning as soon as two
months from now for some vehicle models, and more generally about nine
months from now for most.'' \859\ Auto Innovators continued that
``While NHTSA may technically be providing the statutorily required 18-
month lead time for increasing standards, the actual lead time to
achieve the improvements modeled by NHTSA is much less.'' \860\
---------------------------------------------------------------------------

    \859\ Auto Innovators, at 15.
    \860\ Id., at 53-54.
---------------------------------------------------------------------------

    In response, while lead time is not an express factor for NHTSA
under EPCA as it is for EPA under the CAA, NHTSA still believes lead
time is appropriately considered as part of economic practicability.
NHTSA has long recognized that the statutory 18-month lead time is
shorter than manufacturer product cycles, while also recognizing that
it is the minimum amount of lead time that Congress required for new or
amended (more stringent) standards. NHTSA understands that more lead
time is always preferable from an industry perspective. Lead time has
factored into our maximum feasible analysis by increasing the
stringency of the standards in the last MY of our rule so that
manufacturers will have close to four years to achieve the highest
stringency.
    That said, NHTSA continues to believe that the lead time for the
final standards is adequate. NHTSA agrees with some commenters'
suggestions that the U.S. auto industry has been generally aware since
2012 of potential stringency levels in the rulemaking time frame that
would have been even higher than those that NHTSA is now finalizing.
Automakers in 2012 were planning to achieve these levels; what happened
in the interim was lower gasoline prices than anticipated and the
continuing trend of U.S. consumers generally choosing new vehicles with
lower fuel economy rather than higher fuel economy (perhaps encouraged
by advertising campaigns touting larger vehicles, which generally
produce larger profit margins for manufacturers). Manufacturers who
petitioned the Federal Government to reconsider the EPA 2018 Final
Determination may have been hoping for less stringent standards that
reflected the vehicles they were actually selling in high volumes,
rather than the vehicles they were developing with an eye toward future
CAFE/GHG/ZEV stringency increases, and NHTSA set lower standards in
2020 for MYs 2021-2026 in response to that petition. Technologically,
NHTSA does not believe that automakers ever really got that far ``off
track'' from the original intent of the 2012 standards, or they would
not be in a position today to be constantly announcing and rolling out
new higher-fuel-economy vehicle models. Shifting back to the
perspective of lead time, the question may be less about whether
automakers have enough time to make technological changes in their
fleets, and more, as Kia suggested, whether automakers have enough time
to spread technology they already have throughout enough of their
fleets so that their average fuel economy tracks their anticipated
compliance obligations.

[GRAPHIC] [TIFF OMITTED] TR02MY22.228

    Table VI-5 summarizes the fleetwide penetration rates for certain
technologies from MYs 2020 through 2026. While the regulatory
alternatives considered in this final rule require not-insignificant
application of additional technology, particularly the more stringent
alternatives, all of these technologies exist in the fleet today. The
first two rows--turbocharging with cylinder deactivation and ten-speed
transmissions (the highest number of speeds modeled)--are ICE-
improvement technologies already available on vehicles today. The model
estimates that the average rate of application for turbocharging with
cylinder deactivation could increase from roughly 2 percent in MY 2020
to over 20 percent on average across the industry in MY 2026 in
response to Alternatives 2.5 and 3, but this is still adding an
existing ICE technology to just over 20 percent of vehicles. The model
estimates that the average rate of application for ten-speed
transmissions could increase from roughly 10 percent in MY 2020 to
nearly 40 percent on average across the industry in MY 2026 in response
to Alternatives 2.5 and 3. While this penetration rate may seem high,
it is much lower than previous expectations about advanced transmission
penetration rates in prior rulemakings, and again, is the projected
rate increase applies across the entire industry, during a time frame
in which plenty of vehicles will be redesigned and a new transmission
or powertrain could reasonably be incorporated. Mild hybrids are
estimated to increase from barely 2 percent to roughly 4 percent.
Strong hybrids and high levels of aerodynamic improvements require more
extensive architectural changes to vehicles, and may be more
challenging than the other listed technologies to apply more widely
during the rulemaking time frame, but again, this is industry-wide;
many redesigns will occur during these model years; and manufacturers
are always free to chart their own technology paths to compliance.
Standards may be challenging without being economically impracticable,
and NHTSA believes that that is the case here.
Consumer Demand, Electrification, Net Benefits
    With regard to uncertainty regarding consumer acceptance
(considered through the lens of economic practicability, which is
concerned in part with automakers' ability to sell the vehicles called
for by the standards), some commenters expressed optimism that
consumers will respond favorably. Consumer Reports stated that their
research suggests that consumers would prefer higher fuel economy in
their next vehicles, and stated that ``[a] 2020 nationally
representative survey . . . found that 73 [percent] of respondents said
the federal government should continue to increase fuel economy
standards.'' \861\ EDF echoed these points, stating that ``64 [percent]
of consumers rank fuel economy as extremely important or very important
in considering what car to purchase,'' and that ``research has shown
that consumers are willing to pay more for improvements to fuel economy
than for improvements to acceleration or premium trim.'' \862\ Consumer
Reports argued further that ``[t]here is inherent inequity in the car
marketplace as Consumer Reports' research has found that new car buyers
are predominantly wealthier, whiter, and older, and they determine what
vehicles end up on the used car market. Expanding consumers' choices of
fuel-efficient vehicles will also benefit those that cannot afford to
enter the new car market.'' \863\
---------------------------------------------------------------------------

    \861\ Consumer Reports, Public Hearing Comments, at 1.
    \862\ EDF, at 5.
    \863\ Consumer Reports: Public Hearing Comments, at 1.
---------------------------------------------------------------------------

    Some commenters stated that strong standards would themselves
create demand: Securing America's Future Energy commented that
automakers ``cannot [be expected] to make cars for

which there is not a promising market,'' but that ``the power of the
government's regulatory authority . . . can be used to shape the
market. This rulemaking offers the federal government a valuable
opportunity to exercise its regulatory authority to accelerate the
growth of that market.'' \864\ South Coast AQMD commented that DOE's
``technology targets for battery costs and electric drive
technologies,'' ``the commitment of the federal government to purchase
ZEVs for government fleets,'' and ``President Biden's target of 50
[percent] of new vehicles being ZEVs by 2030'' will all drive demand,
in addition to California's announcement of the 100 percent ZEV target
for 2035.\865\
---------------------------------------------------------------------------

    \864\ Securing America's Future Energy, at 2-3.
    \865\ South Coast AQMD, at 5.
---------------------------------------------------------------------------

    Some commenters argued that strong standards would enhance U.S.
automakers' global competitiveness: ACEEE commented that strong
standards ``provid[e] consumers a wider array of vehicle choices,'' and
improve U.S. automakers' global competitiveness.\866\ Ceres also
supported the idea that Alternative 3 would improve U.S. global
competitiveness.\867\
---------------------------------------------------------------------------

    \866\ ACEEE, Docket No. NHTSA-2021-0053-0074, at 1-2.
    \867\ Ceres, at 1.
---------------------------------------------------------------------------

    Other commenters expressed concern about consumer demand for fuel
economy. NADA, for example, commented that consumers are ``far from
being myopic or inconsistent,'' and will continue to purchase CUVs,
SUVs, and trucks rather than passenger cars as long as fuel prices
remain low, which AEO continues to forecast.\868\ NADA argued that
``NHTSA's current proposal is flawed in that, as with the 2012 joint
rule, the agency has not adequately considered critical demand-side
marketplace factors, including whether OEMs will be able to make and
deliver compliant vehicles that are both marketable and affordable.''
\869\ NADA also commented that ``. . .given that many OEMs were unable
to comply with pre-SAFE Rule CAFE standards since at least MY 2016 (but
for the application of credits), serious questions exist regarding
their ability to meet the standards NHTSA has proposed in a cost
effective, economically practicable manner sufficient to bring to
market light duty vehicles that preserve consumer choice and feature
preferences.'' \870\
---------------------------------------------------------------------------

    \868\ NADA, Docket No. NHTSA-2021-0053-1471, at 8-9.
    \869\ Id., at 5-6.
    \870\ Id.
---------------------------------------------------------------------------

    Mr. Kreucher similarly commented that ``[b]ased on [his]
professional experience, CAFE standards have a major impact on the
automotive choices available to consumers and on the purchase prices of
various models. . . . especially . . . when fuel prices are relatively
low, because low-priced gasoline forces many carmakers to adjust prices
and model availability so that new car purchases produce a sales mix
that complies with CAFE.'' \871\ Mr. Kreucher pointed to recent cuts in
Ford's passenger car lineup as evidence that CAFE standards reduce
consumer choice and argued that ``it is likely that our car-buying
choices would be even broader, and car prices would be even lower, if
the agencies adopted standards that were even more lenient than what
they chose in the proposed rule.'' \872\
---------------------------------------------------------------------------

    \871\ Walter Kreucher, Docket No. NHTSA 2021-0053-0013, at 13.
    \872\ Id., at 12.
---------------------------------------------------------------------------

    Mr. Douglas disagreed that consumer acceptance should even be a
consideration, stating that ``[e]conomic practicability and economic
desirability are two different things, and there is nothing in the
relevant governing statutes directing [NHTSA] to full satisfy auto
consumers at all cost.'' \873\ Mr. Douglas went on to argue that ``[i]t
is unreasonable to set stringency so low that the regulatory framework
produces slow fuel economy improvements that fail to reduce overall
gasoline consumption at an adequate pace, knowing that we could do much
better by forcing consumers to moderate their desires and choose from
greener options.'' \874\ Mr. Douglas commented that it is evident in
EPCA that Congress intended some consideration of consumer choice, as
through the setting of separate standards for cars and trucks, the use
of attribute-based standards defined by a mathematical formula, and the
low-volume exemption.\875\ However, he concluded that the statutory
evidence did not suggest that Congress meant for consumer demand to be
a brake on stringency,\876\ stating that ``[i]t is economically
practicable to disappoint consumers somewhat, and there are less
desirable vehicle options that would significantly reduce the
technological barriers that are preventing meaningful fuel economy
improvements. These feasibility barriers are not written in stone.''
\877\ Mr. Douglas suggested that automakers could easily shift their
fleet mixes or reduce vehicle weight or horsepower to increase fuel
economy levels quickly, and that this would not be economically
impracticable.\878\
---------------------------------------------------------------------------

    \873\ Peter Douglas, Docket No. NHTSA-2021-0053-0085, at 4.
    \874\ Id., at 5.
    \875\ Id., at 21.
    \876\ Id.
    \877\ Id., at 4.
    \878\ Id.
---------------------------------------------------------------------------

    In response, NHTSA points again to case law finding it reasonable
to consider consumer demand as a component of economic
practicability.\879\ Uncertainty about consumer demand is still a
reasonable consideration within economic practicability, albeit one
that is getting somewhat more complicated to parse as industry and
government head toward higher and higher levels of fleet fuel economy
requirements.
---------------------------------------------------------------------------

    \879\ CAS, 793 F.2d 1322 (D.C. Cir. 1986) (Administrator's
consideration of market demand as component of economic
practicability found to be reasonable).
---------------------------------------------------------------------------

    NHTSA agrees that automakers have been relying more heavily on
banked credits for compliance over the last few model years. NHTSA also
agrees with the observation that American consumers purchased larger
and heavier vehicles, on average, than previously expected. This is
evident in the compliance data for both the CAFE and CO2 programs.
NHTSA does not agree that automakers reducing passenger car offerings
is necessarily due to CAFE stringency, however. The standards were
designed to enable automakers to bank compliance credits as a
compliance flexibility, and reliance on those banks means automakers
are using program flexibilities in order to optimize their compliance
strategies and reduce costs. It does not indicate that the standards
are infeasible. There is a chicken and egg question here, in which
consumers seek out larger and heavier vehicles when gas prices are
relatively low; automakers continue to offer those vehicles--and
indeed, market them heavily--and (in some cases) discontinue smaller
and more fuel-efficient models going forward; this marketing strategy
can and should adjust to facilitate compliance with CAFE standards that
were predicated on (among other things) the potential to offer smaller
and more fuel-efficient models, even when controlling for the effects
of the footprint-based standards and separate standards for passenger
cars and light trucks. Meanwhile, automakers also continue to roll out
very high-fuel-efficiency models, some of which are very popular with
consumers, even while other groups of consumers continue to buy the
large, heavy, more traditional ICE models. American consumers today do
have quite a wide array of light-duty vehicle options, many of them
with higher fuel economy than ever before, along with other attributes
that they value. This is

confirmed by recent data from Wards Intelligence, as summarized by the
Energy Information Administration. EIA states that ``[s]ales of several
existing hybrid, plug-in hybrid, and electric models increased in 2021,
but a large portion of the sales increase came from new manufacturer
offerings across different market segments. Manufacturers increased the
number of non-hybrid ICE vehicle models by 49 in 2021, versus an
increase of 126 for hybrid and electric vehicle models.'' \880\ EIA
also notes that ``Manufacturers of hybrid vehicles and plug-in vehicles
have expanded into market segments such as crossovers, vans, and
pickups following consumer preference for larger vehicle. Within each
electric or hybrid powertrain type, crossover vehicles now account for
most sales.'' \881\ While, again, NHTSA does not and is not considering
electrification in deciding on the maximum feasible fuel economy
standards, consistent with 49 U.S.C. 32902(h), it is crystal clear that
these trends are occurring even in the absence of further NHTSA action.
---------------------------------------------------------------------------

    \880\ EIA, ``Today in Energy: Electric vehicles and hybrids
surpass 10% of U.S. light-duty vehicle sales,'' Feb. 9, 2022.
Available at https://www.eia.gov/todayinenergy/detail.php?id=51218
(accessed: March 15, 2022).
    \881\ Id.
---------------------------------------------------------------------------

    The question at the root of uncertainty about consumer demand is
whether the standards will require automakers to change their vehicles
or lineups in ways that affect sales and employment to such an extent
that it makes the standards economically impracticable. As Mr. Douglas
suggested in his comments, some change is not economically
impracticable, because (other than during the pandemic) vehicle sales
have been climbing steadily since the recession in 2008,\882\ a period
during which CAFE standards generally have also been rising. Consumers
have not yet stopped buying new vehicles because CAFE standards have
become more stringent, and they still have many different vehicle
options from which to choose, and many of those different vehicle
options include improved fuel economy levels--but not all.
---------------------------------------------------------------------------

    \882\ ``Light vehicle retail sales in the United States from
1976 to 2021,'' https://www.statista.com/statistics/199983/us-vehicle-sales-since-1951/ (accessed March 15, 2022).
---------------------------------------------------------------------------

    NADA's comments suggest that as standard stringency continues to
increase, automakers will have a choice between making compliant
vehicles, and vehicles that are marketable and affordable--in effect,
that compliant vehicles will not be marketable and affordable. NHTSA
agrees that affordability is a major concern generally, but does not
find it to be a concern for this rulemaking, as evidenced by the per-
vehicle cost discussion above. Moreover, auto dealers have managed to
keep sales levels increasing in recent years (again, excluding the
years affected by the pandemic) even while the average per-vehicle
price has increased.\883\ The 2020 final rule discussed the phenomenon
of lengthening loan terms for new vehicles and expressed concern about
a possible bubble, but even with average prices at their highest
recorded levels, demand is currently still outstripping supply and, as
mentioned above, current economic forecasts show real disposable income
continuing to increase between now and 2030.
---------------------------------------------------------------------------

    \883\ https://www.kbb.com/car-news/average-new-car-price-tops-47000/, (accessed: March 15, 2022).
---------------------------------------------------------------------------

    Thus, given that per-vehicle cost increases attributable to CAFE
standards do not seem insurmountable during the rulemaking time frame,
the next question is whether the technology itself seems likely to
reduce consumer demand for new vehicles such that auto industry sales
and employment fall to economically impracticable levels. Again, NHTSA
does not believe that this is likely during the rulemaking time frame.
The agency estimates that, compared to the No-Action Alternative, this
rule could involve the increased application of a range of
technologies, such as improvements to engine friction, vehicle mass
efficiency, aerodynamics, and automatic transmissions; turbocharged or
high compression ratio engines; as well as some additional deployment
of hybrid-electric vehicles. Although dual-clutch transmissions clearly
did not succeed as anticipated in past NHTSA rulemakings, most of these
other technologies have already enjoyed some level of success in the
marketplace, and the agency is aware of no indications that the future
market will not accept such technologies in due course. Moreover,
automakers themselves are steadily announcing higher fuel economy
models, and NHTSA continues to believe that sophisticated, for-profit
companies would not offer, much less tout, vehicles that they do not
believe are marketable.
    A number of commenters directly addressed NHTSA's suggestions in
the proposal that the proposed standards could be economically
practicable based on automaker announcements and commitments regarding
forthcoming higher-fuel-economy vehicle models. Among commenters
agreeing with NHTSA, Lucid stated that ``the rapidly decreasing costs
of battery production, the commitments already made by many automakers
to increase electrification and technology in their vehicles, and the
incentives for EV purchases in place in several states suggest that
Alternative 3 is economically practicable.'' \884\ Tesla also agreed
with NHTSA that industry announcements ``are indicative of broader
interest and capabilities in achieving greater fuel economy and that
more stringent standards are economically practica[ble].'' \885\ Tesla
further commented that the proposed standards are ``being eclipsed by .
. . real world [manufacturer] plans, capabilities, and consumer-driven
investments.'' \886\
---------------------------------------------------------------------------

    \884\ Lucid, Docket No. NHTSA-2021-0053-1584, at 4.
    \885\ Tesla, at 5.
    \886\ Id.
---------------------------------------------------------------------------

    NCAT noted extensive investment by its members in electrification
technologies and stated that ``[t]he regulations [that have helped spur
those investments] and resulting investments will stimulate technology
innovation and market competition, enable consumer choice, attract
private capital investments, and create high quality jobs.'' \887\
General Motors Company (GM) touted its announcements about and
investments in ZEVs, stating that ``[e]ven as we manage short-term
challenges like COVID-19 and the semiconductor shortage, we continue to
accelerate our investment in EVs.'' \888\
---------------------------------------------------------------------------

    \887\ NCAT, Docket No. NHTSA-2021-0053-1508, at 5.
    \888\ GM, Docket No. NHTSA-2021-0053-1523, at 2-3.
---------------------------------------------------------------------------

    In contrast, Honda stated that ``while commitments are serious,
sincere, and very much underway, it is important that the agencies not
approach such announcements as foregone conclusions. Limited market
adoption of technology necessary for reaching our future climate goals
presents a profoundly challenging and still uncertain industry
transition for the automotive industry in the years ahead.'' \889\
Honda further commented that ``[t]hese challenges are only amplified by
present headwinds; as widely reported in the media over the past 18
months, the automobile industry is facing severe global supply chain
issues that continue to disrupt vehicle production volumes, launch
dates and compliance strategies. Should ongoing supply chain issues
persist well into the next year, development schedules and profits
could be impacted.'' \890\ Kia also noted supply chain issues, and
argued

that accounting for manufacturer announcements ``without a full-scale
cost-benefit analysis may pose gaps that have longer-term
consequences,'' stating that ``[i]t is of critical importance that
NHTSA assures that a full impact of the COVID-19 pandemic has been
incorporated into its model . . . [and] NHTSA . . . continue[s] to add
refinements to this aspect of the model, as the far-reaching supply-
chain implications continue to reveal themselves.'' \891\
---------------------------------------------------------------------------

    \889\ Honda, Docket No. NHTSA-2021-0053-1501, at 8-9.
    \890\ Id., at 9.
    \891\ Kia, at 4-5, 9-10.
---------------------------------------------------------------------------

    Somewhat distinct but also related, several commenters also
discussed NHTSA's statements in the proposal that the California
Framework Agreements represented evidence of economic practicability.
Southern Environmental Law Center (SELC) and South Coast AQMD both
agreed with this assessment. SELC stated that Alternative 3 could be
economically practicable because ``vehicle manufacturers have taken
numerous steps that indicate increased fuel economy is both possible
and profitable,'' and cited the Framework Agreements and new high-fuel-
economy product launches as evidence of market interest in fuel economy
and changing consumer preferences.\892\ South Coast AQMD agreed that
``no for-profit auto manufacturer would voluntarily agree to results
which were either technologically infeasible or economically
impracticable. Thus, NHTSA can be confident that the fuel economy
consequences of these emission Agreements would be feasible and
practicable. But that establishes a floor, not a `maximum feasible'
ceiling.'' \893\
---------------------------------------------------------------------------

    \892\ SELC, Docket No. NHTSA-2021-0053-1495, at 5.
    \893\ South Coast AQMD, at 3.
---------------------------------------------------------------------------

    Conversely, NADA argued that ``. . . the fact that a select few
OEMs entered into voluntary agreements with the State of California
regarding GHG emissions mandates moving forward and/or have announced
aspirational targets to become carbon neutral or to aggressively market
ZEVs should have no bearing on whether the revised CAFE mandates NHTSA
has proposed will be technologically feasible or economically
practicable.'' \894\ While Honda agreed with NHTSA that the Framework
Agreements made ``good business sense,'' Honda argued that ``important
flexibilities [are] needed to reach those targets.'' \895\ Honda
continued that ``Given the significant structural differences between
the California Framework Agreement[s] and the CAFE program, it would be
inappropriate for NHTSA to assume that a commitment to one program
suggests a level of contentment with the other.'' \896\ Tesla argued
that it was incomplete for NHTSA to say that the Framework Agreements
demonstrate manufacturer capability of meeting the standards, because
``[t]he agency fails to acknowledge that some manufacturers may have
entered into the Framework Agreements not because of technology
capabilities, but as an opportunistic hedge and safe harbor from the
more rigorous California GHG standards should the SAFE rule's
rescinding of California's Advanced Clean Cars waiver been found to be
illegal.'' \897\ Honda also disagreed that the Framework Agreements
were necessarily evidence of consumer demand for fuel economy. Honda
stated that ``[w]hile market interest is an important driver, the role
of regulatory requirements cannot be ignored. . . . for many years,
Honda and other automakers have been communicating their views to
regulatory agencies about the disconnect between rapidly escalating
[ZEV] sales mandates and the limited consumer uptake of electric
vehicles, which currently average about 2 percent in the United
States.'' \898\
---------------------------------------------------------------------------

    \894\ NADA, at 5.
    \895\ Honda, at 7-8.
    \896\ Id., at 8.
    \897\ Tesla, A1, at 8.
    \898\ Honda, at 8.
---------------------------------------------------------------------------

    In response, regardless of what is driving manufacturer
announcements and voluntary commitments to raising their fleet fuel
economy levels and reducing fleet emissions in the coming years, the
turning of the tide among automakers is still plainly obvious. Nearly
every manufacturer has made repeated public statements and commitments
to continue improving fuel economy in the coming years, and have also
committed to electrification. These statements have been made despite
uncertainty about Government commitments like subsidies and tax credits
to facilitate demand for higher-fuel-economy vehicles, and in the
absence of forecasted increases in fuel prices that would also improve
such demand.
    NHTSA recognizes that the California Framework Agreements may not
represent the economic practicability of achieving those emissions
levels for the industry as a whole, even if they may represent a level
of economic practicability for the signatory companies. NHTSA also
recognizes that the Framework Agreements are emission reduction
commitments, not fuel economy standards, and that the Agreements will
likely be met with some technologies that also improve fuel economy, as
well as some technologies that are irrelevant to fuel economy but
reduce emissions, and some technologies--such as ZEV--that NHTSA cannot
consider the fuel economy of in assessing what is maximum feasible.
Nonetheless, the Framework Agreements do provide information about the
economic practicability of technologies that both improve fuel economy
and reduce emissions. Further, the automakers who did not sign on to
the Framework Agreements, have made repeated public statements and
commitments about enhancing fuel economy. South Coast AQMD commented
that while in the proposal, NHTSA expressed concern that Alternative 3
may not have been economically practicable due to cost, manufacturers
have ``repeatedly and voluntarily doubled-down on investing in the very
technology that makes these standards achievable.'' \899\ South Coast
AQMD continued:
---------------------------------------------------------------------------

    \899\ South Coast AQMD, at 4.

    That manufacturers are already committing to the necessary
investments is . . . overwhelming evidence that this investment is
not only well within any reasonable definition of practicable, but
is preferable to maximize profits. Even where Alternative 3 may
require certain manufacturers to accelerate the rate of deploying
technological advancements, this would not make Alternative 3
economically impracticable. In fact, that would serve the very
purpose of the CAFE standards--to push forward the goal of fuel
conservation, even faster than the market would arrive at
otherwise.\900\
---------------------------------------------------------------------------

    \900\ Id., at 4-5.

    NHTSA agrees. For-profit companies cannot make decisions contrary
to profit and survive indefinitely in the marketplace. The logical
conclusion must be that the companies believe that one way or another,
they will benefit financially from investing in technologies that
improve fuel economy. But NHTSA continues to believe that these
commitments are not idle, and that they are evidence of manufacturers'
belief that higher-fuel-economy vehicles are saleable.
    Nevertheless, in the interest of not adding undue burden to
manufacturers seeking to make this transition, and recognizing the
ongoing and very real supply chain issues that are still evolving,
NHTSA continues to believe that the most stringent Alternative,
Alternative 3, is likely to be beyond economically practicable for the
rulemaking time frame. While this will be discussed in more detail in
Section VI.D below, Alternative 2.5 provides

more lead time and more breathing room in response to the uncertainty
concerns raised by manufacturer commenters. NHTSA seeks in setting
these CAFE standards to take advantage of the clear momentum of
industry's transition to higher levels of fuel economy while respecting
different challenges among different automakers.
    With regard to net benefits, South Coast AQMD commented that NHTSA
had not explained in the NPRM how negative net benefits for Alternative
3 ``would unreasonably limit consumer choice or lead to a significant
loss of jobs.'' \901\ SELC argued that if NHTSA would switch its cost-
benefit analysis approach entirely to CY instead of MY, it would be
very clear that Alternative 3 has higher societal benefits and would be
economically practicable.\902\ Ceres commented that their analysis
indicated that higher standards led to higher automaker profits,
``assuming high fuel prices during the regulatory period.'' \903\ Our
Children's Trust commented that NHTSA should not use cost-benefit
analysis in its decision-making at all, as ``it favors adults and
industry today over the lives of children and whether they have a
livable planet as they become adults and live out their lives.'' \904\
---------------------------------------------------------------------------

    \901\ South Coast AQMD, at 5-6.
    \902\ SELC, at 6.
    \903\ Ceres, at 2.
    \904\ Our Children's Trust, at 2.
---------------------------------------------------------------------------

    In response, NHTSA uses cost-benefit analysis as one consideration
among many in determining maximum feasible CAFE standards. Regulatory
analysis is a tool used to anticipate and evaluate likely consequences
of rules. It provides a formal way of organizing the evidence on the
key effects that can be monetized, positive and negative, of the
various regulatory alternatives, and helps to inform decision-makers
some of the potential consequences of choosing among the considered
regulatory paths. NHTSA's use of cost-benefit analysis as a tool in
CAFE rulemaking has been upheld in case law.\905\
---------------------------------------------------------------------------

    \905\ Center for Biological Diversity v. NHTSA, 538 F.3d 1172,
1188 (9th Cir. 2008).
---------------------------------------------------------------------------

    As discussed elsewhere in this preamble, NHTSA updated its analysis
for this final rule. After NHTSA completed these updates, a Federal
judge in the Western District of Louisiana enjoined Federal defendants
from using the global social cost of carbon value developed by the
IWG.\906\ NHTSA revised its analysis to follow the court order, using
the values for the SC-GHG as used in the 2020 final rule, and
discounting the 2020 value at both 3 percent and 7 percent. The 2020
value is a severe underestimate of actual climate damages, both because
it does not reflect global damages and because it is not a robust
assessment of damage to the United States. As such, the estimate is
inappropriately low for use in the current analysis. However, using
that severe underestimate of the SC-GHG, NHTSA found that, under a
``model year'' accounting approach, resulted in all regulatory
alternatives indicating net costs in MY 2029, except for Alternative 1
at a 3 percent discount rate with the SC-GHG also discounted at 3
percent, for which NHTSA estimated net benefits of $8.1 billion.
---------------------------------------------------------------------------

    \906\ Louisiana v. Biden, Order, No. 2:21-CV-01074, ECF No. 99
(W.D. La. Feb. 11, 2022).
---------------------------------------------------------------------------

BILLING CODE 4910-59-P

[GRAPHIC] [TIFF OMITTED] TR02MY22.229

    Under a ``calendar year'' accounting approach, net benefits were
estimated to be positive for Alternative 1, and for Alternatives 2,
2.5, and 3, appear generally to straddle zero, with net benefits at a 3
percent discount rate and the 2020 value discounted at 3 percent, and
net costs at a 3 or 7 percent discount rate and the 2020 value
discounted at 7 percent.
---------------------------------------------------------------------------

    \907\ This table uses SC-GHG values from the 2020 final rule.
This value does not fully reflect global climate damages and is not
a robust assessment of damage to the United States. Additionally,
monetized values do not include other important unquantified
effects, such as certain climate benefits, certain energy security
benefits, distributional effects, and certain air quality benefits
from the reduction of toxic air pollutants and other emissions,
among other things.

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

[GRAPHIC] [TIFF OMITTED] TR02MY22.230

BILLING CODE 4910-59-C
    Subsequently, the court of appeals stayed the lower court's order,
allowing NHTSA to return to using Interim Estimates for the SCC (and
other SC-GHGs), and discounting them at 3 percent. Using these values
(which NHTSA believes are more accurate and appropriate) for all
regulatory alternatives appear to be cost-beneficial at both 3 percent
and 7 percent discount rates, both under a ``model year'' accounting
approach and more so under a ``calendar year'' approach. Regardless of
the values used, while some regulatory alternatives have higher net
benefits than others, NHTSA does not consider this dispositive for
determining maximum feasible fuel economy, especially, as here, where
the net benefits of the different alternatives do not vary greatly,
particularly when compared to the overall benefits associated with all
of the regulatory alternatives. Net benefits are exactly that: Net of
costs. Some of the benefits accrue to the public generally while some
costs are borne directly by private actors. NHTSA's analysis, and the
balancing of the factors, considers costs and benefits from both
perspectives. While it is true that cost-benefit analysis, and the
point at which net benefits are maximized, is informative regarding the
economic practicability of different regulatory alternatives, it is one
among many considerations, and an alternative having net costs is not
inherently economically impracticable. Further, again, a quantitative
cost-benefit analysis can only reflect those costs and benefits that
can be monetized or quantified, and therefore generally does not fully
capture the statutorily relevant considerations. Moreover, for purposes
of this final rule, if all alternatives are roughly the same in terms
of net benefits, it is more likely that no alternative is economically
impracticable on that basis alone. The 2020 final rule also had net
benefits that straddled zero, and the agency made a similar conclusion
that when net benefits do not vary greatly among alternatives, they are
likely not dispositive for NHTSA's decision-making.\909\
---------------------------------------------------------------------------

    \908\ This table uses SC-GHG values from the 2020 final rule.
This value does not reflect global climate damages and is not a
robust assessment of damage to the United States. Additionally,
monetized values do not include other important unquantified
effects, such as certain climate benefits, certain energy security
benefits, distributional effects, and certain air quality benefits
from the reduction of toxic air pollutants and other emissions,
among other things.
    \909\ See, e.g., 85 FR 24176 (Apr. 30, 2020).

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

    Additionally, consumer costs and benefits may be even more relevant
to economic practicability, given the assumption that regulatory costs
are passed on to consumers in the form of higher prices for new
vehicles. Even using a MY accounting approach, consumers will still
experience net benefits for all regulatory alternatives when
considering a 3 percent discount rate, and relatively small net costs
when considering a 7 percent discount rate in MY 2029, which resolve to
net benefits by MY 2039 (again, for all regulatory alternatives).\910\
---------------------------------------------------------------------------

    \910\ See Table VI-6 and Table VI-7 above.
---------------------------------------------------------------------------

    Sales and employment: On the topic of sales, NADA commented that
``. . . just under 41 [percent] of U.S. households can afford to buy a
new vehicle in today's market,'' \911\ and that ``more than 90
[percent] of household new light duty vehicle acquisitions involve a
credit sale or lease. . . .'' \912\ NADA stated that lenders for new
vehicle purchases do not consider the vehicle's fuel economy in
determining whether to make the loan to a prospective vehicle
purchaser, and consider only ``the total amount financed,'' not the
``potential reductions in vehicle operating costs, such as those that
may result from lower fuel costs, because they cannot predict
actuarially whether such cost reductions will be saved, let alone
applied, to a loan or lease.'' \913\ Consequently, NADA argued that ``.
. . NHTSA's assertion that fuel economy performance improvements will
result in operating cost reductions that mitigate or offset, at least
partially, the higher up-front costs necessary to buy such performance
improvements is unsound.'' \914\ NADA stated that ``It is imperative
that NHTSA calculate [price and sales] impacts properly and fully
account for how consumers are likely to behave during the MY 2024-2026
timeframe.'' \915\ NADA and Auto Innovators both argued that NHTSA's
sales impact estimates were insufficiently negative, and that real-life
sales impacts would be worse.\916\
---------------------------------------------------------------------------

    \911\ NADA, at 6.
    \912\ Id., at 7.
    \913\ Id., at 7-8.
    \914\ Id., at 9.
    \915\ Id., at 3.
    \916\ Id., at 12; Auto Innovators, at 130.
---------------------------------------------------------------------------

    Related to employment, UAW stated that ``[b]alanced efficiency
regulations, when combined with policies that support domestic auto
production and quality jobs, must be part of a policy approach that
ensures the advanced technology vehicles result in family and community
sustaining jobs for American workers.'' \917\ Several commenters
supported more stringent CAFE standards in order to boost employment
associated with application of more/higher-level technology. Ceres, for
example, stated that ``[s]tronger standards would particularly benefit
suppliers, who collectively employ 3.5 times more Americans than
automakers do,'' and that ``[g]reater EV production would create strong
incentives to build a domestic EV supply chain that can operate at
higher volumes, helping to keep jobs in the U.S. as the global industry
transitions to cleaner technologies.'' \918\ MEMA stated that
``continu[ing] to emphasize and support multiple technological pathways
to meet the targets'' will ``sustain long-term supplier technological
investments,'' and thus employment.\919\ Environmental Law & Policy
Center (ELPC) stated as part of its comments offered at the public
hearing that strong fuel economy standards spur adoption of fuel-saving
technologies, which involve employment.\920\
---------------------------------------------------------------------------

    \917\ UAW, at 4.
    \918\ Ceres, at 1-2.
    \919\ MEMA, at 5.
    \920\ ELPC, Public Hearing Comments, at 1.
---------------------------------------------------------------------------

    UCS noted potential job increases associated both with additional
technology application in response to more stringent standards, and
``greater job growth overall'' due to ``the economywide impact of those
fuel savings,'' which UCS roughly estimated at ``up to 67,100 jobs
annually over the 2021-2029 period.'' \921\ EDF cited a study by
Synapse Energy Economics that projected that ``the augural standards
would add over 100,000 jobs by 2025 and more than 250,000 jobs by
2035,'' stating that `Synapse's study confirms that saving consumers
money at the pump, and allowing them to spend those dollars elsewhere,
will lead to net job creation.''
---------------------------------------------------------------------------

    \921\ UCS, at 10.
---------------------------------------------------------------------------

    In response, NHTSA's analysis for this final rule projects that new
vehicle sales would decrease very slightly--by 70-163 thousand units
annually during 2024-2029--due to our assumption that costs associated
with meeting more stringent CAFE standards are passed through to
consumers. Because the costs associated with meeting more stringent
regulatory alternatives are higher, sales effects are greater for more
stringent alternatives, but NHTSA does not believe that they are in any
way significant enough to signal economic impracticability. By
comparison, year-over-year changes in new light vehicle sales have
historically averaged about 1 million units, with Federal standards
playing a role that cannot be discerned against the backdrop of much
larger forces. For example, the market lost more than four million
units between 2007 and 2008 (due to the Great Recession), but
subsequently showed gains of more than a million units in 2010, 2012,
2013, and 2015. More recently, although final CAFE compliance data for
the 2020 model year is not yet available, the COVID-19 pandemic appears
to have caused a year-over-year contraction that would be the second
largest ever recorded, and shortages of parts such as computer chips
are currently limiting the market's ability to increase rapidly,
despite demand for new vehicles.
    With regard to NADA comments about most new vehicle sales being
financed, and financing officers not considering fuel savings as
relevant to loan repayment capabilities, as we discuss in TSD Chapter
<IP_ADDRESS>, NHTSA expects that financing new vehicle purchases reduces the
cost of fuel economy standards to consumers by allowing them to spread
them out over time. We thus calculate financing costs, but exclude
these from cost and benefit accounting. Moreover, NHTSA returns again
to the relatively low average per-vehicle cost increases associated
with the regulatory alternatives under consideration. The sales effects
we estimate, even with the most stringent regulatory alternatives, are
modest. Even with the pandemic and supply chain issues, vehicle sales
are still somehow increasing year over year, even according to NADA's
own analysis.\922\ As mentioned above, NHTSA projects that its new
standards will impact sales by only about 0.8 percent during MYs 2024-
2029. Thus, again, NHTSA does not believe that sales effects suggest
the economic impracticability of any of the regulatory alternatives
considered in this final rule. NADA exhorts the agency to ``calculate
these [price and sales] impacts properly and fully account for how
consumers are likely to behave during the MY 2024-2026 timeframe.''
\923\ NHTSA's analysis carefully estimates impacts on new vehicle
costs, accounting for direct costs, cost learning effects, and the

historically observed relationship between increased costs and
increased prices. NHTSA's analysis also estimates impacts on the new
vehicle market using a sales model that is amply supported by the
historical record. Because some key market factors (such as
manufacturers' pricing strategies) are proprietary and likely
impossible for the agency to predict with confidence, irrefutably
``correct'' methods to estimate impacts on prices and sales are not
available, and will likely never be available.
---------------------------------------------------------------------------

    \922\ Patrick Manzi, NADA Chief Economist, ``NADA Issues
Analysis of 2021 Auto Sales, 2022 Sales Forecast,'' Jan. 11, 2022,
available at https://blog.nada.org/2022/01/11/nada-issues-analysis-of-2021-auto-sales-2022-sales-forecast/. (Accessed: March 15, 2022)
Specifically, NADA states that ``2021 came to a close with new-light
vehicle sales of 14.93 million units, an increase of 3.1 [percent]
compared to 2020's sales volume of 14.47 million units,'' and,
``Moving into 2022, NADA anticipates new-vehicle sales of 15.4
million units--an increase of 3.4 [percent] from 2021.''
    \923\ NADA, at 3.
---------------------------------------------------------------------------

    For employment, while NHTSA estimates some loss in employment
associated with the slight sales reductions described above, we
estimate gains in employment associated with the new technology that
would be required in response to more stringent CAFE standards. On
balance, we estimate that the technology effects outweigh the sales
effects and lead to employment gains relative to the baseline. Thus,
one could argue that more stringent alternatives could be more
economically practicable from an employment perspective, although the
effects are relatively small.
(c) The Effect of Other Motor Vehicle Standards of the Government on
Fuel Economy
    ``The effect of other motor vehicle standards of the Government on
fuel economy'' involves analysis of the effects of compliance with
emission, safety, noise, or damageability standards on fuel economy
capability and thus on average fuel economy. In many past CAFE
rulemakings, NHTSA has said that it considers the adverse effects of
other motor vehicle standards on fuel economy. It said so because, from
the CAFE program's earliest years \924\ until recently, compliance with
these other types of standards has had a negative effect on fuel
economy. For example, safety standards that have the effect of
increasing vehicle weight thereby lower fuel economy capability, thus
decreasing the level of average fuel economy that NHTSA can determine
to be feasible. NHTSA has also accounted for Federal Tier 3 and
California LEV III criteria pollutant standards within its estimates of
technology effectiveness in this rule.\925\
---------------------------------------------------------------------------

    \924\ 43 FR 63184, 63188 (Dec. 15, 1977). See also 42 FR 33534,
33537 (Jun. 30, 1977).
    \925\ For most ICE vehicles on the road today, the majority of
tailpipe NOX, NMOG, and CO emissions occur during ``cold
start,'' before the three-way catalyst has reached higher exhaust
temperatures (e.g., approximately 300[deg]C) at which point it is
able to convert (through oxidation and reduction reactions) those
emissions into less harmful derivatives. By limiting the amount of
those emissions, tailpipe smog standards require the catalyst to be
brought to temperature rapidly, so modern vehicles employ cold start
strategies that intentionally release fuel energy into the engine
exhaust to heat the catalyst to the right temperature as quickly as
possible. The additional fuel that must be used to heat the catalyst
is typically referred to as a ``cold-start penalty,'' meaning that
the vehicle's fuel economy (over a test cycle) is reduced because
the fuel consumed to heat the catalyst did not go toward the goal of
moving the vehicle forward. The Autonomie work employed to develop
technology effectiveness estimates for this final rule accounts for
cold-start penalties, as discussed in the Autonomie model
documentation.
---------------------------------------------------------------------------

    In other cases, the effect of other motor vehicle standards of the
Government on fuel economy may be neutral, or positive. Since the Obama
administration, NHTSA has considered the GHG standards set by EPA as
``other motor vehicle standards of the Government.'' In the 2012 final
rule, NHTSA stated that ``[t]o the extent the GHG standards result in
increases in fuel economy, they would do so almost exclusively as a
result of inducing manufacturers to install the same types of
technologies used by manufacturers in complying with the CAFE
standards.'' \926\ NHTSA concluded in 2012 that ``no further action was
needed'' because ``the agency had already considered EPA's [action] and
the harmonization benefits of the National Program in developing its
own [action].'' \927\ In the 2020 final rule, NHTSA reinforced that
conclusion by explaining that a textual analysis of the statutory
language made it clear that EPA's CO2 standards applicable
to light-duty vehicles are literally ``other motor vehicle standards of
the Government,'' because they are standards set by a Federal agency
that apply to motor vehicles. NHTSA and EPA are obligated by Congress
to exercise their own independent judgment in fulfilling their
statutory missions, even though both agencies' regulations affect both
fuel economy and CO2 emissions. There are differences
between the two agencies' programs that make NHTSA's CAFE standards and
EPA's GHG standards not perfectly one-to-one (even besides the fact
that EPA regulates other GHGs besides CO2, EPA's
CO2 standards also differ from NHTSA's in a variety of ways,
often because NHTSA is bound by statute to a certain aspect of CAFE
regulation). NHTSA endeavors to create standards that meet our
statutory obligations, including through considering EPA's standards as
other motor vehicle standards of the Government.\928\ As in 2020, NHTSA
has continued to do all of these things with this final rule.
---------------------------------------------------------------------------

    \926\ 77 FR 62624, 62669 (Oct. 15, 2012).
    \927\ Id.
    \928\ Massachusetts v. EPA, 549 U.S. 497, 532 (2007) (``[T]here
is no reason to think that the two agencies cannot both administer
their obligations and yet avoid inconsistency.'').
---------------------------------------------------------------------------

    NHTSA has also considered and accounted for the impacts of
California's ZEV mandate (and its adoption by the Section 177 states),
incorporating them into the baseline as other regulatory requirements
applicable to automakers during the rulemaking time frame. Based on our
analysis, NHTSA does not anticipate that the ZEV mandate will in any
way constrain or otherwise alter NHTSA's determination of what levels
of CAFE standards are maximum feasible. Section IV.B of this preamble
discusses NHTSA's consideration of the state ZEV programs and continued
technical difficulties with precisely modeling state GHG standards for
the model years subject to this rulemaking, and NHTSA refers readers to
that section for more information on the topic. Comments regarding the
effect of other motor vehicle standards of the Government mostly
addressed harmonization of the CAFE and EPA GHG standards, although
some commenters addressed State standards. California Attorney General
et al. discussed the statutory and legislative history of the ``other
motor vehicle standards of the Government'' provision at some length.
Notably, California Attorney General et al. stated that because the
current language of the provision was added in 1994 during a
recodification and because Congress expressly stated in so doing that
it did not intend that the recodification would substantively change
the existing law, therefore ``other motor vehicle standards of the
Government'' meant the same as ``other Federal motor vehicle
standards'' in the original statute.\929\ The commenters continued that
``. . . in the original statute, Congress explicitly defined `Federal
standards' to include California emissions standards that had received
an EPA waiver,'' and concluded that ``[b]ecause EPCA specifically
included California 209(b) standards as `Federal standards,' California
209(b) standards are included in `other Federal motor vehicle
standards' in the original section 2002(e) and thus `other motor
vehicle standards of the Government' in the present-day section
32902(f).'' \930\ California Attorney General et al. further commented
that ``[t]his language directs NHTSA to ask whether manufacturers can
comply with other motor vehicle standards and the new CAFE standard

at the same time; essentially, a fuel economy level is not the `maximum
feasible' if it is achievable only through noncompliance with `other
motor vehicle standards of the Government.' '' \931\ The commenters
thus agreed with including state ZEV standards in the CAFE baseline,
because doing so is ``consistent with Congress' direction that any
compliance pathway modeled for proposed fuel economy standards
continues to comply with California 209(b) standards as well.'' \932\
NCAT agreed that EPA's GHG emissions standards for light-duty vehicles,
along with ZEV mandates for which a waiver has been granted under CAA
209(b), are clearly `` `other motor vehicle standards of the
Government' that NHTSA properly considers . . ., including by modifying
NHTSA's CAFE Model to account for them.'' \933\ NCAT argued further
that ``[t]here is no statutory conflict between the statutory
requirement not to consider the `fuel economy' of alternative fuel
vehicles and the statutory requirement to consider `other motor vehicle
standards of the Government' such as ZEV mandates,'' because ``ZEV
(zero emission vehicle) mandates are vehicle emissions standards not
related to fuel economy because they do not regulate `fuel' or `fuel
economy' as those terms are defined under EPCA, they cannot be met
through more efficient use of `fuel,' and they are enacted for reasons
unrelated to fuel economy.'' \934\
---------------------------------------------------------------------------

    \929\ California Attorney General et al., Docket No. NHTSA-2021-
0053-1499 App. A, at 37, citing Public Law 103-272, 108 Stat. at
1060, 1378 (Jul. 5, 1994).
    \930\ Id., at 40.
    \931\ Id.
    \932\ Id.
    \933\ NCAT, at 6.
    \934\ Id.
---------------------------------------------------------------------------

    Lucid commented that NHTSA should ``further explain that
California's ZEV mandate is crucial to achieving the stated goals of
EPCA, EISA, and the CAFE regulations, and that the CAFE standards put
in place by the rulemaking are designed to work cooperatively with
these ZEV standards.'' \935\ AFPM, in contrast, commented that EPCA
preempts ZEV and California's GHG standards, and that therefore those
standards are invalid regardless of whether a waiver of CAA preemption
is granted by EPA.\936\
---------------------------------------------------------------------------

    \935\ Lucid, at 5.
    \936\ AFPM, at 11-13.
---------------------------------------------------------------------------

    In response, with regard to Lucid's and AFPM's comment, NHTSA's
substantive position on ZEV mandates has not changed since the CAFE
Preemption final rule withdrawing the SAFE 1 rule that NHTSA published
in the Federal Register on December 29, 2021,\937\ and NHTSA is not
offering a new interpretation of the scope of EPCA preemption in this
rule. As the CAFE Preemption final rule makes clear, NHTSA is not
taking a position on whether or not those programs are preempted under
EPCA, nor does NHTSA even have authority to make such determinations
with the force of law. Further, NHTSA has not incorporated the
California and 177 ZEV mandate in the baseline based on a determination
that they are other motor vehicle standards of the Government. Rather,
as explained above, NHTSA has incorporated those standards in the
baseline because they are legal obligations applying to automakers
during the rulemaking time frame, and are therefore relevant to
understanding the state of the world absent any further regulatory
action by NHTSA. With regard to the comment from California Attorney
General et al., NHTSA appreciates the commenters' close reading of the
statutory and legislative history. However, this is not a situation
where consideration of the California ZEV standards and their adoption
by 177 states would change NHTSA's analysis or determination of maximum
feasible standards, as discussed above. It is therefore unnecessary for
NHTSA to decide whether these standards are other motor vehicle
standards of the Government, and as such, NHTSA is not making that
determination.\938\
---------------------------------------------------------------------------

    \937\ 86 FR 74236 (Dec. 29, 2021).
    \938\ NHTSA notes that many commenters offered views as to the
inclusion of California and 177 standards in the baseline and
harmonization of CAFE and California and 177 standards in the
context of discussing other motor vehicle standards of the
Government. The fact that NHTSA is responding to these comments in
the context in which they were raised does not alter the fact that
NHTSA is not making a determination as to whether these standards
are other motor vehicle standards of the Government.
---------------------------------------------------------------------------

    A number of commenters addressed the question of harmonization
between the NHTSA CAFE standards and other standards, which NHTSA
believes is relevant to consideration of ``other motor vehicle
standards of the Government'' insofar as commenters generally asked
NHTSA to set CAFE standards taking into consideration automakers'
simultaneous compliance with those other motor vehicle standards.
Nissan, MECA, Stellantis, GM, Peter Douglas, and BorgWarner all
requested that NHTSA harmonize the CAFE standards with the EPA GHG
standards and CARB's GHG and ZEV standards.\939\ Stellantis stated that
a lack of harmonization between these programs adds ``significant
complexity to compliance and adds unnecessary costs to a resource-
intensive transition to electric vehicles.'' \940\ Ingevity Corporation
did not address CARB standards but requested harmonization between the
EPA GHG standards, the NHTSA CAFE standards, and DOE research
targets.\941\
---------------------------------------------------------------------------

    \939\ Nissan, Docket No. NHTSA-2021-0053-0022, at 2, 6; MECA, at
1; Stellantis, at 2; GM, at 3; Peter Douglas, at 6, BorgWarner,
Docket No. NHTSA-2021-0053-1473, at 2.
    \940\ Stellantis, at 2.
    \941\ Ingevity Corporation, Docket No. NHTSA-2021-0053-0092, at
5.
---------------------------------------------------------------------------

    Commenters also addressed the specific question of harmonization
between NHTSA CAFE and EPA GHG standards, mostly in the context of
stringency. Ford, JLR, MEMA, and Arconic all commented that NHTSA's MY
2026 CAFE standards should be aligned with EPA's MY 2026 GHG
standards.\942\ Several commenters requested that NHTSA account more
fully for EPA programmatic flexibilities when determining CAFE
stringency, suggesting that CAFE and GHG standards are not harmonized
unless CAFE stringency requires no additional effort by automakers
beyond what GHG compliance, with its more extensive flexibilities,
would require. For example, in their comments at the public hearing,
Auto Innovators stated that ``[i]n harmonizing NHTSA actions with EPA
actions, NHTSA should account for the differences in the treatment of
electric vehicles under the EPA and NHTSA programs. Final NHTSA CAFE
and EPA GHG standard should be aligned in stringency such that the CAFE
program does not drive additional improvements beyond those required
under the GHG program, nor make EPA incentives for higher EV production
moot.'' \943\
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    \942\ Ford, at 1; JLR, Docket No. NHTSA-2021-0053-1505, at 3;
MEMA, at 3; Arconic, Docket No. NHTSA-2021-0053-1560, at 2.
    \943\ Auto Innovators Hearing Comments, at 3.
---------------------------------------------------------------------------

    In their written comments, Auto Innovators expanded on this
request, ``. . . recommend[ing] that, at minimum, the differences
caused by direct AC emissions credits, EV compliance calculation
differences, and EV multipliers be accounted for when final CAFE and
GHG standards are set for MYs 2025-2026.'' \944\ Other cited
differences included ``statutory limitations for credit transfers, the
split of the passenger car fleet into import and domestic fleets, and
minimum domestic passenger car standards create additional unquantified
stringency in the CAFE program relative to the GHG program,'' \945\ as
well as the fact that CAFE regulations do not adjust credit value when
credits are carried forward and back, and that NHTSA is bound by

statute on credit carry-forward duration while EPA is not.\946\
Stellantis and Toyota offered similar comments.\947\ Ford, Stellantis,
and Auto Innovators also specifically requested an explicit offset
between the CAFE standards and the GHG standards to account for direct
AC credits that automakers expect to use toward compliance with the GHG
standards.\948\ Auto Innovators further commented that NHTSA's estimate
of the specific amount of direct AC leakage credit that industry would
use in the EPA program might be too low, given passage of the American
Innovation and Manufacturing (AIM) Act, EPA regulations implementing
it, and CARB's stated intent to eliminate high-GWP refrigerants sooner
rather than later \949\--effectively, that manufacturers will be
leaning heavily on direct AC leakage credits as part of their GHG
standards compliance.
---------------------------------------------------------------------------

    \944\ Id., at 37.
    \945\ Id., at 13.
    \946\ Id., at 33.
    \947\ Stellantis, at 9-10; Toyota, Docket No. NHTSA-2021-0053-
1568, at 2-3.
    \948\ Ford, at 1; Stellantis, at 8; Auto Innovators, at 32.
    \949\ Auto Innovators, at 37 n.60.
---------------------------------------------------------------------------

    Other commenters requesting that NHTSA harmonize CAFE stringency
with EPA GHG effective stringency in light of EPA programmatic
flexibilities included UAW, Nissan, AVE, Mercedes-Benz, Hyundai America
Technical Center, Inc. (Hyundai), Volkswagen, and others.\950\ EDF
commented that CAFE and GHG standard stringency and flexibilities
should be harmonized, but by reducing available flexibilities rather
than by dropping stringency to account for them.\951\
---------------------------------------------------------------------------

    \950\ UAW, at 2, 6; Nissan, at 2; AVE, Docket No. NHTSA-2021-
0053-1488-A1, at 3; Mercedes-Benz, Docket No. NHTSA-2021-0053-0952,
at 3; Hyundai, Docket No. NHTSA-2021-0053-1512, at 5; Volkswagen,
Docket No. NHTSA-2021-0053-1548, at 3.
    \951\ EDF, at 1.
---------------------------------------------------------------------------

    Some commenters noted that even if stringencies are aligned, one
program may be more stringent in a given year for a specific
manufacturer than the other. Honda stated that ``[e]ven if GHG and CAFE
topline stringencies were fully aligned, it would not be uncommon for
manufacturers to find themselves compliant in one agency program, while
facing meaningful compliance challenges in another.'' \952\ Auto
Innovators commented similarly.\953\ Toyota stated that ``. . . the
CAFE program `appears' less stringent than the GHG program for 2024 MY,
particularly for light trucks, but the stringency gap shrinks when
credit transfer limitations and other harmonization factors not being
analyzed here are considered.'' \954\
---------------------------------------------------------------------------

    \952\ Honda, Docket No. NHTSA-2021-0053-1501, at 5.
    \953\ Auto Innovators, at 31.
    \954\ Toyota, Docket No. NHTSA-2021-0053-1568, at 2.
---------------------------------------------------------------------------

    Some commenters argued that NHTSA must analyze both CAFE standards
and GHG standards simultaneously to ensure that the CAFE standards are
fully harmonized with the GHG standards. Auto Innovators stated that
``[d]eveloping . . . harmonized regulations requires the Agencies to
fully assess their policies in the context of the other's proposal
(especially since there is not a unified rulemaking over the covered
period due to lead-time constraints).'' \955\ Toyota commented
similarly that NHTSA must analyze both programs simultaneously and then
drop its stringency below the proposal, because ``[a]ttaining single
fleet compliance with both programs by forcing manufacturers to design
for the most stringent elements of both programs does not achieve [the
`One National Program'] objective consistent with past practice.''
\956\ Rivian and Securing America's Future Energy agreed that NHTSA
should analyze both programs simultaneously, but argued that NHTSA
should do so because the CAFE proposal was less stringent than the GHG
proposal, and that therefore NHTSA should raise CAFE stringency in the
final rule.\957\
---------------------------------------------------------------------------

    \955\ Auto Innovators, at 30.
    \956\ Toyota, at 4.
    \957\ Rivian, Docket No. NHTSA-2021-0053-1562, at 4-5; Securing
America's Future Energy, at 8.
---------------------------------------------------------------------------

    Some commenters also argued that NHTSA should adopt a ``deemed-to-
comply'' provision, such that manufacturers need only comply with EPA
GHG standards and NHTSA would accept that compliance in lieu of actual
compliance with CAFE standards.\958\ GM commented as follows:
---------------------------------------------------------------------------

    \958\ See, e.g., Auto Innovators, at 13, 30-31; Stellantis, at
8.

    NHTSA has the statutory authority to adopt a deemed-to-comply
provision as it considers ``the effect of other motor vehicle
standards of the Government''--including EPA's GHG standards--in
determining [maximum feasible CAFE standards]. NHTSA's consideration
of ''economic practicability'' and ``technological feasibility''
should include the economic and technical challenges that EV-focused
manufacturers will face from attempting to comply with separate but
overlapping NHTSA, EPA, and California regulatory regimes. The
statute thus permits--and arguably requires--that NHTSA consider how
it can best coordinate its CAFE standards with EPA's GHG standards
and the nation's Paris Agreement commitments, including (where
appropriate) by deeming compliance with EPA's GHG standards to be
sufficient to constitute compliance with NHTSA's CAFE standards.
This approach is also consistent with the Supreme Court's assumption
that `the two agencies can both administer their obligations and
avoid inconsistency.' \959\
---------------------------------------------------------------------------

    \959\ GM, Docket No. NHTSA-2021-0053-1523, at 6-7. NHTSA
disagrees that Paris Agreement commitments are properly considered
as ``other motor vehicle standards of the Government,'' even if they
are broadly relevant to energy conservation goals, including those
of the CAFE program.

    Volvo Cars (Volvo) commented that NHTSA, EPA, and CARB should work
together to ``reduce reporting requirements by allowing manufacturers
to demonstrate compliance at the end of the year for all programs.''
\960\
---------------------------------------------------------------------------

    \960\ Volvo, Docket No. NHTSA-2021-0053-1565, at 3.
---------------------------------------------------------------------------

    Other commenters simply encouraged NHTSA and EPA to go back to
working together to issue joint rules,\961\ while some commenters
argued there was no need for unified proposals or final rules.\962\ The
environmental group commenters ``. . . urge[d] NHTSA to finalize its
rulemaking as soon as possible, and certainly before April 2022,''
stating that ``[c]ommenters recognize that given the agencies' current
pace, EPA may finalize its revised LDV GHG emissions standards before
NHTSA finalizes this rulemaking. This serial approach is acceptable as
nothing compels the agencies to proceed in tandem.'' \963\ Consumer
Federation of America, in contrast, commented that NHTSA should cede
its decision-making authority to EPA entirely, stating that ``. . .
NHTSA's approach is so favorable to a small number of automakers that
we think Congress should . . . either remove the standard setting
function from NHTSA altogether, or it should make NHTSA's analysis
merely advisory to EPA, who would be charged with setting the
standard.'' \964\
---------------------------------------------------------------------------

    \961\ WDNR, Docket No. NHTSA-2021-0053-0059, at 4; NADA, at 4.
    \962\ CBD et al., Docket No. NHTSA-2021-0053-1572, at 7; Great
Lakes and Midwest Environmental Organizations, Docket No. NHTSA-
2021-0053-1520, at 2; NCAT, at 4.
    \963\ CBD et al., at 7.
    \964\ CFA, Docket No. NHTSA-2021-0053-1482, Appendix A1, at 3.
---------------------------------------------------------------------------

    In response, NHTSA has carefully considered EPA's standards, by
including the baseline (i.e., 2020) CO2 standards in our
analytical baseline for the main analysis. Because the EPA and NHTSA
programs were developed in coordination jointly, and stringency
decisions were made in coordination, NHTSA did not incorporate EPA's
only-recently-finalized CO2 standards as part of the
analytical baseline for the main analysis. The fact that EPA finalized
its rule before NHTSA is an artifact of circumstance only. However, in
response to comments, NHTSA has also

conducted a side analysis in which we analyzed simultaneous compliance
with EPA's recently finalized CO2 standards and the
regulatory alternatives considered here. This analysis confirms that
complying with the EPA and NHTSA standards simultaneously is feasible.
    Unlike the reference case analysis and sensitivity analysis cases
discussed elsewhere in this document and FRIA, this side analysis
applies the modeling approach used for the Final SEIS; that is, without
setting aside additional BEV models or the use of compliance credits
during the model years for which the agency is issuing new CAFE
standards. The agency conducted this side analysis in this way because
NHTSA expects that the approach followed for the Final SEIS provides
the most realistic and internally consistent basis to account for
interactions between the CAFE and CO2 standards. Considering
industry-wide MY 2029 results summarized in the following table, new
CAFE standards clearly lead to a more pronounced shift away from
conventional gasoline powertrains--and toward SHEVs, PHEVs, and BEVs--
when combined with new CO2 standards than when combined with
baseline CO2 standards (i.e., those established in the 2020
final rule), but not a shift that is faster than indicated by many
manufacturers' announced electrification plans. Additional costs
(beyond continued reliance on MY 2020 technology) in MY 2029 under new
CAFE standards are also somewhat higher (by about $700) when new
CO2 standards are also in effect, but only slightly higher
(by about $125) than when baseline CAFE standards are continued
alongside new CO2 standards.
[GRAPHIC] [TIFF OMITTED] TR02MY22.231

    These results do not, however, demonstrate that new CO2
standards somehow hinder compliance with new CAFE standards. Rather,
for some manufacturers, especially those that could be expected to
continue to avail themselves of EPCA's civil penalty provisions, new
CO2 standards are likely to be binding, because paying fines
for a failure to comply with CO2 standards is not a viable
option for a manufacturer wishing to sell vehicles in the U.S. This is
why, in every case shown above, the presence of new CO2
standards leads all manufacturers to achieve MY 2029 CAFE levels that
no longer necessitate payment of civil penalties. On the other hand,
even with new CO2 standards, new CAFE standards could be
binding for some manufacturers in some model years, because in EPCA/
EISA, Congress expressly required, inter alia, that manufacturers meet
minimum standards for domestic cars, that NHTSA limit transfers of CAFE
compliance credits between regulated fleets, and that the fuel economy
ratings of electric vehicles be determined using a petroleum
equivalency factor established by DOE for EVs based on specified
factors.\965\ Overall, these results suggest that new CO2
standards will likely interact with new CAFE standards in a manner that
leads to more widespread industry compliance with new CAFE standards,
leading NHTSA to conclude that new CO2 standards do not
constrain the maximum feasible levels of new CAFE standards.
---------------------------------------------------------------------------

    \965\ See 49 U.S.C. 32904(a)(2)(B).
---------------------------------------------------------------------------

    NHTSA is aware that when multiple agencies regulate concurrently in
the same general space, different regulations may be binding for
different regulated entities at different times. NHTSA agrees that in
the 2012 rule, NHTSA and EPA included in our respective stringencies an
express offset for an assumed amount of direct AC credit and reliance
on EPA incentives for PHEVs EVs, and FCEVs that the agencies believed,
at the time, manufacturers would employ in meeting the EPA standards,
and for which NHTSA could not give credit toward CAFE compliance.\966\
At the time, the agencies stated that:
---------------------------------------------------------------------------

    \966\ See 77 FR 63054 (Oct. 15, 2012).

    We note, however, that the alignment is based on the assumption
that manufacturers implement the same level of direct A/C system
improvements as EPA currently forecasts for those model years, and
on the assumption of PHEV, EV, and FC[E]V penetration at specific
levels. If a manufacturer implements a higher level of direct A/C
improvement technology (although EPA predicts 100 [percent] of
manufacturers will use substitute refrigerants by MY 2021, and the
GHG standards assume this rate of substitution) and/or a higher
penetration of PHEVs, EVs, and FC[E]Vs, then NHTSA's standards would
effectively be more stringent than EPA's. Conversely, if a
manufacturer implements a lower level of direct A/C improvement
technology and/or a lower penetration of PHEVs, EVs and FC[E]Vs,
then EPA's proposed [sic] standards would effectively be more
stringent than NHTSA's. Several manufacturers commented on this
point and suggested that this meant that the standards were not
aligned, because NHTSA's standards might be more stringent in some
years than EPA's. This reflects a misunderstanding of the agencies'
purpose. The agencies have sought to craft harmonized standards such
that manufacturers may build a single fleet of vehicles to meet both
agencies' requirements. That is the case for these final standards.
Manufacturers will have to plan their compliance strategies
considering both the NHTSA standards and the EPA standards and
assure that they are in compliance with both, but they can still

build a single fleet of vehicles to accomplish that goal.\967\
(emphasis added)
---------------------------------------------------------------------------

    \967\ Id. at 63054-63055.

    Even in 2012, the agencies anticipated the possibility of this
situation and explained that regardless of which agency's standards are
binding given a manufacturer's chosen compliance path, manufacturers
will still have to choose a path that complies with both standards, and
in doing so, will still be able to build a single fleet of vehicles--
even if it is not exactly the fleet that the manufacturer might have
preferred to build. This remains the case today.
    In requesting that NHTSA account precisely for each difference
between the programs and calculate the CAFE standard accordingly,
commenters appear to be asking NHTSA to define ``maximum feasible'' as
``the fuel economy level at which no manufacturer need ever apply any
additional technology or spend any additional dollar beyond what EPA's
standards, with their greater flexibilities, would require.'' NHTSA
believes that this takes ``consideration'' of ``the effect of other
motor vehicle standards of the Government'' farther than Congress
intended for it to go. NHTSA has considered EPA's standards in
determining the maximum feasible CAFE standards for MYs 2024-2026, as
demonstrated above and throughout the analysis that informs this
decision. NHTSA has also harmonized its standards with EPA's where
doing so was consistent with NHTSA's separate statutory direction.
NHTSA disagrees that harmonization can only be achieved at the very
cheapest level, or that this would be consistent with NHTSA's statutory
mandate, even though NHTSA understands that for-profit companies would
rather spend less money meeting regulations than more money, and that
automakers have committed to major technological improvements to their
fleets in the coming years. With regard to GM's comment about ``the
economic and technical challenges that EV-focused manufacturers will
face from attempting to comply with separate but overlapping NHTSA,
EPA, and California regulatory regimes,'' NHTSA notes that GM, among
others, has argued that NHTSA may not consider electrification in
standard setting, but also notes that these challenges are likely to be
transitory, albeit genuine during the time frame of this rulemaking,
and NHTSA does provide compliance credits for electric vehicles.
Automakers who build only electric vehicles clearly have no difficulty
complying with NHTSA's CAFE standards or EPA's and CARB's GHG emissions