to reduce the cost of renewable hydrogen

production by 80 percent to $1 per kilogram in one decade.\497\ The BIL
and IRA included funding for several hydrogen programs to accelerate
progress towards the Hydrogen Shot and jumpstart the hydrogen market in
the U.S.
---------------------------------------------------------------------------

    \497\ Satyapal, Sunita. ``2022 AMR Plenary Session''. U.S.
Department of Energy, Hydrogen and Fuel Cell Technologies Office.
June 6, 2022. Available online: https://www.energy.gov/sites/default/files/2022-06/hfto-amr-plenary-satyapal-2022-1.pdf.
---------------------------------------------------------------------------

    For example, the BIL requires development of a National Clean
Hydrogen Strategy and Roadmap. In September 2022, DOE released a draft
of a holistic plan that shows how low-GHG hydrogen can help reduce
emissions throughout the country by about 10 percent by 2050 relative
to 2005 levels.\498\ DRIA Chapter <IP_ADDRESS> further discusses DOE's
National Clean Hydrogen Strategy and Roadmap.
---------------------------------------------------------------------------

    \498\ U.S. Department of Energy. ``DOE National Clean Hydrogen
Strategy and Roadmap''. Draft September 2022. Available online:
https://www.hydrogen.energy.gov/pdfs/clean-hydrogen-strategy-roadmap.pdf.
---------------------------------------------------------------------------

    Recent analysis from ANL using BEAN includes a hydrogen price of
$4.37 per gallon diesel equivalent (gde) in 2030,\499\ which equates to
roughly $3.92 per kg hydrogen.500 501 This analysis was
published after the IRA was passed, and reflects a lower H2 price in
2030 than was in the previous year's analysis.\502\ This price is at
the low end of the range published in DOE's ``Pathways to Commercial
Liftoff'' report on Clean Hydrogen (``Liftoff Report''), which projects
that heavy-duty road transport can expect to pay a retail price of
between $4 and $5 per kg of hydrogen in 2030 if advances in
distribution and storage are commercialized.\503\ This price
incorporates BIL and IRA incentives for hydrogen.\504\ Other DOE
estimates prior to the IRA ranged from $6-$7 per kg in 2030, inclusive
of production, delivery, and dispensing, with the range representing
uncertainty in the assumed rate of technological
progress.505 506 507
---------------------------------------------------------------------------

    \499\ Islam, Ehsan Sabri, Ram Vijayagopal, Aymeric Rousseau. ``A
Comprehensive Simulation Study to Evaluate Future Vehicle Energy and
Cost Reduction Potential'', Report to the U.S. Department of Energy,
Contract ANL/ESD-22/6, October 2022. See Medium- and heavy-duty
vehicles (techno-economic analysis with BEAN). Available online:
https://vms.taps.anl.gov/research-highlights/u-s-doe-vto-hfto-r-d-benefits/.
    \500\ The conversion used was 1 gallon of diesel is equivalent
to 1.116 kg of hydrogen, based on a lower heating value.
    \501\ Hydrogen Tools ``Energy Equivalency of Fuels (LHV)''. U.S.
Department of Energy: Pacific Northwest National Laboratory.
Available online: https://h2tools.org/hyarc/hydrogen-data/energy-equivalency-fuels-lhv.
    \502\ Islam, Ehsan Sabri. Ram Vijayagopal, Ayman Moawad, Namdoo
Kim, Benjamin Dupont, Daniela Nieto Prada, Aymeric Rousseau, ``A
Detailed Vehicle Modeling & Simulation Study Quantifying Energy
Consumption and Cost Reduction of Advanced Vehicle Technologies
Through 2050,'' Report to the U.S. Department of Energy, Contract
ANL/ESD-21/10, October 2021. See previous reports and analysis:
2021. Available online: https://vms.taps.anl.gov/research-highlights/u-s-doe-vto-hfto-r-d-benefits/.
    \503\ U.S. Department of Energy. ``Pathways to Commercial
Liftoff: Clean Hydrogen''. March 2023. Available online: https://liftoff.energy.gov/wp-content/uploads/2023/03/20230320-Liftoff-Clean-H2-vPUB.pdf.
    \504\ The Liftoff Report and draft National Strategy say that
fuel cell trucks and buses can be one of the first new sectors to
adopt hydrogen because of a higher ``willingness to pay'' for fuel
(i.e., a threshold price at which they can remain competitive)
compared to other hard-to-decarbonize sectors like chemicals and
steel.
    \505\ Islam, Ehsan Sabri., Ram Vijayagopal, Ayman Moawad, Namdoo
Kim, Benjamin Dupont, Daniela Nieto Prada, Aymeric Rousseau, ``A
Detailed Vehicle Modeling & Simulation Study Quantifying Energy
Consumption and Cost Reduction of Advanced Vehicle Technologies
Through 2050,'' Report to the U.S. Department of Energy, Contract
ANL/ESD-21/10, October 2021. See previous reports and analysis:
2021. Available online: https://vms.taps.anl.gov/research-highlights/u-s-doe-vto-hfto-r-d-benefits/.
    \506\ Hunter, Chad, Michael Penev, Evan Reznicek, Jason
Lustbader, Alicia Birkby, and Chen Zhang. ``Spatial and Temporal
Analysis of the Total Cost of Ownership for Class 8 Tractors and
Class 4 Parcel Delivery Trucks''. National Renewable Energy Lab.
September 2021. Available online: https://www.nrel.gov/docs/fy21osti/71796.pdf.
    \507\ Ledna et al. ``Decarbonizing Medium- & Heavy-Duty On-Road
Vehicles: Zero-Emission Vehicles Cost Analysis''. U.S. Department of
Energy, National Renewable Energy Laboratory. March 2022. Available
online: https://www.nrel.gov/docs/fy22osti/82081.pdf.
---------------------------------------------------------------------------

    Other available estimates explore clean hydrogen production costs
alone. For example, Rhodium Group found a hydrogen producer price of
$0.39-1.92 per kg, including the IRA hydrogen production tax credit and
assuming the use of utility-scale solar to produce hydrogen.\508\
McKinsey projected green hydrogen costs of roughly $1.30-2.30 per kg in
2030, produced using alkaline electrolyzers. Their analysis did not
mention the IRA. It showed lower costs for blue and grey hydrogen in
2030 before green hydrogen out-competes both by around 2040.\509\ An
ICCT estimate of average hydrogen production costs in 2030 is closer to
$3.10 per kg, but their analysis did not consider IRA impacts.\510\
---------------------------------------------------------------------------

    \508\ Larsen, John et al. ``Assessing the Climate and Clean
Energy Provisions in the Inflation Reduction Act''. Rhodium Group.
August 12, 2022. Available online: https://rhg.com/research/climate-clean-energy-inflation-reduction-act/.
    \509\ Heid, Bernd et al. ``Five charts on hydrogen's role in a
net-zero future''. McKinsey Sustainability. October 25, 2022.
Available online: https://www.mckinsey.com/capabilities/sustainability/our-insights/five-charts-on-hydrogens-role-in-a-net-zero-future.
    \510\ Zhou, Yuanrong, et al. ``Current and future cost of e-
kerosene in the United States and Europe''. Working Paper 2022-14:
The International Council on Clean Transportation. March 2022.
Available online: https://theicct.org/wp-content/uploads/2022/02/fuels-us-europe-current-future-cost-ekerosene-us-europe-mar22.pdf.
---------------------------------------------------------------------------

    According to the Hydrogen Council, increasing the scale and rate of
use of hydrogen across sectors could substantially reduce the costs of
local distribution. As trucking capacity increases and the use, size,
and density of refueling stations increases, equipment manufacturing
costs could decline. For example, they suggest that 2020 distribution
costs of about $5-6 per kg could decline by approximately 80 percent to
get to $1-1.50 per kg in 2030.\511\ A 2018 DOE document details similar
opportunities to reach $2 per kg in distribution and dispensing costs.
In addition to learning and economies of scale associated with scaled
use, they suggest that potential research and development advancements
related to the efficiency and reliability of components could help meet
related DOE price targets.\512\
---------------------------------------------------------------------------

    \511\ Hydrogen Council. ``Path to hydrogen competitiveness: A
cost perspective''. January 20, 2020. Available online: https://hydrogencouncil.com/wp-content/uploads/2020/01/Path-to-Hydrogen-Competitiveness_Full-Study-1.pdf.
    \512\ Rustagi, Neha et al. Record 18003: ``Current Status of
Hydrogen Delivery and Dispensing Costs and Pathways to Future Cost
Reductions''. U.S. Department of Energy. December 17, 2018.
Available online: https://www.hydrogen.energy.gov/pdfs/18003_current_status_hydrogen_delivery_dispensing_costs.pdf.
---------------------------------------------------------------------------

    As further explained in DRIA Chapter <IP_ADDRESS>, for use in HD TRUCS,
we projected the future hydrogen prices shown in Table II-18 for 2027-
2030 and beyond. These values are based on ANL BEAN values and are in
line with price projections in DOE's Liftoff Report that consider the
impacts of BIL and IRA. We converted the $/kg estimates for 2025 and
2030 included in BEAN to dollar per kg by using the conversion factor
of 1 gallon of diesel is equivalent to 1.116 kg of hydrogen, based on
its lower heating value. We rounded up to the nearest $0.50 increment
given the uncertainty of projections, and then interpolated for 2027 to
2029. Prices for 2030 and beyond are held constant in BEAN and in HD
TRUCS.

            Table II-18--Price of Hydrogen for CYs 2027-2030+
                                 [2021$]
------------------------------------------------------------------------
                                                                2030 and
                                 2027       2028       2029      beyond
------------------------------------------------------------------------
$/kg H2.....................      6.10       5.40       4.70       4.00
------------------------------------------------------------------------

    We request comment on our approach and assessment of future fuel,
electricity, and hydrogen prices for the transportation sector.
6. Payback
    After assessing the suitability of the technology and costs
associated with ZEVs, a payback calculation was performed on each of
the 101 HD TRUCS vehicles for the BEV technology and FCEV technology
that we were considering for the technology packages for each use case
for each MY in the MY 2027-2032 timeframe. The payback period was
calculated by determining the number of years that it would take for
the annual operational savings of a ZEV to offset the incremental
upfront purchase price of a BEV or FCEV (after accounting for the IRA
section 13502 battery tax credit and IRA section 13403 vehicle tax
credit as described in DRIA Chapters <IP_ADDRESS> and <IP_ADDRESS>, respectively)
and charging infrastructure costs (for BEVs) when compared to
purchasing a comparable ICE vehicle. The ICE vehicle and ZEV costs
calculated include the retail price equivalent (RPE) multiplier of 1.42
to include both direct and indirect manufacturing costs, as discussed
further in DRIA Chapter 3. The operating costs include the diesel,
hydrogen or electricity costs, DEF costs, and the maintenance and
repair costs. The payback results are shown in Table 2-75 and Table 2-
76 for BEVs for MY 2027 and MY 2032, and in Table 2-77 for FCEVs for MY
2032 of DRIA Chapter 2.

F. Proposed Standards

    Similar to the approach we used to support the feasibility of the
HD GHG Phase 2 vehicle CO2 emission standards, we developed
technology packages that, on average, would meet each of the proposed
standards for each regulatory subcategory of vocational vehicles and
tractors after considering the various factors described in this
section, including technology costs for manufacturers and costs to
purchasers. We applied these technology packages to nationwide
production volumes to support the proposed Phase 3 GHG vehicle
standards. The technology packages utilize the averaging portion of the
longstanding ABT program, and we project manufacturers would produce a
mix of HD vehicles that utilize ICE-powered vehicle technologies and
ZEV technologies, with specific adoption rates for each regulatory
subcategory of vocational vehicles and tractors for each MY. Note that
we have analyzed a technology pathway to support the feasibility and
appropriateness of each proposed level of stringency for each proposed
standard, but manufacturers would be able to use a combination of HD
engine or vehicle GHG-reducing technologies, including zero-emission
and ICE technologies, to meet the standards.
    The proposed standards are shown in Table II-19 and Table II-20 for
vocational vehicles and Table II-21and Table II-22 for tractors. We
request comment and data on our proposal as well as comment and data
supporting more or less stringent HD vehicle GHG standards than those
proposed, as specified in Section II.H. We also request comment on
setting additional new HD vehicle GHG standards in MYs 2033 through
2035 that are more progressively stringent than the MY 2032 standards
and that either continue the approach and trajectory of the proposed
standards or utilize a different approach and trajectory that we
solicited comment on in this proposal.
    The approach we used to select the proposed standards, described in
this Section II, does not specifically include accounting for ZEV
adoption rates that would result from compliance with the California
ACT program. The approach we used developed ZEV technology adoption
rates on a nationwide basis. EPA granted the California ACT waiver
request on March 30, 2023, which did not allow sufficient time for us
to consider an alternative approach for this proposal. With the
granting of the California ACT waiver, we intend to consider for the
final rule how vehicles sold to meet the ACT requirement in California
and other states that may adopt it under CAA section 177 would impact
or be accounted for in the standard setting approach described in this
Section II. For example, we may adjust our reference case to reflect
the ZEV levels projected from ACT in California and other states. We
also may consider increasing the technology adoption rates in the
technology packages and correspondingly increase the stringency of the
proposed Phase 3 emission standards to account for the incremental
difference in the projected ZEV adoption levels from the proposed Phase
3 emission standards and the adoption levels projected from ACT in
those states. We welcome comment on how to consider this ACT in our
proposed approach or in other approaches.

              Table II-19--Proposed MY 2027 Through 2032+ Vocational Vehicle CO2 Emission Standards
                                                [Grams/ton-mile]
----------------------------------------------------------------------------------------------------------------
                                                       CI light    CI medium   CI heavy    SI light    SI medium
           Model year                 Subcategory        heavy       heavy       heavy       heavy       heavy
----------------------------------------------------------------------------------------------------------------
2027............................  Urban.............         294         213         232         340         252
                                  Multi-Purpose.....         257         190         193         299         223
                                  Regional..........         218         173         152         246         202
2028............................  Urban.............         275         209         228         321         248
                                  Multi-Purpose.....         238         186         189         280         219
                                  Regional..........         199         169         148         227         198
2029............................  Urban.............         255         202         225         301         241
                                  Multi-Purpose.....         218         179         186         260         212

                                  Regional..........         179         162         145         207         191
2030............................  Urban.............         238         195         200         284         234
                                  Multi-Purpose.....         201         172         161         243         205
                                  Regional..........         162         155         120         190         184
2031............................  Urban.............         219         188         193         265         227
                                  Multi-Purpose.....         182         165         154         224         198
                                  Regional..........         143         148         113         171         177
2032 and later..................  Urban.............         179         176         177         225         215
                                  Multi-Purpose.....         142         153         138         184         186
                                  Regional..........         103         136          97         131         165
----------------------------------------------------------------------------------------------------------------

  Table II-20--Proposed MY 2027 Through 2032+ Optional Custom Chassis Vocational Vehicle CO2 Emission Standards
                                                [Grams/ton-mile]
----------------------------------------------------------------------------------------------------------------
                                                                                MY 2032
   Optional custom chassis vehicle category      MY 2027    MY 2028    MY 2029    MY 2030    MY 2031   and later
----------------------------------------------------------------------------------------------------------------
School Bus....................................        190        182        176        168        163        149
Other Bus.....................................        286        269        255        237        220        189
Coach Bus.....................................        205        205        205        185        164        154
Refuse Hauler.................................        253        241        232        221        212        191
Concrete Mixer................................        259        250        240        231        224        205
Motor home....................................        226        226        226        226        226        226
Mixed-use vehicle.............................        316        316        316        316        316        316
Emergency vehicle.............................        319        319        319        319        319        319
----------------------------------------------------------------------------------------------------------------

                  Table II-21--Proposed MY 2027 Through MY 2032+ Tractor CO2 Emission Standards
                                                [Grams/ton-mile]
----------------------------------------------------------------------------------------------------------------
                                                                    Class 7 all     Class 8 day       Class 8
              Model year                       Roof height          cab styles          cab         sleeper cab
----------------------------------------------------------------------------------------------------------------
2027..................................  Low Roof................            86.6            66.1            64.1
                                        Mid Roof................            93.1            70.2            69.6
                                        High Roof...............            90.0            68.1            64.3
2028..................................  Low Roof................            84.7            64.6            64.1
                                        Mid Roof................            91.0            68.6            69.6
                                        High Roof...............            88.0            66.6            64.3
2029..................................  Low Roof................            81.8            62.4            64.1
                                        Mid Roof................            87.9            66.3            69.6
                                        High Roof...............            85.0            64.3            64.3
2030..................................  Low Roof................            77.0            58.7            57.7
                                        Mid Roof................            82.7            62.4            62.6
                                        High Roof...............            80.0            60.6            57.9
2031..................................  Low Roof................            67.3            51.4            51.3
                                        Mid Roof................            72.4            54.6            55.7
                                        High Roof...............            70.0            53.0            51.4
2032 and Later........................  Low Roof................            63.5            48.4            48.1
                                        Mid Roof................            68.2            51.5            52.2
                                        High Roof...............            66.0            50.0            48.2
----------------------------------------------------------------------------------------------------------------

  Table II-22--Proposed MY 2027 Through MY 2032+ Heavy-Haul Tractor CO2
                           Emission Standards
                            [Grams/ton-mile]
------------------------------------------------------------------------
                                                           CO2 emission
                       Model year                            standards

------------------------------------------------------------------------
2027....................................................            48.3
2028....................................................            48.3
2029....................................................            48.3
2030....................................................            43.0
2031....................................................            42.5
2032 and Later..........................................            41.1
------------------------------------------------------------------------

    We are proposing new CO2 emission standards using the
regulatory subcategories we adopted in HD GHG Phase 2, as discussed in
Section II.C. As we discuss later in this subsection, the fraction of
ZEVs and fraction of ICE vehicles in the technology packages varies
across the 101 HD TRUCS vehicle types and thus in the regulatory
subcategories. We recognize there may be different regulatory
structures that could be used to reduce GHG emissions from the HD
vehicles.

    During the development of this proposed action, EPA has heard
requests from several stakeholders that EPA consider establishing
CO2 standards for specific vehicle applications (e.g.,
school buses, urban buses, pick-up and delivery vehicles, drayage
trucks, etc.), as a complement to CO2 emission standards
that utilize the existing HD GHG Phase 2 program structure. There are
several reasons stakeholders have explained for asking EPA to consider
this approach. One reason is to target specific applications which may
be the most suited for more stringent CO2 standards at a
more rapid pace than a broader regulatory subcategory. For example, a
pick-up and delivery application may be more suitable for faster
adoption of BEV technology than the broader subcategory of medium
heavy-duty vocational vehicles. This approach could further support the
industry and marketplace focusing resources on specific applications in
the near term in response to more stringent EPA standards, rather than
potentially spreading those resources across a broader range of
products. Another reason some stakeholders suggested EPA consider an
application-specific approach would be to accelerate the deployment of
ZEVs that are concentrated in frontline communities to reduce air
pollution more quickly in those communities.
    We note the current HD GHG Phase 2 program structure includes
standards at broad vehicle subcategory levels (e.g., light heavy-duty
vocational vehicles, medium heavy-duty vocational vehicles, etc.) as
well as optional CO2 emission standards for seven specific
custom chassis applications (e.g., emergency vehicles, motor homes,
cement mixers, school buses). It is important to note the suggestions
from stakeholders for EPA to establish application-specific standards
for some heavy-duty vehicles to accelerate emission reductions in the
Phase 3 program are much different than the reasons EPA established the
HD GHG Phase 2 optional custom chassis standards. EPA established the
optional custom chassis program for a number of reasons, including: a
recognition there are manufacturers who produce specialized heavy-duty
vocational vehicles where some of the technologies EPA used for the
primary program standards would be unsuited for use, concern that the
primary program drive cycles are either unrepresentative or unsuitable
for certain specialized heavy-duty vocational vehicles, concern that
some manufacturers of these specialized vocational vehicles have
limited product offerings such that the primary program's emissions
averaging is not of practical value as a compliance flexibility, and
also concern regarding the appropriateness of the primary program's
vocational vehicle standards as applied to certain specialized/custom
vocational vehicles (See 81 FR 73531 and 81 FR 73686, October 25,
2016).
    Potential challenges EPA recognizes with an application-specific,
more stringent CO2 standard approach include determining
what criteria EPA would use to establish application-specific
standards, how such standards would fit in the overall Phase 3 program
structure, and the difficulty in defining some applications. For
example, a drayage truck in general can be any Class 8 tractor (both
sleeper cab and day cab) that is used to move shipping containers to
and from ports from other locations, including rail yards, shipping
terminals, or other destinations. A drayage tractor is not a unique
application nor do these tractors contain unique design features to
differentiate them from other tractors--nearly any tractor can be used
for drayage operation. Nevertheless, in consideration of potentially
targeting specific applications most suited for more stringent
CO2 standards at a more rapid pace than a broader regulatory
subcategory, EPA requests comment on a standards structure for Phase 3
which would establish unique, mandatory, application-specific standards
for some subset of heavy-duty vehicle applications. EPA requests
comment on what data, what program structure, what applications, and
what criteria EPA should consider for designing application-specific
standards. EPA also requests comment on how the application-specific
CO2 standards would interact with the broader Phase 3
program structure EPA has included in this proposal, including the
CO2 emissions averaging, banking, and trading program. For
example, if EPA were to separate these applications and apply more
stringent standards, EPA requests comment on whether emission credits
should be allowed to be averaged across the primary Phase 3 program and
the application specific standards, and if yes, what limits if any
should apply to those standards. Under this example, EPA may consider
that allowing credits to flow into an application-specific category
could undermine the reasons for establishing such a category (to
accelerate the application of technology and accelerate emission
reductions), while allowing credits generated within an application
specific category to flow into the primary program may provide
incentive for even greater reductions from the application-specific
category.
    To support that the proposed standards are achievable through the
technology pathway projected in the technology packages, the proposed
CO2 standards for each subcategory were determined in two
steps giving consideration to costs, lead time, and other factors, as
described in this section and Section II.G. First, we determined the
technology packages that include ZEVs and ICE vehicles with GHG-
reducing technologies for each of the vocational vehicle and tractor
subcategories as discussed in Section II.F.1. Then we determined the
numeric level of the proposed standards as discussed in Sections II.F.2
and II.F.3.
1. Technology Adoption Rates in the Technology Packages
    We based the proposed standards on technology packages that include
both ICE vehicle and ZEV technologies. In our analysis, the ICE
vehicles include a suite of technologies that represent a vehicle that
meets the existing MY 2027 Phase 2 CO2 emission standards.
These technologies exist today and continue to evolve to improve the
efficiency of the engine, transmission, drivetrain, aerodynamics, and
tire rolling resistance in HD vehicles and therefore reduce their
CO2 emissions. There also may be opportunity for further
adoption of these Phase 2 ICE technologies beyond the adoption rates
used in the HD GHG Phase 2 rule. In addition, the heavy-duty industry
continues to develop CO2-reducing technologies such as
hybrid powertrains and H2-ICE powered vehicles.
    In the transportation sector, new technology adoption rates often
follow an S-shape. As discussed in the preamble to the HD GHG Phase 2
final rule, the adoption rates for a specific technology are initially
slow, followed by a rapid adoption period, then leveling off as the
market saturates, and not always at 100 percent.\513\ For this
proposal, we developed a method to project adoption rates of BEVs and
FCEVs in the HD vehicle market after considering methods in the
literature. Our adoption function, and methods considered and explored
in the formulation of the method used in this proposal, are described
in DRIA Chapter 2.7.9. As stated there, given information currently
available and our experience with the HD vehicle industry, when
purchasing a new vehicle, we believe that the payback period is the
most

relevant metric to determine adoption rates in the HD vehicle industry.
---------------------------------------------------------------------------

    \513\ 81 FR 73558, Oct 25, 2016.
---------------------------------------------------------------------------

    The ZEV adoption rate schedule, shown in Table II-23, shows that
when the payback is immediate, we project up to 80 percent of a
manufacturer's fleet to be ZEV, with diminishing adoption as the
payback period increases.\514\ The schedule was used to assign ZEV
adoption rates to each of the 101 HD TRUCS vehicle types based on its
payback period for MYs 2027 and 2032.
---------------------------------------------------------------------------

    \514\ See DRIA Chapter 2.7.9 for additional information on the
development of the adoption rate schedule for the technology
packages for the proposed standards.
---------------------------------------------------------------------------

    We phased in the proposed standards gradually between MYs 2027 and
2032 to address potential lead time concerns associated with
feasibility for manufacturers to deploy ZEV technologies that include
consideration of time necessary to ramp up battery production,
including the need to increase the availability of critical raw
materials and expand battery production facilities, as discussed in
Section II.D.2.ii. We also phased in the proposed standards recognizing
that it will take time for installation of EVSE by the BEV purchasers.
We project BEV adoption as early as MY 2027, and we project adoption of
FCEVs in the technology packages starting in MY 2030 for select
applications that travel longer distances and/or carry heavier loads
(i.e., coach buses, heavy-haul tractors, sleeper cab tractors, and day
cab tractors). There has been only limited development of FCEVs for the
HD market to date, therefore our assessment is that it would be
appropriate to provide manufacturers with additional lead time to
design, develop, and manufacture FCEV models, but that it would be
feasible by MY 2030. With substantial Federal investment in low-GHG
hydrogen production (see DRIA Chapter 1.8.2), we anticipate that the
price of hydrogen fuel could drop enough by 2030 to make HD FCEVs cost-
competitive with comparable ICE vehicles for some duty cycles. We also
note that the hydrogen infrastructure is expected to need additional
time to further develop, as discussed in greater detail in DRIA Chapter
1.8, but we expect the refueling needs can be met by MY 2030. We also
recognize the impact regulations can have on technology and recharging/
refueling infrastructure development and deployment. Thus we request
comment and data on our proposed adoption rate, including schedule and
methods. We also request comment and data to support other adoption
rate schedules; see also Section II.H.

             Table II-23--Adoption Rate Schedule in HD TRUCS
------------------------------------------------------------------------
                                                              MY 2032
                                              MY 2027     adoption rates
              Payback (yr)                adoption rates   for BEVs and
                                           for BEVs (%)      FCEVs (%)
------------------------------------------------------------------------
<0......................................              80              80
0-1.....................................              55              55
1-2.....................................              32              45
2-4.....................................              18              35
4-7.....................................              13              25
7-10....................................              10              20
10-15...................................               5              15
>15.....................................               0               5
------------------------------------------------------------------------

    We applied an additional constraint within HD TRUCS that limited
the maximum penetration rate to 80 percent for any given vehicle type.
This conservative limit was developed after consideration of the actual
needs of the purchasers related to two primary areas of our analysis.
First, this 80 percent volume limit takes into account that we sized
the batteries, power electronics, e-motors, and infrastructure for each
vehicle type based on the 90th percentile of the average VMT. We
utilize this technical assessment approach because we do not expect
heavy-duty OEMs to design ZEV models for the 100th percentile VMT daily
use case for vehicle applications, as this could significantly increase
the ZEV powertrain size, weight, and costs for a ZEV application for
all users, when only a relatively small part of the market would need
such capabilities. Therefore, the ZEVs we analyzed and have used for
the feasibility and cost projections for this proposal are likely not
appropriate for 100 percent of the vehicle applications in the real-
world. Our second consideration for including an 80 percent volume
limit for ZEVs is that we recognize there is a wide variety of real-
world operation even for the same type of vehicle. For example, some
owners may not have the ability to install charging infrastructure at
their facility, or some vehicles may need to be operational 24 hours a
day. Under our proposed standards, ICE vehicles would continue to be
available to address these specific vehicle applications. We request
comment, data, and analysis on both of these considerations and our use
of an 80 percent volume limit. Our request for comment includes a
request for data to inform an assessment of the distribution of daily
miles traveled and the distribution of the number of hours available
daily to charge for each of the vehicle types that we could use to
update a constraint like this in the final rulemaking analysis.
    After the technology assessment, as described in Section II.D.4 and
DRIA Chapter 2, and payback analysis, as described in Section II.E.6
and DRIA Chapter 2.8.2, EPA determined the ICE vehicle and ZEV adoption
rates for each regulatory subcategory. We first determined the ZEV
adoption rates projected for each of the 101 vehicle types for MYs 2027
and 2032, which can be found in DRIA Chapter <IP_ADDRESS>. We then
aggregated the projected ZEV adoption rates for the specific vehicle
types into their respective regulatory subcategories relative to the
vehicle's sales weighting, as described in DRIA Chapter 2.9.1. The
resulting projected ZEV adoption rates (shown in Table II-24) and
projected ICE vehicle adoption rates that achieve a level of
CO2 emissions performance equal to the existing MY 2027
emission standards (shown in Table II-21) were built into our
technology packages. We request comment and data on our projected
adoption rates in the technology packages as well as data supporting
higher or lower adoption rates than the projected levels. We also
request comment on projecting adoption rates out through MY 2035.

                 Table II-24--Projected ZEV Adoption Rates for MYs 2027-2032 Technology Packages
----------------------------------------------------------------------------------------------------------------
      Regulatory subcategory        MY 2027 (%)  MY 2028 (%)  MY 2029 (%)  MY 2030 (%)  MY 2031 (%)  MY 2032 (%)
----------------------------------------------------------------------------------------------------------------
LHD Vocational....................           22           28           34           39           45           57
MHD Vocational....................           19           21           24           27           30           35
HHD Vocational....................           16           18           19           30           33           40
MHD All Cab and HHD Day Cab                  10           12           15           20           30           34
 Tractors.........................
Sleeper Cab Tractors..............            0            0            0           10           20           25
Heavy Haul Tractors...............            0            0            0           11           12           15

Optional Custom Chassis: School              30           33           35           38           40           45
 Bus..............................
Optional Custom Chassis: Other Bus            0            6           11           17           23           34
Optional Custom Chassis: Coach Bus            0            0            0           10           20           25
 \515\............................
Optional Custom Chassis: Refuse              15           19           22           26           29           36
 Hauler...........................
Optional Custom Chassis: Concrete            18           21           24           27           29           35
 Mixer............................
Optional Custom Chassis: Emergency            0            0            0            0            0            0
 Vehicles.........................
Optional Custom Chassis:                      0            0            0            0            0            0
 Recreational Vehicles............
Optional Custom Chassis: Mixed Use            0            0            0            0            0            0
----------------------------------------------------------------------------------------------------------------

   Table II-25--Projected Adoption Rates for MYs 2027-2032 ICE Vehicles With CO2-Reducing Technologies in the
                                               Technology Packages
----------------------------------------------------------------------------------------------------------------
      Regulatory subcategory        MY 2027 (%)  MY 2028 (%)  MY 2029 (%)  MY 2030 (%)  MY 2031 (%)  MY 2032 (%)
----------------------------------------------------------------------------------------------------------------
LHD Vocational....................           78           72           66           61           55           43
MHD Vocational....................           81           79           76           73           70           65
HHD Vocational....................           84           82           81           70           67           60
MHD All Cab and HHD Day Cab                  90           88           85           80           70           66
 Tractors.........................
Sleeper Cab Tractors..............          100          100          100           90           80           75
Heavy Haul Tractors...............          100          100          100           89           88           85
Optional Custom Chassis: School              70           67           65           62           60           55
 Bus..............................
Optional Custom Chassis: Other Bus          100           94           89           83           77           66
Optional Custom Chassis: Coach Bus          100          100          100           90           80           75
 \516\............................
Optional Custom Chassis: Refuse              85           81           78           74           71           64
 Hauler...........................
Optional Custom Chassis: Concrete            82           79           76           73           71           65
 Mixer............................
Optional Custom Chassis: Emergency          100          100          100          100          100          100
 Vehicles.........................
Optional Custom Chassis:                    100          100          100          100          100          100
 Recreational Vehicles............
Optional Custom Chassis: Mixed Use          100          100          100          100          100          100
----------------------------------------------------------------------------------------------------------------

2. Calculation of the Proposed Tractor Standards
---------------------------------------------------------------------------

    \515\ We are proposing to use the same adoption rates projected
for sleeper cab tractors, which are also projected to be FCEVs in
MYs 2030-2032.
    \516\ We are proposing to use the same adoption rates projected
for sleeper cab tractors, which are also projected to be FCEVs in
MYs 2030-2032.
---------------------------------------------------------------------------

    The proposed CO2 emission standards for the tractor
subcategories are calculated by determining the CO2
emissions from a technology package that consists of both ICE-powered
vehicles and ZEVs. The projected fraction of ZEVs that emit zero grams
CO2/ton-mile at the tailpipe are shown in Table II-24. The
remaining fraction of vehicles in the technology package are ICE-
powered vehicles that include the technologies listed in Table II-1
(reflecting the GEM inputs for the individual technologies that make up
the technology packages that meets the existing MY 2027 CO2
tractor emission standards). Thus, in the technology packages, the ICE-
powered vehicles emit at the applicable existing MY 2027 CO2
emission standards, as shown in Table II-26. We request comment on ICE
vehicle technologies that could support more stringent standards than
those proposed.
    The proposed CO2 emission standards for each model year
are calculated by multiplying the fraction of ICE-powered vehicles in
each technology package by the applicable existing MY 2027
CO2 emission standards. The proposed standards are presented
in Section II.F.

                     Table II-26--Existing MY 2027 and Later Tractor CO2 Emission Standards
                                                [Grams/ton-mile]
----------------------------------------------------------------------------------------------------------------
                                                    Class 7 All     Class 8 Day       Class 8
                                                    cab styles          cab         Sleeper cab     Heavy-haul
----------------------------------------------------------------------------------------------------------------
Low Roof........................................            96.2            73.4            64.1            48.3
Mid Roof........................................           103.4            78.0            69.6
High Roof.......................................           100.0            75.7            64.3
----------------------------------------------------------------------------------------------------------------

3. Calculation of the Proposed Standards for Vocational Vehicles
    The proposed CO2 emission standards for the vocational
vehicles regulatory subcategories are calculated by determining the
CO2 emissions from a technology package that consists of
both ICE-powered vehicles and ZEVs. The projected fraction of ZEVs that
emit zero grams CO2/ton-mile at the tailpipe are shown in
Table II-24. The remaining fraction of vehicles in the technology
package are ICE-powered vehicles that include the technologies listed
in Table II-2 (reflecting the GEM inputs for the individual
technologies that make up the technology packages that meets the
existing MY 2027 CO2 vocational vehicles emission
standards). We request comment on ICE vehicle technologies that could
support more stringent standards than those proposed.

    As discussed in Section II.C, vocational vehicle CO2
emission standards are subdivided by weight class, SI-powered or CI-
powered vehicles, and by operation. There are a total of 15 different
vocational vehicle standards in the primary program for each model
year, in addition to the optional custom chassis standards. The
existing MY 2027 vocational vehicle emission standards are shown in
Table II-27 (which, like tractors, are what the ICE-powered vehicles
emit at in the proposed technology packages). The HD GHG Phase 2
structure enables the technologies that perform best during urban
driving or the technologies that perform best at highway driving to
each be properly recognized over the appropriate drive cycles. The HD
GHG Phase 2 structure was developed recognizing that there is not a
single package of engine, transmission, and driveline technologies that
is suitable for all ICE-powered vocational vehicle applications. In
this proposal, we are continuing the current approach of deeming
tailpipe emissions of regulated GHG pollutants (including
CO2) to be zero from electric vehicles and hydrogen fuel
cell vehicles.\517\ Therefore, the need to recognize the variety in
vocational vehicle CO2 emissions may no longer be necessary
for ZEVs because ZEVs are deemed to have zero CO2 emissions.
Similarly, the existing SI and CI distinction within vocational vehicle
regulatory subcategory structure is not optimal for vocational ZEVs
because they cannot be technically described as either SI-powered or
CI-powered.
---------------------------------------------------------------------------

    \517\ See 40 CFR 1037.150(f) for our proposed interim provision
that CO2 emissions would be deemed to be zero, with no
CO2-related testing, for BEVs, FCEVs, and vehicles
powered by H2-ICE that solely use hydrogen fuel.

                Table II-27--Existing MY 2027 and Later Vocational Vehicle CO2 Emission Standards
                                                [Grams/ton-mile]
----------------------------------------------------------------------------------------------------------------
                                                   CI light    CI medium     CI heavy     SI light    SI medium
                                                    heavy        heavy        heavy        heavy        heavy
----------------------------------------------------------------------------------------------------------------
Urban..........................................          367          258          269          413          297
Multi-Purpose..................................          330          235          230          372          268
Regional.......................................          291          218          189          319          247
----------------------------------------------------------------------------------------------------------------
Optional Custom Chassis: School Bus............                                271
----------------------------------------------------------------------------------------------------------------
Optional Custom Chassis: Other Bus.............                                286
----------------------------------------------------------------------------------------------------------------
Optional Custom Chassis: Coach Bus.............                                205
----------------------------------------------------------------------------------------------------------------
Optional Custom Chassis: Refuse Hauler.........                                298
----------------------------------------------------------------------------------------------------------------
Optional Custom Chassis: Concrete Mixer........                                316
----------------------------------------------------------------------------------------------------------------
Optional Custom Chassis: Motor Home............                                226
----------------------------------------------------------------------------------------------------------------
Optional Custom Chassis: Mixed-Use Vehicle.....                                316
----------------------------------------------------------------------------------------------------------------
Optional Custom Chassis: Emergency Vehicle.....                                319
----------------------------------------------------------------------------------------------------------------

    Also discussed in Section II.C, the vehicle ABT program allows
credits to exchange with all vehicles within a weight class. ABT
CO2 emission credits are determined using the equation in 40
CFR 1037.705. The credits are calculated based on the difference
between the applicable standard for the vehicle and the vehicle's
family emission limit multiplied by the vehicle's regulatory payload
and useful life. For example, as shown in Table II-28, using the
existing light heavy-duty vocational vehicle MY 2027 CO2
emission standards, the amount of credit a ZEV would earn varies
between 124 Mg and 177 Mg, depending on the regulatory subcategory it
would be certified to. We recognize that in many cases it may not be
clear to the manufacturer whether to certify the vocational ZEV to a SI
or CI regulatory subcategory, i.e. for the manufacturer to know whether
the ZEV was purchased in lieu of a comparable CI-powered or SI-powered
vehicle. Furthermore, as just discussed, because ZEVs have zero
CO2vehicle exhaust emissions the programmatic basis for
requiring the manufacturer to differentiate the ZEVs by operation to
appropriately account for the variety of driveline configurations would
not exist, though the amount of credit the ZEV would earn would depend
on the regulatory subcategory selected for certification. In short, we
recognize the difficulties in, and consequences of, determining which
of the regulatory subcategories to which a ZEV should be certified
under the existing HD GHG Phase 2 emission standards' structure for
vocational vehicles. To address this concern, we are proposing a two-
step approach. First, we propose to revise the ABT credit calculation
regulations; this change would begin in MY 2027. Second, we derived the
proposed MY 2027 and later standards accounting for the proposed
changes to the ABT credit calculations. Note that BEVs, FCEVs, and H2-
ICE vehicles would still be able to be certified to the vocational
vehicle urban, multi-purpose, or regional standards or to the
applicable optional custom chassis standards.

   Table II--28 Example CO2 Emission Credit Calculations for Light Heavy-Duty (LHD) BEV/FCEVs by Regulatory Subcategory Based Off the Existing MY 2027
                                                                        standards
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                          SI LHD  multi-      SI LHD                      CI LHD  multi-      CI LHD
                                                           SI LHD urban       purpose        regional      CI LHD urban       purpose        regional
--------------------------------------------------------------------------------------------------------------------------------------------------------
Existing MY 2027 Standard (gCO2/ton-mile)...............             413             372             319             367             330             291
CO2 credit per BEV or FCEV (Mg).........................             177             159             136             157             141             124
--------------------------------------------------------------------------------------------------------------------------------------------------------

    EPA proposes to revise the definition of the variable ``Std'' in 40
CFR 1037.705 to establish a common reference emission standard for
vocational vehicles with tailpipe CO2 emissions deemed to be
zero (i.e., BEVs, FCEVs, and vehicles with engines fueled with pure
hydrogen).\518\ Beginning in MY 2027, manufacturers would use the
applicable Compression-Ignition Multi-Purpose (CI MP) standard for
their vehicle's corresponding weight class when calculating ABT
emission credits for vocational vehicles with tailpipe CO2
emissions deemed to be zero.\519\ We selected the CI MP standard
because it is the regulatory subcategory with the highest production
volume in MY 2021. We also recognize a need to balance two different
timing considerations concerning the potential impacts of this proposed
change. First, prior to the effective date of this proposed change,
there is a potential for manufacturers producing BEVs, FCEVs, and
certain H2-ICE vehicles to generate larger credits than they would
after this change, depending on the vocational vehicle subcategory to
which a vehicle is certified. Second, we recognize that manufacturers
develop their emissions compliance plans several years in advance to
manage their R&D and manufacturing investments. After taking these into
account, we propose that this regulation revision become effective
beginning in MY 2027 to provide manufacturers with sufficient time to
adjust their production plans, if necessary. We request comment on this
proposed revision.
---------------------------------------------------------------------------

    \518\ See the proposed updates to 40 CFR 1037.150(f).
    \519\ See 40 CFR 1037.105 for the compression-ignition multi-
purpose CO2 standards.
---------------------------------------------------------------------------

    Taking the proposed change to the ZEV ABT credit calculation into
account, if we calculated the proposed standards by multiplying the
fraction of ICE-powered vehicles in the technology package (by model
year) by the applicable existing MY 2027 CO2 emission
standards, like we did for tractors, then this would lead to a scenario
where it would take different levels of ZEV adoption rates to meet the
proposed standards in each regulatory subcategory than we included in
our assessment. Therefore, we used an alternate approach that maintains
the same level of ZEV adoption rates in each regulatory subcategory
within a weight class, taking the proposed change to the ZEV ABT credit
calculation into account. The equation for calculating the proposed MY
2032 vocational vehicle standards is shown in Equation II-1. This
equation is used to calculate the proposed standards for each
vocational vehicle regulatory subcategory, using the existing MY 2027
CI MP standard for each corresponding weight class (LH, MH, HH).
Equation II-2 through Equation II-4 show how the proposed Equation II-1
would be used for each regulatory subcategory for an example model year
(MY 2032). The existing MY 2027 standards can be found in Table II-27,
and the projected ZEV adoption rates by model year are in Table II-24.
The same equations were used for the proposed MY 2027 through 2031
standards but replacing the MY 2032 Standards and ZEV adoption rates
with values for the specific model year. The results of the
calculations for the MY 2032 LHD vocational vehicles are shown in Table
II-29. The calculations for the other model years and vocational
vehicle subcategories are shown in DRIA Chapter 2.9.

Equation II-1: Proposed Vocational Vehicle Standard Calculation

MY 2032 StdRegSubcat = Existing 2027
StdRegSubcat-(MY 2027 Existing CI MP StdRegSubcat
* MY 2032 ZEV%)

Equation II-2: Proposed Vocational Vehicle Standard Calculation Light
Heavy-Duty Regulatory Subcategories for MY 2032

MY 2032 StdRegSubcat = Existing 2027
StdRegSubcat-(330 g/mi * 57%)

Equation II-3: Proposed Vocational Vehicle Standard Calculation Medium
Heavy-Duty Regulatory Subcategories for MY 2032

MY 2032 StdRegSubcat = Existing 2027
StdRegSubcat-(235 g/mi * 35%)

Equation II-4: Proposed Vocational Vehicle Standard Calculation Heavy
Heavy-Duty Regulatory Subcategories for MY 2032

MY 2032 StdRegSubcat = Existing 2027 StdRegSubcat
- (230 g/mi * 40%)

                 Table II-29--Calculations of the Proposed MY 2032 CO2 Emission Standards for Light Heavy-Duty (LHD) Vocational Vehicles
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                          SI LHD  multi-      SI LHD                      CI LHD  multi-      CI LHD
                                                           SI LHD urban       purpose        regional      CI LHD urban       purpose        regional
--------------------------------------------------------------------------------------------------------------------------------------------------------
Existing MY 2027 Standard (gCO2/ton-mile)...............             413             372             319             367             330             291
ZEV Adoption Rate in Technology Package.................             57%             57%             57%             57%             57%             57%
Proposed CO2 Emission Standard (gCO2/ton-mile)..........             225             184             131             179             142             103
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The calculations for the other model years and vocational vehicle
subcategories are shown in DRIA Chapter 2.9. We welcome comment on this
approach to taking the proposed change to the ZEV ABT credit

calculation into account in setting vocational vehicle standards. We
also request comment alternatively on using the same approach for
vocational vehicles as we are proposing for tractors (see Section
II.F.2).
    After considering the potential concerns with ZEVs fitting into the
existing HD GHG Phase 2 vocational vehicle regulatory subcategories
structure, we are proposing to maintain the existing HD GHG Phase 2
vocational vehicle regulatory subcategories with the proposed changes
noted in this section. We request comment on possible alternative
vocational vehicle regulatory subcategory structures, such as reducing
the number of vocational vehicle subcategories to only include the
Multi-Purpose standards in each weight class, and/or maintaining Urban,
Multipurpose, and Regional but combining SI and CI into a standard for
each weight class.
    The HD GHG Phase 2 program includes optional custom chassis
emission standards for eight specific vehicle types. Those vehicle
types may either meet the primary vocational vehicle program standards
or, at the vehicle manufacturer's option, they may comply with these
optional standards. The existing optional custom chassis standards are
numerically less stringent than the primary HD GHG Phase 2 vocational
vehicle standards, but the ABT program is more restrictive for vehicles
certified to these optional standards. Banking and trading of credits
is not permitted, with the exception that small businesses that may use
traded credits to comply. Averaging is only allowed within each
subcategory for vehicles certified to these optional standards. If a
manufacturer wishes to generate tradeable credits from the production
of these vehicles, they may certify them to the primary vocational
vehicle standards.
    In this action, we are proposing to establish more stringent
standards for several, but not all, of these optional custom chassis
subcategories. We are proposing revised MY 2027 emission standards and
new MY 2028 through MY 2032 and later emission standards for the school
bus, other bus, coach bus, refuse hauler, and concrete mixer optional
custom chassis regulatory subcategories. We are not proposing any
changes to the existing ABT program restrictions for the optional
custom chassis regulatory subcategories. Because vehicles certified to
the optional custom chassis standards would continue to have restricted
credit use and can only be used for averaging within a specific custom
chassis regulatory subcategory, we do not have the same potential
credit concern as we do for the primary vocational vehicle standards.
Therefore, we determined the proposed optional custom chassis emission
standards by multiplying the fraction of ICE-powered vehicles in the
technology package (by model year) by the applicable existing MY 2027
CO2 emission standards, like we did for determining the
proposed tractor emission standards.
    We are not proposing new standards for motor homes certified to the
optional custom chassis regulatory subcategory because of the projected
impact of the weight of batteries in BEVs in the MYs 2027-2032, as
described in DRIA Chapter 2.8.1. Furthermore, we also are not proposing
new standards for emergency vehicles certified to the optional custom
chassis regulatory subcategory due to our assessment that these
vehicles have unpredictable operational requirements and may have
limited access to recharging facilities while handling emergency
situations in the MYs 2027-2032 timeframe. Finally, we are not
proposing new standards for mixed-use vehicle optional custom chassis
regulatory subcategory because these vehicles are designed to work
inherently in an off-road environment (such as hazardous material
equipment or off-road drill equipment) or be designed to operate at low
speeds such that it is unsuitable for normal highway operation and
therefore may have limited access to on-site depot or public charging
facilities in the MYs 2027-2032 timeframe.\520\ We do not have concerns
that manufacturers could inappropriately circumvent the proposed
vocational vehicle standards or proposed optional custom chassis
standards because vocational vehicles are built to serve a purpose. For
example, a manufacturer cannot certify a box truck to the emergency
vehicle custom chassis standards. We request comment on specific
considerations and impacts the proposed standards would have on
vehicles certified to these optional custom chassis standards. We also
request comment and data regarding the potential for more stringent GHG
standards for the motor homes, emergency vehicles, or mixed-use
vehicles optional custom chassis regulatory subcategories in this time
frame.
---------------------------------------------------------------------------

    \520\ Mixed-use vehicles must meet the criteria as described in
40 CFR 1037.105(h)(1), 1037.631(a)(1), and 1037.631(a)(2).
---------------------------------------------------------------------------

4. Summary of Costs To Meet the Proposed Emission Standards
    We based the proposed standards on technology packages that include
both ICE vehicle and ZEV technologies. In our analysis, the ICE
vehicles include a suite of technologies that represent a vehicle that
meets the existing MY 2027 Phase 2 CO2 emission standards.
We accounted for these technology costs as part of the HD GHG Phase 2
final rule. Therefore, our technology costs for the ICE vehicles are
considered to be $0 because we did not add additional CO2-
reducing technologies to the ICE vehicles beyond those in the baseline
vehicle. The incremental cost of a heavy-duty ZEV is the marginal cost
of ZEV powertrain components compared to ICE powertrain components on a
comparable ICE vehicle. This includes the removal of the associated
costs of ICE-specific components from the baseline vehicle and the
addition of the ZEV components and associated costs. DRIA Chapter 2.3.2
and 2.4.3 includes the ICE powertrain and BEV powertrain cost estimates
for each of the 101 HD vehicle types. DRIA Chapter 2.5.2 includes the
FCEV powertrain cost projections for the coach buses, heavy-haul
tractors, sleeper cab tractors, and day cab tractors.
i. Manufacturer Costs
    Table II-30 and Table II-31 show the ZEV technology costs for
manufacturers relative to the reference case described in Section
V.A.1, including the direct manufacturing costs that reflect learning
effects, the indirect costs, and the IRA section 13502 Advanced
Manufacturing Production Credit, on average aggregated by regulatory
group for MYs 2027 and 2032, respectively.\521\ The incremental ZEV
adoption rate reflects the difference between the ZEV adoption rates in
the technology packages that support our proposed standards and the
reference case. As shown in Table II-30 and Table II-31, we project
that some vocational vehicle types will achieve technology cost parity
between comparable ICE vehicles and ZEVs for manufacturers by MY 2032.
These vehicles in our analysis include school buses and single unit
trucks (which include vehicles such as delivery trucks). Our analysis
is consistent with other studies. For example, an EDF/Roush study found
that by MY 2027, BEV transit buses, school buses, delivery vans, and
refuse haulers would each cost less upfront

than a comparable ICE vehicle.\522\ ICCT similarly found that
``although zero-emission trucks are more expensive in the near-term
than their diesel equivalents, electric trucks will be less expensive
than diesel in the 2025-2030 time frame, due to declining costs of
batteries and electric motors as well as increasing diesel truck costs
due to emission standards compliance.'' \523\ These studies were
developed prior to passage of the IRA, and therefore we would expect
the cost comparisons to be even more favorable after considering the
IRA provisions. For example, the Rocky Mountain Institute found that
because of the IRA, the TCO of electric trucks will be lower than the
TCO of comparable diesel trucks about five years faster than without
the IRA. They expect cost parity as soon as 2023 for urban and regional
duty cycles that travel up to 250 miles and 2027 for long-hauls that
travel over 250 miles.\524\
---------------------------------------------------------------------------

    \521\ Indirect costs are described in detail in Section IV.B.2.
    \522\ Nair, Vishnu; Sawyer Stone; Gary Rogers; Sajit Pillai;
Roush Industries, Inc. ``Technical Review: Medium and Heavy Duty
Electrification Costs for MY 2027-2030.'' February 2022. Page 18.
Last accessed on February 9, 2023 at https://blogs.edf.org/climate411/files/2022/02/EDF-MDHD-Electrification-v1.6_20220209.pdf.
    \523\ Hall, Dale and Nic Lutsey. ``Estimating the Infrastructure
Needs and Costs for the Launch of Zero-Emission Trucks.'' February
2019. Page 4. Last accessed on February 9, 2023 at https://theicct.org/wp-content/uploads/2021/06/ICCT_EV_HDVs_Infrastructure_20190809.pdf.
    \524\ Kahn, Ari, et al. ``The Inflation Reduction Act Will Help
Electrify Heavy-Duty Trucking''. Rocky Mountain Institute. August
25, 2022. Available online: https://rmi.org/inflation-reduction-act-will-help-electrify-heavy-duty-trucking/.

      Table II-30--Manufacturer Costs To Meet the Proposed MY 2027 Standards Relative to the Reference Case
                                                     [2021$]
----------------------------------------------------------------------------------------------------------------
                                                                    Incremental
                                                                   ZEV adoption       Per-ZEV      Fleet-average
                        Regulatory group                              rate in      manufacturer     per-vehicle
                                                                    technology    RPE on average   manufacturer
                                                                    package (%)                         RPE
----------------------------------------------------------------------------------------------------------------
LHD Vocational..................................................              18          $1,750            $323
MHD Vocational..................................................              15          15,816           2,411
HHD Vocational..................................................              12            -505             -62
Day Cab Tractors................................................               8          64,121           5,187
Sleeper Cab Tractors............................................               0             N/A               0
----------------------------------------------------------------------------------------------------------------

      Table II-31--Manufacturer Costs To Meet the Proposed MY 2032 Standards Relative to the Reference Case
                                                     [2021$]
----------------------------------------------------------------------------------------------------------------
                                                                    Incremental
                                                                   ZEV adoption       Per-ZEV      Fleet-average
                        Regulatory group                              rate in      manufacturer     per-vehicle
                                                                    technology    RPE on average   manufacturer
                                                                    package (%)                         RPE
----------------------------------------------------------------------------------------------------------------
LHD Vocational..................................................              45         -$9,515         -$4,326
MHD Vocational..................................................              24           1,358             326
HHD Vocational..................................................              28           8,146           2,300
Day Cab Tractors................................................              30          26,364           8,013
Sleeper Cab Tractors............................................              21          54,712          11,445
----------------------------------------------------------------------------------------------------------------

i. Purchaser Costs
    We also evaluated the costs of the proposed standards for
purchasers on average by regulatory group, as shown in Table II-32 and
Table II-33. Our assessment of the upfront purchaser costs include the
incremental cost of a ZEV relative to a comparable ICE vehicle after
accounting for the two IRA tax credits (IRA section 13502, ``Advanced
Manufacturing Production Credit,'' and IRA section 13403, ``Qualified
Commercial Clean Vehicles'') and the associated EVSE costs, if
applicable. We also assessed the incremental annual operating savings
of a ZEV relative to a comparable ICE vehicle. The payback periods
shown reflect the number of years it would take for the annual
operating savings to offset the increase in total upfront costs for the
purchaser.

                                Table II-32--MY 2027 Purchaser Per-ZEV Upfront Costs, Operating Costs, and Payback Period
                                                                         [2021$]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Total          Annual
                                                           Adoption rate    Incremental                     incremental     incremental   Payback period
                    Regulatory group                       in technology    per-ZEV RPE   EVSE costs Per-  upfront per-      operating       (year) on
                                                            package (%)       cost on     ZEV on average   ZEV costs on      costs on         average
                                                                              average                         average         average
--------------------------------------------------------------------------------------------------------------------------------------------------------
LHD Vocational..........................................              22         -$1,733         $10,562          $8,828         -$4,474               3
MHD Vocational..........................................              19             482          14,229          14,711          -5,194               3

HHD Vocational..........................................              16          -9,531          19,756          10,225          -4,783               3
Day Cab Tractors........................................              10          24,121          37,682          61,803          -7,275               8
Sleeper Cab Tractors....................................               0             N/A             N/A             N/A             N/A             N/A
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The average costs represent the average across the regulatory group, for example the first row represents the average across all Light Heavy-Duty
  vocational vehicles.

                                Table II-33--MY 2032 Purchaser Per-ZEV Upfront Costs, Operating Costs, and Payback Period
                                                                         [2021$]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Total          Annual
                                                           Adoption rate    Incremental                     incremental     incremental   Payback period
                    Regulatory group                       in technology    per-ZEV RPE   EVSE costs Per-  upfront per-      operating       (year) on
                                                            package (%)       cost on     ZEV on average   ZEV costs on      costs on         average
                                                                              average                         average         average
--------------------------------------------------------------------------------------------------------------------------------------------------------
LHD Vocational..........................................              57         -$9,608         $10,552            $944         -$4,043               1
MHD Vocational..........................................              35          -2,907          14,312          11,405          -5,397               3
HHD Vocational..........................................              40          -8,528          17,233           8,705          -7,436               2
Day Cab Tractors........................................              34             582          16,753          17,335          -6,791               3
Sleeper Cab Tractors....................................              25          14,712               0          14,712          -2,290               7
--------------------------------------------------------------------------------------------------------------------------------------------------------

    As shown in Table II-33, under our proposal we estimate that the
average upfront cost per vehicle to purchase a new MY 2032 vocational
ZEV and associated EVSE compared to a comparable ICE vehicle (after
accounting for two IRA tax credits, IRA section 13502, ``Advanced
Manufacturing Production Credit,'' and IRA section 13403, ``Qualified
Commercial Clean Vehicles''), would be offset by operational costs
(i.e., savings that come from the lower costs to operate, maintain, and
repair ZEV technologies), such that we expect the upfront cost increase
would be recouped due to operating savings in one to three years, on
average for vocational vehicles. For a new MY 2032 day cab tractor ZEV
and associated EVSE, under our proposal we estimate the average
incremental upfront cost per vehicle would be recovered in three years,
on average. Similarly, for sleeper cab tractors, we estimate that the
initial cost increase would be recouped in seven years. We discuss this
in more detail in DRIA Chapter 2.
    The average per-vehicle purchaser costs shown in Table II-32 for MY
2027 are higher than the MY 2032 per-vehicle costs. The reduction in
costs over time are reflective of technology learning, as discussed in
Section IV.B. It is worth noting that though the upfront costs of a BEV
day cab tractor, for example, are higher when one considers both the
vehicle and the EVSE, purchasers would still recoup these upfront costs
within eight years of ownership on average. Also of note, our proposed
standards in MY 2027 have a lower adoption rate of 10 percent for these
day cab tractors, in recognition of the higher cost in MY 2027 than in
MY 2032. The upfront vehicle cost increase projected at $24,000
represents a less than a 25 percent increase when compared to the
average price of $100,000 for a new day cab tractor. Purchasers also
would have the option to consider alternatives to purchasing an EVSE at
the time of purchasing a vehicle. For example, depending on the
location of the vehicle, heavy-duty public charging may be a better
solution than depot charging. The purchaser could instead of spending
over $37,000 upfront on average for EVSE, they could instead spread the
cost over time through public charging where the EVSE costs would be
built into the electricity cost.
5. Lead Time Assessment
    Two of the significant aspects of the IRA are the tax credit
available for the manufacturing of batteries and the tax credit
available for the purchase of HD zero-emission vehicles, where the IRA
provisions' qualifications are met. The tax credits significantly
reduce, and in many cases erase, the incremental cost of purchasing a
HD ZEV when compared to the cost of purchasing a comparable ICE
vehicle. Therefore, as explained in our payback analysis, we expect the
IRA will incentivize the demand and purchaser acceptance for HD ZEVs.
However, demand and purchaser acceptance are only two of the factors we
consider when evaluating the feasibility of HD ZEV technologies in the
MY 2027 through MY 2032 timeframe. As we propose standards for MYs 2027
through 2032, which are between four and nine years from now, we
considered the lead time required for manufacturers to design, develop,
and produce the ZEV and ICE vehicle technologies in the technology
packages, in addition to lead time considerations for the charging and
hydrogen refueling infrastructure. We welcome comment on our assessment
of lead time in these areas.
    Manufacturers require time to design, develop, and build new
vehicles. Based on discussions with heavy-duty manufacturers, depending
on the amount of content that is new on a vehicle, it could take two to
four years or more years to design, develop and prove the safety and
reliability of a new HD vehicle. A typical design process includes the
design and building of prototype or demonstration vehicles that are
evaluated over several months or years in real world operation. The
manufacturers need to accumulate miles and experience a wide variety of
environmental conditions on these

prototype vehicles to demonstrate the product's durability and
reliability. Then manufacturers would work to commercialize the vehicle
and in turn build it in mass production. We also considered that
manufacturers are likely limited in terms of the financial resources,
human resources, and testing facilities to redesign all of their
vehicles at the same time. Typically, manufacturers would focus on the
applications with the best business case because these would be where
the customers would be most willing to purchase, therefore the proposed
standards phase in over a period of time starting in MY 2027 through MY
2032. For HD BEVs, we have considered that BEV technology has been
demonstrated to be technically feasible in heavy-duty transportation
and that manufacturers will learn from the research and development
work that has gone into developing the significant number of LD and HD
electric vehicle models that are on the road today, as noted in Section
II.D.2 and DRIA Chapter 1.5.5, and our proposed standards are supported
by technology packages with increasing BEV adoption rates beginning in
MY 2027 (see also our discussion in this subsection regarding our
consideration of adequate time for infrastructure development for HD
BEVs). For HD FCEVS, as discussed in Section II.D.3 and II.D.4, along
with DRIA Chapter 1.7.5, fuel cell technology in other sectors has been
in existence for decades, has been demonstrated to be technically
feasible in heavy-duty transportation, and there are a number of HD
FCEV models that are commercially available today with more expected to
become available by 2024. However, we included this technology for our
proposed standards starting in MY 2030 in part to take into
consideration additional lead time to allow manufacturers to design,
develop, and manufacture HD FCEV models (see also our discussion in
this subsection regarding our consideration of adequate time for
infrastructure development for HD FCEVs).
    We discuss in Sections II.D.1 and II.F.1 the need for ICE vehicles
to continue to install CO2-reducing technologies, such as
advanced aerodynamics, efficient powertrains, and lower rolling
resistance tires. In our technology assessment for this proposal, we
included the technology packages we considered in setting the existing
Phase 2 MY 2027 CO2 emission standards. Each of these
technologies exists today and continues to be developed by
manufacturers. As noted in 2016 when we issued the HD GHG Phase 2 final
rule, at that time we provided over ten years of lead time to the
manufacturers to continue the development and deployment of these
technologies. Our current assessment is that these ICE vehicle
technologies continue to be feasible in the MY 2027 and later
timeframe.
    As a new vehicle is being designed and developed, we considered
that manufacturers will also need time to significantly increase HD ZEV
production volumes from today's volumes. In particular, manufacturers
will need to build new or modify existing manufacturing production
lines to assemble the new products that include ZEV powertrains. We
also considered that manufacturers will require time to source new
components, such as heavy-duty battery packs, motors, fuel cell stacks,
and other ZEV components, including the sourcing of the critical
materials, as discussed in Section II.D.2.ii. As described in Section
II.D.5, we anticipate that manufacturers will not develop vehicles to
cover all types of HD vehicles at once but will focus on those with the
most favorable business case first, increase the adoption of those
vehicles over time, and then develop other applications. We believe our
approach described in Section II.D.5 shows the adoption rates for the
applications we have considered would be achievable in the MY 2027 and
later timeframe. We welcome comment on the manufacturer lead time
requirements for HD ZEVs.
    Purchasers of BEVs will also need to consider how they will charge
their vehicles. Our assessment of the availability of public charging
infrastructure, EVSE technology, and costs associated with depot
charging are included in Section II.E.2 of this preamble, DRIA Chapter
1 and DRIA Chapter 2. As noted in DRIA Chapter 2, we anticipate that
many first-time BEV owners may opt to purchase and install EVSE at or
near the time of vehicle purchase and we therefore account for these
capital costs upfront. In terms of EVSE for HD BEVs, this equipment is
available today for purchase. However, it takes time for individual or
fleet owners to develop charging site plans for their facility, obtain
permits, purchase the EVSE, and have it installed. For the depots that
may be charging a greater number of vehicles or with high-power DCFC
ports, an upgrade to the electricity distribution system may be
required. As noted in DRIA Chapter 1, we expect significant increases
in HD charging infrastructure due to a combination of public and
private investments. This includes Federal funding available through
the BIL \525\ and the IRA.\526\ As discussed in DRIA Chapter <IP_ADDRESS>,
states, OEMs, utilities, EVSE providers and others are also investing
in and supporting the deployment of charging infrastructure. For
example, Daimler Trucks North America, Volvo Trucks, Navistar, and
PACCAR are a few of the HD manufacturers investing in EVSE, sometimes
packaging the sale of EVSE with the vehicle.527 528 529 530
Because of these projected increases and the funding available through
the BIL and IRA, and as we are proposing more stringent standards that
begin in MY 2027, our assessment supports that there is sufficient time
for the infrastructure, especially for depot charging, to gradually
increase over the remainder of this decade to levels that support the
stringency of the proposed standards for the timeframe they would
apply. We request comment on time considerations for all levels of HD
charging infrastructure, including Level 2 up to 350 kW DCFC systems.
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    \525\ Infrastructure Investment and Jobs Act, Public Law 117-58,
135 Stat. 429 (2021), available at https://www.congress.gov/117/plaws/publ58/PLAW-117publ58.pdf.
    \526\ Inflation Reduction Act, Public Law 117-169, 136 Stat.
1818 (2022).
    \527\ Daimler Truck North America. ``Daimler Trucks North
America, Portland General Electric open first-of-its-kind heavy-duty
electric truck charging site''. April 21, 2021. Available online:
https://northamerica.daimlertruck.com/PressDetail/daimler-trucks-north-america-portland-general-2021-04-21.
    \528\ Volvo Trucks USA. ``Volvo Trucks Simplifies EV Charger
Procurement with Vendor Direct Shipping Program''. September 29,
2022. Available online: https://www.volvotrucks.us/news-and-stories/press-releases/2022/september/volvo-trucks-simplifies-ev-charger-procurement-with-vendor-direct-shipping-program.
    \529\ Navistar. ``Navistar and In-Charge Energy Now Offer
Carbon-Neurtral Electric Vehicle Charging''. Available online:
https://news.navistar.com/2021-10-25-Navistar-and-In-Charge-Energy-Now-Offer-Carbon-Neutral-Electric-Vehicle-Charging.
    \530\ Paccar Parts. ``Electric Vehicle Chargers''. Available
online: https://www.paccarparts.com/technology/ev-chargers/.
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    Purchasers of FCEVs will need to consider how they will obtain
hydrogen to refuel the vehicles. As discussed in DRIA Chapter 1.8,
there are currently 54 public retail hydrogen fueling stations in the
United States, primarily for light-duty vehicles in California
according to DOE's Alternative Fuels Data Center. When including
private and planned stations in a search, there are over 130 refueling
station locations nationwide.\531\ There are also numerous nationally
designated hydrogen-ready or hydrogen-pending Alternative Fueling
Corridors. Corridor-ready designations

have public hydrogen stations no greater than 100 miles apart and no
greater than five miles off the highway. Corridor-pending designations
have public hydrogen stations separated by more than 100 miles but no
greater than five miles off the highway.532 533 In addition,
DOE's draft Clean Hydrogen Strategy and Roadmap suggests a regional
``clean hydrogen hub'' approach to infrastructure. Under provisions of
the BIL, DOE is investing $8 billion through 2026 to support the
development of at least four hubs that can demonstrate the production,
processing, delivery, storage, and end use of clean hydrogen.
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    \531\ U.S. Department of Energy, Alternative Fuels Data Center.
``Hydrogen Fueling Station Locations''. Last accessed on January 27,
2023. Available online: https://afdc.energy.gov/fuels/hydrogen_locations.html#/analyze?fuel=HY.
    \532\ U.S. Department of Transportation, Federal Highway
Administration. ``Alternative Fuel Corridors: Hydrogen''. Available
online: https://hepgis.fhwa.dot.gov/fhwagis/
ViewMap.aspx?map=Highway+Information[bond]Hydrogen+(HY-
Round+1,2,3,4,5+and+6)#.
    \533\ U.S. Department of Transportation, Federal Highway
Administration. ``Alternative Fuel Corridors; Frequently Asked
Questions FAST Act Section 1413--Alternative Fuel Corridor
Designations Updated December 2020 to Support Round 5''. Available
online: https://www.fhwa.dot.gov/environment/alternative_fuel_corridors/resources/faq/.
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    DOE released a Liftoff Report on clean hydrogen to establish a
common fact base moving forward for dialogue and coordinated action
across the full technology value chain (e.g., from upstream production
to downstream end uses). The report considers the impact of hub funding
and tax credits under BIL and IRA, including the hydrogen production
tax credit (PTC). It identifies three phases of rapid market growth:
near-term expansion (~2023-2026), industrial scaling (~2027-2034), and
long-term growth (~2035+). The report acknowledges that there are both
opportunities and challenges for sectors with few decarbonization
alternatives like heavy-duty transportation end uses, including long-
haul trucks. During the timeframe of this rule (i.e., through 2032),
the Liftoff Report supports a scenario where low-GHG hydrogen will be
emerging for long-haul trucks.\534\ We project that hydrogen
consumption from FCEVs in this proposal would be a small proportion of
total low-GHG hydrogen expected to be produced through 2030 in the
United States.
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    \534\ U.S. Department of Energy. ``Pathways to Commercial
Liftoff: Clean Hydrogen''. March 2023. Available online: https://liftoff.energy.gov/wp-content/uploads/2023/03/20230320-Liftoff-Clean-H2-vPUB.pdf.
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    To meet more immediate needs, end users may expect to rely on
hydrogen deliveries from central production facilities. After
evaluating the existing and future hydrogen refueling
infrastructure,\535\ we considered FCEVs only in the MY 2030 and later
timeframe to better ensure we have provided adequate time for
infrastructure development and because we expect that refueling needs
can be met by MY 2030, as discussed in Section II.D.4 and in DRIA
Chapter 2.1. We request comment on lead time considerations related to
the development of HD hydrogen fueling infrastructure.
---------------------------------------------------------------------------

    \535\ U.S. Department of Energy. ``Pathways to Commercial
Liftoff: Clean Hydrogen''. March 2023. Available online: https://liftoff.energy.gov/wp-content/uploads/2023/03/20230320-Liftoff-Clean-H2-vPUB.pdf.
---------------------------------------------------------------------------

    Giving consideration to these factors, our analysis supports that
there is sufficient lead time to meet the proposed standards, which
manufacturers may comply with through application of BEV technologies,
FCEV technologies, or further improvements to ICE vehicles, including
H2-ICE powered vehicles. However, we also considered and are requesting
comment on an alternative standards reflecting a slower phase-in of HD
ZEV adoption rates, and are also seeking comment on more stringent
standards reflecting a more aggressive phase-in of HD ZEV adoption
rates, as described in Section II.H.
    Additionally, while we believe there is sufficient time for the
charging and refueling infrastructure to develop for the reasons
explained in this section, EPA recognizes that such infrastructure for
BEVs and FCEVs is important for the success of the increasing
development and adoption of these vehicle technologies. EPA carefully
considered that there are significant efforts already underway to
develop and expand heavy-duty electric charging and hydrogen refueling
infrastructure both at the local, State and Federal government level as
well as from private industry, as discussed in DRIA Chapters 1 and 2
and this section. Those are important early actions that, as we just
explained, will support the increase in ZEV charging and refueling
infrastructure needed for the future growth of ZEV technology of the
magnitude EPA is projecting in this proposal's technology packages. EPA
has heard from some representatives from the heavy-duty vehicle
manufacturing industry both optimism regarding the heavy-duty
industry's ability to produce ZEV technologies in future years at high
volume, but also concern that a slow growth in ZEV refueling
infrastructure can slow the growth of heavy-duty ZEV adoption, and that
this may present challenges for vehicle manufacturers' ability to
comply with future EPA GHG standards. EPA has a vested interest in
monitoring industry's performance in complying with mobile source
emission standards, including the highway heavy-duty industry. EPA
monitors industry's performance through a range of approaches,
including regular meetings with individual companies and regulatory
requirements for data submission as part of the annual certification
process. EPA also provides transparency to the public through actions
such as publishing industry compliance reports (such as has been done
during the heavy-duty GHG Phase 1 program).\536\ EPA requests comment
on what, if any, additional information and data EPA should consider
collecting and monitoring during the implementation of the Phase 3
standards; we also request comment on whether there are additional
stakeholders EPA should work with during implementation of the Phase 3
standards and what measures EPA should include to help ensure success
of the Phase 3 program, including with respect to the important issues
of refueling and charging infrastructure for ZEVs.
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    \536\ See EPA Reports EPA-420-R-21-001B covering Model Years
2014-2018, and EPA report EPA-420-R-22-028B covering Model Years
2014-2020, available online at https://www.epa.gov/compliance-and-fuel-economy-data/epa-heavy-duty-vehicle-and-engine-greenhouse-gas-emissions.
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G. EPA's Basis That the Proposed Standards Are Feasible and Appropriate
Under the Clean Air Act

1. Overview
    As discussed in Section II.A of this preamble, there is a critical
need for further GHG reductions to address the adverse impacts of air
pollution from HD vehicles on public health and welfare. With continued
advances in internal combustion emissions controls and vehicle zero
emission technologies coming into the mainstream as key vehicle
emissions controls, EPA believes substantial further emissions
reductions are feasible and appropriate under the Clean Air Act.
    The Clean Air Act authorizes EPA to establish emissions standards
for motor vehicles to regulate emissions of air pollutants that
contribute to air pollution which, in the Administrator's judgment, may
reasonably be anticipated to endanger public health or welfare. Heavy-
duty vehicles are significant contributors to the U.S. GHG emissions
inventories, and additional reductions in GHGs from vehicles are needed
to avoid the worst consequences of climate change as discussed in
Section II.A.

    This proposed rule also considers the large potential impact that
the Inflation Reduction Act (IRA) will have on facilitating production
and adoption of ZEV technologies. The IRA provides powerful incentives
in reducing the cost to manufacture and purchase ZEVs, as well as
reducing the cost of charging infrastructure, that will help facilitate
increased market penetration of ZEV technology in the time frame
considered in this rulemaking. Thus, it is an important element of
EPA's cost and feasibility assessment, and EPA has considered the
impacts of the IRA in our assessment of the appropriate proposed
standards.
    As we did in HD GHG Phase 1 and Phase 2 rulemakings, in this Phase
3 proposal we considered the following factors: the impacts of
potential standards on emissions reductions of GHG emissions; technical
feasibility and technology effectiveness; the lead time necessary to
implement the technologies; costs to manufacturers; costs to purchasers
including operating savings; reduction of non-GHG emissions; the
impacts of standards on oil conservation and energy security; impacts
of standards on the truck industry; other energy impacts; as well as
other relevant factors such as impacts on safety.\537\ See Section
II.G.5 for further discussion of how we balanced the factors we
considered for the proposed Phase 3 standards.
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    \537\ 81 FR 73512 (October 25, 2016) and 76 FR 57129 (September
15, 2011).
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2. Consideration of Technological Feasibility, Compliance Costs and
Lead Time
    The technological readiness of the heavy-duty industry to meet the
proposed standards for model years 2027-2032 and beyond is best
understood in the context of over a decade of heavy-duty vehicle
emissions reduction programs in which the HD industry has introduced
emissions reducing technologies in a wide lineup of ever more efficient
and cost-competitive vehicle applications. Electrification technologies
have seen particularly rapid development over the last several years
such that early HD ZEV models are in use today for some applications
and and are expected to expand to many more applications, as discussed
DRIA Chapters 1.5 and 2, and as a result the number of ZEVs projected
in the proposal and across all the alternatives considered here is much
higher than in any of EPA's prior rulemaking analyses.
    As discussed in DRIA Chapter 1.5.5 and Section I, the ZEV
technology necessary to achieve significantly more stringent standards
has already been developed and deployed. Additionally, manufacturers
have announced plans to rapidly increase their investments in ZEV
technologies over the next decade. In addition, the IRA and the BIL
provide many monetary incentives for the production and purchase of
ZEVs in the heavy-duty market, as well as incentives for electric
vehicle charging infrastructure. Furthermore, there have been multiple
actions by states to accelerate the adoption of heavy-duty ZEVs, such
as (1) a multi-state Memorandum of Understanding for the support of
heavy-duty ZEV adoption; \538\ and (2) the State of California's ACT
program, which has also been adopted by other states and includes a
manufacturer requirement for zero-emission truck sales.\539\ Together
with the range of ICE technologies that have been already demonstrated
over the past decade, BEVs and FCEVs with no tailpipe emissions (and 0
g CO2/ton-mile certification values) are capable of
supporting rates of annual stringency increases that are much greater
than were typical in earlier GHG rulemakings.
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    \538\ NESCAUM MOU, available at https://www.nescaum.org/documents/mhdv-zev-mou-20220329.pdf.
    \539\ EPA granted the ACT rule waiver requested by California
under CAA section 209(b) on March 30, 2023. The ACT had been adopted
by five states under CAA section 177: Oregon, Washington, New York,
New Jersey, and Massachusetts. Oregon and Washington adopted ACT as-
is, whereas New York, New Jersey, and Massachusetts adopted ACT on a
one-year delay.
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    In setting standards for a future model year, EPA considers the
extent deployment of advanced technologies would be available and
warranted in light of the benefits to public health and welfare in GHG
emission reductions, and potential constraints, such as cost of
compliance, lead time, raw material availability, component supplies,
redesign cycles, charging and refueling infrastructure, and purchasers'
willingness to purchase (including payback). The extent of these
potential constraints has diminished significantly in light of
increased and further projected investment by manufacturers, increased
and further projected acceptance by purchasers, and significant support
from Congress to address such areas as upfront purchase price, charging
infrastructure, critical mineral supplies, and domestic supply chain
manufacturing. In response to the increased stringency of the proposed
standards, manufacturers would be expected to adopt advanced
technologies, such as increased electrification, at an increasing pace
across more of their vehicles. To evaluate the feasibility of BEVs and
FCEVs in our technology packages that support the proposed standards,
EPA developed a tool called HD TRUCS, to evaluate the design features
needed to meet the energy and power demands of various HD vehicle types
when using ZEV technologies. The overarching design and functionality
of HD TRUCS is premised on ensuring each of the 101 ZEV types could
perform the same work as a comparable ICE vehicle counterpart. Within
the HD TRUCS modeling that EPA conducted to support this proposal, we
have imposed constraints to reflect the rate at which a manufacturer
can deploy ZEV technologies that include consideration of time
necessary to ramp up battery production, including the need to increase
the availability of critical raw materials and expand battery
production facilities, as discussed in Section II.D.2.ii.
    Constraints on the technology adoption limits in our compliance
modeling as well as other aspects of our lead time assessment are
described in Section II.F. Overall, given the number and breadth of
current low or zero emission vehicles and the constraints we have made
to limit the rate of development for new HD vehicles, our assessment
shows that there is sufficient lead time for the industry to more
broadly deploy existing technologies and successfully comply with the
proposed standards.
    Our analysis projects that for the industry overall, nearly 50
percent of new vocational vehicles and 25 to 35 percent of new tractors
in MY 2032 would be ZEVs. EPA believes that this is an achievable level
based on our technical assessment for this proposal that includes
consideration of the feasibility and lead time required for ZEVs and
appropriate consideration of the cost of compliance for manufacturers.
Our assessment of the appropriateness of the level of ZEVs in our
analysis is also informed by public announcements by manufacturers
about their plans to transition fleets to electrified vehicles, as
described in Section I.A.2 of this preamble. More detail about our
technical assessment, and our assessment of the production feasibility
of ZEVs is provided in Section II.D and II.E of this Preamble and
Chapters 1 and 2 of the DRIA. At the same time, we note that the
proposed standards are performance-based and do not mandate any
specific technology for any manufacturer or any vehicles. Moreover, the
overall industry does not necessarily need to reach this level of ZEVs
in order to comply--this

is one of many possible compliance pathways that manufacturers could
choose to take under the performance-based standards. For example,
manufacturers that choose to increase their sales of hybrid vehicle
technologies or apply more advanced technology to non-hybrid ICE
vehicles would require a smaller number of ZEVs than we have projected
in our assessment to comply with the proposed standards.
    In considering feasibility of the proposed standards, EPA also
considers the impact of available compliance flexibilities on
manufacturers' compliance options. Manufacturers widely utilize the
program's established averaging, banking and trading (ABT) provisions
which provide a variety of flexible paths to plan compliance. We have
discussed this dynamic in past rules, and we anticipate that this same
dynamic will support compliance with this rulemaking. The GHG credit
program was designed to recognize that manufacturers typically have a
multi-year redesign cycle and not every vehicle will be redesigned
every year to add emissions-reducing technology. Moreover, when
technology is added, it will generally not achieve emissions reductions
corresponding exactly to a single year-over-year change in stringency
of the standards. Instead, in any given model year, some vehicles will
be ``credit generators,'' over-performing compared to their respective
CO2 emission standards in that model year, while other
vehicles will be ``debit generators'' and under-performing against
their standards. As the proposed standards reach increasingly lower
numerical levels, some vehicle designs that had generated credits
against their CO2 emission standard in earlier model years
may instead generate debits in later model years. In MY 2032 when the
proposed standards reach the lowest level, it is possible that only
BEVs, FCEVs, and H2-ICE vehicles are generating positive credits, and
all ICE vehicles generate varying levels of deficits. Even in this
case, the application of ICE technologies can remain an important part
of a manufacturer's compliance strategy by reducing the amount of
debits generated by these vehicles. A greater application of ICE
technologies (e.g., hybrids) can enable compliance with fewer ZEVs than
if less ICE technology was adopted, and therefore enable the tailoring
of a compliance strategy to the manufacturer's specific market and
product offerings. Together, a manufacturer's mix of credit-generating
and debit-generating vehicles contribute to its sales-weighted average
performance, compared to its standard, for that year.
    Just as the averaging approach in the HD vehicle GHG program allows
manufacturers to design a compliance strategy relying on the sale of
both credit-generating vehicles and debit-generating vehicles in a
single year, the credit banking and trading provisions of the program
allow manufacturers to design a compliance strategy relying on
overcompliance and undercompliance in different years, or even by
different manufacturers. Credit banking allows credits to carry-over
for up to five years and allows manufacturers up to three years to
address any credit deficits. Credit trading is a compliance flexibility
provision that allows one vehicle manufacturer to purchase credits from
another, though trading of GHG credits has not occurred with HD GHG
credits.
    The proposed performance-based standards with ABT provisions give
manufacturers a degree of flexibility in the design of specific
vehicles and their fleet offerings, while allowing industry overall to
meet the standards and thus achieve the health and environmental
benefits projected for this rulemaking. EPA has considered the
averaging portion of the ABT program in the feasibility assessments for
previous rulemakings and continues that practice here. We also continue
to acknowledge that the other provisions in ABT that provide
manufacturers additional flexibility also support the feasibility of
the proposed standards. By averaging across vehicles in the vehicle
averaging sets and by allowing for credit banking across years,
manufacturers have the flexibility to adopt emissions-reducing
technologies in the manner that best suits their particular market and
business circumstances. EPA's annual Heavy-Duty Vehicle and Engine
Greenhouse Gas Emissions Compliance Report illustrates how different
manufacturers have chosen to make use of the GHG program's various
credit features.\540\ It is clear that manufacturers are widely
utilizing several of the credit programs available, and we expect that
manufacturers will continue to take advantage of the compliance
flexibilities and crediting programs to their fullest extent, thereby
providing them with additional tools in finding the lowest cost
compliance solutions in light of the proposed standards.
---------------------------------------------------------------------------

    \540\ ``The Final Phase 1 EPA Heavy-Duty Vehicle and Engine
Greenhouse Gas Emissions Compliance Report (Model Years 2014-20),''
EPA-420-R-22-028. November 2022. Last accessed on February 9, 2023
at https://www.epa.gov/compliance-and-fuel-economy-data/epa-heavy-duty-vehicle-and-engine-greenhouse-gas-emissions.
---------------------------------------------------------------------------

    In addition to technological feasibility and lead time, EPA has
considered the cost for the heavy-duty industry to comply with the
proposed standards. See Section II.F.4 and Chapter 2 of the DRIA for
our analysis of compliance costs for manufacturers. We estimate that
the MY 2032 fleet average per-vehicle cost to manufacturers by
regulatory group would range between a cost savings for LHD vocational
vehicles to $2,300 for HHD vocational vehicles and between $8,000 and
$11,400 per tractor. EPA notes the projected costs per vehicle for this
proposal are similar to the fleet average per-vehicle costs projected
for the HD GHG Phase 2 rule that we considered to be reasonable. The
Phase 2 tractor standards were projected to cost between $10,200 and
$13,700 per vehicle (81 FR 73621). The Phase 2 vocational vehicle
standards were projected to cost between $1,486 and $5,670 per vehicle
(81 FR 73718). Furthermore, the estimated MY 2032 costs to
manufacturers represent less than about ten percent of the average
price of a new heavy-duty tractor today (conservatively estimated at
$100,000 in 2022).\541\ For this proposal, EPA finds that the expected
vehicle compliance costs are reasonable in light of the emissions
reductions in air pollutants and the resulting benefits for public
health and welfare.
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    \541\ Note that these values are averages across all vehicles
and there will be differences for each individual vehicle.
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3. Consideration of Emissions of GHGs
    An essential factor that EPA considered in determining the
appropriate level of the proposed standards is the reductions in GHG
emissions and associated public health and welfare impacts.\542\
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    \542\ As further explained in Section II.G.4, we note that we
also expect the proposed GHG emission standards would lead to an
increase in HD ZEVs, which would also result in reductions of
vehicle emissions of non-GHG pollutants that contribute to ambient
concentrations of ozone, particulate matter (PM2.5),
NO2, CO, and air toxics. EPA did not select the proposed
GHG emission standards based on non-GHG reductions of vehicle
emissions; nonetheless, the GHG and non-GHG reductions of vehicle
emissions of the proposed program reinforce our view that the
proposed standards represent an appropriate weighing of the
statutory factors and other relevant considerations.
---------------------------------------------------------------------------

    The proposed GHG standards would achieve significant reductions in
GHG emissions. The proposed standards would achieve approximately 1.8
billion metric tons in net CO2 cumulative emission
reductions from calendar years 2027 through 2055 (see Section V of the
preamble and Chapter 4 of the DRIA). As discussed in Section VI of this

preamble, these GHG emission reductions would make an important
contribution to efforts to limit climate change and its anticipated
impacts.
    The proposed CO2 emission standards would reduce adverse
impacts associated with climate change and would yield significant
benefits, including those we can monetize and those we are unable to
fully monetize due to data and modeling limitations. The program would
result in significant social benefits including $87 billion in climate
benefits (with the average SC-GHGs at a 3 percent discount rate). A
more detailed description and breakdown of these benefits can be found
in Section VII of the preamble and Chapter 7 of the DRIA.
    As discussed in Section VII, we monetize benefits of the proposed
CO2 standards and evaluate other costs in part to better
enable a comparison of costs and benefits pursuant to E.O. 12866, but
we recognize that there are benefits we are unable to fully quantify.
EPA's consistent practice has been to set standards to achieve improved
air quality consistent with CAA section 202, and not to rely on cost-
benefit calculations, with their uncertainties and limitations, in
identifying the appropriate standards. Nonetheless, our conclusion that
the estimated benefits considerably exceed the estimated costs of the
proposed program reinforces our view that the proposed standards
represent an appropriate weighing of the statutory factors and other
relevant considerations.
4. Consideration of Impacts on Purchasers, Non-GHG Emissions, Energy,
Safety and Other Factors
    Another factor that EPA considered in determining the proposed
standards is the impact of the proposed HD CO2 standards on
purchasers, consistent with the approach we used in HD GHG Phase 1 and
Phase 2. In this proposal, we considered willingness to purchase (such
as practicability, payback, and costs for vehicle purchasers including
EVSE) in determining the appropriate level of the proposed standards.
Businesses that operate HD vehicles are under competitive pressure to
reduce operating costs, which should encourage purchasers to identify
and rapidly adopt vehicle technologies that provide a positive total
cost of ownership. Outlays for labor and fuel generally constitute the
two largest shares of HD vehicle operating costs, depending on the
price of fuel, distance traveled, type of HD vehicle, and commodity
transported (if any), so businesses that operate HDVs face strong
incentives to reduce these costs.543 544 However, as noted
in DRIA Chapter 6.2, there are a number of other considerations that
may impact a purchaser's willingness to adopt new technologies. Within
HD TRUCS, we considered the impact on purchasers through our evaluation
of payback periods. The payback period is the number of years that it
would take for the annual operational savings of a ZEV to offset the
incremental upfront purchase price of a BEV or FCEV (after accounting
for the IRA section 13502 battery tax credit and IRA section 13403
vehicle tax credit) and charging infrastructure costs (for BEVs) when
compared to purchasing a comparable ICE vehicle. The average per-
vehicle costs to a purchaser by regulatory group for a MY 2032 heavy-
duty vehicle, including associated EVSE and after considering the IRA
battery-manufacturer and vehicle-purchaser tax credits, are projected
to range between $900 and $11,000 for vocational vehicles and $14,700
and $17,300 for tractors. As noted in Section II.F.4.ii, EPA concludes
that the proposed standards would be beneficial for purchasers because
the lower operating costs during the operational life of the vehicle
would offset the increase in vehicle technology costs. For example,
purchasers of MY 2032 vocational vehicles and day cab tractors on
average by regulatory group would recoup the upfront costs through
operating savings within the first three years of ownership.
Furthermore, the purchasers would benefit from annual operating cost
savings for each year after the payback occurs. EPA finds that these
average costs to purchasers are reasonable considering the operating
savings which more than offsets these costs, as was also the case with
the HD GHG Phase 2 rule. See 81 FR 73482.
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    \543\ American Transportation Research Institute, An Analysis of
the Operational Costs of Trucking, September 2013. Docket ID: EPA-
HQ-OAR-2014-0827-0512.
    \544\ Transport Canada, Operating Cost of Trucks, 2005. Docket
ID: EPA-HQ-OAR-2014-0827-0070.
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    We also considered the practicability and suitability of the
proposed standards as we applied an additional constraint within HD
TRUCS that limited the maximum ZEV adoption rate to 80 percent for any
given vehicle type. This conservative limit was developed after
consideration of the actual needs of the purchasers, as discussed in
Section II.F.1.
    Within our analysis, to support the practicability and suitability
of the proposed standards we also considered the lead time necessary
for purchasers to install depot charging and the lead time necessary
for development of hydrogen infrastructure that would be required for
the use of these technologies. As further explained in DRIA Chapter 1.6
and Sections II.E.2 and II.F.5, our assessment supports that depot
charging can be installed in time for the purchase and use of the
volume of MY 2027 BEVs we project could be used to comply with the
proposed standards. With respect to hydrogen infrastructure, as further
explained in DRIA Chapter 1.8 and Section II.F.5, we recognize that
this may take longer to develop, and therefore included a constraint
for FCEVs such that we did not propose new standards for long-haul
vehicles until MY 2030, when we expect refueling needs can be met for
the volume of FCEVs we project could be used to comply with the
proposed standards. Furthermore, we also assessed the impact of future
HD BEVs on the grid, as discussed in Section II.E.2. Our assessment is
that grid reliability is not expected to be adversely affected by the
modest increase in electricity demand associated with HD BEV charging
and thus was not considered to be a constraining consideration.
    EPA considers our analysis of the impact of the proposed
CO2 emission standards on vehicle and upstream emissions for
non-GHG pollutants as supportive of the proposed standards. The
proposed standards would decrease vehicle emissions of non-GHG
pollutants that contribute to ambient concentrations of ozone,
particulate matter (PM2.5), NO2, CO, and air
toxics. By 2055, when considering downstream vehicle, EGU, and refinery
emissions, we estimate a net decrease in emissions from all pollutants
modeled (i.e., NOX, PM2.5, VOC, and
SO2) (see Section V of the preamble and Chapter 4 of the
DRIA for more detail).
    As also explained in Section II.G.3, and as discussed in Section
VII, we monetize benefits of the proposed standards and evaluate other
costs in part to better enable a comparison of costs and benefits
pursuant to E.O. 12866, but we recognize that there are benefits we are
unable to fully quantify. EPA's consistent practice has been to set
standards to achieve improved air quality consistent with CAA section
202, and not to rely on cost-benefit calculations, with their
uncertainties and limitations, in identifying the appropriate
standards.
    EPA also evaluated the impacts of the proposed HD GHG standards on
energy, in terms of oil conservation and energy security through
reductions in fuel consumption. This proposal is projected to reduce
U.S. oil imports 4.3 billion gallons through 2055 (see Section VI.F).

We estimate the benefits due to reductions in energy security
externalities caused by U.S. petroleum consumption and imports would be
approximately $12 billion under the proposed program. EPA considers
this proposal to be beneficial from an energy security perspective and
thus this factor was considered to be a supportive and not constraining
consideration.
    EPA estimates that the present value of monetized net benefits to
society would be approximately $320 billion through the year 2055
(annualized net benefits of $17 billion through 2055), more than 5
times the cost in vehicle technology and associated electric vehicle
supply equipment (EVSE) combined. Regarding social costs, EPA estimates
that the cost of vehicle technology (not including the vehicle or
battery tax credits) and EVSE would be approximately $9 billion and $47
billion respectively, and that the HD industry would save approximately
$250 billion in operating costs (e.g., savings that come from less
liquid fuel used, lower maintenance and repair costs for ZEV
technologies as compared to ICE technologies, etc.). The program would
result in significant social benefits including $87 billion in climate
benefits (with the average SC-GHGs at a 3 percent discount rate).
Between $15 and $29 billion of the estimated total benefits through
2055 are attributable to reduced emissions of non-GHG pollutants,
primarily those that contribute to ambient concentrations of
PM2.5. Finally, the benefits due to reductions in energy
security externalities caused by U.S. petroleum consumption and imports
would be approximately $12 billion under the proposed program. A more
detailed description and breakdown of these benefits can be found in
Section VIII of the preamble and Chapter 7 of the DRIA. Our conclusion
that the estimated benefits considerably exceed the estimated costs of
the proposed program reinforces our view that the proposed standards
represent an appropriate weighing of the statutory factors and other
relevant considerations.
    Section 202(a)(4)(A) of the CAA specifically prohibits the use of
an emission control device, system or element of design that will cause
or contribute to an unreasonable risk to public health, welfare, or
safety. EPA has a history of considering the safety implications of its
emission standards, including the HD Phase 1 and Phase 2 rule. We
highlight the numerous industry standards and safety protocols that
exist today for heavy-duty BEVs and FCEVs that provide guidance on the
safe design of these vehicles in Section II.D and DRIA Chapter 1 and
thus this factor was considered to be a supportive and not constraining
consideration.
5. Selection of Proposed Standards Under CAA 202(a)
    Under section 202(a), EPA has a statutory obligation to set
standards to reduce emissions of air pollutants from classes of motor
vehicles that the Administrator has found contribute to air pollution
that may be expected to endanger public health and welfare. In setting
such standards, the Administrator must provide adequate lead time for
the development and application of technology to meet the standards,
taking into consideration the cost of compliance. EPA's proposed
standards properly implement this statutory provision, as discussed in
this Section II.G. In setting standards for a future model year, EPA
considers the extent deployment of advanced technologies would be
available and warranted in light of the benefits to public health and
welfare in GHG emission reductions, and potential constraints, such as
cost of compliance, lead time, raw material availability, component
supplies, redesign cycles, charging and refueling infrastructure, and
purchasers' willingness to purchase (including payback). The extent of
these potential constraints has diminished significantly in light of
increased and further projected investment by manufacturers, increased
and further projected acceptance by purchasers, and significant support
from Congress to address such areas as upfront purchase price, charging
infrastructure, critical mineral supplies, and domestic supply chain
manufacturing. The proposed standards would achieve significant and
important reductions in GHG emissions that endanger public health and
welfare. Furthermore, as discussed throughout this preamble, the
emission reduction technologies needed to meet the proposed standards
have already been developed and are feasible and available for
manufacturers to utilize in their fleets at reasonable cost in the
timeframe of these proposed standards, even after considering key
elements including battery manufacturing capacity and critical
materials availability.
    As discussed throughout this preamble, the emission reduction
technologies needed to meet the proposed standards are feasible and
available for manufacturers to utilize in HD vehicles in the timeframe
of these proposed standards. The proposed emission standards are based
on one potential technology path (represented in multiple technology
packages for the various HD vehicle regulatory subcategories per MY)
that includes adoption rates for both ICE vehicle technologies and
zero-emission vehicle technologies that EPA regards as feasible and
appropriate under CAA section 202(a) for the reasons given in this
Section II.G, and as further discussed throughout Section II and DRIA
Chapter 2. For the reasons described in that analysis, EPA believes
these technologies can be developed and applied in HD vehicles and