[Federal Register Volume 86, Number 151 (Tuesday, August 10, 2021)]
[Proposed Rules]
[Pages 43726-43811]
[FR Doc No: 2021-16582]

Vol. 86

Tuesday,

No. 151

August 10, 2021

Part II

 Environmental Protection Agency

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40 CFR Parts 86 and 600

 Revised 2023 and Later Model Year Light-Duty Vehicle Greenhouse Gas
Emissions Standards; Proposed Rule

Federal Register / Vol. 86 , No. 151 / Tuesday, August 10, 2021 /
Proposed Rules

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 86 and 600

[EPA-HQ-OAR-2021-0208; FRL 8469-02-OAR]
RIN 2060-AV13

Revised 2023 and Later Model Year Light-Duty Vehicle Greenhouse
Gas Emissions Standards

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

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SUMMARY: The Environmental Protection Agency (EPA) is proposing to
revise the greenhouse gas (GHG) emissions standards for light-duty
vehicles for 2023 and later model years to make the standards more
stringent. On January 20, 2021, President Biden issued Executive Order
13990 ``Protecting Public Health and the Environment and Restoring
Science To Tackle the Climate Crisis'' directing EPA to consider
whether to propose suspending, revising, or rescinding the standards
previously revised under the ``The Safer Affordable Fuel-Efficient
(SAFE) Vehicles Rule for Model Years 2021-2026 Passenger Cars and Light
Trucks,'' promulgated in April 2020. The SAFE rule significantly
weakened the standards established in 2012, which in part set GHG
standards for model years 2021-25. EPA believes that in light of the
significant contribution of light-duty vehicles to transportation
sector GHG emissions, standards more stringent than those relaxed in
the SAFE rule are appropriate under the Clean Air Act. EPA is proposing
to revise the GHG standards to be more stringent than the SAFE rule
standards in each model year from 2023 through 2026. EPA is also
proposing to include several flexibilities to incentivize the
production and sale of vehicles with zero and near-zero emissions
technology to reduce compliance costs and to address the lead time of
the proposed standards. In addition, EPA is proposing some technical
amendments to clarify and streamline our regulations. Compliance with
the proposed standards would be feasible at reasonable costs to
manufacturers. The proposed revised standards would result in
significant benefits for public health and welfare, primarily through
substantial reductions in both GHG emissions and fuel consumption and
associated fuel costs paid by drivers, and the benefits of the proposed
standards would be far in excess of costs.

DATES:
    Comments: Written comments must be received on or before September
27, 2021.
    Public Hearing: EPA plans to hold a virtual public hearing on
August 25, 2021. An additional session may be held on August 26th if
necessary to accommodate the number of testifiers that sign-up to
testify. Please refer to the separate Federal Register notice issued by
EPA for public hearing details. The hearing notice is available at
https://www.epa.gov/regulations-emissions-vehicles-and-engines/proposed-rule-revise-existing-national-ghg-emissions.

ADDRESSES: You may send comments, identified by Docket ID No. EPA-HQ-
OAR-2021-0208, by any of the following methods:
     Federal eRulemaking Portal: https://www.regulations.gov/
(our preferred method). Follow the online instructions for submitting
comments.
     Email<EMAIL_ADDRESS>Include Docket ID No. EPA-
HQ-OAR-2021-0208 in the subject line of the message.
     Mail: U.S. Environmental Protection Agency, EPA Docket
Center, OAR, Docket EPA-HQ-OAR-2021-0208, Mail Code 28221T, 1200
Pennsylvania Avenue NW, Washington, DC 20460.
     Hand Delivery or Courier (by scheduled appointment only):
EPA Docket Center, WJC West Building, Room 3334, 1301 Constitution
Avenue NW, Washington, DC 20004. The Docket Center's hours of
operations are 8:30 a.m.-4:30 p.m., Monday-Friday (except Federal
Holidays).
    Instructions: All submissions received must include the Docket ID
No. EPA-HQ-OAR-2021-0208 for this rulemaking. Comments received may be
posted without change to https://www.regulations.gov/, including any
personal information provided. For detailed instructions on sending
comments and additional information on the rulemaking process, see the
``Public Participation'' heading of the SUPPLEMENTARY INFORMATION
section of this document. Out of an abundance of caution for members of
the public and our staff, the EPA Docket Center and Reading Room are
closed to the public, with limited exceptions, to reduce the risk of
transmitting COVID-19. Our Docket Center staff will continue to provide
remote customer service via email, phone, and webform. We encourage the
public to submit comments via https://www.regulations.gov/ or email, as
there may be a delay in processing mail. Hand deliveries and couriers
may be received by scheduled appointment only. For further information
on EPA Docket Center services and the current status, please visit us
online at https://www.epa.gov/dockets.
    EPA plans to hold a virtual public hearing for this rulemaking.
Please refer to the separate Federal Register notice issued by EPA for
public hearing details. The hearing notice is available at https://www.epa.gov/regulations-emissions-vehicles-and-engines/proposed-rule-revise-existing-national-ghg-emissions.

FOR FURTHER INFORMATION CONTACT: Tad Wysor, Office of Transportation
and Air Quality, Assessment and Standards Division (ASD), Environmental
Protection Agency, 2000 Traverwood Drive, Ann Arbor, MI 48105;
telephone number:<PHONE_NUMBER>; email address<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:

A. Public Participation

Written Comments

    EPA will keep the comment period open until September 27, 2021. All
information will be available for inspection at the EPA Air Docket No.
EPA-HQ-OAR-2021-0208. Submit your comments, identified by Docket ID No.
EPA-HQ-OAR-2021-0208, at https://www.regulations.gov (our preferred
method), or the other methods identified in the ADDRESSES section. Once
submitted, comments cannot be edited or removed from the docket. EPA
may publish any comment received to its public docket. Do not submit to
EPA's docket at https://www.regulations.gov any information you
consider to be Confidential Business Information (CBI) or other
information whose disclosure is restricted by statute. Multimedia
submissions (audio, video, etc.) must be accompanied by a written
comment. The written comment is considered the official comment and
should include discussion of all points you wish to make. EPA will
generally not consider comments or comment contents located outside of
the primary submission (i.e., on the web, cloud, or other file sharing
system). For additional submission methods, the full EPA public comment
policy, information about CBI or multimedia submissions, and general
guidance on making effective comments, please visit https://www.epa.gov/dockets/commenting-epa-dockets.
    EPA is temporarily suspending its Docket Center and Reading Room
for public visitors, with limited exceptions, to reduce the risk of
transmitting COVID-19. Our Docket Center staff will continue to provide
remote customer

service via email, phone, and webform. We encourage the public to
submit comments via https://www.regulations.gov/ as there may be a
delay in processing mail. Hand deliveries or couriers will be received
by scheduled appointment only. For further information and updates on
EPA Docket Center services, please visit us online at https://www.epa.gov/dockets.
    EPA continues to carefully and continuously monitor information
from the Centers for Disease Control and Prevention (CDC), local area
health departments, and our Federal partners so that we can respond
rapidly as conditions change regarding COVID-19.

Virtual Public Hearing

    EPA plans to hold a virtual public hearing on August 25, 2021. An
additional session will be held on August 26th if necessary, to
accommodate the number of testifiers that sign-up to testify. Please
refer to the separate Federal Register notice issued by EPA for public
hearing details. The hearing notice is available at https://www.epa.gov/regulations-emissions-vehicles-and-engines/proposed-rule-revise-existing-national-ghg-emissions. Please also refer to this
website for any updates regarding the hearings. EPA does not intend to
publish additional documents in the Federal Register announcing
updates.

B. Does this action apply to me?

    This action affects companies that manufacture or sell passenger
automobiles (passenger cars) and non-passenger automobiles (light
trucks) as defined in 49 CFR part 523. Regulated categories and
entities include:

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                                      NAICS     Examples of potentially
             Category               codes \A\      regulated entities
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Industry..........................     336111  Motor Vehicle
                                       336112   Manufacturers.
Industry..........................     811111  Commercial Importers of
                                       811112   Vehicles and Vehicle
                                                Components.
                                       811198
                                       423110
Industry..........................     335312  Alternative Fuel Vehicle
                                       811198   Converters.
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\A\ North American Industry Classification System (NAICS).

    This list is not intended to be exhaustive, but rather provides a
guide regarding entities likely to be regulated by this action. To
determine whether particular activities may be regulated by this
action, you should carefully examine the regulations. You may direct
questions regarding the applicability of this action to the person
listed in FOR FURTHER INFORMATION CONTACT.

Table of Contents

I. Executive Summary
    A. Purpose of This Proposed Rule and Legal Authority
    1. Proposal for Near-Term Standards Through Model Year 2026
    2. Why does EPA believe the proposed standards are appropriate
under the CAA?
    3. Future Longer-Term Action to Further Reduce Light-Duty
Vehicle Emissions in 2027 and Beyond
    B. Summary of Proposed Light-Duty Vehicle GHG Program
    1. Proposed Revised GHG Emissions Standards
    2. Proposed Compliance Incentives and Flexibilities
    C. Analytical Support for the Proposed Revised Standards
    1. Summary of Analyses for This Proposed Rule
    2. History of Similar Analyses
    D. Summary of Costs and Benefits of the Proposed Program
    E. How has EPA considered environmental justice in this
proposal?
    F. Affordability and Equity
    G. What alternatives is EPA considering?
    1. Description of the Alternatives
    2. Summary of Costs and Benefits of the Alternatives
    3. Summary of the Proposal's Costs and Benefits Compared to the
Alternatives
II. EPA Proposal for MY 2023-2026 Light-Duty Vehicle GHG Standards
    A. Proposed Model Year 2023-2026 GHG Standards for Light-Duty
Vehicles, Light-Duty Trucks, and Medium Duty Passenger Vehicles
    1. What fleet-wide emissions levels correspond to the
CO2 standards?
    2. What are the proposed CO2 attribute-based
standards?
    3. EPA's Statutory Authority Under the CAA
    4. Averaging, Banking, and Trading Provisions for CO2
Standards
    5. Certification, Compliance, and Enforcement
    6. On-Board Diagnostics Program Updates
    7. Stakeholder Engagement
    8. How do EPA's proposed standards relate to NHTSA's CAFE
proposal and to California's GHG program?
    B. Additional Manufacturer Compliance Flexibilities
    1. Multiplier Incentives for Advanced Technology Vehicles
    2. Advanced Technology Incentives for Full-Size Pickups
    3. Off-Cycle Technology Credits
    4. Air Conditioning System Credits
    5. Natural Gas Vehicles Technical Correction
    C. What alternatives is EPA considering?
III. Technical Assessment of the Proposed CO2 Standards
    A. What approach did EPA use in analyzing potential standards?
    B. Projected Compliance Costs and Technology Penetrations
    1. GHG Targets and Compliance Levels
    2. Projected Compliance Costs per Vehicle
    3. Technology Penetration Rates
    C. Are the proposed standards feasible?
    D. How did EPA consider the two alternatives in choosing the
proposed program?
IV. How would this proposal reduce GHG emissions and their
associated effects?
    A. Impact on GHG Emissions
    B. Climate Change Impacts From GHG Emissions
    C. Global Climate Impacts and Benefits Associated With the
Proposal's GHG Emissions Reductions
V. How would the proposal impact non-GHG emissions and their
associated effects?
    A. Impact on Non-GHG Emissions
    B. Health and Environmental Effects Associated With Exposure to
Non-GHG Pollutants Impacted by the Proposed Standards
    C. Air Quality Impacts of Non-GHG Pollutants
VI. Basis for the Proposed GHG Standards Under CAA Section 202(a)
    A. Consideration of Technological Feasibility and Lead Time
    1. Technological Readiness of the Auto Industry in Meeting
Revised GHG Standards
    2. Opportunities Provided Through Credits and Incentives
Provisions
    B. Consideration of Vehicle Costs of Compliance
    C. Consideration of Impacts on Consumers
    D. Consideration of Emissions of GHGs and Other Air Pollutants
    E. Consideration of Energy, Safety and Other Factors
    F. Balancing of Factors Under CAA 202(a)
VII. What are the estimated cost, economic, and other impacts of the
proposal?
    A. Conceptual Framework for Evaluating Consumer Impacts
    B. Vehicle Sales Impacts
    C. Changes in Fuel Consumption

    D. Greenhouse Gas Emission Reduction Benefits
    E. Non-Greenhouse Gas Health Impacts
    F. Energy Security Impacts
    G. Impacts of Additional Driving
    H. Safety Considerations in Establishing GHG Standards
    I. Summary of Costs and Benefits
    J. Impacts on Consumers of Vehicle Costs and Fuel Savings
    K. Employment Impacts
    L. Environmental Justice
    1. GHG Impacts
    2. Non-GHG Impacts
    M. Affordability and Equity Impacts
VIII. Statutory and Executive Order Reviews
    A. Executive Order 12866: ``Regulatory Planning and Review and
Executive Order 13563: Improving Regulation and Regulatory Review''
    B. Paperwork Reduction Act
    C. Regulatory Flexibility Act
    D. Unfunded Mandates Reform Act
    E. Executive Order 13132: ``Federalism''
    F. Executive Order 13175: ``Consultation and Coordination With
Indian Tribal Governments''
    G. Executive Order 13045: ``Protection of Children From
Environmental Health Risks and Safety Risks''
    H. Executive Order 13211: ``Energy Effects''
    I. National Technology Transfer and Advancement Act
    J. Executive Order 12898: ``Federal Actions To Address
Environmental Justice in Minority Populations and Low-Income
Populations''
IX. Statutory Provisions and Legal Authority

I. Executive Summary

A. Purpose of This Proposed Rule and Legal Authority

1. Proposal for Near-Term Standards Through Model Year 2026
    The Environmental Protection Agency (EPA) is proposing to revise
existing national greenhouse gas (GHG) emissions standards for
passenger cars and light trucks under section 202(a) of the Clean Air
Act (CAA), 42 U.S.C. 7521(a). Section 202(a) requires EPA to establish
standards for emissions of air pollutants from new motor vehicles
which, in the Administrator's judgment, cause or contribute to air
pollution which may reasonably be anticipated to endanger public health
or welfare.
    This proposal also responds to Executive Order (E.O.) 13990,
``Protecting Public Health and the Environment and Restoring Science To
Tackle the Climate Crisis'' (Jan. 20, 2021), which directs EPA to
consider taking the action proposed in this notice: \1\
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    \1\ 86 FR 7037, January 25, 2021.

    ``[T]he head of the relevant agency, as appropriate and
consistent with applicable law, shall consider publishing for notice
and comment a proposed rule suspending, revising, or rescinding the
agency action[s set forth below] within the time frame specified.''
    ``Establishing Ambitious, Job-Creating Fuel Economy Standards: .
. . `The Safer Affordable Fuel-Efficient (SAFE) Vehicles Rule for
Model Years 2021-2026 Passenger Cars and Light Trucks,' 85 FR 24174
(April 30, 2020), by July 2021. . . . In considering whether to
propose suspending, revising, or rescinding the latter rule, the
agency should consider the views of representatives from labor
unions, States, and industry.''

    The proposed program would revise the light-duty vehicle GHG
standards previously revised by the SAFE rule and would build upon
earlier EPA actions and supporting analyses that established or
maintained stringent light-duty vehicle GHG emissions standards. For
example, in 2012, EPA issued a final rule establishing light-duty
vehicle GHG standards for model years (MYs) 2017-2025,\2\ which were
supported in analyses accounting for compliance costs, lead time and
other relevant factors.\3\ That rule and its analyses also accounted
for the development and availability of advanced GHG emission-reducing
technologies for gasoline-fueled vehicles, which demonstrated that the
standards were appropriate under section 202(a) of the CAA.\4\ This
proposed rule provides additional analysis that takes into
consideration updated data and recent developments. Auto manufacturers
are currently implementing an increasing array of advanced gasoline
vehicle GHG emission-reducing technologies at a rapid pace throughout
their vehicle fleets. Vehicle electrification technologies are also
advancing rapidly, as battery costs have continued to decline, and
automakers have announced an increasing diversity and volume of zero-
emission vehicle models. Meanwhile, in 2019, several auto manufacturers
voluntarily entered into agreements with the State of California to
comply with GHG emission reduction targets through MY 2026 across their
national vehicle fleets (the ``California Framework Agreements'') that
are more stringent than the EPA standards as revised by the SAFE rule.
These developments further support EPA's decision to reconsider and
propose revising the existing EPA standards to be more stringent,
particularly in light of factors indicating that more stringent near-
term standards are feasible at reasonable cost and would achieve
significantly greater GHG emissions reductions and public health and
welfare benefits than the existing program. In developing this
proposal, EPA has conducted outreach with a wide range of interested
stakeholders, including labor unions, States, and industry as provided
in E.O. 13990, and we will continue to engage with these and other
stakeholders as part of our regulatory development process.
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    \2\ EPA's model year emission standards also apply in subsequent
model years, unless revised, e.g., MY 2025 standards issued in the
2012 rule also applied to MY 2026 and beyond.
    \3\ 77 FR 62624, October 15, 2012.
    \4\ Id.
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    This proposal is limited to MYs 2023-2026, given lead time
considerations under the CAA, which is consistent with E.O. 13990's
direction to review the SAFE rule standards. We have designed the
proposed program based on our assessment that the proposed standards
are reasonable and appropriate and will achieve a significant level of
GHG reductions for MYs 2023-2026 vehicles, with the expectation that a
future, longer-term program for MYs 2027 and later will build upon
these near-term standards.
    EPA has set previous light-duty vehicle GHG emission standards in
joint rulemakings where NHTSA also established CAFE standards. EPA has
concluded that it is not necessary at this time for this EPA proposal
to be done in a joint action with NHTSA. EPA has coordinated with
NHTSA, both on a bilateral level as well as through the interagency
review of the EPA proposal led by the Office of Management and Budget.
2. Why does EPA believe the proposed standards are appropriate under
the CAA?
    EPA is proposing to revise GHG emissions standards for passenger
cars and light trucks under its authority in section 202(a) of the CAA.
Section 202(a) requires EPA to establish standards for emissions of
pollutants from new motor vehicles which, in the Administrator's
judgment, cause or contribute to air pollution which may reasonably be
anticipated to endanger public health or welfare. Standards under
section 202(a) take effect ``after such period as the Administrator
finds necessary to permit the development and application of the
requisite technology, giving appropriate consideration to the cost of
compliance within such period.'' Thus, in establishing or revising
section 202(a) standards designed to reduce air pollution that
endangers public health and welfare, EPA also must consider issues of
technological feasibility, compliance cost, and lead time. EPA also may
consider other factors and in previous light-duty vehicle GHG standards
rulemakings has considered the impacts of potential GHG standards

on the auto industry, fuel savings by consumers, oil conservation,
energy security and other energy impacts, as well as other relevant
considerations such as safety.
    As we describe in greater detail below, EPA has carefully
considered the technological feasibility and cost of the proposed
standards and the available lead time for manufacturers to comply with
them, including existing and proposed flexibilities designed to
facilitate compliance during the MYs 2023-2026 timeframe. Based on our
analysis, we believe that the proposed standards, combined with
proposed flexibilities that address lead time considerations resulting
from relaxations in standards revised in the SAFE rule, are appropriate
and justified under section 202(a) of the CAA. Our updated analysis for
this proposal, as well as our earlier analyses of similar standards,
supports the conclusion that the proposed standards are technologically
feasible for the model years covered (MYs 2023-2026) and that the costs
of compliance for manufacturers would be reasonable. The proposed
standards would result in greater reductions in GHG emissions, as well
as reductions in emissions of some criteria pollutants and air toxics,
resulting in significant benefits for public health and welfare. We
also show that the proposal would result in reduced vehicle operating
costs for consumers and that the benefits of the proposed program would
significantly exceed the costs.
    EPA has significantly updated its analysis for this rule. As
discussed further below, we have updated a number of key inputs, such
as, for example, certain technology costs and penetrations, to ensure
they are up to date. Notably, the results of this updated analysis are
generally in agreement with prior analyses, including those conducted
for the SAFE rule. In particular, the costs that have been estimated
for manufacturers to meet standards of a similar stringency to the
proposed standards have been roughly consistent since EPA first
estimated them in 2012. That is, although manufacturers have less lead
time before these standards would be implemented than with previous
rulemakings, the significant progress that has been made in
implementing advanced gasoline technologies in the fleet (as well as
advances in electric and hybrid vehicle technology) since 2012 means
the proposed standards can be achieved at roughly the same cost as
previous estimates, and additional lead time is unnecessary.
    When considering similar cost estimates in the SAFE rule, EPA
identified some factors, primarily costs to manufacturers and upfront
costs to consumers, as favoring reductions in stringency of the then-
existing standards, and other factors, such as reduced emissions that
endanger public health and welfare and reduced operating costs for
consumers, as favoring increased stringency (or a lower degree of
reduced stringency). In balancing these factors in the SAFE rule, EPA
placed greater weight on the former factors, and thereby decided to
make EPA's GHG standards significantly less stringent. But the purpose
of adopting standards under CAA section 202 is to address air pollution
that may reasonably be anticipated to endanger public health and
welfare. Indeed, reducing air pollution has traditionally been the
focus of such standards. EPA has reconsidered how costs, lead time and
other factors were weighed in the SAFE rule and is reaching a different
conclusion as to the appropriate stringency of GHG standards. In light
of the statutory purpose of section 202, the Administrator is placing
greater weight on the emission reductions and resulting public health
and welfare benefits, as well as the savings in vehicle operating costs
for consumers, and proposing significantly more stringent standards for
MYs 2023-2026 compared to the standards established by the SAFE rule.
As discussed in Section III.A, the proposed standards take into
consideration both the updated analysis for this rule and past EPA
analyses conducted for similar GHG standards. We are revising decisions
made in the SAFE final rule in accordance with Supreme Court decisions
affirming that agencies are free to reconsider and revise their prior
decisions where they provide a reasonable explanation for their revised
decisions.\5\ In this rulemaking, the agency is changing its 2020
position and restoring its previous approach by proposing to find, in
light of the statutory purposes of the Clean Air Act and in particular
of section 202(a), that it is more appropriate to place greater weight
on the magnitude and benefits of reducing emissions that endanger
public health and welfare, while continuing to consider compliance
costs, lead time and other relevant factors.
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    \5\ See, e.g., Encino Motorcars, LLC v. Navarro, 136 S. Ct.
2117, 2125 (2016); FCC v. Fox Television Stations, Inc., 556 U.S.
502, 515 (2009).
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3. Future Longer-Term Action To Further Reduce Light-Duty Vehicle
Emissions in 2027 and Beyond
    Addressing the climate crisis will require substantial reductions
in GHG emissions from the transportation sector. The transportation
sector is the largest U.S. source of GHG emissions, representing 29
percent of total GHG emissions.\6\ Within the transportation sector,
light-duty vehicles are the largest contributor, at 58 percent, and
thus comprise 17 percent of total U.S. GHG emissions.\7\ GHG emissions
have significant impacts on public health and welfare as evidenced by
the well-documented scientific record and as set forth in EPA's
Endangerment and Cause or Contribute Findings under Section 202(a) of
the CAA.\8\ Additionally, major scientific assessments continue to be
released that further advance our understanding of the climate system
and the impacts that GHGs have on public health and welfare both for
current and future generations, as discussed in Section IV.B, making it
clear that continued emission reductions in the light-duty vehicle
sector are needed beyond the model years covered by the standards
proposed today.
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    \6\ Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990-
2019 (EPA-430-R-21-005, published April 2021).
    \7\ 7 Ibid.
    \8\ 74 FR 66496, December 15, 2009; 81 FR 54422, August 15,
2016.
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    This proposed action therefore serves as a critical building block
for a comprehensive, multipollutant longer-term regulatory program
implementing EPA's statutory authority under the CAA. We are at a
pivotal moment in the history of the light-duty transportation sector--
a shift to zero-emission vehicle technologies is already underway, and
it presents a strong potential for dramatic reductions in GHG and
criteria pollutant emissions over the longer term. Major automakers as
well as many global jurisdictions and U.S. states have announced plans
to shift the light-duty fleet toward zero-emissions technology, as
detailed below. EPA anticipates that the design of a future, longer-
term program beyond 2026 will incorporate accelerating advances in
zero-emission technologies.
    A proliferation of recent announcements from automakers signals a
rapidly growing shift in investment away from internal-combustion
technologies and toward high levels of electrification. These automaker
announcements are supported by continued advances in automotive
electrification technologies, and further driven by the need to

compete in a global market as other countries implement aggressive
zero-emission transportation policies. For example, in January 2021,
General Motors announced plans to become carbon neutral by 2040,
including an effort to shift its light-duty vehicles entirely to zero-
emissions by 2035.\9\ In March 2021, Volvo announced plans to make only
electric cars by 2030,\10\ and Volkswagen announced that it expects
half of its U.S. sales will be all-electric by 2030.\11\ In April 2021,
Honda announced a full electrification plan to take effect by 2040,
with 40 percent of North American sales expected to be fully electric
or fuel cell vehicles by 2030, 80 percent by 2035 and 100 percent by
2040.\12\ In May 2021, Ford announced that they expect 40 percent of
their global sales will be all-electric by 2030.\13\ In June 2021, Fiat
announced a move to all electric vehicles by 2030, and in July 2021 its
parent corporation Stellantis announced an intensified focus on
electrification across all of its brands.14 15 Also in July
2021, Mercedes-Benz announced that all of its new architectures would
be electric-only from 2025, with plans to become ready to go all-
electric by 2030 where possible.\16\
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    \9\ General Motors, ``General Motors, the Largest U.S.
Automaker, Plans to be Carbon Neutral by 2040,'' Press Release,
January 28, 2021.
    \10\ Volvo Car Group, ``Volvo Cars to be fully electric by
2030,'' Press Release, March 2, 2021.
    \11\ Volkswagen Newsroom, ``Strategy update at Volkswagen: The
transformation to electromobility was only the beginning,'' March 5,
2021. Accessed June 15, 2021 at https://www.volkswagen-newsroom.com/en/stories/strategy-update-at-volkswagen-the-transformation-to-electromobility-was-only-the-beginning-6875.
    \12\ Honda News Room, ``Summary of Honda Global CEO Inaugural
Press Conference,'' April 23, 2021. Accessed June 15, 2021 at
https://global.honda/newsroom/news/2021/c210423eng.html.
    \13\ Ford Motor Company, ``Superior Value From EVs, Commercial
Business, Connected Services is Strategic Focus of Today's
`Delivering Ford+' Capital Markets Day,'' Press Release, May 26,
2021.
    \14\ Stellantis, ``World Environment Day 2021--Comparing
Visions: Olivier Francois and Stefano Boeri, in Conversation to
Rewrite the Future of Cities,'' Press Release, June 4, 2021.
    \15\ Stellantis, ``Stellantis Intensifies Electrification While
Targeting Sustainable Double-Digit Adjusted Operating Income Margins
in the Mid-Term,'' Press Release, July 8, 2021.
    \16\ Mercedes-Benz, ``Mercedes-Benz prepares to go all-
electric,'' Press Release, July 22, 2021.
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    These announcements and others like them continue a pattern over
the past several years of many manufacturers taking steps to
aggressively pursue zero-emission technologies, introduce a wide range
of zero-emission vehicle models, and reduce their reliance on the
internal-combustion engine in various markets around the
globe.17 18 These goals and investments have been coupled
with a rapidly increasing availability of plug-in vehicle models in the
U.S.\19\ For example, the number of all-electric vehicle (EV) and plug-
in hybrid electric vehicle (PHEV) models available for sale in the U.S.
more than doubled from about 24 in MY 2015 to about 60 in MY 2021, with
offerings in a growing range of vehicle segments.\20\ Recent model
announcements indicate that this number will increase to more than 80
models by MY 2023, with many more expected to reach production before
the end of the decade.\21\ Many of the zero-emission vehicles already
on the market today cost less to drive than conventional
vehicles,22 23 offer improved performance and handling,\24\
and can be charged at a growing network of public chargers \25\ as well
as at home.
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    \17\ Environmental Defense Fund and M.J. Bradley & Associates,
``Electric Vehicle Market Status--Update, Manufacturer Commitments
to Future Electric Mobility in the U.S. and Worldwide,'' April 2021.
    \18\ International Council on Clean Transportation, ``The end of
the road? An overview of combustion-engine car phase-out
announcements across Europe,'' May 10, 2020.
    \19\ Muratori et al., ``The rise of electric vehicles--2020
status and future expectations,'' Progress in Energy v3n2 (2021),
March 25, 2021. Accessed July 15, 2021 at https://iopscience.iop.org/article/10.1088/2516-1083/abe0ad.
    \20\ Fueleconomy.gov, 2015 Fuel Economy Guide and 2021 Fuel
Economy Guide.
    \21\ Environmental Defense Fund and M.J. Bradley & Associates,
``Electric Vehicle Market Status--Update, Manufacturer Commitments
to Future Electric Mobility in the U.S. and Worldwide,'' April 2021.
    \22\ Department of Energy Vehicle Technologies Office,
Transportation Analysis Fact of the Week #1186, ``The National
Average Cost of Fuel for an Electric Vehicle is about 60% Less than
for a Gasoline Vehicle,'' May 17, 2021.
    \23\ Department of Energy Vehicle Technologies Office,
Transportation Analysis Fact of the Week #1190, ``Battery-Electric
Vehicles Have Lower Scheduled Maintenance Costs than Other Light-
Duty Vehicles,'' June 14, 2021.
    \24\ Consumer Reports, ``Electric Cars 101: The Answers to All
Your EV Questions,'' November 5, 2020. Accessed June 8, 2021 at
https://www.consumerreports.org/hybrids-evs/electric-cars-101-the-answers-to-all-your-ev-questions/.
    \25\ Department of Energy Alternative Fuels Data Center,
Electric Vehicle Charging Station Locations. Accessed on May 19,
2021 at https://afdc.energy.gov/fuels/electricity_locations.html#/find/nearest?fuel=ELEC.
---------------------------------------------------------------------------

    At the same time, an increasing number of global jurisdictions and
U.S. states plan to take actions to shift the light-duty fleet toward
zero-emissions technology. In 2020, California announced an intention
to require increasing volumes of zero-emission vehicles to meet the
goal that, by 2035, all new light-duty vehicles sold in the state be
zero-emission vehicles.\26\ Massachusetts \27\ and New York \28\ are
also poised to adopt similar targets and requirements to take effect by
2035. Several other states may adopt similar provisions by 2050 as
members of the International Zero-Emission Vehicle Alliance.\29\
Globally, at least 12 countries, as well as numerous local
jurisdictions, have announced similar goals to shift all new passenger
car sales to zero-emission vehicles in the coming years, including
Norway (2025); the Netherlands, Denmark, Iceland, Ireland, Sweden, and
Slovenia (2030); Canada and the United Kingdom (2035); France and Spain
(2040); and Costa Rica (2050).30 31 Together, these
countries represent approximately 13 percent of the global market for
passenger cars,\32\ in addition to that represented by the
aforementioned U.S. states and other global jurisdictions.
---------------------------------------------------------------------------

    \26\ State of California Office of the Governor, ``Governor
Newsom Announces California Will Phase Out Gasoline-Powered Cars &
Drastically Reduce Demand for Fossil Fuel in California's Fight
Against Climate Change,'' Press Release, September 23, 2020.
    \27\ Commonwealth of Massachusetts, ``Request for Comment on
Clean Energy and Climate Plan for 2030,'' December 30, 2020.
    \28\ New York State Senate, Senate Bill S2758, 2021-2022
Legislative Session. January 25, 2021.
    \29\ ZEV Alliance, ``International ZEV Alliance Announcement,''
Dec. 3, 2015. Accessed on July 16, 2021 at http://www.zevalliance.org/international-zev-alliance-announcement/.
    \30\ International Council on Clean Transportation, ``Update on
the global transition to electric vehicles through 2019,'' July
2020.
    \31\ Reuters, ``Canada to ban sale of new fuel-powered cars and
light trucks from 2035,'' June 29, 2021. Accessed July 1, 2021 from
https://www.reuters.com/world/americas/canada-ban-sale-new-fuel-powered-cars-light-trucks-2035-2021-06-29/.
    \32\ International Council on Clean Transportation, ``Growing
momentum: Global overview of government targets for phasing out new
internal combustion engine vehicles,'' posted 11 November 2020,
accessed April 28, 2021 at https://theicct.org/blog/staff/global-ice-phaseout-nov2020.
---------------------------------------------------------------------------

    EPA recognizes that in addition to substantially reducing GHG
emissions, a longer-term rulemaking could also address criteria
pollutant and air toxics emissions from the new light-duty vehicle
fleet--especially important considerations during the transition to
zero-emission vehicles. EPA expects that a future longer-term
rulemaking will take critical steps to continue the trajectory of
transportation emission reductions needed to protect public health and
welfare. Achieving this trajectory with the help of increased fleet
penetration of zero-emission vehicles would bring with it other
advantages as well, such as potentially large reductions in roadway
pollution and noise in overburdened communities, and potentially
support for the future development of vehicle-to-grid services that
could become a key enabler for increased utilization of

variable renewable energy sources, such as wind and solar, across the
grid.\33\
---------------------------------------------------------------------------

    \33\ Department of Energy Electricity Advisory Committee,
``Enhancing Grid Resilience with Integrated Storage from Electric
Vehicles: Recommendations for the U.S. Department of Energy,'' June
25, 2018.
---------------------------------------------------------------------------

B. Summary of Proposed Light-Duty Vehicle GHG Program

    EPA is proposing revised GHG standards that would begin in MY 2023
and increase in stringency year over year through MY 2026. EPA proposes
to increase the stringency of the standards from the average roughly
1.5 percent year-over-year stringency increase of the relaxed SAFE
standards to a nearly 10 percent proposed stringency increase in MY
2023, followed by a nearly 5 percent proposed stringency increase in
each MY from 2024 through 2026. EPA believes the 10 percent proposed
increase in stringency in MY 2023 is appropriate given the
technological investments industry has continued to make beyond what
would be required to meet the SAFE rule revised standards, such as
improvements being made in response to the California Framework
Agreements, as well as the compliance flexibilities built into the
program. Also, as discussed in Section I.G below, EPA requests comment
on standards for MY 2026 that would result in fleet average target
levels that are in the range of 5-10 g/mile lower (i.e., more
stringent) than the levels proposed. This request for comments is in
keeping with the additional lead time available for this out-year
compared to MYs 2023-2025, and because EPA may determine that it is
appropriate, particularly in light of the accelerating transition to
electrified vehicles, to require additional reductions in this time
frame. The proposed standards would achieve significant GHG and other
emission reductions and related public health and welfare benefits,
while providing consumers with lower operating costs resulting from
significant fuel savings. Our analysis described in this notice
demonstrates that the proposed standards are appropriate under section
202(a) of the CAA, considering costs, technological feasibility,
available lead time, and other factors. The proposed trajectory of
increasing stringency from MYs 2023 to 2026 takes into account the
credit-based emissions averaging, banking and trading flexibilities of
the current program as well as additional flexibility provisions that
we are proposing to ease the transition to more stringent standards.
EPA also took into account manufacturers' ability to generate credits
against the existing standards relaxed in the SAFE rule for MYs 2021
and 2022, which we are not proposing to revise.
    In our design and analyses of the proposed program and our overall
updated assessment of feasibility, EPA also took into account the
decade-long light-duty vehicle GHG emission reduction program in which
the auto industry has introduced a wide lineup of ever more fuel-
efficient, GHG-reducing technologies. The technological achievements
already developed and applied to vehicles within the current new
vehicle fleet will enable the industry to achieve the proposed
standards even without the development of new technologies beyond those
already widely available. Furthermore, in light of the design cycle
timing for vehicles, EPA has basis to expect that the vehicles that
automakers will be selling during the first years of the proposed MY
2023-26 program were already designed before the less stringent SAFE
standards were recently adopted. Further support that the technologies
needed to meet the proposed standards do not need to be developed, but
are already widely available and in use on vehicles, can be found in
the fact that five vehicle manufacturers, representing about a third of
U.S. auto sales, agreed in 2019 with the State of California that their
nationwide fleets would meet GHG emission reduction targets more
stringent than the applicable EPA standards beginning in model year
2021. The fact that five automakers voluntarily entered into the
California Framework Agreements also supports the feasibility of
meeting standards at least as stringent as the emission reduction
targets under the California Framework, which we describe in detail
later in this preamble. We describe additional details of the proposal
below and in later sections of the preamble as well as in the Draft
Regulatory Impact Analysis (DRIA). We also describe and analyze both
less stringent and more stringent alternatives, consistent with OMB
Circular A-4.
    Although most automakers have launched ambitious plans to develop
and produce increasing numbers of zero- and near-zero-emission
vehicles, EPA recognizes that during the near-term timeframe of the
proposed standards through MY 2026, the new vehicle fleet likely will
continue to consist primarily of gasoline-fueled vehicles. In this
preamble and in the DRIA, we provide our analyses supporting our
assessment that the proposed standards for MYs 2023 through 2026 would
be achievable primarily through the application of advanced gasoline
vehicle technologies. We project that during the four-year ramping up
of the stringency of the CO2 standards, the proposed
standards could be met with gradually increasing sales of plug-in
electric vehicles in the U.S., up to about 8 percent market share
(including both electric vehicles (EVs) and plug-in hybrid electric
vehicles (PHEVs)) by MY 2026. Given that EVs and PHEVs represented
about 2 percent of the new vehicle market in MY 2019,\34\ this would
represent a significant increase in penetration of these vehicles but
one that we believe is reasonable given automaker announcements on
increasing EV and PHEV production. We note later in this preamble in
the discussion of the alternative levels of stringency that EPA is
considering, that there may be the potential for higher levels of EV
penetration by MY 2026, which could enable EPA to consider a more
stringent standard for MY 2026. As described elsewhere in this
preamble, we believe that, in conjunction with the proposed standards,
the limited but focused incentives and flexibilities that we are
proposing would support automakers' acceleration of their introduction
and sales of advanced technologies, including zero and near-zero-
emission technologies.
---------------------------------------------------------------------------

    \34\ ``The 2020 EPA Automotive Trends Report, Greenhouse Gas
Emissions, Fuel Economy, and Technology since 1975,'' EPA-420-R-21-
003, January 2021, p. 52.
---------------------------------------------------------------------------

1. Proposed Revised GHG Emissions Standards
i. Proposed Revised CO2 Targets
    As with EPA's previous light-duty GHG programs, EPA is proposing
footprint-based standards curves for both passenger cars and trucks.
Each manufacturer would have a unique standard for the passenger cars
category and another for the truck category \35\ for each MY based on
the sales-weighted footprint-based CO2 targets \36\ of the
vehicles produced in that MY. Figure 1 shows EPA's proposed standards,
expressed as average fleetwide GHG emissions targets (cars and trucks
combined), projected through MY 2026. For comparison, the figure also
shows the corresponding targets for the SAFE final rulemaking (FRM) and
the 2012 FRM. The projected fleet targets for this proposed rule
increase in stringency in

MY 2023 by about 10 percent (from the existing SAFE rule standards in
MY 2022), followed by stringency increases thereafter of nearly 5
percent year over year from MY 2024 through MY 2026. Also, as discussed
in Section I.G, EPA requests comment on standards for MY 2026 that
would result in fleet average target levels that are in the range of 5-
10 g/mile lower (i.e., more stringent) than the levels proposed. As
with all EPA vehicle emissions standards, the proposed MY 2026
standards would then remain in place for all subsequent MYs, unless and
until they are revised in a subsequent rulemaking. Table 1 presents the
estimates of EPA's proposed standards presented in Figure 1, again in
terms of the projected overall industry fleetwide CO2-
equivalent emission compliance target levels. The industry fleet-wide
estimates in Table 1 are projections based on modeling that EPA
conducted for the proposed rule, taking into consideration projected
fleet mix and footprints for each manufacturer's fleet in each model
year. Table 2 presents projected industry fleet average year-over-year
percent reductions comparing the existing standards under the SAFE rule
and the proposed revised standards. See Section II.A below for a full
discussion of the proposed standards and presentations of the footprint
standards curves.
---------------------------------------------------------------------------

    \35\ Passenger cars include cars and smaller cross-overs and
SUVs, while the truck category includes larger cross-overs and SUVs,
minivans, and pickup trucks.
    \36\ Because compliance is based on the full range of vehicles
in a manufacturer's car and truck fleets, with lower-emitting
vehicles compensating for higher-emitting vehicles, the emission
levels of specific vehicles within the fleet are referred to as
targets, rather than standards.
---------------------------------------------------------------------------

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[GRAPHIC] [TIFF OMITTED] TP10AU21.000

BILLING CODE 6560-50-C

                 Table 1--Projected Industry Fleet-Wide CO2 Compliance Targets for MYs 2023-2026
                                                   [grams/mi]
----------------------------------------------------------------------------------------------------------------
                                      2022 *           2023            2024            2025           2026 **
----------------------------------------------------------------------------------------------------------------
Cars............................             180             165             157             149             142
Trucks..........................             260             232             221             210             199
Combined Cars and Trucks........             220             199             189             180             171
----------------------------------------------------------------------------------------------------------------
* SAFE rule targets included for reference.
** EPA is also requesting comment on MY 2026 standards that would result in fleet average levels that are 5-10 g/
  mile more stringent than the levels shown.
The combined car/truck CO2 targets are a function of assumed car/truck shares. For this illustration, we assume
  an approximately 50/50% split in MYs 2023-2026. See DRIA Chapter 2 for detail.

                                   Table 2--Projected Industry Fleet Average Target Year-Over-Year Percent Reductions
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                             SAFE rule                                       Proposal
                                                         -----------------------------------------------------------------------------------------------
                                                              Cars %         Trucks %       Combined %        Cars %         Trucks %       Combined %
--------------------------------------------------------------------------------------------------------------------------------------------------------
2023....................................................             1.7             1.5             1.6             8.3            10.8             9.8
2024....................................................             1.1             1.2             1.2             4.8             4.7             4.7
2025....................................................             2.3             2.0             2.2             5.1             5.0             4.9
2026 *..................................................             1.8             1.6             1.7             4.7             5.2             5.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
* The percentages shown do not include EPA's request for comments on MY 2026 standards that are 5-10 g/mile more stringent than proposed.

2. Proposed Compliance Incentives and Flexibilities
    The existing GHG program established in the 2010 and 2012 rules
included several key flexibilities, such as credit programs and
technology incentives that are discussed further in this proposal where
EPA is requesting comment or proposing modifications.\37\ These
include:
---------------------------------------------------------------------------

    \37\ See 75 FR 25324, May 7, 2010 and 77 FR 62624, Oct. 15,
2012.

 Credit Averaging, Banking, and Trading (ABT) including credit
carry-forward, credit carry-back, transferring credits between a
manufacturer's car and truck fleets, and credit trading between
manufacturers (MY 2012 and later)
 Off-cycle credits for GHG emissions reductions not captured on
the test procedures used for fleet average compliance with the
footprint-based standards (MY 2012 and later)
 Air conditioning credits for system efficiency improvements
and reduced refrigerant leakage or use of low global warming potential
refrigerants (MY 2012 and later)
 Multiplier incentives for advanced technology vehicles
including electric vehicles, fuel cell vehicles, plug-in hybrids
(ending after MY 2021)
 Multiplier incentives for natural gas fueled vehicles (MY
2021-2026)
 Full-size pick-up incentives for hybridization or performance
improvements equivalent to hybridization (ending after MY 2021)

    EPA is proposing a targeted set of extended or additional
compliance flexibilities and incentives that we believe are appropriate
given the stringency and lead time of the proposed standards. We are
proposing four types of flexibilities/incentives, in addition to
flexibilities/incentives that already will be available for these MYs
under EPA's existing regulations: (1) A limited extension of carry-
forward credits generated in MYs 2016 through 2020; (2) an extension of
the advanced technology vehicle multiplier credits for MYs 2022 through
2025 with a cumulative credit cap; (3) restoration of the 2012 rule's
full-size pickup truck incentives for strong hybrids or similar
performance-based credit for MYs 2022 through 2025 (provisions which
were removed in the SAFE rule); and (4) an increase of the off-cycle
credits menu cap from 10 g/mile to 15 g/mile. EPA is also proposing to
remove the multiplier incentives for natural gas fueled vehicles for
MYs 2023-2026. We summarize these proposals below and provide details
in Sections II.B and II.C below.
    The GHG program includes existing provisions initially established
in the 2010 rule, which set the MY 2012-2016 GHG standards, for how
credits may be used within the program. These averaging, banking, and
trading (ABT) provisions include credit carry-forward, credit carry-
back (also called deficit carry-forward), credit transfers (within a
manufacturer), and credit trading (across manufacturers). These ABT
provisions define how credits may be used and are integral to the
program. The current program limits credit carry-forward to 5 years.
EPA is proposing a limited extension of credit carry-forward for
credits generated in MYs 2016 through 2020. The proposal would change
the credit carry-forward time limitation for MY 2016 credits from five
to seven years and the carry-forward limit for MYs 2017-2020 from 5 to
6 years, as shown in Table 3 below.

                                           Table 3--EPA Proposed Extension of Credit Carry-Forward Provisions
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                        MYs credits are valid under EPA's proposed extension
           MY credits are banked           -------------------------------------------------------------------------------------------------------------
                                              2016      2017      2018      2019      2020      2021      2022      2023      2024      2025      2026
--------------------------------------------------------------------------------------------------------------------------------------------------------
2016......................................  ........        x         x         x         x         x         +         +   ........  ........  ........
2017......................................  ........  ........        x         x         x         x         x         +   ........  ........  ........
2018......................................  ........  ........  ........        x         x         x         x         x         +   ........  ........
2019......................................  ........  ........  ........  ........        x         x         x         x         x         +   ........
2020......................................  ........  ........  ........  ........  ........        x         x         x         x         x         +
2021......................................  ........  ........  ........  ........  ........  ........        x         x         x         x         x
--------------------------------------------------------------------------------------------------------------------------------------------------------
x = Current program. + = Proposed additional years.

    The existing GHG program also includes temporary incentives through
MY 2021 that encourage the use of advanced technologies such as
electric, hybrid, and fuel cell vehicles, as well as incentives for
full-size pickups using strong hybridization or technologies providing
similar emissions reductions to hybrid technology. The full-size pickup
incentives originally were available through MY 2025, but the SAFE rule
removed these incentives for MYs 2022 through 2025. When EPA
established these incentives in the 2012 rule, EPA recognized that they
would reduce the effective stringency of the standards, but believed
that it was worthwhile to have a limited near-term

loss of emissions reduction benefits to increase the potential for far
greater emissions reduction and technology diffusion benefits in the
longer term.\38\ EPA believed that the temporary regulatory incentives
would help bring low emission technologies to market more quickly than
in the absence of incentives.\39\ With these same goals in mind for
this program, EPA is proposing multiplier incentives from MY 2022
though MY 2025 with a cap on multiplier credits and to reinstate the
full-size pickup incentives removed from the program by the SAFE rule.
These proposed incentives are intended as a temporary measure
supporting the transition to zero-emission vehicles and to provide
additional flexibility in meeting the MY 2023-2026 proposed standards,
as further discussed in Section II.B.1.
---------------------------------------------------------------------------

    \38\ See Tables III-2 and III-3, 77 FR 62772, October 15, 2012.
    \39\ 77 FR 62812, October 15, 2012.
---------------------------------------------------------------------------

    EPA is also proposing to remove the extended multiplier incentives
added by the SAFE rule from the GHG program after MY 2022. EPA is
proposing to end multipliers for NGVs in this manner because NGVs are
not a near-zero emissions technology and EPA believes multipliers are
no longer necessary or appropriate for these vehicles. Any NGV
multiplier credits generated in MY 2022 would be included under the
proposed multiplier cap.
    The current program also includes credits for real-world emissions
reductions not reflected on the test cycles used for measuring
CO2 emissions for compliance with the fleet average
standards. There are credits for using technologies that reduce GHG
emissions that aren't captured on EPA tests (``off-cycle''
technologies) and improvements to air conditioning systems that
increase efficiency and reduce refrigerant leakage. These credit
opportunities do not sunset under the existing regulations, remaining a
part of the program through MY 2026 and beyond unless the program is
changed by regulatory action. EPA is proposing to modify an aspect of
the off-cycle credits program to provide additional opportunities for
manufacturers to generate credits by increasing the pre-defined menu
credit cap from 10 to 15 g/mile. EPA is also proposing to modify some
of the regulatory definitions that are used to determine whether a
technology is eligible for the menu credits. EPA is not proposing
changes to the air conditioning credits elements of the program.

C. Analytical Support for the Proposed Revised Standards

1. Summary of Analyses for This Proposed Rule
    All of EPA's analyses of the national light-duty vehicle GHG
program over the past decade have been built on the same overall
framework and produce the same types of results. Section III.A below
explains this common EPA framework in more detail. In summary, it
includes the following primary elements:
i. Analyzing Issues of Feasibility, Costs, and Lead Time
    As with our earlier analyses, EPA used a model to simulate the
decision process of auto manufacturers in choosing among the emission
reduction technologies available to incorporate in vehicles across
their fleets. The models take into account both the projected costs of
established and newer technologies and the relative ability of each of
these technologies to reduce GHG emissions. This process identifies
potential pathways for manufacturers to comply with a given set of GHG
standards. EPA then estimates projected average and total costs for
manufacturers to produce these vehicles to meet the standards under
evaluation during the model years covered by the analysis.
    In addition to projecting the technological capabilities of the
industry and estimating compliance costs for each of the four affected
model years (MYs 2023-2026), EPA has considered the role of the
averaging, banking, and trading system that has been available and
extensively used by the industry since the beginning of the light-duty
vehicle GHG program in model year 2012. Our analysis of the current and
anticipated near-future usage of the GHG credit mechanisms (III.B.2
below) reinforces the trends we identified in our other analyses
showing widespread technological advancement in the industry at
reasonable per-vehicle costs. Together, these analyses support EPA's
conclusion under section 202(a) of the CAA that technologically
feasible pathways are available at reasonable costs for automakers to
comply with the proposed standards during each of the four model years.
We discuss these analyses and their results further in Section III
below.
ii. Analyzing the Projected Impacts of the Proposed Program
    We also estimate the GHG and non-GHG emission impacts (tailpipe and
upstream) of the proposed standards. EPA then builds on the estimated
changes in emissions and fuel consumption to calculate expected net
economic impacts from these changes. Key economic inputs include: The
social costs of GHGs; measures of health impacts from changes in
criteria pollutant emissions; a value for the vehicle miles traveled
``rebound effect;'' estimates of energy security impacts of changes in
fuel consumption; and costs associated with crashes, noise, and
congestion from additional rebound driving.
    Our overall analytical approach generates key results for the
following metrics: Incremental costs per vehicle (industry-wide
averages and by manufacturer); total vehicle technology costs for the
auto industry; GHG emissions reductions and criteria pollutant
emissions reductions; penetration of key GHG-reducing technologies
across the fleet; consumer fuel savings; oil reductions; and net
societal costs and benefits. We discuss these analyses in Sections III,
IV, V, and VII below as well as in the DRIA.
2. History of Similar Analyses
    At several points during the past decade, EPA has performed
detailed analyses to evaluate the technological feasibility, as well as
to project program costs and benefits, of the national light-duty
vehicle GHG emissions control program. Although the purposes of these
analyses varied, and EPA used somewhat different modeling approaches
and tools, in each case these analyses included assessments of the
program in the later years of the standards, i.e., MYs 2022 through
2025 or 2026. As we describe in more detail in Chapter 1 of the DRIA,
EPA performed similar analyses in support of the 2011 proposal and 2012
final rule establishing the original MY 2017-2025 light-duty vehicle
GHG standards; in 2016-January 2017 in support of the Midterm
Evaluation process and Determination concerning the MY 2022-2025
standards; and in 2018 during the development of the SAFE proposed
rule.
    It is notable that, although each analysis is based on projections
from the then-available fleet data forward to model years 2025 or 2026,
the results of each of these earlier analyses, as well as the updated
analysis we have performed for our proposed standards, have all
produced very similar results in several key metrics. For example, the
estimated projected cost to manufacturers to implement similar
standards in 2025-2026 has remained fairly consistent since 2012. Thus,
while we believe the updated analysis presented in the DRIA provides
strong support for the

feasibility and appropriateness of the proposed program, the consistent
results from the earlier analyses further reinforce the robustness of
our conclusions.

D. Summary of Costs and Benefits of the Proposed Program

    EPA estimates that this proposal would result in significant
present-value net benefits of $86 billion to $140 billion (annualized
net benefits of $4.2 billion to $7.3 billion)--that is, the total
benefits far exceed the total costs of the program. Table 4 below
summarizes EPA's estimates of total discounted costs, fuel savings, and
benefits. The results presented here project the monetized
environmental and economic impacts associated with the proposed
standards during each calendar year through 2050. The proposal also
would have significant benefits for consumers, as the fuel savings for
American drivers would total $120 to $250 billion through 2050. With
these fuel savings, consumers would benefit from reduced operating
costs over the vehicle lifetime.
    The benefits include climate-related economic benefits from
reducing emissions of GHGs that contribute to climate change,
reductions in energy security externalities caused by U.S. petroleum
consumption and imports, the value of certain particulate matter-
related health benefits (including premature mortality), the value of
additional driving attributed to the rebound effect, and the value of
reduced refueling time needed to fill a more fuel-efficient vehicle.
The analysis also includes estimates of economic impacts stemming from
additional vehicle use, such as the economic damages caused by crashes,
congestion, and noise (from increased rebound driving). See the DRIA
for more information regarding these estimates.

   Table 4--Monetized Discounted Costs, Benefits, and Net Benefits of the Proposed Program for Calendar Years
                                                  Through 2050
                                      [Billions of 2018 dollars] a b c d e
----------------------------------------------------------------------------------------------------------------
                                                  Present value                       Annualized value
                                     ---------------------------------------------------------------------------
                                      3%  Discount rate  7%  Discount rate  3%  Discount rate  7%  Discount rate
----------------------------------------------------------------------------------------------------------------
Costs...............................               $240               $150                $12                $12
Fuel Savings........................                250                120                 13                9.9
Benefits............................                130                110                6.9                6.3
Net Benefits........................                140                 86                7.3                4.2
----------------------------------------------------------------------------------------------------------------
Notes:
a Values rounded to two significant figures; totals may not sum due to rounding. Present and annualized values
  are based on the stream of annual calendar year costs and benefits included in the analysis (2021-2050) and
  discounted back to year 2021.
b Climate benefits are based on reductions in CO2, CH4 and N2O emissions and are calculated using four different
  estimates of the social cost of each greenhouse gas (SC-GHG model average at 2.5%, 3%, and 5% discount rates;
  95th percentile at 3% discount rate), which each increase over time. In this table, we show the benefits
  associated with the average SC-GHGs at a 3% discount rate but the Agency does not have a single central SC-GHG
  point estimate. We emphasize the importance and value of considering the benefits calculated using all four SC-
  GHG estimates and present them later in this preamble. As discussed in Chapter 3.3 of the DRIA, a
  consideration of climate benefits calculated using discount rates below 3 percent, including 2 percent and
  lower, is also warranted when discounting intergenerational impacts.
c The same discount rate used to discount the value of damages from future GHG emissions (SC-GHGs at 5, 3, and
  2.5 percent) is used to calculate the present and annualized values of climate benefits for internal
  consistency, while all other costs and benefits are discounted at either 3% or 7%.
d Net benefits reflect the fuel savings plus benefits minus costs.
e Non-GHG impacts associated with the standards presented here do not include the full complement of health and
  environmental effects that, if quantified and monetized, would increase the total monetized benefits. Instead,
  the non-GHG benefits are based on benefit-per-ton values that reflect only human health impacts associated
  with reductions in PM2.5 exposure.

    A second way to present the net benefits of the proposal is using a
vehicle MY lifetime basis. Table 5 and Table 6 summarize EPA's
estimates of total discounted costs, fuel savings, and benefits through
the full lifetime of vehicles projected to be sold in MYs 2023-2026.
The estimated results presented here project the monetized
environmental and economic impacts associated with the proposed
standards. Note that standards continue at their MY2026 levels beyond
MY2026 in any scenario. At both a 3% and 7% discount rate all model
years show substantial fuel savings and net benefits.

Table 5--GHG Analysis of Lifetime Costs & Benefits To Meet the Proposed MYs 2023-2026 GHG Standards, 3% Discount
                                                      Rate
                                 [For vehicles produced in MY 2023-2026]a b c d
                                               [Billions of 2018$]
----------------------------------------------------------------------------------------------------------------
                       MY                              Costs       Fuel savings      Benefits      Net benefits
----------------------------------------------------------------------------------------------------------------
                                                 Present values
----------------------------------------------------------------------------------------------------------------
2023............................................            $4.8            $3.6            $1.9           $0.68
2024............................................             5.9               7             3.6             4.7
2025............................................             6.7             8.6             4.4             6.2
2026............................................             8.1              13             7.2              12
                                                 ---------------------------------------------------------------
    Sum.........................................              26              33              17              24
----------------------------------------------------------------------------------------------------------------

                                                Annualized values
----------------------------------------------------------------------------------------------------------------
2023............................................            0.21            0.16            0.08           0.029
2024............................................            0.26             0.3            0.16             0.2
2025............................................            0.29            0.37            0.19            0.27
2026............................................            0.35            0.58            0.31            0.54
                                                 ---------------------------------------------------------------
    Sum.........................................             1.1             1.4            0.74               1
----------------------------------------------------------------------------------------------------------------
Notes:
\a\ The lifetime costs and benefits of each MY vehicle are discounted back to 2021.
\b\ Climate benefits are based on reductions in CO2, CH4 and N2O emissions and are calculated using four
  different estimates of the social cost of each greenhouse gas (SC-GHG model average at 2.5%, 3%, and 5%
  discount rates; 95th percentile at 3% discount rate), which each increase over time. In this table, we show
  the benefits associated with the average SC-GHGs at a 3% discount rate, but the Agency does not have a single
  central SC-GHG point estimate. We emphasize the importance and value of considering the benefits calculated
  using all four SC-GHG estimates and present them later in this preamble. As discussed in Chapter 3.3 of the
  DRIA, a consideration of climate benefits calculated using discount rates below 3 percent, including 2 percent
  and lower, is also warranted when discounting intergenerational impacts.
\c\ The same discount rate used to discount the value of damages from future GHG emissions is used to calculate
  the present and annualized value of SC-GHGs for internal consistency, while all other costs and benefits are
  discounted at 3% in this table.
\d\ Non-GHG impacts associated with the standards presented here do not include the full complement of health
  and environmental effects that, if quantified and monetized, would increase the total monetized benefits.
  Instead, the non-GHG benefits are based on benefit-per-ton values that reflect only human health impacts
  associated with reductions in PM2.5 exposure.

Table 6--GHG Analysis of Lifetime Costs & Benefits To Meet the Proposed MYs 2023-2026 GHG Standards, 7% Discount
                                                      Rate
                                 [For vehicles produced in MY 2023-2026]a b c d
                                               [Billions of 2018$]
----------------------------------------------------------------------------------------------------------------
                       MY                              Costs       Fuel savings      Benefits      Net benefits
----------------------------------------------------------------------------------------------------------------
                                                 Present values
----------------------------------------------------------------------------------------------------------------
2023............................................            $4.4            $2.6            $1.7          -$0.14
2024............................................             5.5             4.7             3.3             2.4
2025............................................             6.1             5.5             3.9             3.4
2026............................................             7.3             8.2             6.2             7.2
                                                 ---------------------------------------------------------------
    Sum.........................................              23              21              15              13
----------------------------------------------------------------------------------------------------------------
                                                Annualized values
----------------------------------------------------------------------------------------------------------------
2023............................................            0.33            0.19           0.085          -0.053
2024............................................            0.41            0.35            0.16             0.1
2025............................................            0.45            0.41            0.19            0.15
2026............................................            0.55            0.62            0.31            0.38
                                                 ---------------------------------------------------------------
    Sum.........................................             1.7             1.6            0.75            0.58
----------------------------------------------------------------------------------------------------------------
Notes:
\a\ The lifetime costs and benefits of each MY vehicle are discounted back to 2021.
\b\ Climate benefits are based on reductions in CO2, CH4 and N2O emissions and are calculated using four
  different estimates of the social cost of each greenhouse gas (SC-GHG model average at 2.5%, 3%, and 5%
  discount rates; 95th percentile at 3% discount rate), which each increase over time. In this table, we show
  the benefits associated with the average SC-GHGs at a 3% discount rate, but the Agency does not have a single
  central SC-GHG point estimate. We emphasize the importance and value of considering the benefits calculated
  using all four SC-GHG estimates and present them later in this preamble. As discussed in Chapter 3.3 of the
  DRIA, a consideration of climate benefits calculated using discount rates below 3 percent, including 2 percent
  and lower, is also warranted when discounting intergenerational impacts.
\c\ The same discount rate used to discount the value of damages from future GHG emissions is used to calculate
  the present and annualized value of SC-GHGs for internal consistency, while all other costs and benefits are
  discounted at 7% in this table.
\d\ Non-GHG impacts associated with the standards presented here do not include the full complement of health
  and environmental effects that, if quantified and monetized, would increase the total monetized benefits.
  Instead, the non-GHG benefits are based on benefit-per-ton values that reflect only human health impacts
  associated with reductions in PM2.5 exposure.

E. How has EPA considered environmental justice in this proposal?

    Executive Orders 12898 (59 FR 7629, February 16, 1994) and 14008
(86 FR 7619, February 1, 2021) direct federal agencies, to the greatest
extent practicable and permitted by law, to make achieving
environmental justice (EJ) part of their mission by identifying and
addressing, as appropriate, disproportionately high and adverse human
health or environmental effects of their programs, policies, and
activities on minority populations and low-income populations in the
United States. Chapter 8.3 discusses the potential environmental
justice concerns associated with this proposal. EPA defines
environmental justice as the fair treatment and meaningful

involvement of all people regardless of race, color, national origin,
or income with respect to the development, implementation, and
enforcement of environmental laws, regulations, and policies. Executive
Order 14008 also calls on federal agencies to make achieving
environmental justice part of their missions ``by developing programs,
policies, and activities to address the disproportionately high and
adverse human health, environmental, climate-related and other
cumulative impacts on disadvantaged communities, as well as the
accompanying economic challenges of such impacts.'' It declares a
policy ``to secure environmental justice and spur economic opportunity
for disadvantaged communities that have been historically marginalized
and overburdened by pollution and under-investment in housing,
transportation, water and wastewater infrastructure and health care.''
Under Executive Order 13563 (76 FR 3821), federal agencies may consider
equity, human dignity, fairness, and distributional considerations,
where appropriate and permitted by law.
    EPA's 2016 ``Technical Guidance for Assessing Environmental Justice
in Regulatory Analysis'' provides recommendations on conducting the
highest quality analysis feasible, recognizing that data limitations,
time and resource constraints, and analytic challenges will vary by
media and regulatory context. \40\
---------------------------------------------------------------------------

    \40\ ``Technical Guidance for Assessing Environmental Justice in
Regulatory Analysis.'' Epa.gov, Environmental Protection Agency,
https://www.epa.gov/sites/production/files/2016-06/documents/ejtg_5_6_16_v5.1.pdf. (June 2016).
---------------------------------------------------------------------------

    EPA's mobile source regulatory program has historically reduced
significant amounts of both GHG and non-GHG pollutants to the benefit
of all U.S. residents, including populations that live near roads and
in communities with EJ concerns. EJ concerns may arise in the context
of this rulemaking in two key areas.
    First, minority populations and low-income populations may be
especially vulnerable to the impacts of climate change. As discussed in
Section IV.C, this proposed rulemaking would mitigate the impacts of
climate change by achieving significant GHG emission reductions, which
would benefit populations that may be especially vulnerable to various
forms of damages associated with climate change.
    Second, in addition to significant climate-change benefits, the
proposed standards would also impact non-GHG emissions. As discussed in
Section VII.L.2, numerous studies have found that environmental hazards
such as air pollution are more prevalent in areas where minority
populations and low-income populations represent a higher fraction of
the population compared with the general population. There is
substantial evidence, for example, that people who live or attend
school near major roadways are more likely to be of a racial minority,
Hispanic ethnicity, and/or low socioeconomic status (see Section
VII.L.2).
    We expect this proposed rule would result in both small reductions
and small increases of non-GHG emissions. These effects could
potentially impact communities with EJ concerns, though not necessarily
immediately and not equally in all locations. For this proposal, the
air quality information needed to perform a quantified analysis of the
distribution of such impacts was not available. We therefore recommend
caution when interpreting these broad, qualitative observations.
    We note that EPA intends to develop a future rule to control
emissions of GHGs as well as criteria and air toxic pollutants from
light-duty vehicles for MYs beyond 2026. We are considering how to
project air quality impacts from the changes in non-GHG emissions for
that future rulemaking (see Section V.C).

F. Affordability and Equity

    In addition to considering environmental justice impacts, we have
examined the effects of the proposed standards on affordability of
vehicles and transportation services for low-income households in
Section VII.L of this Preamble and Chapter 8.4 of the DRIA. As with the
effects of the proposed standards on vehicle sales discussed in Section
VII.B, the effects of the proposed standards on affordability and
equity depend in part on two countervailing effects: The increase in
the up-front costs of new vehicles subject to more stringent standards,
and the decrease in operating costs from reduced fuel consumption over
time. The increase in up-front new vehicle costs has the potential to
increase the prices of used vehicles, to make credit more difficult to
obtain, and to make the least expensive new vehicles less desirable
compared to used vehicles. The reduction in operating costs over time
has the potential to mitigate or reverse all these effects. Lower
operating costs on their own increase mobility (see DRIA Chapter 3.1
for a discussion of rebound driving).
    While social equity involves issues beyond income and
affordability, including race, ethnicity, gender, gender
identification, and residential location, the potential effects of the
proposed standards on lower-income households are of great importance
for social equity and reflect these contrasting forces. The overall
effects on vehicle ownership, including for lower-income households,
depend heavily on the role of fuel consumption in vehicle sales
decisions, as discussed in Section VII.M. At the same time, lower-
income households own fewer vehicles per household, are more likely to
buy used vehicles than new, and spend more on fuel than on vehicles on
an annual basis than higher-income households. In addition, for lower-
income households, fuel expenditures are a larger portion of household
income, so the fuel savings that would result from this proposal may be
more impactful to these consumers. Thus, the benefits of this proposal
may be stronger for lower-income households even if they buy used
vehicles: As vehicles meeting the proposed standards enter the used
vehicle market, they will retain the fuel economy/GHG-reduction
benefits, and associated fuel savings, while facing a smaller portion
of the upfront vehicle costs. The reduction in operating costs may also
increase access to transportation services, such as ride-hailing and
ride-sharing, where the lower per-mile costs may play a larger role
than up-front costs in pricing. As a result, lower-income consumers may
be affected more from the reduction in operating costs than the
increase in up-front costs.
    New electric vehicles currently have higher up-front costs and
lower operating costs than gasoline vehicles and require access to
charging infrastructure that may not be readily available to many. EPA
has heard from some environmental justice groups and Tribes that
limited access to electric vehicles and charging infrastructure can be
a barrier for purchasing EVs. This proposal projects that the vast
majority of vehicles produced in the time frame of the proposed
standards will be gasoline-fueled vehicles (with EVs and PHEVs
gradually increasing to about 8 percent total market share by MY 2026
compared to about 4 percent in the No Action scenario, see DRIA Chapter
4.1.3, Table 4-30). However, EPA will monitor and study affordability
issues related to electric vehicles as their prevalence in the vehicle
fleet increases.

G. What alternatives is EPA considering?

1. Description of the Alternatives
    Along with the proposed standards, EPA analyzed both a more
stringent and a less stringent alternative. For the less stringent
alternative, Alternative 1, EPA used the coefficients in the California

Framework for the 2.7 percent effective stringency level (as described
in Section II.B.1) as the basis for the MY 2023 stringency level and
the 2012 rule's MY 2025 standards as the basis for the MY 2026
stringency level, with linear year-over-year reductions between the two
points for MYs 2024 and 2025. EPA views the California Framework as a
reasonable basis for the least stringent alternative that EPA would
consider finalizing, since it represents a level of stringency that
five manufacturers have already committed to achieving. EPA did not
include incentive multipliers for Alternative 1, as doing so would only
further reduce the effective stringency of this Alternative, and EPA
views Alternative 1 as the lower end of stringency that it believes is
appropriate through 2026.
    For the more stringent alternative, Alternative 2, EPA used the
2012 rule standards as the basis for MY 2023-2025 targets, with the
standards continuing to increase in stringency in a linear fashion for
MY 2026. Alternative 2 adopts the 2012 rule stringency levels in MY
2023 and follows the 2012 rule standard target levels through MY 2025.
EPA extended the same linear average year-over-year trajectory for MYs
2023-2025 to MY 2026 for the final standards under Alternative 2. As
noted in Section II.A.1, EPA believes that it is important to continue
to make progress in MY 2026 beyond the MY 2025 standard levels in the
2012 rule. As with the proposal, Alternative 2 meets this objective.
EPA did not include in Alternative 2 the proposed incentive multipliers
with the proposed cumulative credit cap in MYs 2022-2025, which would
have the effect of making Alternative 2 less stringent. As discussed in
Section II.B.1, EPA is requesting comment on whether or not to include
the proposed multipliers, and our request for comments extends to
whether to include multipliers both for the proposal and for
Alternative 2.\41\
---------------------------------------------------------------------------

    \41\ 41 See ``Benefits and Costs of the EPA Light-duty Vehicle
GHG Proposal with and without Advanced Technology Multipliers,''
memorandum to Docket.
---------------------------------------------------------------------------

    As previously noted in Section I.B.2, EPA is proposing several
modifications to program flexibilities. These proposed program changes,
except for the advanced technology multipliers, would also apply to the
alternatives. Table 7 below provides a list of the proposed
flexibilities and their applicability to the proposed and alternative
standards.

            Table 7--Applicability of Revised Flexibility Provisions to the Proposal and Alternatives
----------------------------------------------------------------------------------------------------------------
            Provision                       Proposal                Alternative 1             Alternative 2
----------------------------------------------------------------------------------------------------------------
Extension of credit carry-forward  Yes......................  Yes.....................  Yes.
 for MY 2016-2020 credits.
Advanced technology incentive      Yes......................  No......................  No.
 multipliers for MYs 2022-2025
 with cap.
Increase of off-cycle menu cap     Yes......................  Yes.....................  Yes.
 from 10 to 15 g/mile.
Reinstatement of full-size pickup  Yes......................  Yes.....................  Yes.
 incentives for strong hybrids or
 equivalent technologies for MYs
 2022-2025.
----------------------------------------------------------------------------------------------------------------
EPA's technical analysis, presented in Section III, consists of model runs using a model capable of reflecting
  some but not all of these provisions. The modeling includes consideration of advanced technology incentive
  multipliers for the proposal but not for the alternatives. The model runs also include the 15 grams per mile
  off-cycle menu cap as appropriate given the standards or targets to which a fleet being modeled is complying.
  Not included in the model runs are the full-size pickup truck technology incentive credit or the extension of
  the emissions credit carry-forward.

    The fleet average targets for the two alternatives compared to the
proposed standards are provided in Table 8 below. EPA also requests
comment on the level of stringency for MY 2026 for the alternatives and
the proposed standards. Specifically, EPA requests comment on standards
for MY 2026 that would result in fleet average target levels that are
in the range of 5-10 g/mile lower (i.e., more stringent) than the
levels shown for MY 2026 in Table 8. EPA is requesting specific comment
on whether the level of stringency for MY 2026 should be greater in
keeping with the additional lead time available for this out-year
compared to MYs 2023-2025, and because EPA may determine that it is
appropriate, particularly in light of the accelerating transition to
electrified vehicles, to require additional reductions in this
timeframe. As discussed in detail in Section A.3 of the Executive
Summary, there has been a proliferation of recent announcements from
automakers signaling a rapidly growing shift in investment away from
internal-combustion technologies and toward high levels of
electrification. EPA has also heard from a wide range of stakeholders
over the past several months, including but not limited to the
automotive manufacturers and the automotive suppliers, that the
significant investments being made now to develop and launch new EV
product offerings and in the expansion of EV charging infrastructure
could enable higher levels of EV penetration to occur in the
marketplace by the MY 2026 time frame than EPA has projected in this
proposal for both the proposed MY 2026 standards and the Alternative 2
MY 2026 standards. The information concerning the investment landscape
potentially accelerating to an even greater extent of market
penetration of EV products helps inform EPA's request for comment on
the potential for a more stringent MY 2026 standard that would reflect
this information and related considerations, including any additional
information provided by commenters. In light of these stakeholder views
and other available information, EPA is soliciting comment on the
appropriateness of more stringent MY 2026 standards.

             Table 8--Projected Fleet Average Target Levels for Proposed Standards and Alternatives
                                                [CO2 grams/mile]
----------------------------------------------------------------------------------------------------------------
                                                                     Proposal      Alternative 1   Alternative 2
                           Model year                                projected       projected       projected
                                                                      targets         targets         targets
----------------------------------------------------------------------------------------------------------------
2021............................................................           * 223           * 223           * 224
2022............................................................           * 220           * 220           * 220

2023............................................................             199             203             195
2024............................................................             189             194             186
2025............................................................             180             185             177
2026 **.........................................................             171             177             169
----------------------------------------------------------------------------------------------------------------
* SAFE rule standards included here for reference.
** EPA is also requesting comment on MY 2026 standards that would result in fleet average levels that are 5-10 g/
  mile more stringent than the levels shown.

  [GRAPHIC] [TIFF OMITTED] TP10AU21.001

    As shown in Figure 2, the range of alternatives that EPA has
analyzed is fairly narrow, with the proposed standard targets differing
from the alternatives in any given MY in MYs 2023-2026 by 2 to 6 g/
mile, although EPA is requesting comment on a wider range of standards,
particularly for MY 2026 as noted above. EPA believes this approach is
reasonable and appropriate considering the relatively limited lead time
for the proposed standards, especially for MYs 2023-2025, EPA's
assessment of feasibility, the existing automaker commitments to meet
the California Framework (representing about one-third of the auto
market), the standards adopted in the 2012 rule; and the need to reduce
GHG emissions. EPA provides a discussion of the feasibility of the
proposed standard and alternatives and the selection of the proposed
standards in Section III.D. The analysis of costs and benefits of
Alternatives 1 and 2 is shown in the DRIA Chapters 4, 6, and 10. EPA
requests comments on all aspects of Alternatives 1 and 2 or other
alternatives roughly within the stringency range of the proposal and
the Alternatives.
2. Summary of Costs and Benefits of the Alternatives
    EPA estimates that Alternative 1 would result in significant
present-value net benefits of $76 billion to $130 billion (annualized
net benefits of $4.1 billion to $6.6 billion)--that is, the total
benefits far exceed the total costs of the program. Table 9 below
summarizes EPA's estimates of total discounted costs, fuel savings, and
benefits for Alternative 1. The results presented here project the
monetized

environmental and economic impacts associated with the proposed
standards during each calendar year through 2050. Alternative 1 also
would have significant benefits for consumers, as the fuel savings for
American drivers would total $98 billion to $200 billion through 2050.
With these fuel savings, consumers would benefit from reduced operating
costs over the vehicle lifetime.
    The benefits include climate-related economic benefits from
reducing emissions of GHGs that contribute to climate change,
reductions in energy security externalities caused by U.S. petroleum
consumption and imports, the value of certain particulate matter-
related health benefits (including premature mortality), the value of
additional driving attributed to the rebound effect, and the value of
reduced refueling time needed to fill a more fuel-efficient vehicle.
The analysis also includes estimates of economic impacts stemming from
additional vehicle use, such as the economic damages caused by crashes,
congestion, and noise (from increased rebound driving). See the DRIA
for more information regarding these estimates.

Table 9--Monetized Discounted Costs, Benefits, and Net Benefits of Alternative 1 for Calendar Years Through 2050
                                      [Billions of 2018 dollars] a b c d e
----------------------------------------------------------------------------------------------------------------
                                                  Present value                       Annualized value
                                     ---------------------------------------------------------------------------
                                       3% Discount rate   7% Discount rate   3% Discount rate   7% Discount rate
----------------------------------------------------------------------------------------------------------------
Costs...............................               $190               $110               $9.5               $9.2
Fuel savings........................                200                 98                 10                7.9
Benefits............................                120                 93                  6                5.4
Net benefits........................                130                 76                6.6                4.1
----------------------------------------------------------------------------------------------------------------
Notes:
\a\ Values rounded to two significant figures; totals may not sum due to rounding. Present and annualized values
  are based on the stream of annual calendar year costs and benefits included in the analysis (2021-2050) and
  discounted back to year 2021.
\b\ Climate benefits are based on reductions in CO2, CH4 and N2O emissions and are calculated using four
  different estimates of the social cost of each greenhouse gas (SC-GHG model average at 2.5%, 3%, and 5%
  discount rates; 95th percentile at 3% discount rate), which each increase over time. In this table, we show
  the benefits associated with the average SC-GHGs at a 3% discount rate but the Agency does not have a single
  central SC-GHG point estimate. We emphasize the importance and value of considering the benefits calculated
  using all four SC-GHG estimates and present them later in this preamble. As discussed in Chapter 3.3 of the
  DRIA, a consideration of climate benefits calculated using discount rates below 3 percent, including 2 percent
  and lower, is also warranted when discounting intergenerational impacts.
\c\ The same discount rate used to discount the value of damages from future GHG emissions (SC-GHGs at 5, 3, and
  2.5 percent) is used to calculate the present and annualized values of climate benefits for internal
  consistency, while all other costs and benefits are discounted at either 3% or 7%.
\d \ Net benefits reflect the fuel savings plus benefits minus costs.
\e\ Non-GHG impacts associated with the standards presented here do not include the full complement of health
  and environmental effects that, if quantified and monetized, would increase the total monetized benefits.
  Instead, the non-GHG benefits are based on benefit-per-ton values that reflect only human health impacts
  associated with reductions in PM2.5 exposure.

    A second way to present the net benefits of the proposal is using a
vehicle MY lifetime basis. Table 10 and Table 11 summarize EPA's
estimates of total discounted costs, fuel savings, and benefits through
the full lifetime of vehicles projected to be sold in MYs 2023-2026
under Alternative 1. The estimated results presented here project the
monetized environmental and economic impacts associated with the
Alternative 1 standards. Note that standards continue at their MY2026
levels beyond MY2026 in any scenario. At both a 3% and 7% discount rate
all model years show substantial fuel savings and net benefits.

  Table 10--GHG Analysis of Lifetime Costs & Benefits To Meet the Alternative 1 MYs 2023-2026 GHG Standards, 3%
                                                  Discount Rate
                                 [For vehicles produced in MY 2023-2026] a b c d
                                               [Billions of 2018$]
----------------------------------------------------------------------------------------------------------------
                       MY                              Costs       Fuel savings      Benefits      Net benefits
----------------------------------------------------------------------------------------------------------------
                                                 Present values
----------------------------------------------------------------------------------------------------------------
2023............................................            $3.9            $3.4              $2            $1.5
2024............................................             4.9             6.5             3.7             5.3
2025............................................             5.6             7.7             4.5             6.5
2026............................................             6.4              10               6             9.7
                                                 ---------------------------------------------------------------
    Sum.........................................              21              28              16              23
----------------------------------------------------------------------------------------------------------------
                                                Annualized values
----------------------------------------------------------------------------------------------------------------
2023............................................            0.17            0.15           0.085           0.067
2024............................................            0.21            0.28            0.16            0.23
2025............................................            0.24            0.33            0.19            0.28
2026............................................            0.28            0.44            0.26            0.42
                                                 ---------------------------------------------------------------
    Sum.........................................             0.9             1.2             0.7               1
----------------------------------------------------------------------------------------------------------------
Notes:

\a\ The lifetime costs and benefits of each MY vehicle are discounted back to 2021.
\b\ Climate benefits are based on reductions in CO2, CH4, and N2O emissions and are calculated using four
  different estimates of the social cost of each greenhouse gas (SC-GHG model average at 2.5%, 3%, and 5%
  discount rates; 95th percentile at 3% discount rate), which each increase over time. In this table, we show
  the benefits associated with the average SC-GHGs at a 3% discount rate, but the Agency does not have a single
  central SC-GHG point estimate. We emphasize the importance and value of considering the benefits calculated
  using all four SC-GHG estimates and present them later in this preamble. As discussed in Chapter 3.3 of the
  DRIA, a consideration of climate benefits calculated using discount rates below 3 percent, including 2 percent
  and lower, is also warranted when discounting intergenerational impacts.
\c\ The same discount rate used to discount the value of damages from future GHG emissions is used to calculate
  the present and annualized value of SC-GHGs for internal consistency, while all other costs and benefits are
  discounted at 3% in this table.
\d\ Non-GHG impacts associated with the standards presented here do not include the full complement of health
  and environmental effects that, if quantified and monetized, would increase the total monetized benefits.
  Instead, the non-GHG benefits are based on benefit-per-ton values that reflect only human health impacts
  associated with reductions in PM2.5 exposure.

  Table 11--GHG Analysis of Lifetime Costs & Benefits To Meet the Alternative 1 MYs 2023-2026 GHG Standards, 7%
                                                  Discount Rate
                                 [For Vehicles Produced in MY 2023-2026] a b c d
                                               [Billions of 2018$]
----------------------------------------------------------------------------------------------------------------
                       MY                              Costs       Fuel savings      Benefits      Net benefits
----------------------------------------------------------------------------------------------------------------
                                                 Present values
----------------------------------------------------------------------------------------------------------------
2023............................................            $3.7            $2.4            $1.7            $0.4
2024............................................             4.7             4.3             3.2             2.8
2025............................................             5.1             4.9             3.8             3.6
2026............................................             5.6             6.2               5             5.6
                                                 ---------------------------------------------------------------
    Sum.........................................              19              18              14              12
----------------------------------------------------------------------------------------------------------------
                                                Annualized values
----------------------------------------------------------------------------------------------------------------
2023............................................            0.28            0.18           0.091         -0.0084
2024............................................            0.35            0.32            0.17            0.14
2025............................................            0.38            0.37             0.2            0.19
2026............................................            0.42            0.47            0.26            0.31
                                                 ---------------------------------------------------------------
    Sum.........................................             1.4             1.3            0.72            0.63
----------------------------------------------------------------------------------------------------------------
Notes:
\a\ The lifetime costs and benefits of each MY vehicle are discounted back to 2021.
\b\ Climate benefits are based on reductions in CO2, CH4 and N2O emissions and are calculated using four
  different estimates of the social cost of each greenhouse gas (SC-GHG model average at 2.5%, 3%, and 5%
  discount rates; 95th percentile at 3% discount rate), which each increase over time. In this table, we show
  the benefits associated with the average SC-GHGs at a 3% discount rate, but the Agency does not have a single
  central SC-GHG point estimate. We emphasize the importance and value of considering the benefits calculated
  using all four SC-GHG estimates and present them later in this preamble. As discussed in Chapter 3.3 of the
  DRIA, a consideration of climate benefits calculated using discount rates below 3 percent, including 2 percent
  and lower, is also warranted when discounting intergenerational impacts.
\c\ The same discount rate used to discount the value of damages from future GHG emissions is used to calculate
  the present and annualized value of SC-GHGs for internal consistency, while all other costs and benefits are
  discounted at 7% in this table.
\d\ Non-GHG impacts associated with the standards presented here do not include the full complement of health
  and environmental effects that, if quantified and monetized, would increase the total monetized benefits.
  Instead, the non-GHG benefits are based on benefit-per-ton values that reflect only human health impacts
  associated with reductions in PM2.5 exposure.

    EPA estimates that Alternative 2 would result in significant
present value net benefits of $110 billion to $180 billion (annualized
net benefits of $5.7 billion to $9.1 billion)--that is, the total
benefits far exceed the total costs of the program. Table 12 below
summarizes EPA's estimates of total discounted costs, fuel savings, and
benefits for Alternative 2. The results presented here project the
monetized environmental and economic impacts associated with the
proposed standards during each calendar year through 2050. Alternative
2 also would have significant benefits for consumers, as the fuel
savings for American drivers would total $150 billion to $290 billion
through 2050. With these fuel savings, consumers would benefit from
reduced operating costs over the vehicle lifetime.
    The benefits include climate-related economic benefits from
reducing emissions of GHGs that contribute to climate change,
reductions in energy security externalities caused by U.S. petroleum
consumption and imports, the value of certain particulate matter-
related health benefits (including premature mortality), the value of
additional driving attributed to the rebound effect, and the value of
reduced time needed to refuel a more fuel efficient vehicle. The
analysis also includes estimates of economic impacts stemming from
additional vehicle use, such as the economic damages caused by crashes,
congestion, and noise (from increased rebound driving). See the DRIA
for more information regarding these estimates.

  Table 12--Monetized Discounted Costs, Benefits, and Net Benefits of Alternative 2 for Calendar Years Through
                                                      2050
                                      [Billions of 2018 dollars] a b c d e
----------------------------------------------------------------------------------------------------------------
                                                  Present value                       Annualized value
                                     ---------------------------------------------------------------------------
                                       3% Discount rate   7% Discount rate   3% Discount rate   7% Discount rate
----------------------------------------------------------------------------------------------------------------
Costs...............................               $290               $180                $15                $14
Fuel Savings........................                290                150                 15                 12
Benefits............................                170                140                8.8                  8
Net Benefits........................                180                110                9.1                5.7
----------------------------------------------------------------------------------------------------------------
Notes:
\a\ Values rounded to two significant figures; totals may not sum due to rounding. Present and annualized values
  are based on the stream of annual calendar year costs and benefits included in the analysis (2021-2050) and
  discounted back to year 2021.
\b\ Climate benefits are based on reductions in CO2, CH4 and N2O emissions and are calculated using four
  different estimates of the social cost of each greenhouse gas (SC-GHG model average at 2.5%, 3%, and 5%
  discount rates; 95th percentile at 3% discount rate), which each increase over time. In this table, we show
  the benefits associated with the average SC-GHGs at a 3% discount rate but the Agency does not have a single
  central SC-GHG point estimate. We emphasize the importance and value of considering the benefits calculated
  using all four SC-GHG estimates and present them later in this preamble. As discussed in Chapter 3.3 of the
  DRIA, a consideration of climate benefits calculated using discount rates below 3 percent, including 2 percent
  and lower, is also warranted when discounting intergenerational impacts.
\c\ The same discount rate used to discount the value of damages from future GHG emissions (SC-GHGs at 5, 3, and
  2.5 percent) is used to calculate the present and annualized values of climate benefits for internal
  consistency, while all other costs and benefits are discounted at either 3% or 7%.
\d\ Net benefits reflect the fuel savings plus benefits minus costs.
\e\ Non-GHG impacts associated with the standards presented here do not include the full complement of health
  and environmental effects that, if quantified and monetized, would increase the total monetized benefits.
  Instead, the non-GHG benefits are based on benefit-per-ton values that reflect only human health impacts
  associated with reductions in PM2.5 exposure.

    A second way to present the net benefits of the proposal is using a
vehicle MY lifetime basis. Table 13 and Table 14 summarize EPA's
estimates of total discounted costs, fuel savings, and benefits through
the full lifetime of vehicles projected to be sold in MYs 2023-2026
under Alternative 2. The estimated results presented here project the
monetized environmental and economic impacts associated with the
proposed standards. Note that standards continue at their MY2026 levels
beyond MY2026 in any scenario. At both a 3% and 7% discount rate all
model years show substantial fuel savings and net benefits.

  Table 13--GHG Analysis of Lifetime Costs & Benefits To Meet the Alternative 2 MY 2023-2026 GHG Standards, 3%
                                                  Discount Rate
                                 [For vehicles produced in MY 2023-2026] a b c d
                                               [Billions of 2018$]
----------------------------------------------------------------------------------------------------------------
                       MY                              Costs       Fuel savings      Benefits      Net benefits
----------------------------------------------------------------------------------------------------------------
                                                 Present values
----------------------------------------------------------------------------------------------------------------
2023............................................            $6.8            $7.7            $4.6            $5.5
2024............................................             7.7             9.8             5.7             7.8
2025............................................             8.4              11             6.5             9.1
2026............................................             9.2              13             7.8              12
                                                 ---------------------------------------------------------------
    Sum.........................................              32              42              25              34
----------------------------------------------------------------------------------------------------------------
                                                Annualized values
----------------------------------------------------------------------------------------------------------------
2023............................................            $0.3           $0.33            $0.2           $0.24
2024............................................            0.33            0.42            0.25            0.34
2025............................................            0.37            0.48            0.28            0.39
2026............................................             0.4            0.57            0.34            0.51
                                                 ---------------------------------------------------------------
    Sum.........................................             1.4             1.8             1.1             1.5
----------------------------------------------------------------------------------------------------------------
Notes:
\a\ The lifetime costs and benefits of each MY vehicle are discounted back to 2021.
\b\ Climate benefits are based on reductions in CO2, CH4 and N2O emissions and are calculated using four
  different estimates of the social cost of each greenhouse gas (SC-GHG model average at 2.5%, 3%, and 5%
  discount rates; 95th percentile at 3% discount rate), which each increase over time. In this table, we show
  the benefits associated with the average SC-GHGs at a 3% discount rate, but the Agency does not have a single
  central SC-GHG point estimate. We emphasize the importance and value of considering the benefits calculated
  using all four SC-GHG estimates and present them later in this preamble. As discussed in Chapter 3.3 of the
  DRIA, a consideration of climate benefits calculated using discount rates below 3 percent, including 2 percent
  and lower, is also warranted when discounting intergenerational impacts.
\c\ The same discount rate used to discount the value of damages from future GHG emissions is used to calculate
  the present and annualized value of SC-GHGs for internal consistency, while all other costs and benefits are
  discounted at 3% in this table.
\d\ Non-GHG impacts associated with the standards presented here do not include the full complement of health
  and environmental effects that, if quantified and monetized, would increase the total monetized benefits.
  Instead, the non-GHG benefits are based on benefit-per-ton values that reflect only human health impacts
  associated with reductions in PM2.5 exposure.

  Table 14--GHG Analysis of Lifetime Costs & Benefits To Meet the Alternative 2 MY 2023-2026 GHG Standards, 7%
                                                  Discount Rate
                                 [For vehicles produced in MY 2023-2026] a b c d
                                               [Billions of 2018$]
----------------------------------------------------------------------------------------------------------------
                       MY                              Costs       Fuel savings      Benefits      Net benefits
----------------------------------------------------------------------------------------------------------------
                                                 Present values
----------------------------------------------------------------------------------------------------------------
2023............................................            $6.3            $5.4              $4            $3.1
2024............................................               7             6.5               5             4.4
2025............................................             7.4             7.1             5.5             5.2
2026............................................             7.9             8.2             6.6             6.9
                                                 ---------------------------------------------------------------
    Sum.........................................              29              27              21              20
----------------------------------------------------------------------------------------------------------------
                                                Annualized Values
----------------------------------------------------------------------------------------------------------------
2023............................................            0.48             0.4            0.21            0.14
2024............................................            0.53            0.49            0.26            0.22
2025............................................            0.56            0.54            0.29            0.27
2026............................................            0.59            0.61            0.34            0.37
                                                 ---------------------------------------------------------------
    Sum.........................................             2.2               2             1.1               1
----------------------------------------------------------------------------------------------------------------
Notes:
\a\ The lifetime costs and benefits of each MY vehicle are discounted back to 2021.
\b\ Climate benefits are based on reductions in CO2, CH4 and N2O emissions and are calculated using four
  different estimates of the social cost of each greenhouse gas (SC-GHG model average at 2.5%, 3%, and 5%
  discount rates; 95th percentile at 3% discount rate), which each increase over time. In this table, we show
  the benefits associated with the average SC-GHGs at a 3% discount rate, but the Agency does not have a single
  central SC-GHG point estimate. We emphasize the importance and value of considering the benefits calculated
  using all four SC-GHG estimates and present them later in this preamble. As discussed in Chapter 3.3 of the
  DRIA, a consideration of climate benefits calculated using discount rates below 3 percent, including 2 percent
  and lower, is also warranted when discounting intergenerational impacts.
\c\ The same discount rate used to discount the value of damages from future GHG emissions is used to calculate
  the present and annualized value of SC-GHGs for internal consistency, while all other costs and benefits are
  discounted at 7% in this table.
\d\ Non-GHG impacts associated with the standards presented here do not include the full complement of health
  and environmental effects that, if quantified and monetized, would increase the total monetized benefits.
  Instead, the non-GHG benefits are based on benefit-per-ton values that reflect only human health impacts
  associated with reductions in PM2.5 exposure.

3. Summary of the Proposal's Costs and Benefits Compared to the
Alternatives
    Here we present the proposal's costs and benefits (as summarized
previously in Section I.D) alongside the costs and benefits of the
alternatives (as summarized previously in Section I.G.2).
    Table 15 below summarizes EPA's estimates of present value total
discounted costs, fuel savings, and benefits. Table 16 below summarizes
EPA's estimates of annualized values of the total discounted costs,
fuel savings, and benefits. The results presented in these tables
project the monetized environmental and economic impacts associated
with the proposed standards during each calendar year through 2050. The
benefits include climate-related economic benefits from reducing
emissions of GHGs that contribute to climate change, reductions in
energy security externalities caused by U.S. petroleum consumption and
imports, the value of certain particulate matter-related health
benefits (including premature mortality), the value of additional
driving attributed to the rebound effect, and the value of reduced
refueling time needed to fill a more fuel efficient vehicle. The
analysis also includes estimates of economic impacts stemming from
additional vehicle use, such as the economic damages caused by crashes,
congestion, and noise (from increased rebound driving). See the DRIA
for more information regarding these estimates.

 Table 15--Present Value Monetized Discounted Costs, Benefits, and Net Benefits of the Proposed Program and Alternatives for Calendar Years Through 2050
                                                          [Billions of 2018 dollars] a b c d e
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                            3% Discount rate                                         7% Discount rate
                                       -----------------------------------------------------------------------------------------------------------------
                                             Proposal        Alternative 1      Alternative 2         Proposal        Alternative 1      Alternative 2
--------------------------------------------------------------------------------------------------------------------------------------------------------
Costs.................................               $240               $190               $290               $150               $110               $180
Fuel Savings..........................                250                200                290                120                 98                150
Benefits..............................                130                120                170                110                 93                140
Net Benefits..........................                140                130                180                 86                 76                110
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes:
\a\ Values rounded to two significant figures; totals may not sum due to rounding. Present and annualized values are based on the stream of annual
  calendar year costs and benefits included in the analysis (2021-2050) and discounted back to year 2021.