In Phase 1, EPA set the useful life for engines and vehicles with respect to GHG emissions equal to the respective useful life periods for criteria pollutants.  In April 2014, as part of the Tier 3 light-duty vehicle final rule, EPA extended the regulatory useful life period for criteria pollutants to 150,000 miles or 15 years, whichever comes first, for Class 2b and 3 pickup trucks and vans and some light-duty trucks (79 FR 23414, April 28, 2014).  Class 2 through Class 5 heavy-duty vehicles subject to the GHG standards described in this section for vocational applications generally use the same kinds of engines, transmissions, and emission controls as the Class 2b and 3 vehicles that are chassis-certified to the criteria standards under 40 CFR part 86, subpart S.  EPA is therefore proposing that the Phase 2 GHG standards for vocational vehicles at or below 19,500 pounds GVWR apply over the same useful life of 150,000 miles or 15 years.  In many cases, this will result in aligned useful-life values for criteria and GHG standards.  Where this longer useful life is not aligned with the useful life that applies for criteria standards (generally in the case of engine-based certification under 40 CFR part 86, subpart A), EPA may revisit the useful-life values for both criteria and GHG standards in a future rulemaking.  For medium heavy-duty vehicles (19,500 to 33,000 pounds GVWR) and heavy heavy-duty vehicles (above 33,000 pounds GVWR) EPA is proposing to keep the useful-life values from Phase 1, which are 185,000 miles (or 10 years) and 435,000 miles (or 10 years), respectively.  EPA requests comment on this approach, including the proposed values and the overall process envisioned for achieving the long-term goal of adopting harmonized useful-life specifications for criteria and GHG standards that properly represent the manufacturers' obligation to meet emission standards over the expected service life of the vehicles.  EPA may also revisit the useful-life values that apply for medium heavy-duty vehicles and heavy heavy-duty vehicles.
One technology option for vocational vehicle manufacturers to reduce GHG emissions is to use a smaller engine, perhaps in conjunction with a hybrid powertrain.  This could lead to a situation where the engine and the vehicle are subject to emission standards over different useful-life periods.  For example, an urban bus (heavy heavy-duty vehicle), might be able to use a medium heavy-duty engine, or even a light heavy-duty engine.  While such a mismatch in useful life values could be confusing, we don't believe it poses any particular policy problem that we need to address.  EPA requests comment on the possibility of mismatched engine and vehicle useful-life values and on any possible implications this may have for manufacturers' ability to design, certify, produce, and sell their engines and vehicles.
While NHTSA would use useful life considerations as described above for establishing fuel consumption performance for initial compliance and for ABT, NHTSA does not intend to implement an in-use compliance program for fuel consumption, because it is not required under EISA and because it is not currently anticipated there would be notable deterioration of fuel consumption over the engines' useful life.
    Assigning Vehicles to Test Cycles
The agencies propose the following logic for deciding which chassis configurations would be assigned to each of the three proposed vocational duty cycles and thus regulatory subcategories:
       * A vehicle would be certified over the Multipurpose Duty Cycle, unless one of the following conditions warrants certifying over either the Regional or Urban cycle.
       * If the vehicle is powered by a CI engine, use the Regional Duty Cycle if the resulting value from the calculation described in Equation V-1 is less than 75 percent.
       * If the vehicle is powered by a SI engine, use the Regional Duty Cycle if the resulting value from the calculation described in Equation V-1 is less than 45 percent.
Equation V-1 Proposed Regional Duty Cycle Cutpoint
       Cutpoint Regional=65 mph x axle ratio x trans ratio x CSLR*fntestx100
Where
CutpointRegional is the percent of maximum engine test speed that is achieved at a vehicle speed of 65 mph,
SLR is the static loaded tire radius entered into GEM as specified in the regulations,
Axle ratio is the drive axle ratio that entered into GEM as specified in the regulations,
Trans ratio is the ratio of the top transmission gear that is not permanently locked out,
fntest is the maximum engine test speed as defined at 40 CFR 1065.610, and
C is a constant equal to
5280ftmix 12inftx .0254min60minhrx 2PI

       * If a vehicle is powered by a CI engine, use the Urban Duty Cycle if the resulting value from the calculation described in Equation V-2 is greater than 90 percent.
       * If a vehicle is powered by a SI engine, use the Urban Duty Cycle if the resulting value from the calculation described in Equation V-2 is greater than 50 percent.
Equation V-2 Proposed Urban Duty Cycle Cutpoint
       Cutpoint Urban=55 mph x axle ratio x trans ratio x CSLR*fntestx100
Where
CutpointUrban is the percent of maximum engine test speed that is achieved at a vehicle speed of 55 mph,
SLR is the static loaded tire radius entered into GEM as specified in the regulations,
Axle ratio is the drive axle ratio that is entered into GEM as specified in the regulations,
Trans ratio is the ratio of the top transmission gear that is not permanently locked out,
fntest is the maximum engine test speed as defined at 40 CFR 1065.610, and
C is a constant equal to
5280ftmix 12inftx .0254min60minhrx 2PI
The agencies ran GEM with many vocational vehicle configurations to develop a data set with which we could assess appropriate cutpoints for the above equations.  The configurations varied primarily by the engine model, fuel type, and axle ratio.  See the draft RIA Chapter 2.9.2 for further details on the assessment process for these proposed cutpoints.
The agencies realize that there are vocational vehicles for which the above logic may not result in an appropriate assignment of test cycle. Therefore we are proposing an exception that would enable any vehicle with a hybrid drivetrain to certify over the Urban test cycle.  Further, we are proposing that the following vehicles must be certified using the Regional cycle: intercity coach buses, recreational vehicles, and vehicles whose engine is exclusively certified over the SET.  We are also proposing to allow manufacturers to request a different duty cycle.  We request comment on this approach, and whether we should allow manufacturers to have complete freedom to select a test cycle without any need for EPA or NHTSA approval.
Other Compliance Provisions
    Emission Control Labels
EPA considers it crucial that field inspectors are able to identify whether a vehicle is certified, and if so whether it is in the certified condition.  To facilitate this identification in Phase 1, EPA adopted labeling provisions for vocational vehicles that included several items.  The Phase 1 vocational vehicle label must include the manufacturer, vehicle identifier such as the Vehicle Identification Number, vehicle family, regulatory subcategory, date of manufacture, compliance statements, and emission control system identifiers (see 40 CFR 1037.135).  In Phase 1, the vocational vehicle emission control system identifier is tire rolling resistance, plus any innovative and advanced technologies.  The number of proposed emission control systems for greenhouse gas emissions in Phase 2 has increased significantly.  For example, the engine, transmission, axle configuration, tire radius, and idle reduction system are control systems that can be evaluated on-cycle in Phase 2 (i.e. these technologies' performance can now be input to GEM), but could not be evaluated in Phase 1.  Due to the significant complexity in determining greenhouse gas emissions as proposed in Phase 2, EPA does not believe that we can appropriately assess whether a vehicle is in a certified condition or not through simply comparing information that could be made available on an emission control label with the components installed on a vehicle.  Therefore, EPA proposes to remove the requirement to include the emission control system identifiers required in 40 CFR 1037.135(b)(6) and in Appendix III to 40 CFR part 1037 from the emission control labels for vocational vehicles certified to the primary Phase 2 standards.  EPA is not proposing to modify the existing emission control labels for vocational vehicles certified to the Phase 1 CO2 standards.
[Additional text on labeling and compliance to be added.]
    End of Year Reports
In the Phase 1 program, manufacturers participating in the ABT program provided 90 day and 270 day reports to EPA and NHTSA after the end of the model year.  The agencies adopted two reports for the initial program to help manufacturers become familiar with the reporting process.  For the HD Phase 2 program, the agencies propose to simplify reporting such that manufacturers would only be required to submit one end of the year report 120 days after the end of the model year with the potential to obtain approval for a delay up to 30 days.  We welcome comment on this proposed revision.
    Delegated Assembly
The proposed standards for vocational vehicles are based on the application of a wide range of technologies.  Certifying vehicle manufacturers manage their compliance demonstration to reflect this range of technologies by describing their certified configurations in the application for certification.  In many cases, these technologies are designed and assembled (or installed) directly by the certifying vehicle manufacturer, which is typically the chassis manufacturer.  In these cases, it is straightforward to assign the responsibility to the certifying vehicle manufacturer for ensuring that vehicles are in their proper certified configuration when sold to the ultimate user.  In Phase 1, the only vehicle technology available for certified vocational vehicles was LRR tires. Because these are generally installed by the chassis manufacturer, there would have been no need to rely on a second stage manufacturer for purposes of certification.
In Phase 2, the agencies are considering certain technologies where the certifying vehicle manufacturer may want or need to rely on a downstream manufacturing company (a secondary vehicle manufacturer) to take steps to assemble or install certain components or technologies to bring the vehicle into a certified configuration.  A similar relationship between manufacturers applies with aftertreatment devices for certified engines.  EPA has adopted "delegated assembly" provisions for engines at 40 CFR 1068.261 to describe how manufacturers can share compliance responsibilities through these cooperative assembly procedures.
We are proposing to take a similar approach for vehicle-based GHG standards in 40 CFR part 1037.  The delegated assembly provisions as proposed for GHG standards are focused on add-on features to reduce aerodynamic drag, and on air conditioning systems.  This may occur, for example, if the certifying manufacturer sells a cab-complete chassis to a secondary vehicle manufacturer, which in turn installs a box with the appropriate aerodynamic accessories to reduce drag losses.  To the extent certifying manufacturers rely on secondary vehicle manufacturers to bring the vehicle into a certified configuration, the following provisions would apply:
         * The certifying manufacturer would describe their approach to delegated assembly in the application for certification.
         * The certifying manufacturer would create installation instructions to describe how the secondary vehicle manufacturer would bring the vehicle into a certified configuration.
         * The certifying manufacturer would have a contractual agreement with each affected secondary vehicle manufacturer obligating the secondary vehicle manufacturer to build each vehicle into a certified configuration and to provide affidavits confirming proper assembly procedures, and to provide information regarding deployment of each type of technology (if there are technology options that relate to different GEM input values).
         * If the secondary vehicle manufacturer must separately purchase the components needed to bring vehicles into a certified configuration, the certifying manufacturer must perform periodic on-site audits of secondary vehicle manufacturers to ensure that the secondary vehicle manufacturer is selecting the proper components, ordering the appropriate quantities of those components, and assembling those components consistent with the appropriate certified configuration.
The delegated assembly provisions are most relevant to vocational vehicles, but we are not proposing to limit these provisions to vocational vehicles.  Similarly, we expect that aerodynamic devices and air conditioning systems are the most likely technologies for which delegated assembly is appropriate, but we are not proposing to limit the use of delegated assembly to these technologies.
Secondary manufacturers (such as body builders) that build complete vehicles from certified chassis are obligated to comply with the emission-related installation instructions provided by the certifying manufacturer.  Secondary manufacturers that build complete vehicles from exempted chassis are obligated to comply with all of the regulations.
The draft regulations at §1037.621 describe further detailed provisions related to delegated assembly.  We request comment on all aspects of these provisions.  In particular, we request comment on how the procedures should be applied more broadly or more narrowly for specific technologies.  We also request comment on any further modifications that should be made to the delegated assembly provisions to reflect the nature of manufacturing relationships or technologies that are specific to greenhouse gas standards for heavy-duty highway vehicles.
    Demonstrating Compliance with Proposed HFC Leakage Standards
EPA is proposing requirements for vocational chassis manufacturers to demonstrate reductions in direct emissions of HFC in their A/C systems and components through a design-based method.  The method for calculating A/C leakage is the same as was adopted in Phase 1 for tractors and HD pickups and vans. It is based closely on an industry-consensus leakage scoring method, described below. This leakage scoring method is correlated to experimentally-measured leakage rates from a number of vehicles using the different available A/C components. As is done currently for other HD vehicles, vocational chassis manufacturers would choose from a menu of A/C equipment and components used in their vehicles in order to establish leakage scores, to characterize their A/C system leakage performance. The percent leakage per year would then be calculated as this score divided by the system refrigerant capacity.
Consistent with the light-duty rule and the Phase 1 program for other HD vehicles, EPA is proposing a requirement that vocational chassis manufacturers compare the components of a vehicle's A/C system with a set of leakage-reduction technologies and actions that is based closely on that developed through the Improved Mobile Air Conditioning program and SAE International (as SAE Surface Vehicle Standard J2727, "HFC-134a, Mobile Air Conditioning System Refrigerant Emission Chart," August 2008 version).  See generally 75 FR 25426.  The SAE J2727 approach was developed from laboratory testing of a variety of A/C related components, and EPA believes that the J2727 leakage scoring system generally represents a reasonable correlation with average real-world leakage in new vehicles.  This approach associates each component with a specific leakage rate in grams per year that is identical to the values in J2727 and then sums together the component leakage values to develop the total A/C system leakage. Unlike the light-duty program, in the heavy-duty vehicle program, the total A/C leakage score is divided by the value of the total refrigerant system capacity to develop a percent leakage per year.  EPA believes that the design-based approach results in estimates of likely leakage emissions reductions that are comparable to those that would result from performance-based testing.
Consistent with HD GHG Phase 1, EPA is not proposing a specific in-use standard for leakage, as neither test procedures nor facilities exist to measure refrigerant leakage from a vehicle's air conditioning system.  However, consistent with the HD Phase 1 program and the light-duty rule, where we propose to require that manufacturers attest to the durability of components and systems used to meet the CO2 standards (see 75 FR 25689), we propose to require that manufacturers of heavy-duty vocational vehicles attest to the durability of these systems, and provide an engineering analysis that demonstrates component and system durability.
    Glider Vehicles
EPA is proposing to not exempt glider vehicles from the Phase 2 GHG emission and fuel consumption standards.   Gliders and glider kits are exempt from NHTSA's Phase 1 fuel consumption standards.  The EPA's interim provisions of Phase 1 exempted glider vehicles produced by small businesses from the Phase 1 CO2 emission standards but did not include such a blanket exemption for other glider vehicles.  Thus, some glider vehicles are already subject to the requirement to obtain a vehicle certificate prior to introduction into commerce as a new vehicle.  However, the agencies believe glider manufacturers may not understand how these regulations apply to them, resulting in a number of uncertified vehicles.
EPA is concerned about adverse economic impacts on small businesses that assemble glider kits and glider vehicles. Therefore, EPA is proposing a new provision that would grandfather existing small businesses, but cap annual production based on recent sales.  This approach is consistent with the approach recommended by the Small Business Advocacy Review Panel, which believed there should be an allowance to produce some glider vehicles for legitimate purposes.  EPA requests comment on whether any special provisions would be needed to accommodate glider vehicles.  See Section XIV.A.8 for additional discussion of the proposed requirements for glider vehicles.
Similarly, NHTSA is considering including gliders under its Phase 2 program.  The agencies request comment on their respective considerations.
Proposed Compliance Flexibility Provisions
EPA and NHTSA are proposing three flexibility provisions specifically for vocational vehicle manufacturers in Phase 2.  These are an averaging, banking and trading program for CO2 emissions and fuel consumption credits, provisions for off-cycle credits for technologies that are not included as inputs to the GEM, and optional chassis certification.  The agencies are also proposing to remove or modify several Phase 1 interim provisions, as described below.  Program-wide compliance flexibilities are discussed in Section I.B.3 to I.C.1.
    Averaging, Banking, and Trading (ABT) Program
Averaging, banking, and trading of emission credits have been an important part of many EPA mobile source programs under CAA Title II. ABT provisions provide manufacturers flexibilities that assist in the efficient development and implementation of new technologies and therefore enable new technologies to be implemented at a more aggressive pace than without ABT.  NHTSA and EPA propose to carry-over the Phase 1 ABT provisions for vocational vehicles into Phase 2, as it is an important way to achieve each agency's programmatic goals.   ABT is also discussed in Section I and Section III.F.1.
Consistent with the Phase 1 averaging sets, the agencies propose that chassis manufacturers may average SI-powered vocational vehicle chassis with CI-powered vocational vehicle chassis, within the same vehicle weight class group.  In Phase 1, all vocational and tractor chassis within a vehicle weight class group were able to average with each other, regardless of whether they were powered by a CI or SI engine.  The proposed Phase 2 approach would continue this.  The only difference is that in Phase 2, there would be different numerical standards set for the SI-powered and CI-powered vehicles, but that would not need to alter the basis for averaging.  This is consistent with the Phase 1 approach where, for example, Class 8 day cab tractors, Class 8 sleeper cab tractors and Class 8 vocational vehicles each have different numerical standards, while they all belong to the same averaging set.
As discussed in V. E. (1) (c), EPA is proposing to change the useful life for LHD vocational vehicles for GHG emissions from the current 11 years/120,000 miles to 15 years/150,000 miles to be consistent with the useful life of criteria pollutants recently updated in EPA's Tier 3 rule.  For the same reasons, EPA is also proposing this useful life adjustment for HD pickups and vans, as described in Section VI.E.(1).  According to the credits calculation formula at 40 CFR 1037.705 and 49 CFR 535.7, useful life in miles is a multiplicative factor included in the calculation of CO2 and fuel consumption credits.  In order to ensure that banked credits would maintain their value in the transition from Phase 1 to Phase 2, NHTSA and EPA propose an adjustment factor of 1.25 for credits that are carried forward from Phase 1 to the MY 2021 and later Phase 2 standards.  Without this adjustment factor the proposed change in useful life would effectively result in a discount of banked credits that are carried forward from Phase 1 to Phase 2, which is not the intent of the change in the useful life.  The agencies do not believe that this proposed adjustment would result in a loss of program benefits because there is little or no deterioration anticipated for CO2 emissions and fuel consumption over the life of the vehicles.  Also, the carry-forward of credits is an integral part of the program, helping to smoothing the transition to the new Phase 2 standards.  The agencies believe that effectively discounting carry-forward credits from Phase 1 to Phase 2 would be unnecessary and could negatively impact the feasibility of the proposed Phase 2 standards.  EPA and NHTSA request comment on all aspects of the averaging, banking, and trading program.
Innovative and Off-Cycle Technology Credits
In Phase 1, the agencies adopted an emissions and fuel consumption credit generating opportunity that applied to innovative technologies that reduce fuel consumption and CO2 emissions.  These technologies were required to not be in common use with heavy-duty vehicles before the 2010MY and not reflected in the GEM simulation tool (i.e., the benefits are "off-cycle").  See 76 FR at 57253. The agencies propose to largely continue the Phase 1 innovative technology program but to redesignate it as an off-cycle program for Phase 2.
The agencies recognize that there are emerging technologies today that are being developed, but would not be accounted for in the GEM tool, and therefore would be considered off-cycle.  These technologies could include systems such as electrified accessories, air conditioning system efficiency, and aerodynamics for vocational vehicles beyond those tested and pre-approved in the HD Phase 2 program.  Such off-cycle technologies could include known, commercialized technologies if they are not yet widely utilized in a particular heavy-duty sector subcategory.  Any credits for these technologies would need to be based on real-world fuel consumption and GHG reductions that can be measured with verifiable test methods using representative driving conditions typical of the engine or vehicle application.  More information about off-cycle technology credits can be found at Section I.C.1.c.
As in Phase 1, the agencies are proposing to continue to provide two paths for approval of the test procedure to measure the CO2 emissions and fuel consumption reductions of an off-cycle technology used in vocational vehicles.  See 40 CFR 1037.610 and 49 CFR 535.7.  The first path would not require a public approval process of the test method.  A manufacturer could use "pre-approved" test methods for HD vehicles including the A-to-B chassis testing, powerpack testing or on-road testing.  A manufacturer may also use any developed test procedure that has known quantifiable benefits.  A test plan detailing the testing methodology would be required to be approved prior to collecting any test data.  The agencies are also proposing to continue the second path, which includes a public approval process of any testing method that could have questionable benefits (i.e., an unknown usage rate for a technology).  Furthermore, the agencies are proposing to modify their provisions to clarify what documentation must be submitted for approval, which would align them with provisions in 40 CFR 86.1869-12.  NHTSA is separately proposing to prohibit credits from technologies addressed by any of its crash avoidance safety rulemakings (i.e., congestion management systems).  See also 77 FR at 62733 (discussion of similar issue in the light duty greenhouse gas/fuel economy regulations).  We welcome recommendations on how to improve or streamline the off-cycle technology approval process.
 There are some technologies that are entering the market today, and although our model does not have the capability to simulate the effectiveness over the test cycles, there are reliable estimates of effectiveness available to the agencies. These are proposed to be recognized in our HD Phase 2 certification procedures as pre-defined technologies, and would not be considered off-cycle.  Examples of such technologies for vocational vehicles include 6x2 axles and axle lubricants.  These default effectiveness values would be used as valid inputs to GEM.  The projected effectiveness of each vocational vehicle technology is discussed in the draft RIA Chapter 2.9.
The agencies propose that the approval for Phase 1 innovative technology credits (approved prior to 2021 MY) would be carried into the Phase 2 program on a limited basis for those technologies where the benefit is not accounted for in the Phase 2 test procedure.  Therefore, the manufacturers would not be required to request new approval for any innovative credits carried into the off-cycle program, but would have to demonstrate the new cycle does not account for these improvements beginning in the 2021 MY.  The agencies believe this is appropriate because technologies, such as those related to the transmission or driveline, may no longer be "off-cycle" because of the addition of these technologies into the Phase 2 version of GEM. The agencies also seek comments on whether off-cycle technologies in the Phase 2 program should be limited by infrequent common use and by what model years, if any.  We also seek comments on an appropriate penetration rate for a technology not to be considered in common use.
    Optional Chassis Certification
In Phase 2, the agencies are proposing to continue the Phase 1 provisions allowing the optional chassis certification of vehicles over 14,000 pounds GVWR.  In Phase 1 the agencies allowed manufacturers the option to choose to comply with heavy-duty pickup or van standards, for incomplete vehicles that were identical to those on complete pickup truck or van counterparts, with respect to most components that affect GHG emissions and fuel consumption, such as engines, cabs, frames, transmissions, axles, and wheels.  The incomplete vehicles would typically be produced as cab-complete vehicles.  For example, a manufacturer could certify under this allowance an incomplete pickup truck that includes the cab, but not the bed.  The Phase 1 program also includes provisions that allow manufacturers to include some Class 4 and Class 5 vehicles in averaging sets subject to the chassis-based HD pickup and van standards, rather than the vocational vehicle program.
This optional chassis certification of vehicles over 14,000 pounds applies for greenhouse gas emission standards in Phase 1, but not for criteria pollutant emission standards.  We revisited this issue in the recent Tier 3 final rule, where we revised the regulation to allow this same flexibility relative to exhaust emission standards for criteria pollutants.  However, EPA is now seeking comment on the proper approach for certifying vehicles above 14,000 lbs GVWR, because there are lingering questions about how best to align the certification processes for GHG emissions and for criteria pollutants. The agencies are requesting comment on several issues on this topic, including whether there should be an upper weight limit to this allowance.  See Section XIV.A.2 for the issues on which the agencies seek comment with respect to chassis and engine certification for GHG and criteria pollutants for vehicles opting into the HD pickup and van program.
    Phase 1 Flexibilities Not Proposed for Phase 2
As described above in Section I, the agencies are not proposing to provide advanced technology credits in Phase 2.  These technologies had been defined in Phase 1 as hybrid powertrains, Rankine cycle engines, all-electric vehicles, and fuel cell vehicles (see 40 CFR 1037.150(i)), at a 1.5 credit value with the purpose to promote the early implementation of advanced technologies that were not expected to be widely adopted in the market in the 2014 to 2018 time frame. Our feasibility assessment for the proposed Phase 2 vocational vehicle standards includes a projection of the use of hybrid powertrains as described earlier in this section; therefore the agencies believe it would no longer be appropriate to provide extra credit for this technology.  As noted above, waste heat recovery is not projected to be utilized for vocational vehicles within the time frame of Phase 2.  While the agencies are not proposing to premise the Phase 2 vocational vehicle standards on fuel cells or electric vehicles, we expect that any vehicle certified with this technology would provide such a large credit to a manufacturer that an additional incentive credit would not be necessary.  We welcome comments on the need for such incentives, including information on why an incentive for specific technologies in this time frame may be warranted, recognizing that the incentive would result in reduced benefits in terms of CO2 emissions and fuel use due to the Phase 2 program.
The agencies are not proposing to extend early credits to manufacturers who comply early with Phase 2 standards, because the ABT program from Phase 1 will be available to manufacturers and this displaces the need for early credits (see 40 CFR 1037.150(a)).  Please see the more complete discussion of this above in Section I.
Another Phase 1 interim flexibility that the agencies are not proposing to continue in Phase 2 is the flexibility known as the "loose engine" provision, whereby SI engines sold to chassis manufacturers and intended for use in vocational vehicles need not meet the separate SI engine standard (See preamble Section II and draft RIA Chapter 2.6), and instead may be averaged with the manufacturer's HD pickup and van fleet.  We believe the benefits this particular flexibility offers for manufacturers in the interim between Phase 1 and Phase 2 would diminish considerably in Phase 2.  The agencies are proposing a Phase 2 SI engine standard that is no more stringent than the MY 2016 SI engine standard adopted in Phase 1, while the proposed Phase 2 standards for the HD pickup and van fleet would be progressively more stringent through MY 2027.  The primary certification path designed in the Phase 1 program for both CI and SI engines sold separately and intended for use in vocational vehicles was that they be engine certified while the vehicle would be GEM certified under the GHG rules.  In Phase 2 the agencies propose to continue this as the certification path for such engines intended for vocational vehicles.  See the draft RIA Chapter 2.6 for further discussion of the separate engine standard for SI engines intended for vocational vehicles.
    Other Phase 1 Interim Provisions
In HD Phase 1, EPA adopted provisions to delay the onboard diagnostics (OBD) requirements for heavy-duty hybrid powertrains (see 40 CFR 86.010-18(q)).  This provision delayed full OBD requirements for hybrids until MY 2016 and MY 2017.  In discussion with manufacturers during the development of Phase 2, the agencies have learned that meeting the on-board diagnostic requirements for criteria pollutant engine certification continues to be a potential impediment to adoption of hybrid systems.  See Section XIII.A.1 for a discussion of regulatory changes proposed to reduce the non-GHG certification burden for engines paired with hybrid powertrain systems.
Also in Phase 1, EPA adopted provisions that reinforced the fact that we were setting GHG emissions from the tailpipe of heavy-duty vehicles.  Therefore, we treated all electric vehicles as having zero emissions of CO2, CH4, and N2O (see 40 CFR 1037.150(f)).  Similarly, NHTSA adopted regulations in Phase 1 that set the fuel consumption standards based on the fuel consumed by the vehicle.  The agencies also did not require emission testing for electric vehicles in Phase 1.  The agencies considered the potential unintended consequence of ignoring upstream emissions from the charging of heavy-duty battery-electric vehicles.  In our assessment, we have observed that the few all-electric heavy-duty vocational vehicles that have been certified are being produced in very small volumes in MY2014.  As we look to the future, we project very limited adoption of electric vocational vehicles into the market; therefore, we believe that this provision is still appropriate.  Unlike the MY2012-2016 light-duty rule, which adopted a cap whereby upstream emissions would be counted after a certain volume of sales (see 75 FR 25434-25436), we believe there is no need to propose a cap for vocational vehicles because of the infrequent projected use of EV technologies in the Phase 2 timeframe.  In Phase 2, we propose to continue to deem electric vehicles as having zero CO2, CH4, and N2O emissions as well as zero fuel consumption.  We welcome comments on this approach.

Heavy-duty Pickups and Vans
Introduction and Summary of Phase 1 HD Pickup and Van Standards
In the Phase 1 rule, EPA and NHTSA established GHG and fuel consumption standards and a program structure for complete Class 2b and 3 heavy-duty vehicles (referred to in these rules as "HD pickups and vans"), as described below.  The Phase 1 standards began to be phased-in in MY 2014 and the agencies believe the program is working well.  The agencies are proposing to retain most elements from the structure of the program established in the Phase 1 rule for the Phase 2 program while proposing more stringent Phase 2 standards for MY 2027, phased in over MYs 2021-2027, that would require additional GHG reductions and fuel consumption improvements.  The MY 2027 standards would remain in place unless and until amended by the agencies.
Heavy-duty vehicles with GVWR between 8,501 and 10,000 lb are classified in the industry as Class 2b motor vehicles.  Class 2b includes vehicles classified as medium-duty passenger vehicles (MDPVs) such as very large SUVs.  Because MDPVs are frequently used like light-duty passenger vehicles, they are regulated by the agencies under the light-duty vehicle rules.  Thus the agencies did not adopt additional requirements for MDPVs in the Phase 1 rule and are not proposing additional requirements for MDPVs in this rulemaking.  Heavy-duty vehicles with GVWR between 10,001 and 14,000 lb are classified as Class 3 motor vehicles.  Class 2b and Class 3 heavy-duty vehicles together emit about 15 percent of today's GHG emissions from the heavy-duty vehicle sector.
About 90 percent of HD pickups and vans are (3/4)-ton and 1-ton pickup trucks, 12- and 15-passenger vans, and large work vans that are sold by vehicle manufacturers as complete vehicles, with no secondary manufacturer making substantial modifications prior to registration and use.  Most of these vehicles are produced by companies with major light-duty markets in the United States, primarily Ford, General Motors, and Chrysler.  Often, the technologies available to reduce fuel consumption and GHG emissions from this segment are similar to the technologies used for the same purpose on light-duty pickup trucks and vans, including both engine efficiency improvements (for gasoline and diesel engines) and vehicle efficiency improvements.
In the Phase 1 rule EPA adopted GHG standards for HD pickups and vans based on the whole vehicle (including the engine), expressed as grams of CO2 per mile, consistent with the way these vehicles are regulated by EPA today for criteria pollutants.  NHTSA adopted corresponding gallons per 100 mile fuel consumption standards that are likewise based on the whole vehicle.  This complete vehicle approach adopted by both agencies for HD pickups and vans was consistent with the recommendations of the NAS Committee in its 2010 Report.  EPA and NHTSA adopted a structure for the Phase 1 HD pickup and van standards that in many respects paralleled long-standing NHTSA CAFE standards and more recent coordinated EPA GHG standards for manufacturers' fleets of new light-duty vehicles.  These commonalities include a new vehicle fleet average standard for each manufacturer in each model year and the determination of these fleet average standards based on production volume-weighted targets for each model, with the targets varying based on a defined vehicle attribute.  Vehicle testing for both the HD and light-duty vehicle programs is conducted on chassis dynamometers using the drive cycles from the EPA Federal Test Procedure (Light-duty FTP or "city" test) and Highway Fuel Economy Test (HFET or "highway" test).
For the light-duty GHG and fuel economy standards, the agencies factored in vehicle size by basing the emissions and fuel economy targets on vehicle footprint (the wheelbase times the average track width).  For those standards, passenger cars and light trucks with larger footprints are assigned higher GHG and lower fuel economy target levels in acknowledgement of their inherent tendency to consume more fuel and emit more GHGs per mile. EISA requires that NHTSA study "the appropriate metric for measuring and expressing commercial medium- and heavy-duty vehicle and work truck fuel efficiency performance, taking into consideration, among other things, the work performed by such on-highway vehicles and work trucks..."  49 U.S.C. 32902 (k) (1)(B).  For HD pickups and vans, the agencies also set standards based on vehicle attributes, but used a work-based metric as the attribute rather than the footprint attribute utilized in the light-duty vehicle rulemaking. Work-based measures such as payload and towing capability are key among the parameters that characterize differences in the design of these vehicles, as well as differences in how the vehicles will be utilized.  Buyers consider these utility-based attributes when purchasing a HD pickup or van.  EPA and NHTSA therefore finalized Phase 1 standards for HD pickups and vans based on a "work factor" attribute that combines the vehicle's payload and towing capabilities, with an added adjustment for 4-wheel drive vehicles.  See generally 76 FR 57161-62.
For Phase 1, the agencies adopted provisions such that each manufacturer's fleet average standard is based on production volume-weighting of target standards for all vehicles that in turn are based on each vehicle's work factor.  These target standards are taken from a set of curves (mathematical functions).  The Phase 1 curves are shown in the figures below for reference and are described in detail in the Phase 1 final rule.  The agencies established separate curves for diesel and gasoline HD pickups and vans.  The agencies are proposing to continue to use the work-based attribute and gradually declining standards approach for the Phase 2 standards, as discussed in Section VI.B. below.  Note that this approach does not create an incentive to reduce the capabilities of these vehicles because less capable vehicles are required to have proportionally lower emissions and fuel consumption targets.

Figure VI-1: EPA Phase 1 CO2 Target Standards and NHTSA Fuel Consumption Target Standards for Diesel HD Pickups and Vans

Figure VI-2: EPA Phase 1 CO2 Target Standards and NHTSA Fuel Consumption Target Standards for Gasoline HD Pickups and Vans
EPA phased in its CO2 standards gradually starting in the 2014 model year, at 15-20-40-60-100 percent of the model year 2018 standards stringency level in model years 2014-2015-2016-2017-2018, respectively.  The phase-in takes the form of the set of target standard curves shown above, with increasing stringency in each model year.  The final EPA Phase 1 standards for 2018 (including a separate standard to control air conditioning system leakage) represent an average per-vehicle reduction in GHGs of 17 percent for diesel vehicles and 12 percent for gasoline vehicles, compared to a common MY 2010 baseline.  EPA also finalized a compliance alternative whereby manufacturers can phase in different percentages: 15-20-67-67-67-100 percent of the model year 2019 standards stringency level in model years 2014-2015-2016-2017-2018-2019, respectively.  This compliance alternative parallels and is equivalent to NHTSA's first alternative described below.
NHTSA's Phase 1 program allows manufacturers to select one of two fuel consumption standard alternatives for model years 2016 and later.  The first alternative defines individual gasoline vehicle and diesel vehicle fuel consumption target curves that will not change for model years 2016-2018, and are equivalent to EPA's 67-67-67-100 percent target curves in model years 2016-2017-2018-2019, respectively.  This option is consistent with EISA requirements that NHTSA provide 4 years lead-time and 3 years of stability for standards.  49 U.S.C. Section 32902 (k)(3).  The second alternative uses target curves that are equivalent to EPA's 40-60-100 percent target curves in model years 2016-2017-2018, respectively.  Stringency for the alternatives in Phase 1 was selected by the agencies to allow a manufacturer, through the use of the credit carry-forward and carry-back provisions that the agencies also finalized, to meet both NHTSA fuel efficiency and EPA GHG emission standards using a single compliance strategy.  If a manufacturer cannot meet an applicable standard in a given model year, it may make up its shortfall by over-complying in a subsequent year.  NHTSA also allows manufacturers to voluntarily opt into the NHTSA HD pickup and van program in model years 2014 or 2015.  For these model years, NHTSA's fuel consumption target curves are equivalent to EPA's target curves.  The Phase 1 phase-in options are summarized in Table VI-1.
Table VI-1 Phase 1 Standards Phase-in Options

2014
2015
2016
2017
2018
2019
EPA Primary Phase-in
15%
20%
40%
60%
100%
100%
EPA Compliance Option
15%
20%
67%
67%
67%
100%
NHTSA First Option
0%
0%
67%
67%
67%
100%
NHTSA Second Option
0%
0%
40%
60%
100%
100%
The form and stringency of the Phase 1 standards curves are based on the performance of a set of vehicle, engine, and transmission technologies expected (although not required) to be used to meet the GHG emissions and fuel economy standards for model year 2012-2016 light-duty vehicles, with full consideration of how these technologies are likely to perform in heavy-duty vehicle testing and use.  All of these technologies are already in use or have been announced for upcoming model years in some light-duty vehicle models, and some are in use in a portion of HD pickups and vans as well.  The technologies include:
advanced 8-speed automatic transmissions
aerodynamic improvements
electro-hydraulic power steering
engine friction reductions
improved accessories
low friction lubricants in powertrain components
lower rolling resistance tires
lightweighting
gasoline direct injection
diesel aftertreatment optimization
air conditioning system leakage reduction (for EPA program only)

Proposed HD Pickup and Van Standards
As described in this section, NHTSA and EPA are proposing more stringent MY 2027 and later Phase 2 standards that would be phased in over model years 2021-2027.  The agencies are proposing standards based on a year-over-year increase in stringency of 2.5 percent over MYs 2021-2027 for a total increase in stringency for the Phase 2 program of about 16 percent compared to the MY 2018 Phase 1 standard.  Note that an individual manufacturer's fleet-wide target may differ from this stringency increase due to changes in vehicle sales mix and changes in work factor.  The agencies have analyzed several alternatives which are discussed in this section below and in Section X.  In particular, we are requesting comment not only on the proposed standards but also particularly on Alternative 4 alternative standard which would result in approximately the same Phase 2 program stringency increase of about 16 percent compared to Phase 1 but would do so two years earlier, in MY 2025 rather than in MY 2027.  The Alternative 4 phase in from 2021-2025 would be based on a year-over-year increase in stringency of 3.5 percent, as discussed below. While we believe the proposed preferred alternative is feasible in the time frame of this rule, and that Alternative 4 could potentially be feasible, the two phase-in schedules differ in the required adoption rate of advanced technologies for certain high volume vehicle segments.  The agencies' analysis essentially shows that the additional lead-time provided by the preferred alternative would allow manufacturers to more fully utilize lower cost technologies thereby reducing the adoption rate of more advanced higher cost technologies such as strong hybrids.  As discussed in more detail in C.8 below, both of the considered phase-ins require comparable penetration rates of several non-hybrid technologies with some approaching 100 percent penetration. However, as discussed below, the additional lead-time provided by Alternative 3 would allow manufacturers more flexibility to fully utilize these non-hybrid technologies to reduce the number of hybrids needed compared to Alternative 4.  Alternative 4 would additionally require significant penetration of strong hybridization. We request comments, additional information, data, and feedback to determine the extent to which such adoption would be realistic within the MY 2025 timeframe.
When considering potential Phase 2 standards, the agencies anticipate that the technologies listed above that were considered in Phase 1 will continue to be available in the future if not already applied under Phase 1 standards and that additional technologies will also be available:
* advanced engine improvements for friction reduction and low friction lubricants
* improved engine parasitics, including fuel pumps, oil pumps, and coolant pumps
* valvetrain variable lift and timing
* cylinder deactivation
* direct gasoline injection
* cooled exhaust gas recirculation
* turbo downsizing of gasoline engines
* Diesel engine efficiency improvements
* downsizing of diesel engines
* 8-speed automatic transmissions
* electric power steering
* high efficiency transmission gear boxes and driveline
* further improvements in accessory loads
* additional improvements in aerodynamics and tire rolling resistance
* low drag brakes
* mass reduction
* mild hybridization
* strong hybridization
Sections VI.C. and D below and Section 2 of the Draft RIA provide a detailed analysis of these and other potential technologies for Phase 2, including their feasibility, costs, and effectiveness and projected application rates for reducing fuel consumption and CO2 emissions when utilized in HD pickups and vans.  Sections VI.C and D and Section X also discuss the selection of the proposed standards and the alternatives considered.
In addition to the EPA's CO2 emission standards and NHTSA's fuel consumption standards for HD pickups and vans, EPA in Phase 1 also finalized standards for two additional GHGs  --  N2O and CH4, as well as standards for air conditioning-related HFC emissions in the Phase 1 rule.  EPA is proposing to continue these standards in Phase 2.  Also, consistent with CAA Section 202(a)(1), EPA finalized Phase 1 standards that apply to HD pickups and vans in use and EPA is proposing in-use standards for these vehicles in Phase 2.  All of the proposed standards for these HD pickups and vans are discussed in more detail below.  Program flexibilities and compliance provisions related to the standards for HD pickups and vans are discussed in Section VI.E.
A relatively small number of HD pickups and vans are sold by vehicle manufacturers as incomplete vehicles, without the primary load-carrying device or container attached.  A sizeable subset of these incomplete vehicles, often called cab-chassis vehicles, are sold by the vehicle manufacturers in configurations with complete cabs and many of the components that affect GHG emissions and fuel consumption identical to those on complete pickup truck or van counterparts  --  including engines, cabs, frames, transmissions, axles, and wheels.  The Phase 1 program includes provisions that allow manufacturers to include these incomplete vehicles as well as some Class 4 through 6 vehicles to be regulated under the chassis-based HD pickup and van program (i.e. subject to the standards for HD pickups and vans), rather than the vocational vehicle program.  The agencies are proposing to continue allowing such incomplete vehicles the option of certifying under either the heavy duty pickup and van standards or the standards for vocational vehicles.
Phase 1 also includes optional compliance paths for spark-ignition engines identical to engines used in heavy-duty pickups and vans to comply with 2b/3 standards.  See 40 CFR 1037.150(m) and 49 CFR 535.5(a)(7).  Manufacturers sell such engines as "loose engines" or install these engines in incomplete vehicles that are not cab-complete vehicles.  The agencies are not proposing to retain the loose engine provisions for Phase 2.  These program elements are discussed above in Section V.E. on vocational vehicles and XIV.A.2 on engines.
NHTSA and EPA request comment on all aspects of the proposed HD pickup and van standards and program elements described below and the alternatives discussed in Section X.
Vehicle-Based Standards
For Phase 1, EPA and NHTSA chose to set vehicle-based standards whereby the entire vehicle is chassis-tested.  The agencies propose to retain this approach for Phase 2.  About 90 percent of Class 2b and 3 vehicles are pickup trucks, passenger vans, and work vans that are sold by the original equipment manufacturers as complete vehicles, ready for use on the road.  In addition, most of these complete HD pickups and vans are covered by CAA vehicle emissions standards for criteria pollutants (i.e., they are chassis tested similar to light-duty), expressed in grams per mile.  This distinguishes this category from other, larger heavy-duty vehicles that typically have engines covered by CAA engine emission standards for criteria pollutants, expressed in grams per brake horsepower-hour.  As a result, Class 2b and 3 complete vehicles share both substantive elements and a regulatory structure much more in common with light-duty trucks than with the other heavy-duty vehicles.
Three of these features in common  are especially significant: (1) over 95 percent of the HD pickups and vans sold in the United States are produced by Ford, General Motors, and Chrysler  -  three companies with large light-duty vehicle and light-duty truck sales in the United States; (2) these companies typically base their HD pickup and van designs on higher sales volume light-duty truck platforms and technologies, often incorporating new light-duty truck design features into HD pickups and vans at their next design cycle, and (3) at this time most complete HD pickups and vans are certified to vehicle-based rather than engine-based EPA criteria pollutant and GHG standards.  There is also the potential for substantial GHG and fuel consumption reductions from vehicle design improvements beyond engine changes (such as through optimizing aerodynamics, weight, tires, and accessories), and a single manufacturer is generally responsible for both engine and vehicle design.  All of these factors together suggest that it is still appropriate and reasonable to base standards on performance of the vehicle as a whole, rather than to establish separate engine and vehicle GHG and fuel consumption standards, as is being done for the other heavy-duty categories.  The chassis-based standards approach for complete vehicles was also consistent with NAS recommendations and there was consensus in the public comments on the Phase 1 proposal supporting this approach.  For all of these reasons, the agencies continue to believe that establishing chassis-based standards for Class 2b and 3 complete vehicles is appropriate for Phase 2.
Work-Based Attributes
In developing the Phase 1 HD rulemaking, the agencies emphasized creating a program structure that would achieve reductions in fuel consumption and GHGs based on how vehicles are used and on the work they perform in the real world.  Work-based measures such as payload and towing capability are key among the things that characterize differences in the design of vehicles, as well as differences in how the vehicles will be used. Vehicles in the 2b and 3 categories have a wide range of payload and towing capacities.  These work-based differences in design and in-use operation are key factors in evaluating technological improvements for reducing CO2 emissions and fuel consumption.  Payload has a particularly important impact on the test results for HD pickup and van emissions and fuel consumption, because testing under existing EPA procedures for criteria pollutants and the Phase 1 standards is conducted with the vehicle loaded to half of its payload capacity (rather than to a flat 300 lb as in the light-duty program), and the correlation between test weight and fuel use is strong.
Towing, on the other hand, does not directly factor into test weight as nothing is towed during the test.  Hence, setting aside any interdependence between towing capacity and payload, only the higher curb weight caused by any heavier truck components would play a role in affecting measured test results.  However towing capacity can be a significant factor to consider because HD pickup truck towing capacities can be quite large, with a correspondingly large effect on vehicle design.
We note too that, from a purchaser perspective, payload and towing capability typically play a greater role than physical dimensions in influencing purchaser decisions on which heavy-duty vehicle to buy.  For passenger vans, seating capacity is of course a major consideration, but this correlates closely with payload weight.
For these reasons, EPA and NHTSA set Phase 1 standards for HD pickups and vans based on a "work factor" attribute that combines vehicle payload capacity and vehicle towing capacity, in lbs, with an additional fixed adjustment for four-wheel drive (4wd) vehicles.  This adjustment accounts for the fact that 4wd, critical to enabling many off-road heavy-duty work applications, adds roughly 500 lb to the vehicle weight.  The work factor is calculated as follows: 75 percent maximum payload + 25 percent of maximum towing + 375 lbs if 4wd.  Under this approach, target GHG and fuel consumption standards are determined for each vehicle with a unique work factor (analogous to a target for each discrete vehicle footprint in the light-duty vehicle rules).  These targets will then be production weighted and summed to derive a manufacturer's annual fleet average standard for its heavy-duty pickups and vans.  There was widespread support (and no opposition) for the work factor-based approach to standards and fleet average approach to compliance expressed in the comments we received on the Phase 1 rule.  The agencies are proposing to continue using the work factor attribute for the Phase 2 standards and request comments on continuing this approach.
Recognizing that towing is not reflected in the certification test for these vehicles, however, the agencies are requesting comment with respect to the treatment of towing in the work factor, especially for diesel vehicles.  More specifically, does using the existing work factor equation create an inappropriate incentive for manufacturers to provide more towing capability than needed for some operators, or a disincentive for manufacturers to develop vehicles with intermediate capability.  In other words, does it encourage "surplus" towing capability that has no value to vehicle owners and operators?  We recognize that some owners and operators do actually use their vehicles to tow very heavy loads, and that some owners and operators who rarely use their vehicles to tow heavy loads nonetheless prefer to own vehicles capable of doing so.  However, others may never tow such heavy loads and purchase their vehicles for other reasons, such as cargo capacity or off-road capability.  Some of these less demanding (in terms of towing) users may choose to purchase gasoline-powered vehicles that are typically less expensive and have lower GCWR values, an indicator of towing capability.  However, others could prefer a diesel engine more powerful than today's gasoline engines but less powerful than the typical diesel engines found in 2b and 3 pickups today.  In this context, the agencies are considering (but have not yet evaluated) four possible changes to the work factor and how it is applied.  First, the agencies are considering revising the work factor to weight payload by 80 percent and towing by 20 percent.  Second, we are considering capping the amount of towing that could be credited in the work factor.  For example, the work factors for all vehicles with towing ratings above 15,000 lbs could be calculated based on a towing rating of 15,000 lbs.  It is important to be clear that such a provision would not limit the towing capability manufacturers could provide, but would only impact the extent to which the work factor would "reward" towing capability.  Third, the agencies are considering changing the shape of the standard curve for diesel vehicles to become more flat at very high work factors.  A flatter curve would mean that vehicles with very high work factors would be more similar to vehicles with lower work factors than is the case for the proposed curve.  Thus, conceptually, flattening the curves at the high end might be appropriate if we were to determine that these high work factor vehicles actually operate in a manner more like the vehicles with lower work factors.  For example, when not towing and when not hauling a full payload, heavy-duty pickup trucks with very different work factors may actually be performing the same amount of work.  Finally, we are considering having different work factor formulas for pickups and vans, and are also further considering whether any of other changes should be applied differently to pickups than to vans.  We welcome comments on both the extent to which surplus towing may be an issue and whether any of the potential changes discussed above would be appropriate.  Commenters supporting such changes are encouraged to also address any potential accompanying changes.  For example, if we reweight the work factor, would other changes to the coefficients defining the target curves be important to ensure that standards remain at the maximum feasible levels.  (Commenters should, however, recognize that average requirements will, in any event, depend on fleet mix, and the agencies expect to update estimates of future fleet mix before issuing a final rule.)
As noted in the Phase 1 rule, the attribute-based CO2 and fuel consumption standards are meant to be as consistent as practicable from a stringency perspective.  Vehicles across the entire range of the HD pickup and van segment have their respective target values for CO2 emissions and fuel consumption, and therefore all HD pickups and vans will be affected by the standard.  With this attribute-based standards approach, EPA and NHTSA believe there should be no significant effect on the relative distribution of vehicles with differing capabilities in the fleet, which means that buyers should still be able to purchase the vehicle that meets their needs.
Standards
The agencies are proposing Phase 2 standards based on analysis performed to determine the appropriate HD pickup and van Phase 2 standards and the most appropriate phase in of those standards.  This analysis, described below and in the Draft RIA, considered:
projections of future U.S. sales for HD pickup and vans
the estimates of corresponding CO2 emissions and fuel consumption for these vehicles
forecasts of manufacturers' product redesign schedules
the technology available in new MY 2014 HD pickups and vans to specify preexisting technology content to be included in the analysis fleet (the fleet of vehicles used as a starting point for analysis) extending through MY 2030
the estimated effectiveness, cost, applicability, and availability of technologies for HD pickup and vans
manufacturers' ability to use credit carry-forward
the levels of technology that are projected to be added to the analysis fleet through MY 2030 considering improvements needed in order to achieve compliance with the Phase 1 standards (thus defining the reference fleet - i.e., under the No-Action Alternative -- relative to which to measure incremental impacts of Phase 2 standards), and
the levels of technology that are projected to be added to the analysis fleet through MY2030 considering further improvements needed in order to achieve compliance with standards defining each regulatory (action) alternative for Phase 2.
Based on this analysis, EPA is proposing CO2 attribute-based target standards shown in Figure VI-3 and Figure VI-4, and NHTSA is proposing the equivalent attribute-based fuel consumption target standards, also shown in Figure VI-3 and Figure VI-4, applicable in model year 2021-2027.  As shown in these tables, these standards would be phased in year-by-year commencing in MY 2021.  The agencies are not proposing to change the standards for 2018-2020 and therefore the standards would remain stable at the MY 2018 Phase 1 levels for MYs 2019 and 2020.  EISA requires four years of lead-time and three years stability for NHTSA standards and this period of lead-time and stability for 2018-2020 is consistent with the EISA requirements. For MYs 2021-2027, the agencies are proposing annual reductions in the standards as the primary phase-in of the Phase 2 standards.  The proposed standards become 16 percent more stringent overall between MY 2020 and MY 2027.  This approach to the Phase 2 standards as a whole can be considered a phase-in or implementation schedule of the proposed MY 2027 standards (which, as noted, would apply thereafter unless and until amended).
For EPA, Section 202(a) provides the Administrator with the authority to establish standards, and to revise those standards "from time to time," thus providing the Administrator with considerable discretion in deciding when to revise the Phase 1 MY 2018 standards.  EISA requires that NHTSA provide four full model years of regulatory lead time and three full model years of regulatory stability for its fuel economy standards.  49 U.S.C. 32902(k)(3).  Consistent with these authorities, the agencies are proposing more stringent standards beginning with MY 2021 that consider the level of technology we predict can be applied to new vehicles in the 2021 MY. EPA believes the proposed Phase 2 standards are consistent with CAA requirements regarding lead-time, reasonable cost, and feasibility, and safety.  Manufacturers in the HD pickup and van market segment have relatively few vehicle lines and redesign cycles are typically longer compared to light-duty vehicles.  Also, the timing of vehicle redesigns differs among manufacturers.  To provide lead time needed to accommodate these longer redesign cycles, the proposed Phase 2 GHG standards would not reach their highest stringency until 2027.  Although the proposed standards would become more stringent over time between MYs 2021 and 2027, the agencies expect manufacturers will likely strive to make improvements as part of planned redesigns, such that some model years will likely involve significant advances, while other model years will likely involve little change.  The agencies also expect manufacturers to use program flexibilities (e.g., credit carry-forward provisions and averaging, banking, and trading provisions) to help balance compliance costs over time (including by allowing needed changes to align with redesign schedules).  The agencies are proposing to provide stable standards in MYs 2019-2020 in order to provide necessary lead time for Phase 2.  However, for some manufacturers, the transition to the Phase 2 standards may begin earlier (e.g., as soon as MY 2017) depending on their vehicle redesign cycles.  Although standards are not proposed to change in MYs 2019-2020, manufacturers may introduce additional technologies in order to carry forward corresponding improvements and perhaps generate credits under the 5 year credit carry-forward provisions established in Phase 1 and proposed to continue for Phase 2.  Sections VI.C. and D below provides additional discussion of vehicle redesign cycles and the feasibility of the proposed standards.
While it is unlikely that there is a phase-in approach that would equally fit with all manufacturers' unique product redesign schedules, the agencies recognize that there are other ways the Phase 2 standards could be phased in and request comments on other possible approaches.  One alternative approach would be to phase in the standards in a few step changes, for example in MYs 2021, 2024 and 2027.  Under this example, if the step changes on the order of 5 percent, 10 percent, and 16 percent improvements from the MY 2020 baseline in MYs 2021, 2024 and 2027 respectively, the program would provide CO2 reductions and fuel improvements roughly equivalent to the proposed approach.  Among the factors the agencies would consider in assessing a different phase-in than that proposed would be impacts on lead time, feasibility, cost, CO2 reductions and fuel consumption improvements.  The agencies request that commenters consider all of these factors in their recommendations on phase-in.
As in Phase 1, the proposed Phase 2 standards would be met on a production-weighted fleet average basis.  No individual vehicle would have to meet a particular fleet average standard.  Nor would all manufacturers have to meet numerically identical fleet average requirement.  Rather, each manufacturer would have its own unique fleet average requirement based on the production- weighted average of the heavy duty pickups and vans it chooses to produce.  Moreover, averaging, banking, and trading provisions, just alluded to and discussed further below, would provide significant additional compliance flexibility in implementing the standards.  It is important to note, however, that while the standards would differ numerically from manufacturer to manufacturer, effective stringency should be essentially the same for each manufacturer.
Also, as with the Phase 1 standards, the agencies are proposing separate Phase 2 targets for gasoline-fueled (and any other Otto-cycle) vehicles and diesel-fueled (and any other diesel-cycle) vehicles.  The targets would be used to determine the production-weighted fleet average standards that apply to the combined diesel and gasoline fleet of HD pickups and vans produced by a manufacturer in each model year.  The above-proposed stringency increase for Phase 2 applies equally to the separate gasoline and diesel targets.  The agencies considered different rates of increase for the gasoline and diesel targets in order to more equally balance compliance burdens across manufacturers with varying gasoline/diesel fleet mixes. However, at least among major HD pickup and van manufacturers, our analysis suggests limited potential for such optimization, especially considering uncertainties involved with manufacturers' future fleet mix.  The agencies have thus maintained the equivalent rates of stringency increase.  The agencies invite comment on this element.

Figure VI-3: EPA Proposed CO2 Target Standards and NHTSA Proposed Fuel Consumption Target Standards for Diesel HD Pickups and Vans

Figure VI-4: EPA Proposed CO2 Target Standards and NHTSA Proposed Fuel Consumption Target Standards for Gasoline HD Pickups and Vans

Described mathematically, EPA's and NHTSA's proposed target standards are defined by the following formulas:
EPA CO2 Target (g/mile) = [a x WF] + b
NHTSA Fuel Consumption Target (gallons/100 miles) =  [c x WF] + d
Where:
      WF = Work Factor = [0.75 x (Payload Capacity + xwd)] + [0.25 x Towing Capacity]
Payload Capacity = GVWR (lb)  -  Curb Weight (lb)
xwd = 500 lb if the vehicle is equipped with 4wd, otherwise equals 0 lb.
Towing Capacity = GCWR (lb)  -  GVWR (lb)
Coefficients a, b, c, and d are taken from Table VI-2.
Table VI-2 Proposed Phase 2 Coefficients for HD Pickup and Van Target Standards
                                Diesel Vehicles
Model Year
                                                                              a
                                                                              b
                                                                              c
                                                                              d
                                                                    2018-2020 a
                                                                         0.0416
                                                                            320
                                                                       0.000409
                                                                           3.14
                                                                           2021
                                                                         0.0406
                                                                            312
                                                                       0.000399
                                                                           3.06
                                                                           2022
                                                                         0.0395
                                                                            304
                                                                       0.000389
                                                                           2.98
                                                                           2023
                                                                         0.0386
                                                                            297
                                                                       0.000379
                                                                           2.91
                                                                           2024
                                                                         0.0376
                                                                            289
                                                                       0.000370
                                                                           2.84
                                                                           2025
                                                                         0.0367
                                                                            282
                                                                       0.000360
                                                                           2.77
                                                                           2026
                                                                         0.0357
                                                                            275
                                                                       0.000351
                                                                           2.70
                                                                 2027 and later
                                                                         0.0348
                                                                            268
                                                                       0.000343
                                                                           2.63
                               Gasoline Vehicles
Model Year
                                                                              a
                                                                              b
                                                                              c
                                                                              d
                                                                    2018-2020 a
                                                                          0.044
                                                                            339
                                                                       0.000495
                                                                           3.81
                                                                           2021
                                                                         0.0429
                                                                            331
                                                                       0.000483
                                                                           3.71
                                                                           2022
                                                                         0.0418
                                                                            322
                                                                       0.000471
                                                                           3.62
                                                                           2023
                                                                         0.0408
                                                                            314
                                                                       0.000459
                                                                           3.53
                                                                           2024
                                                                         0.0398
                                                                            306
                                                                       0.000447
                                                                           3.44
                                                                           2025
                                                                         0.0388
                                                                            299
                                                                       0.000436
                                                                           3.36
                                                                           2026
                                                                         0.0378
                                                                            291
                                                                       0.000425
                                                                           3.27
                                                                 2027 and later
                                                                         0.0369
                                                                            284
                                                                       0.000415
                                                                           3.19
      [a] Phase 1 primary phase-in coefficients.  Alternative phase-in coefficients are different in MY2018 only.
As noted above, the standards are not proposed to change from the final Phase 1 standards for MYs 2018-2020.  The MY 2018-2020 standards are shown in the Figures and tables above for reference.
NHTSA and EPA have also analyzed regulatory alternatives to the proposed standards, as discussed in Sections VI.C and D and Section X. below.  The agencies request comments on all of the alternatives analyzed for the proposal, but request comments on Alternative 4 in particular.  The agencies believe Alternative 4 has the potential to be the maximum feasible alternative; however, based on the evidence currently before us, EPA and NHTSA have outstanding questions regarding relative risks and benefits of Alternative 4 due to the timeframe envisioned by that alternative.  Alternative 4 would provide less lead time for the complete phase-in of the proposed Phase 2 standards based on an annual improvement of 3.5 percent per year in MYs 2021-2025 compared to the proposed Alternative 3 per year improvement of 2.5 percent in MYs 2021-2027.  The CO2 and fuel consumption attribute-based target standards for the Alternative 4 phase-in are shown in Figure VI-5 and Figure VI-6 below.  As the target curves for Alternative 4 show in comparison to the target curves shown above for the proposed Alternative 3, the final Phase 2 standards would result in essentially the same level of stringency under either alternative.  However, the Phase 2 standards would be fully implemented two years earlier, in MY 2025, under Alternative 4.  The agencies are seriously considering whether this Alternative 4 (i.e., the proposed standards but with two years less lead-time) would be realistic and feasible, as described in Sections VI.C and D, Section X, and in the Draft RIA Chapter 11.  Alternative 4 is predicated on shortened lead time that would result in accelerated and in some cases higher adoption rates of the same technologies on which the proposed Alternative 3 is predicated.  The agencies request comments, data, and information that would help inform determination of the maximum feasible (for NHTSA) and appropriate (for EPA) stringency for HD pickups and vans and are particularly interested in information and data related to the expected adoption rates of different emerging technologies, such as mild and strong hybridization.

Figure VI-5: Alternative 4 EPA CO2 Target Standards and NHTSA Fuel Consumption Target Standards for Diesel HD Pickups and Vans

Figure VI-6: Alternative 4 EPA CO2 Target Standards and NHTSA Fuel Consumption Target Standards for Gasoline HD Pickups and Vans

As with Phase 1 standards, to calculate a manufacturer's HD pickup and van fleet average standard, the agencies are proposing that separate target curves be used for gasoline and diesel vehicles.  The agencies' proposed standards result in approximately 16 percent reductions in CO2 and fuel consumption for both diesel and gasoline vehicles relative to the MY 2018 Phase 1 standards for HD pickup trucks and vans.  These target reductions are based on the agencies' assessment of the feasibility of incorporating technologies (which differ for gasoline and diesel powertrains) in the 2021-2027 model years, and on the differences in relative efficiency in the current gasoline and diesel vehicles.
The agencies generally prefer to set standards that do not distinguish between fuel types where technological or market-based reasons do not strongly argue otherwise.  However, as with Phase 1, we continue to believe that fundamental differences between spark ignition and compression ignition engines warrant unique fuel standards, which is also important in ensuring that our program maintains product choices available to vehicle buyers.  In fact, gasoline and diesel fuel behave so differently in the internal combustion engine that they have historically required unique test procedures, emission control technologies and emission standards. These technological differences between gasoline and diesel engines for GHGs and fuel consumption exist presently and will continue to exist after Phase 1 and through Phase 2 until advanced research evolves the gasoline fueled engine to diesel-like efficiencies. This will require significant technological breakthroughs currently in early stages of research such as homogeneous charge compression ignition (HCCI) or similar concepts.  Because these technologies are still in the early research stages, we believe the proposed separate fuel type standards are appropriate in the timeframe of this rule to protect for the availability of both gasoline and diesel engines and will result in roughly equivalent redesign burdens for engines of both fuel types as evidenced by feasibility and cost analysis in RIA Chapter 10.  The agencies request comment on the level of stringency of the proposed standards, the continued separate targets for gasoline and diesel HD pickups and vans, and the continued use of the work-based attribute approach described above.
The proposed NHTSA fuel consumption target curves and the EPA GHG target curves are equivalent.  The agencies established the target curves using the direct relationship between fuel consumption and CO2 using conversion factors of 8,887 g CO2/gallon for gasoline and 10,180 g CO2/gallon for diesel fuel.
It is expected that measured performance values for CO2 will generally be equivalent to fuel consumption.  However, Phase 1 established a provision that EPA is not proposing to change for Phase 2 that allows manufacturers, if they choose, to use CO2 credits to help demonstrate compliance with N2O and CH4 emissions standards, by expressing any N2O and CH4 under compliance in terms of their CO2-equivalent and applying CO2 credits as needed.  For test families that do not use this compliance alternative, the measured performance values for CO2 and fuel consumption will be equivalent because the same test runs and measurement data will be used to determine both values, and calculated fuel consumption will be based on the same conversion factors that are used to establish the relationship between the CO2 and fuel consumption target curves (8,887 g CO2/gallon for gasoline and 10,180 g CO2/gallon for diesel fuel).  For manufacturers that choose to use the EPA provision for CO2 credit use in demonstrating N2O and CH4 compliance, compliance with the CO2 standard will not be directly equivalent to compliance with the NHTSA fuel consumption standard.
What Are the HD Pickup and Van Test Cycles and Procedures
The Phase 1 program established testing procedures for HD pickups and vans and NHTSA and EPA are not proposing to change these testing protocols.  The vehicles would continue to be tested using the same heavy-duty chassis test procedures currently used by EPA for measuring criteria pollutant emissions from these vehicles, but with the addition of the highway fuel economy test cycle (HFET).  These test procedures are used by manufacturers for certification and emissions compliance demonstrations and by the agencies for compliance verification and enforcement.  Although the highway cycle driving pattern is identical to that of the light-duty test, other test parameters for running the HFET, such as test vehicle loaded weight, are identical to those used in running the current EPA Federal Test Procedure for complete heavy-duty vehicles. Please see Section II.C (2) of the Phase 1 preamble (76 FR 57166) for a discussion of how HD pickups and vans would be tested.
One item that the agencies are considering to change is how vehicles are categorized into test weight bins.  Under the current test procedures, vehicles are tested at 500 lb increments of inertial weight classes when testing at or above 5500 lbs test weight.  For example, all vehicles having a calculated test weight basis of 11,251 to 11,750 pounds would be tested 11,500 pounds (i.e., the midpoint of the range).  However, for some vehicles, the existence of these bins and the large intervals between bins may reduce or eliminate the incentive for mass reduction for some vehicles, as a vehicle may require significant mass reduction before it could switch from one test weight bin to the next lower bin.  For other vehicles, these bins may unduly reward relatively small reductions of vehicle mass, as a vehicle's mass may be only slightly greater than that needed to be assigned a 500-pound lighter inertia weight class.  For example, for a vehicle with a calculated test weight basis of 11,700 pounds, a manufacturer would receive no regulatory benefit for reducing the vehicle weight by 400 pounds, because the vehicle would stay within the same weight bracket.  The agencies do recognize that the test weight bins allow for some reduction in testing burden as many vehicles can be grouped together under a single test.  For Phase 2, the agencies seek comment on whether the test weight bins should be changed in order to allow for more realistic testing of HD pickups and vans and better capture of the improvements due to mass reduction.  Some example changes could include reducing the five hundred pound interval between bins to smaller intervals similar to those allowed for vehicles tested below 5,500 lbs. test weight, or allowing any test weight value that is not fixed to a particular test weight bin.  The latter scenario would still allow some grouping of vehicles to reduce test burden, and the agencies also seek comment on how vehicles would be grouped and how the test weight of this group of vehicles should be selected.
We further seek comment as to whether there may be a more appropriate method such as allowing analytical adjustment of the CO2 levels and fuel consumption within a vehicle weight class to more precisely account for the individual vehicle models performance.  For example, could an equation like the one specified in 40 CFR 1037.104(g) for analytically adjusting CO2 emissions be used.  The agencies are specifically considering an approach in which vehicles are tested in the same way with the same test weights, but manufacturers have the option to either accept the emission results as provided under the current regulations, or choose to adjust the emissions based on the actual test weight basis (actual curb plus half payload) instead of the equivalent test weight for the 500 test weight interval.  Should the agencies finalize this as an option, manufacturers choosing to adjust their emissions would be required to do so for all of their vehicles, and not just for those with test weights below the midpoint of the range.
Fleet Average Standards
NHTSA and EPA are proposing to retain the fleet average standards approach finalized in the Phase 1 rule and structurally similar to light-duty Corporate Average Fuel Economy (CAFE) and GHG standards.  The fleet average standard for a manufacturer is a production-weighted average of the work factor-based targets assigned to unique vehicle configurations within each model type produced by the manufacturer in a model year.  Each manufacturer would continue to have an average GHG requirement and an average fuel consumption requirement unique to its new HD pickup and van fleet in each model year, depending on the characteristics (payload, towing, and drive type) of the vehicle models produced by that manufacturer, and on the U.S.-directed production volume of each of those models in that model year.  Vehicle models with larger payload/towing capacities and/or four-wheel drive have individual targets at numerically higher CO2 and fuel consumption levels than less capable vehicles, as discussed in Section VI.B(1).
The fleet average standard with which the manufacturer must comply would continue to be based on its final production figures for the model year, and thus a final assessment of compliance would occur after production for the model year ends.  The assessment of compliance also must consider the manufacturer's use of carry-forward and carry-back credit provisions included in the averaging, banking, and trading program.  Because compliance with the fleet average standards depends on actual test group production volumes, it is not possible to determine compliance at the time the manufacturer applies for and receives an (initial) EPA certificate of conformity for a test group.  Instead, at certification the manufacturer would demonstrate a level of performance for vehicles in the test group, and make a good faith demonstration that its fleet, regrouped by unique vehicle configurations within each model type, is expected to comply with its fleet average standard when the model year is over.  EPA will issue a certificate for the vehicles covered by the test group based on this demonstration, and will include a condition in the certificate that if the manufacturer does not comply with the fleet average, then production vehicles from that test group will be treated as not covered by the certificate to the extent needed to bring the manufacturer's fleet average into compliance.  As in the parallel program for light-duty vehicles, additional "model type" testing will be conducted by the manufacturer over the course of the model year to supplement the initial test group data.  The emissions and fuel consumption levels of the test vehicles will be used to calculate the production-weighted fleet averages for the manufacturer, after application of the appropriate deterioration factor to each result to obtain a full useful life value.  Please see Section II.C (3)(a) of the Phase 1 preamble (76 FR 57167) for further discussion of the fleet average approach for HD pickups and vans.
In-use Standards
  Section 202(a)(1) of the CAA specifies that EPA set emissions standards that are applicable for the useful life of the vehicle.  EPA is proposing to continue the in-use standards approach for individual vehicles that EPA finalized for the Phase 1 program. NHTSA did not adopt Phase 1 in-use standards and is not proposing in-use standards for Phase 2.  For the EPA program, compliance with the in-use standard for individual vehicles and vehicle models does not impact compliance with the fleet average standard, which will be based on the production-weighted average of the new vehicles.  Vehicles that fail to meet their in-use emission standards would be subject to recall to correct the noncompliance.
As with Phase 1, EPA proposes that the in-use Phase 2 standards for HD pickups and vans be established by adding an adjustment factor to the full useful life emissions used to calculate the GHG fleet average.  EPA proposes that each model's in-use CO2 standard be the model-specific level used in calculating the fleet average, plus 10 percent.  No adverse comments were received on this provision during the Phase 1 rulemaking.  Please see Section II.C (3)(b) of the Phase 1 preamble (76 FR 57167) for further discussion of in-use standards for HD pickups and vans.
For Phase 1, EPA aligned the useful life for GHG emissions with the useful life that was in place for criteria pollutants: 11 years or 120,000 miles, whichever occurs first (40 CFR 86.1805-04(a)).  Since the Phase 1 rule was finalized, EPA updated the useful life for criteria pollutants as part of the Tier 3 rulemaking.  The new useful life implemented for Tier 3 is 150,000 miles or 15 years, whichever occurs first.  EPA proposes that the useful life for GHG emissions also be updated to 150,000 miles/15 years starting in MY 2021 when the Phase 2 standards begin so that the useful life remains aligned for GHG and criteria pollutant standards long term.  With the relatively flat deterioration generally associated with CO2 and the proposed in-use standard adjustment factor discussed above, EPA does not believe the proposed change in useful life would significantly affect the feasibility of the proposed Phase 2 standards.   EPA requests comments on the proposed change to useful life.
Other GHG Standards for HD Pickups and Vans
This section addresses greenhouse gases other than CO2.  Note that since these are greenhouse gases not directly related to fuel consumption, NHTSA does not have equivalent standards.
Nitrous Oxide (N2O) and Methane (CH4)
In the Phase 1 rule, EPA established emissions standards for HD pickups and vans for both nitrous oxide (N2O) and methane (CH4).  Similar to the CO2 standard approach, the N2O and CH4 emission levels of a vehicle are based on a composite of the light-duty FTP and HFET cycles with the same 55 percent city weighting and 45 percent highway weighting.  The N2O and CH4 standards were both set by EPA at 0.05 g/mile. Unlike the CO2 standards, averaging between vehicles is not allowed.  The standards are designed to prevent increases in N2O and CH4 emissions from current levels, i.e., a no-backsliding standard.  EPA is not proposing to change the N2O or CH4 standards or related provisions established in the Phase 1 rule. Please see Phase 1 preamble Section II.E. (76 FR 57188-57193) for additional discussion of N2O and CH4 emissions and standards.
Across both current gasoline- and diesel-fueled heavy-duty vehicle designs, emissions of CH4 and N2O are relatively low and the intent of the cap standards is to ensure that future vehicle technologies or fuels do not result in an increase in these emissions.  Given the global warning potential (GWP) of CH4, the 0.05 g/mile cap standard is equivalent to about 1.25 g/mile CO2, which is much less than 1 percent of the overall GHG emissions of most HD pickups and vans.  The effectiveness of oxidation of CH4 using a three-way or diesel oxidation catalyst is limited by the activation energy, which tends to be higher where the number of carbon atoms in the hydrocarbon molecule is low and thus CH4 is very stable.  At this time we are not aware of any technologies beyond the already present catalyst systems which are highly effective at oxidizing most hydrocarbon species for gasoline and diesel fueled engines that would further lower the activation energy across the catalyst or increase the energy content of the exhaust (without further increasing fuel consumption and CO2 emissions) to further reduce CH4 emissions at the tailpipe.  We note that we are not aware of any new technologies that would allow us to adopt more stringent CH4 and N2O standards at this time.  The CH4 standard remains an important backstop to prevent future increases in CH4 emissions.
N2O is emitted from gasoline and diesel vehicles mainly during specific catalyst temperature conditions conducive to N2O formation.  The 0.05 g/mile standard, which translates to a CO2-equivalent value of 14.9 g/mile, ensures that systems are not designed in a way that emphasizes efficient NOx control while allowing the formation of significant quantities of N2O.  The Phase 1 N2O standard of 0.05 g/mile for pickups and vans was finalized knowing that it is more stringent than the Phase 1 N2O engine standard of 0.10 g/hp-hr, currently being revaluated as discussed in Section II.D.3.  EPA continues to believe that the 0.05 g/mile standard provides the necessary assurance that N2O will not significantly increase, given the mix of gasoline and diesel fueled engines in this market and the upcoming implementation of the light-duty and heavy-duty (up to 14,000 lbs. GVWR) Tier 3 NOx standards.  EPA knows of no technologies that would lower N2O emissions beyond the control provided by the precise emissions control systems already being implemented to meet EPA's criteria pollutant standards.  Therefore, EPA continues to believe the 0.05 g/mile N2O standard remains appropriate.
If a manufacturer is unable to meet the N2O or CH4 cap standards, the EPA program allows the manufacturer to comply using CO2 credits.  In other words, a manufacturer may offset any N2O or CH4 emissions above the standard by taking steps to further reduce CO2.  A manufacturer choosing this option would use GWPs to convert its measured N2O and CH4 test results that are in excess of the applicable standards into CO2eq to determine the amount of CO2 credits required.  For example, a manufacturer would use 25 Mg of positive CO2 credits to offset 1 Mg of negative CH4 credits or use 298 Mg of positive CO2 credits to offset 1 Mg of negative N2O credits.  By using the GWP of N2O and CH4, the approach recognizes the inter-correlation of these compounds in impacting global warming and is environmentally neutral for demonstrating compliance with the individual emissions caps.  Because fuel conversion manufacturers certifying under 40 CFR Part 85, subpart F do not participate in ABT programs, EPA included in the Phase 1 rule a compliance option for fuel conversion manufacturers to comply with the N2O and CH4 standards that is similar to the credit program described above.  See 76 FR 57192/3.  The compliance option will allow conversion manufacturers, on an individual engine family basis, to convert CO2 over compliance into CO2 equivalents of N2O and/or CH4 that can be subtracted from the CH4 and N2O measured values to demonstrate compliance with CH4 and/or N2O standards.  EPA did not include similar provisions allowing over compliance with the N2O or CH4 standards to serve as a means to generate CO2 credits because the CH4 and N2O standards are cap standards representing levels that all but the worst vehicles should already be well below.  Allowing credit generation against such cap standard would provide a windfall credit without any true GHG reduction.  EPA proposes to maintain these provisions for Phase 2 as they provide important flexibility without reducing the overall GHG benefits of the program.
EPA is requesting comment on updating GWPs used in the calculation of credits discussed above.  Please see the full discussion of this issue and request for comments provided in Sections II.D and XI.D.
Air Conditioning Related Emissions
Air conditioning systems contribute to GHG emissions in two ways  -  direct emissions through refrigerant leakage and indirect exhaust emissions due to the extra load on the vehicle's engine to provide power to the air conditioning system.  HFC refrigerants, which are powerful GHG pollutants, can leak from the A/C system.  This includes the direct leakage of refrigerant as well as the subsequent leakage associated with maintenance and servicing, and with disposal at the end of the vehicle's life.  Currently, the most commonly used refrigerant in automotive applications  -  R134a, has a high GWP. Due to the high GWP of R134a, a small leakage of the refrigerant has a much greater global warming impact than a similar amount of emissions of CO2 or other mobile source GHGs.
In Phase 1, EPA finalized low leakage requirement for all air conditioning systems installed in 2014 model year and later HDVs, with the exception of Class 2b-8 vocational vehicles. As discussed in Section V.B.3, EPA is proposing to extend leakage standards to vocational vehicles for Phase 2.  For air conditioning systems with a refrigerant capacity greater than 733 grams, EPA finalized a leakage standard which is a "percent refrigerant leakage per year" to assure that high-quality, low-leakage components are used in each air conditioning system design.  EPA finalized a standard of 1.50 percent leakage per year for heavy-duty pickup trucks and vans and Class 7 and 8 tractors.  See Section II.E.5. of the Phase 1 preamble (76 FR 57194-57195) for further discussion of the A/C leakage standard.
 In addition to use of leak-tight components in air conditioning system design, manufacturers could also decrease the global warming impact of leakage emissions by adopting systems that use alternative, lower global warming potential (GWP) refrigerants, to replace the refrigerant most commonly used today, HFC-134a (R-134a).  The potential use of alternative refrigerants in HD vehicles and EPA's proposed revisions to 40 CFR 1037.115 so that use of certain lower GWP refrigerants would cause an air conditioning system in a HD vehicle to be deemed to comply with the low leakage standard is discussed in Section I.F. above.
In addition to direct emissions from refrigerant leakage, air conditioning systems also create indirect exhaust emissions due to the extra load on the vehicle's engine to provide power to the air conditioning system.  These indirect emissions are in the form of the additional CO2 emitted from the engine when A/C is being used due to the added loads.  Unlike direct emissions which tend to be a set annual leak rate not directly tied to usage, indirect emissions are fully a function of A/C usage.  These indirect CO2 emissions are associated with air conditioner efficiency, since (as just noted) air conditioners create load on the engine.  See 74 FR 49529.  In Phase 1, the agencies did not set air conditioning efficiency standards for vocational vehicles, combination tractors, or heavy-duty pickup trucks and vans.  The CO2 emissions due to air conditioning systems in these heavy-duty vehicles were estimated to be minimal compared to their overall emissions of CO2.  This continues to be the case.  For this reason, EPA is not proposing to establish standards for A/C efficiency for Phase 2.
NHTSA and EPA request comments on all aspects of the proposed HD pickup and van standards and program elements described in this section.
Feasibility of Pickup and Van Standards
EPCA and EISA require NHTSA to "implement a commercial medium- and heavy-duty on-highway vehicle and work truck fuel efficiency improvement program designed to achieve the maximum feasible improvement" and to establish corresponding fuel consumption standards "that are appropriate, cost-effective, and technologically feasible."  Section 202 (a) (1) and (2) of the Clean Air Act require EPA to establish standards for emissions of pollutants from new motor vehicles and engines which emissions cause or contribute to air pollution which may reasonably be anticipated to endanger public health or welfare, which include GHGs.  See section I.E. above. Under section 202 (a) (1) and (2), EPA considers such issues as technology effectiveness, its cost (both per vehicle, per manufacturer, and per consumer), the lead time necessary to implement the technology, and based on this the feasibility and practicability of potential standards; the impacts of potential standards on emissions reductions of both GHGs and non-GHG emissions; the impacts of standards on oil conservation and energy security; the impacts of standards on fuel savings by customers; the impacts of standards on the truck industry; other energy impacts; as well as other relevant factors such as impacts on safety.
As part of the feasibility analysis of potential standards for HD pickups and vans, the agencies have applied DOT's CAFE Compliance and Effects Modeling System (sometimes referred to as "the CAFE model" or "the Volpe model"), which DOT's Volpe National Transportation Systems Center (Volpe Center) developed, maintains, and applies to support NHTSA CAFE analyses and rulemakings.  The agencies used this model to determine the range of stringencies that might be achievable through the use of technology that is projected to be available in the Phase 2 time frame.  From these runs, the agencies identified the stringency level that would be technology-forcing (i.e. reflect levels of stringency based on performance of merging as well as currently available control technologies), but leave manufacturers the flexibility to adopt varying technology paths for compliance and allow adequate lead time to develop, test, and deploy the range of technologies.
As noted in Section I and discussed further below, the analysis considers two reference cases for HD pickups and vans, a flat baseline (designated Alternative 1a) where no improvements are modeled beyond those needed to meet Phase 1 standards and a dynamic baseline (designated Alternative 1b) where certain cost-effective technologies (i.e., those that payback within a 6 month period) are assumed to be applied by manufacturers to improve fuel efficiency beyond the Phase 1 requirements in the absence of new Phase 2 standards. NHTSA considered its primary analysis to be based on the more dynamic baseline whereas EPA considered both reference cases.  As shown below and in Sections VII through X, using the two different reference cases has little impact on the results of the analysis and would not lead to a different conclusion regarding the appropriateness of the proposed standards.  As such, the use of different reference cases corroborates the results of the overall analysis.
 The proposed phase-in schedule of reduction of 2.5 percent per year in fuel consumption and CO2 levels relative to the 2018 MY Phase 1 standard level, starting in MY 2021 and extending through MY 2027, was chosen to strike a balance between meaningful reductions in the early years and providing manufacturers with needed lead time via a gradually accelerating ramp-up of technology penetration.  By expressing the phase-in in terms of increasing year to year stringency for each manufacturer, while also providing for credit generation and use (including averaging, carry-forward, and carry-back), we believe our proposed program would afford manufacturers substantial flexibility to satisfy the proposed phase-in through a variety of pathways: the gradual application of technologies across the fleet, greater application levels on only a portion of the fleet, and a sufficiently broad set of available technologies to account for the variety of current technology deployment among manufacturers and the lowest-cost compliance paths available to each.
We decided to propose a phased implementation schedule that would be appropriate to accommodate manufacturers' redesign workload and product schedules, especially in light of this sector's limited product offerings and long product cycles.  We did not estimate the cost of implementing the proposed standards immediately in 2021 without a phase-in, but we qualitatively assessed it to be somewhat higher than the cost of the phase-in we are proposing, due to the workload and product cycle disruptions it could cause, and also due to manufacturers' resulting need to develop some of these technologies for heavy-duty applications sooner than or simultaneously with light-duty development efforts.  See 75 FR 25451/3 (May 7, 2010) (documenting types of drastic cost increases associated with trying to accelerate redesign schedules and concluding that "[w]e believe that it would be an inefficient use of societal resources to incur such costs when they can be obtained much more cost effectively just one year later").  On the other hand, waiting until 2027 before applying any new standards could miss the opportunity to achieve meaningful and cost-effective early reductions not requiring a major product redesign.
The agencies believe that Alternative 4 has the potential to be the maximum feasible alternative, however, the agencies are uncertain that the potential technologies and market penetration rates included in Alternative 4 are currently technologically feasible.  Alternative 4 would ultimately reach the same levels of stringency as Alternative 3, but would do so with less lead time.  This could require the application of a somewhat different (and possibly broader) application of the projected technologies depending on product redesign cycles.  We expect, in fact, that some of these technologies may well prove feasible and cost-effective in this timeframe, and may even become technologies of choice for individual manufacturers.
Additionally, Alternative 3 provides two more years of phase-in than Alternative 4, which eases compliance burden by having more vehicle redesigns and lower stringency during the phase-in period.  Historically, the vehicles in this segment are typically only redesigned every 6-10 years, so many of the vehicles may not even be redesigned during the timeframe of the stringency increase.  In this case, a manufacturer must either make up for any vehicle that falls short of its target through some combination of early compliance, overcompliance, credit carry-forward and carry-back, and redesigning vehicles more frequently.  Each of these will increase technology costs to the manufacturers and vehicle purchasers, and early redesigns will significantly increases capital costs and product development costs.  Also, the longer phase-in time for Alternative 3 means that any manufacturer will have a slightly lower target to meet from 2021-2026 than for the shorter phase-in of Alternative 4, though by 2027 the manufacturers will have the same target in either alternative.
Alternative 4 is projected to be met using a significantly higher degree of hybridization including the use of more strong hybrids, compared to the proposed preferred Alternative 3.  In order to comply with a 3.5 percent per year increase in stringency over MYs 2021-2025, manufacturers would need to adopt more technology compared to the 2.5 percent per year increase in stringency over MYs 2021-2027.  The two years of additional lead time provided by Alternative 3 to achieve the proposed final standards reduces the potential number of strong hybrids projected to be used by allowing for other more cost effective technologies to be more fully utilized across the fleet.  Alternative 4 is also projected to result in higher costs than the proposed Alternative 3.  The agencies' analysis is discussed in detail below.
In some cases, the model selects strong hybrids as a more cost effective technology over certain other technologies including stop-start and mild hybrid.  In other words, strong hybrids are not a technology of last resort in the analysis.  The agencies believe it is technologically feasible to apply hybridization to HD pick-ups and vans in the lead time provided.  However, strong hybrids present challenges in this market segment compared to light-duty where there are several strong hybrids already available.  The agencies do not believe that at this stage there is enough information about the viability of strong hybrid technology in this vehicle segment to assume that they can be a part of large-volume deployment strategies for regulated manufacturers.  For example, we believe that hybrid electric technology could provide significant GHG and fuel consumption benefits, but we recognize that there is uncertainty at this time over the real world effectiveness of these systems in HD pickups and vans, and over customer acceptance of the technology for vehicles with high GCWR towing large loads.  Further, the development, design, and tooling effort needed to apply this technology to a vehicle model is quite large, and might not be cost-effective due to the small sales volumes relative to the light-duty sector.  Additionally, the analysis does not project that engines would be down-sized in conjunction with hybridization for HD pick-ups and vans due to the importance pickup trucks buyers place on engine horsepower and torque necessary to meet towing objectives.  Therefore, with no change projected for engine size, the strong hybrid costs do not include costs for engine changes.  In light-duty, the use of smaller engines facilitates much of a hybrid's benefit.
Due to these considerations, the agencies have conducted a sensitivity analysis that is based on the use of no strong hybrids.  The results of the analysis are also discussed below.  The analysis indicates that there would be a technology pathway that would allow manufacturers to meet both the proposed preferred Alternatives 3 and Alternative 4 without the use of strong hybrids.  However, the analysis indicates that costs would be higher and the cost effectiveness would be lower under the no strong hybrid approach, especially for Alternative 4, which provides less lead time to manufacturers.
We also considered proposing less stringent standards under which manufacturers could comply by deploying a more limited set of technologies.  However, our assessment concluded with a high degree of confidence that the technologies on which the proposed standards are premised would be available at reasonable cost in the 2021-2027 timeframe, and that the phase-in and other flexibility provisions allow for their application in a very cost-effective manner, as discussed in this section below.
More difficult to characterize is the degree to which more or less stringent standards might be appropriate because of under- or over-estimating the costs or effectiveness of the technologies whose performance is the basis of the proposed standards.  For the most part, these technologies have not yet been applied to HD pickups and vans, even on a limited basis.  We are therefore relying to some degree on engineering judgment in predicting their effectiveness.  Even so, we believe that we have applied this judgment using the best information available, primarily from a NHTSA contracted study at SwRI and our recent rulemaking on light-duty vehicle GHGs and fuel economy, and have generated a robust set of effectiveness values. Chapter 10 of the draft RIA provides a detailed description of the CAFE Model and the analysis performed for the proposal.
Regulatory Alternatives Considered by the Agencies
As discussed above, the agencies are proposing standards defined by fuel consumption and GHG targets that continue through model year 2020 unchanged from model year 2018, and then increase in stringency at an annual rate of 2.5 percent through model year 2027.  In addition to this regulatory alternative, the agencies also considered a no-action alternative under which standards remain unchanged after model year 2018, as well as three other alternatives, defined by annual stringency increases of 2.0 percent, 3.5 percent, and 4.0 percent during 2021-2025.  For each of the "action alternatives" (i.e., those involving stringency increases beyond the no-action alternative), the annual stringency increases are applied as follows:  An annual stringency increase of r is applied by multiplying the model year 2020 target functions (identical to those applicable to model year 2018) by 1  -  r to define the model year 2021 target functions, multiplying the model year 2021 target functions by 1  -  r to define the model year 2022 target functions, continuing through 2025 for all alternatives except for the preferred Alternative 3 which extends through 2027.  In summary, the agencies have considered the following five regulatory alternatives in Table VI-3.
                      Table VI-3 Regulatory Alternatives
Regulatory Alternative
                          Annual Stringency Increase

                                   2019-2020
                                   2021-2025
                                   2026-2027
1: No Action
                                     None
                                     None
                                     None
2: 2.0%/y
                                     None
                                     2.0%
                                     None
3: 2.5%/y
                                     None
                                     2.5%
                                     2.5%
4: 3.5%/y
                                     None
                                     3.5%
                                     None
5: 4.0%/y
                                     None
                                     4.0%
                                     None

DOT CAFE Model
DOT developed the CAFE model in 2002 to support the 2003 issuance of CAFE standards for MYs 2005-2007 light trucks.  DOT has since significantly expanded and refined the model, and has applied the model to support every ensuing CAFE rulemaking for both light-duty and heavy-duty.  For this analysis, the model was reconfigured to use the work based attribute metric of "work factor" established in the Phase 1 rule instead of the light duty "footprint" attribute metric.
Although the CAFE model can also be used for more aggregated analysis (e.g., involving "representative vehicles", single-year snapshots, etc.), NHTSA designed the model with a view toward (a) detailed simulation of manufacturers' potential actions given a defined set of standards, followed by (b) calculation of resultant impacts and economic costs and benefits.  The model is intended to describe actions manufacturers could take in light of defined standards and other input assumptions and estimates, not to predict actions manufacturers will take in light of competing product and market interests (e.g. engine power, customer features, technology acceptance, etc.).
For this rule, the agencies conducted coordinated and complementary analyses using two analytical methods for the heavy-duty pick up and van segment by employing both DOT's CAFE model and EPA's MOVES model.  The agencies used EPA's MOVES model to estimate fuel consumption and emissions impacts for tractor-trailers (including the engine that powers the tractor), and vocational vehicles (including the engine that powers the vehicle).  Additional calculations were performed to determine corresponding monetized program costs and benefits.  For heavy-duty pickups and vans, the agencies performed complementary analyses, which we refer to as "Method A" and "Method B".  In Method A, the CAFE model was used to project a pathway the industry could use to comply with each regulatory alternative and the estimated effects on fuel consumption, emissions, benefits and costs.  In Method B, the CAFE model was used to project a pathway the industry could use to comply with each regulatory alternative, along with resultant impacts on per vehicle costs, and the MOVES model was used to calculate corresponding changes in total fuel consumption and annual emissions.  Additional calculations were performed to determine corresponding monetized program costs and benefits.  NHTSA considered Method A as its central analysis and Method B as a supplemental analysis.  EPA considered the results of both methods.  The agencies concluded that both methods led the agencies to the same conclusions and the same selection of the proposed standards.  See Section VII for additional discussion of these two methods.
As a starting point, the model makes use of an input file defining the analysis fleet -- that is, a set of specific vehicle models (e.g., Ford F250) and model configurations (e.g., Ford F250 with 6.2-liter V8 engine, 4WD, and 6-speed manual transmission) estimated or assumed to be produced by each manufacturer in each model year to be included in the analysis.  The analysis fleet includes key engineering attributes (e.g., curb weight, payload and towing capacities, dimensions, presence of various fuel-saving technologies) of each vehicle model, engine, and transmissions, along with estimates or assumptions of future production volumes.  It also specifies the extent to which specific vehicle models share engines, transmissions, and vehicle platforms, and describes each manufacturer's estimated or assumed product cadence (i.e., timing for freshening and redesigning different vehicles and platforms).  This input file also specifies a payback period used to estimate the potential that each manufacturer might apply technology to improve fuel economy beyond levels required by standards.  The file used for this analysis was created from 2014 manufacturer compliance reports for the base sales and technology information, and a future fleet projection created from a combination of data from a sales forecast that the agencies purchased from IHS Automotive and total volumes class 2b and 3 fleet volumes from 2014 AEO Reference Case.  A complete description of the future fleet is available in Draft RIA Chapter 10.
A second input file to the model contains a variety of contextual estimates and assumptions.  Some of these inputs, such as future fuel prices and vehicle survival and mileage accumulation (versus vehicle age), are relevant to estimating manufacturers' potential application of fuel-saving technologies.  Some others, such as fuel density and carbon content, vehicular and upstream emission factors, the social cost of carbon dioxide emissions, and the discount rate, are relevant to calculating physical and economic impacts of manufacturers' application of fuel-saving technologies.
A third input file contains estimates and assumptions regarding the future applicability, availability, efficacy, and cost of various fuel-saving technologies.  Efficacy is expressed in terms of the percentage reduction in fuel consumption, cost is expressed in dollars, and both efficacy and cost are expressed on an incremental basis (i.e., estimates for more advanced technologies are specified as increments beyond less advanced technologies).  The input file also includes "synergy factors" used to make adjustments accounting for the potential that some combinations of technologies may result fuel savings or costs different from those indicated by incremental values.
Finally, a fourth model input file specifies standards to be evaluated.  Standards are defined on a year-by-year basis separately for each regulatory class (passenger cars, light trucks, and heavy-duty pickups and vans).  Regulatory alternatives are specified as discrete scenarios, with one scenario defining the no-action alternative or "baseline", all other scenarios defining regulatory alternatives to be evaluated relative to that no-action alternative.
Given these inputs, the model estimates each manufacturer's potential year-by-year application of fuel-saving technologies to each engine, transmission, and vehicle.  Subject to a range of engineering and planning-related constraints (e.g., secondary axle disconnect can't be applied to 2-wheel drive vehicles, many major technologies can only be applied practicably as part of a vehicle redesign, and applied technologies carry forward between model years), the model attempts to apply technology to each manufacturer's fleet in a manner that minimizes "effective costs" (accounting, in particular, for technology costs and avoided fuel outlays), continuing to add improvements as long as doing so would help toward compliance with specified standards or would produce fuel savings that "pay back" at least as quickly as specified in the input file mentioned above.
After estimating the extent to which each manufacturer might add fuel-saving technologies under each specified regulatory alternative, the model calculates a range of physical impacts, such as changes in highway travel (i.e., VMT), changes in fleetwide fuel consumption, changes in highway fatalities, and changes in vehicular and upstream greenhouse gas and criteria pollutant emissions.  The model also applies a variety of input estimates and assumptions to calculate economic costs and benefits to vehicle owners and society, based on these physical impacts.
Since the manufacturers of HD pickups and vans generally only have one basic pick-up truck and van with different versions ((i.e., different wheelbases, cab sizes, two-wheel drive, four-wheel drive, etc.) there exists less flexibility than in the light-duty fleet to coordinate model improvements over several years.  As such, the CAFE model allows changes to the HD pickups and vans to meet new standards according to predefined redesign cycles included as a model input.  As noted above, the opportunities for large-scale changes (e.g., new engines, transmission, vehicle body and mass) thus occur less frequently than in the light-duty fleet, typically at spans of eight or more years for this analysis.  However, opportunities for gradual improvements not necessarily linked to large scale changes can occur between the redesign cycles (i.e., model refresh).  Examples of such improvements are upgrades to an existing vehicle model's engine, transmission and aftertreatment systems.  Given the long redesign cycle used in this analysis and the understanding with respect to where the different manufacturers are in that cycle, the agencies have initially determined that the full implementation of the proposed standards would be feasible and appropriate by the 2027 model year.
This analysis reflects several changes made to the model since 2012, when NHTSA used the model to estimate the effects, costs, and benefits of final CAFE standards for light-duty vehicles produced during MYs 2017-2021, and augural standards for MYs 2022-2025.  Some of these changes specifically enable analysis of potential fuel consumption standards (and, hence, CO2 emissions standards harmonized with fuel consumption standards) for heavy-duty pickups and vans; other changes implement more general improvements to the model.  Key changes include the following:
   * Changes to accommodate standards for heavy-duty pickups and vans, including attribute-based standards involving targets that vary with "work factor".
   * Explicit calculation of test weight, taking into account test weight "bins" and differences in the definition of test weight for light-duty vehicles (curb weight plus 300 pound) and heavy-duty pickups and vans (average of GVWR and curb weight).
   * Procedures to estimate increases in payload when curb weight is reduced, increases in towing capacity if GVWR is reduced, and calculation procedures to correspondingly update calculated work factors.
   * Inclusion of technologies not included in prior analyses.
   * Changes to enable more explicit accounting for shared vehicle platforms and adoption and "inheritance" of major engine changes.
   *    Expansion of the Monte Carlo simulation procedures used to perform probabilistic uncertainty analysis.
   In addition to the inputs summarized above, the agencies' analysis of potential standards for HD pickups and vans makes use of a range of other estimates and assumptions specified as inputs to the CAFE modeling system.  Some significant inputs (e.g., estimates of future fuel prices) also applicable to other HD segments are discussed below in Section IX.  Others more specific to the analysis of HD pickups and vans are listed as follows, with additional details in section D:

   * Vehicle survival and mileage accumulation
   * VMT rebound
   * On-road "gap" in fuel consumption
   * Fleet population profile
   * Past fuel consumption levels
   * Long-term fuel consumption levels
   * Payback period
   * Coefficients for fatality calculations
   * Compliance credits carried-forward
   * Emission factors for non-CO2 emissions
   * Refueling time benefits
   * External Costs of travel
   * Ownership and operating costs

   The CAFE model and its modifications for this rulemaking are described in more detail in Section 0below as well as the Draft RIA Chapter 10.