revised to emphasize the purpose of the program: Energy conservation.
NHTSA continues to believe that strong fuel economy standards function
as an important insurance policy against oil price volatility,
particularly to protect consumers even as the U.S. has improved its
energy independence over time. The only way to continue to insulate
consumers and the U.S. economy further against the negative effects of
swings in oil prices is to continue to improve fleet fuel economy and
take other steps to reduce the oil-intensity of the economy. Moreover,
as climate change progresses, the U.S. may face new energy-related
security risks if climate effects exacerbate geopolitical tensions and
destabilization. Thus, mitigating climate effects by increasing fuel
economy standards, as all of the action alternatives considered in this
final rule would do, can also potentially improve U.S. security. There
are extremely important energy security benefits associated with
raising CAFE stringency that are not discussed in TSD Chapter 6.2.4,
and which are difficult to quantify, but have weighed heavily for NHTSA
in determining the maximum feasible standards in this final rule.
    Additionally, nearly all auto manufacturers have announced
forthcoming advanced technology, high-fuel-economy vehicle models, and
made strong public commitments that mirror the goals of the
Administration, with those announcements continuing as the economy
recovers from the global coronavirus pandemic, even despite slow-to-
resolve supply chain challenges. Five major manufacturers voluntarily
bound themselves to stricter GHG national-level requirements as part of
the California Framework Agreements, which were finalized in fall 2020.
Many, though not all, of the technologies that automakers will use to
comply with those agreements will also improve fuel economy.
Importantly, NHTSA's own updated analysis of technological feasibility
and cost indicates that significant improvements in fuel economy
relative to the existing standards are feasible and economically
practicable. Some facts on the ground remain similar to what was before
NHTSA in the prior analysis--gas prices have risen recently but remain
forecasted to stay relatively low in the mid- to longer-term according
to AEO 2021,\1083\ for example, and light-duty vehicle sales since 2020
have struggled to recover from the effects of the pandemic. The
vehicles that did sell have tended to be, on average, larger, heavier,
and more powerful, all factors which increase fuel consumption. Yet
overall fleet fuel economy still achieved a record high according to
the 2021 EPA Automotive Trends Report--thus, again, enough has changed
that a rebalancing of the EPCA factors is appropriate for MYs 2024-
2026. South Coast AQMD commented that ``NHTSA . . . should be
forthright that the balancing of statutory factors is changed not
merely because of new facts, but because the SAFE rule took an
unprecedented approach of elevating non-statutory factors above
Congress' express directives and overriding purpose. . . .'' \1084\
NHTSA agrees that the agency's current determination of what CAFE
standards are maximum feasible for MYs 2024-2026 is based on a
combination of changed facts and evolved legal interpretations--again,
that a rebalancing of the factors is in order. As discussed in Section
VI.B, agencies are entitled to change their minds, and the record
contained in this preamble and the accompanying rulemaking documents
provides extensive evidence of why the agency is making this new
determination.
---------------------------------------------------------------------------

    \1083\ Even AEO 2022 continues to reflect gasoline retail prices
that are well below $4/gallon through 2050. See https://www.eia.gov/outlooks/aeo/pdf/AEO2022_ChartLibrary_Petroleum.pdf (accessed: Mar.
24, 2022).
    \1084\ South Coast AQMD, Docket No. NHTSA-2021-0053-1477, at 1.
---------------------------------------------------------------------------

    NHTSA believes, as we will explain in more detail below, that
Alternative 2.5 is the maximum feasible alternative that manufacturers
can achieve for MYs 2024-2026, based on its significant fuel savings
benefits to consumers and its environmental and energy security
benefits relative to all other alternatives except Alternative 3.
Although Alternative 3 would provide greater fuel savings benefits,
NHTSA estimates that Alternative 3 would result in a large average per-
vehicle cost increase, which for many automakers could exceed $2,000,
compared to the price of vehicles under Alternative 2.5. In contrast to
Alternative 3, and that it comes at a cost we believe the market can
bear. While Alternative 1 produces higher net benefits, it also
continues to allow fuel consumption and accompanying disbenefits that
could have been avoided in a cost-beneficial manner. And while
Alternative 3 achieves greater reductions in fuel consumption than
Alternative 2, it shows lower net benefits under a 7 percent discount
rate. Alternative 3 also, as detailed above, adds technology costs of
over $2,000 per vehicle for more manufacturers as compared to the
baseline, while Alternative 2.5 has somewhat lower costs and greater
lead time for the largest increase in standards for MY 2026. Regardless
of net benefits, NHTSA would still conclude that Alternative 2.5 is
economically practicable, based on per-vehicle costs, technology levels
estimated to be required to meet the standards, and the slight
additional lead time provided as compared to Alternative 3.
    Additionally, these standards represent some of the largest year
over year increases in CAFE stringency that NHTSA has ever required, so
we believe that providing maximum lead time for the biggest increase of
10 percent for MY 2026 is reasonable and appropriate, particularly
given the ongoing rapid changes in the auto industry. Choosing
Alternative 3 would require industry to

ramp up even faster, and thus provide less lead time, with consequences
for economic practicability. With relatively small estimated sales
effects and actually positive estimated effects on employment, we are
confident that Alternative 2.5 is feasible, and that industry can meet
these standards.
    In re-evaluating all of the factors that NHTSA considers in
determining maximum feasible CAFE standards, the agency was compelled
to balance what we believe is a credible case for choosing Alternative
3 as opposed to Alternative 2.5. In doing so, NHTSA must balance the
four statutory factors. Alternative 2.5 and Alternative 3 each produce
significant reductions in fuel use, and while Alternative 3 is
estimated to result in more savings, it could require significant
additional technology application. Alternative 3 also appears to be
slightly beyond the level of economic practicability for the model
years addressed by this rule, when considering per-vehicle costs,
technology application rates, and lead time. Even though Alternative 3
maximizes energy conservation, and NHTSA believes it is technologically
feasible, economic practicability tips the balance for the agency to
Alternative 2.5. Alternative 2.5 is an ambitious but achievable set of
standards that NHTSA has concluded represents the right balancing for
MYs 2024-2026--it is technologically feasible; it continues to push
fuel economy improvements, bolstering the industry's trajectory toward
higher future standards by keeping stringency high in the mid-term. It
meets the need of the U.S. to conserve energy, creating important (if
unquantifiable) energy security benefits, but in our estimation, not
beyond the point of economic practicability; and we believe that it is
complementary to other motor vehicle standards of the Government. For
these reasons, NHTSA concludes that Alternative 2.5 is maximum feasible
for MYs 2024-2026.
    NHTSA notes that the issues raised by commenters and with which the
agency is grappling have become more intertwined over time.
Increasingly, the issues do not parse neatly into the separate
considerations that Congress directs NHTSA to evaluate in determining
what CAFE standards are maximum feasible. Factors that Congress directs
NHTSA not to consider are, in many ways, also intertwined with the
factors that NHTSA must consider. Yet NHTSA is still required to set
CAFE standards for cars and trucks, for each model year, at the maximum
feasible level, and if the evidence suggests that more stringent
standards are maximum feasible, then EPCA's overarching purpose of
energy conservation must guide us. The discussion below seeks to
untangle the issues so that the statutory factors and their
relationship to each other can be evaluated, while still avoiding the
prohibited considerations, while still being aware of and informed by
reality.
    In the 2020 final rule, NHTSA interpreted the need of the U.S. to
conserve energy as less important than in previous rulemakings. This
was in part because of structural changes in global oil markets as a
result of shale oil drilling in the U.S., but also because in the
context of environmental effects, NHTSA narrowly interpreted EPCA/EISA
as not requiring the agency to ``single-mindedly address carbon
emissions at the expense of all other considerations.'' \1085\ Focusing
heavily on the ``very small'' ``impacts on global mean surface
temperature resulting from this action,'' NHTSA concluded then that
``[t]aking climate change into account elevates the importance of the
`need of the United States to conserve energy' criterion in NHTSA's
balancing,'' and stated that, ``[h]owever, in light of the limits in
what the agency can achieve, the potential offsetting impacts to the
environment, and the statutory requirement to consider other factors,
the impacts of carbon emissions alone cannot drive the outcome of
NHTSA's decision-making.'' \1086\
---------------------------------------------------------------------------

    \1085\ 85 FR 25173 (Apr. 30, 2020).
    \1086\ Id.
---------------------------------------------------------------------------

    One of those other factors was consumer demand for vehicles with
higher fuel economy levels, which is relevant to the economic
practicability of potential CAFE standards--if industry's response to
standards is to make vehicles that consumers refuse to purchase, then
the standards may not be economically practicable.\1087\ In the 2020
final rule, NHTSA expressed concern that low gasoline prices and
apparent consumer preferences for larger, heavier, more powerful
vehicles would make it exceedingly difficult for manufacturers to
achieve higher standards without negative consequences to sales and
jobs, and would cause consumer welfare losses. Since then, however,
more and more manufacturers are announcing more and more vehicle models
with advanced engines and varying levels of electrification. In the
NPRM, NHTSA argued that it is reasonable to conclude that manufacturers
(who are all for-profit companies) would not be announcing plans to
offer these types of vehicles if they did not expect to be able to sell
them,\1088\ and thus that manufacturers are more sanguine about
consumer demand for fuel efficiency going forward than they have been
previously.
---------------------------------------------------------------------------

    \1087\ Mr. Douglas commented that ``[w]hen automakers argue that
they cannot feasibly increase fuel economy any further, what they
are really saying is that they cannot possibly increase fuel economy
any further while continuing to produce the vehicles that consumers
demand.'' Peter Douglas, Docket No. NHTSA-2021-0053-0085, at 20.
    \1088\ To the extent that manufacturers are offering these
vehicles in response to expected regulations, NHTSA still believes
that they would not do so before any required standards had been
announced if they believed the vehicles were unsaleable or
unmanageably detrimental to profits. Vehicle manufacturers are
sophisticated corporate entities well able to communicate their
views to regulatory agencies.
---------------------------------------------------------------------------

    Additionally, NHTSA no longer believes that it is reasonable or
appropriate to focus only on ``avoiding waste'' in evaluating the need
of the U.S. to conserve energy. EPCA's overarching purpose is energy
conservation. The need of the U.S. to conserve energy may be reasonably
interpreted as continuing to push the balancing toward greater
stringency. Recent events have further reinforced the enduring
importance of reducing Americans' exposure to volatility in globalized
oil markets through improved fuel economy. There are extremely
important energy security benefits associated with raising CAFE
stringency that are not discussed in TSD Chapter 6.2.4, and which are
difficult to quantify, but have weighed heavily for NHTSA in
determining the maximum feasible standards in this final rule.
    The following text will walk through the four statutory factors in
more detail and discuss NHTSA's decision-making process more
thoroughly. To be clear at the outset, however, the fundamental
balancing of factors for this final rule is different from the 2020
final rule because NHTSA reconsidered how to balance its relevant
statutory obligations under EPCA, and interprets the need of the U.S.
to conserve energy as weighing more heavily than it did at the time of
the 2020 final rule. As noted earlier in this preamble NHTSA, like any
other Federal agency, is afforded an opportunity to reconsider prior
views and, when warranted, to adopt new positions. The evidence also
suggests that higher standards are economically practicable, as well as
being technologically feasible and feasible in the context of (and
complementary of) the effects of other motor vehicle standards of the
Government on fuel economy. In order to be maximum feasible in the
rulemaking time frame, CAFE standards need to be set at levels that
reflect all of that evidence.

    Again, for context and for the reader's reference, here are the
regulatory alternatives among which NHTSA has chosen maximum feasible
CAFE standards for MYs 2024-2026, representing different annual rates
of stringency increase over the required levels in MY 2023:
[GRAPHIC] [TIFF OMITTED] TR02MY22.233

    In evaluating the statutory factors to determine maximum feasible
standards, we may begin with the need of the U.S. to conserve energy,
which is being considered more holistically in this final rule as
compared to in the 2020 final rule. According to the analysis presented
in Section V and in the accompanying FRIA and Final SEIS, Alternative 3
would save consumers the most in fuel costs, and would achieve the
greatest reductions in climate change-causing CO2 emissions.
Alternative 3 would also maximize fuel consumption reductions, better
protecting consumers from international oil market instability and
price spikes. Alternative 2.5 saves somewhat less fuel (and thus, saves
consumers somewhat less on fuel costs and reduces CO2
emissions by somewhat less), but still saves more fuel (and thus fuel
cost and CO2 emissions) than Alternatives 1 and 2. For now,
gasoline is still the dominant fuel used in light-duty transportation.
As such, consumers, and the economy more broadly, are subject to
fluctuations in gasoline price that impact the cost of travel and,
consequently, the demand for mobility. Vehicles are long-lived assets
and the long-term price uncertainty and volatility of petroleum still
represents a risk to consumers. By increasing the fuel economy of
vehicles in the marketplace, more stringent CAFE standards better
insulate consumers against these risks over longer periods of time,
even when accounting for the increased upfront technology costs. Fuel
economy improvements that reduce demand for oil are a more effective
hedging strategy against price volatility than increasing U.S. energy
production, because gasoline prices are at this time linked to global
oil prices. Continuing to reduce the amount of money consumers spend on
vehicle fuel thus remains an important consideration for the need of
the U.S. to conserve energy.
    As discussed in Section VI.A, many commenters agreed that
Alternative 3 likely best met the need of the U.S. to conserve energy,
because it maximized fuel conservation, with attendant energy security
benefits from reduced petroleum use, more fuel savings for consumers,
and the most positive impacts on the climate. Tens of thousands of
commenters thus urged NHTSA to choose Alternative 3.\1089\ Commenters
arguing that Alternative 3 was maximum feasible and also that
compliance flexibilities should be curtailed (in order to maximize
real-world fuel savings and emissions reductions) included the Climate
Group,\1090\ ELPC,\1091\ American Lung Mid-Atlantic,\1092\ Sierra
Club,\1093\ UCS,\1094\ SELC,\1095\ Zero Emission Transportation
Association (ZETA),\1096\ ACEEE,\1097\ Great Lakes and Midwest
Environmental Organizations,\1098\ National Parks Conservation
Association,\1099\ roughly 17,000 citizen-members of UCS,\1100\ and
24,700 citizens who signed a petition from Consumer Reports.\1101\ NRDC
submitted over 27,000 letters from citizen-members asking NHTSA to set
standards at least as stringent as EPA's Alternative 2 and to reduce
compliance flexibilities, to ``put us on the road to the goal of
reaching 100 [percent] net-zero vehicle sales by 2035.'' \1102\ Sierra
Club members also submitted over 4,000 letters asking NHTSA to set
stringent fuel economy standards.\1103\
---------------------------------------------------------------------------

    \1089\ See, e.g., CFA, Docket No. NHTSA-2021-0053-1482-Al, at 1;
Peter Douglas, Docket No. NHTSA-2021-0053-0085, at 1; Ceres, Docket
No. NHTSA-2021-0053-0076, at 1; many individual citizen commenters
who submitted form letters to the docket beginning with ``As a
person of faith and conscience . . .''; and many individual citizen
commenters at the public hearing.
    \1090\ Climate Group, Docket No. NHTSA-2021-0053-0052, at 1.
    \1091\ ELPC public hearing comments, Docket No. NHTSA-2021-0053-
0060, at 1.
    \1092\ American Lung Mid-Atlantic, Docket No. NHTSA-2021-0053-
0067, at 3.
    \1093\ Sierra Club public hearing comments, Docket No. NHTSA-
2021-0053-0562, throughout.
    \1094\ UCS public hearing comments, Docket No. NHTSA-2021-0053-
1085, at 1-2, and UCS, Docket No. NHTSA-2021-0053-1567, at 3-4.
    \1095\ SELC, Docket No. NHTSA-2021-0053-1495, at 1-2.
    \1096\ ZETA, Docket No. NHTSA-2021-0053-1510, at 1.
    \1097\ ACEEE, Docket No. NHTSA-2021-0053-0074, at 6.
    \1098\ Great Lakes and Midwest Environmental Organizations,
Docket No. NHTSA-2021-0053-1520, at 1.
    \1099\ National Parks Conservation Association, Docket No.
NHTSA-2021-0053-1569, at 2.
    \1100\ UCS citizen-member letters, Docket No. NHTSA-2021-0053-
1583, at 1.
    \1101\ Consumer Reports, Docket No. NHTSA-2021-0053-1576-A7, at
1.
    \1102\ NRDC, Docket No. NHTSA-2021-0053-1594, at 1.
    \1103\ Sierra Club, Docket No. NHTSA-2021-0053-1611, at 1.
---------------------------------------------------------------------------

    Other commenters focused on the need to maximize fuel savings
because Congress directs NHTSA to set maximum feasible CAFE standards.
California Attorney General et al. stated that ``Congress' purpose in
drafting this language--and specifically, in requiring NHTSA to
establish `maximum feasible' standards--is clear. Congress intended the
agency to conserve fuel, and thereby save consumers money, insulate the

United States from global oil price instabilities, and reduce the
impact of oil consumption on the environment.'' \1104\ ACEEE similarly
commented that maximum feasible ``means that NHTSA is empowered and
required to push efficiency as far as technically feasible. Maximizing
fuel savings would deliver the greatest fuel cost savings to consumers
and greatest benefits to public health and national security.'' \1105\
EDF similarly commented that ``maximum feasible'' means prioritizing
energy conservation.\1106\ EDF thus stated that the statutory factors
were balanced appropriately in the proposal because ``NHTSA
recognize[d] that the need of the U.S. to conserve energy must include
serious consideration of the energy security risks of continuing to
consume oil, which more stringent fuel economy standards can reduce.''
\1107\ South Coast AQMD stated that the 2020 final rule had interpreted
the need of the U.S. to conserve energy incorrectly, and argued that
``NHTSA should make unequivocal that the statute-set purpose of EPCA to
conserve energy necessarily requires affording that statutory factor
great weight in setting fuel economy standards, and the agency lacks
authority to alter the relative priorities set by Congress.'' \1108\
Mr. Douglas commented that ``[t]he agency is explicitly directed [by
statute] to maximize fuel economy, not economic prosperity. Nor is the
agency directed to maximize the ease by which automakers might overcome
technological barriers while still remaining profitable.'' \1109\ Other
commenters argued that choosing Alternative 3 would represent the best
balancing of all statutory factors, and also would be optimal for
energy conservation and its attendant effects.\1110\
---------------------------------------------------------------------------

    \1104\ California Attorney General et al., Docket No. NHTSA-
2021-0053-1530, at 22.
    \1105\ ACEEE, Docket No. NHTSA-2021-0053-0074, at 4.
    \1106\ EDF, Docket No. NHTSA-2021-0053-1617, at 2.
    \1107\ EDF, Docket No. NHTSA-2021-0053-1617, at 6.
    \1108\ South Coast AQMD, Docket No. NHTSA-2021-0053-1477, at 2.
    \1109\ Peter Douglas, Docket No. NHTSA-2021-0053-0085, at 14.
    \1110\ See, e.g., South Coast AQMD, Docket No. NHTSA-2021-0053-
1477, at 6; WDNR, Docket No. NHTSA-2021-0053-0059, at 2; Ceres,
Docket No. NHTSA-2021-0053-0076, at 1.
---------------------------------------------------------------------------

    With regard to another subset of considerations under the need of
the U.S. to conserve energy, a coalition of health-oriented
organizations commented that NHTSA should finalize standards at least
as stringent as Alternative 3 to maximize long-term health benefits and
achieve health equity nationwide.\1111\ The Carbon Fuel Alliance also
commented that Alternative 3 was best for meeting health and
environmental concerns,\1112\ and Bay Area Air Quality Management
District and the Mid-Atlantic Regional Council Air Quality Forum both
commented that Alternative 3 was best for climate, air quality, and
equity.\1113\
---------------------------------------------------------------------------

    \1111\ American Lung Association, Docket No. NHTSA-2021-0053-
1502, at 1.
    \1112\ Carbon Fuel Alliance, Docket No. NHTSA-2021-0053-1475, at
2.
    \1113\ Bay Area Quality Management Air District, Docket No.
NHTSA-2021-0053-1472, at 2-4; Mid-Atlantic Regional Council Air
Quality Forum, Docket No. NHTSA-2021-0053-1470, at 1.
---------------------------------------------------------------------------

    NHTSA continues to believe, as many commenters agreed, that
Alternative 3 best meets the need of the U.S. to conserve energy of the
regulatory alternatives considered, because it saves the most fuel,
which means that it maximizes consumer savings on fuel costs, reduces
climate emissions by the greatest amount, and reduces U.S.
participation in global oil markets, with attendant benefits to energy
security and the national balance of payments. The table below shows,
among other things, NHTSA's estimated quantified private and social
benefits associated with the need of the U.S. to conserve energy.

[GRAPHIC] [TIFF OMITTED] TR02MY22.234

    Saving money on fuel and reducing CO2 and other
pollutant emissions by reducing fuel consumption are also important
equity goals. NHTSA recognizes the comments discussed in Section VI.A
which suggested that fuel expenditures are a more significant budget
item for citizens who are part of lower-income and disadvantaged
communities. Part of our goal in determining maximum feasible CAFE
standards is trying to improve fuel savings across the fleet as a
whole, rather than for a handful of new vehicle buyers. By maximizing
fuel savings to consumers, CAFE standards can help to improve equity.
By maximizing CO2 reductions, the U.S. is able to achieve
the most toward reaching our goals under the Paris Climate Agreements,
President Biden's goals as set forth via Executive order, and to
maximize climate equity concerns.
    The Final SEIS finds that overall, projected changes in both
upstream and downstream emissions of criteria and toxic air pollutants
are generally beneficial but still mixed, with emissions of some
pollutants remaining constant or increasing and emissions of some
pollutants decreasing. These increases are associated with both
upstream and downstream sources, and therefore, may disproportionately
affect minority and low-income populations that reside in proximity to
these sources. However, the magnitude of the change in emissions
relative to the No-Action Alternative is minor for all action
alternatives, and would not be characterized as high or adverse; over
time, adverse health impacts are projected to decrease nationwide under
each of the action alternatives.
    While NHTSA recognizes the comments discussed above in Section VI.A
suggesting that eventual fleet electrification could create new energy
security questions, the CAFE standards in this time frame are not the
but-for cause of those questions. NHTSA will continue to monitor these
questions going forward.
    On that note, however, many comments received to the NPRM discussed
vehicle electrification. These comments are part of why the issues are
increasingly intertwined, because these commenters believe
electrification touches at least three and possibly all of the
statutory factors simultaneously--technological feasibility (to some
extent), economic practicability (to a

greater extent), the effect of other motor vehicle standards of the
Government on fuel economy (also to a greater extent), and the need of
the United States to conserve energy (also to a greater extent, as
discussed already). Some comments mentioned it in terms of whether
industry was committed to electrification \1114\ or insufficiently
committed to electrification,\1115\ or whether the CAFE standards would
result in sufficient levels of electrification in order to meet climate
goals.\1116\ Many industry comments expressed commitment to
electrification and climate goals, but concurrently argued that the
proposed standards would require too much electrification \1117\ and
that in order to meet those stated commitments to electrification and
climate goals, no further improvements on the remaining ICE vehicles
should be required,\1118\ and significant government assistance would
be necessary regardless.\1119\ Other comments (often from the same
commenters) insisted that NHTSA must attend to the levels of
electrification being deployed (in order to avoid requiring further
investments in improving ICE-technology vehicles), while concurrently
noting that Congress prohibited consideration of the fuel economy of
BEVs in determining maximum feasible fuel economy.\1120\
---------------------------------------------------------------------------

    \1114\ See, e.g., Auto Innovators, Docket No. NHTSA-2021-0053-
1492, at 11-12 (stating that the same day as President Biden's
announcement of the Executive order establishing the electrification
target for 2030, ``. . . multiple automobile manufacturers announced
a shared aspiration to achieve sales of 40-50 [percent] of annual
U.S. volumes of EVs by 2030 to move the nation closer to a zero-
emissions future consistent with Paris climate goals. Other
automobile manufacturers made similar commitments leading up to and
following the signing of E.O. 14037. Collectively, automakers have
committed to investing more than $330 billion to transforming cars
and trucks to an exciting, electrified future, and are on pace to
debut almost 100 BEV models by the end of 2024.''). See also Volvo,
Docket No. NHTSA-2021-0053-1565, at 2 (``Volvo Cars is committed to
electrification and every new Volvo motor launched since 2019 has
had an electric motor. Over the next four years, Volvo Cars is
launching a fully electric car every year and our aim is to make
all-electric cars 50 [percent] of global sales by 2025, with the
rest hybrids.''); Stellantis, Docket No. NHTSA-2021-0053-1527, at 1
(stating that it planned ``to spend over $35 billion to support a
targeted 40 [percent] electric vehicle mix--consisting of plug-in
hybrid and battery electric vehicles--in the U.S. by 2030. This
includes investments in developing four all-new electric
platforms.''); Nissan, Docket No. NHTSA-2021-0053-0022, at 3
(stating that ``As part of its corporate sustainability efforts, . .
. In January 2021 . . . Nissan announced that every all-new Nissan
vehicle offered in Japan, China, Europe, and the U.S. will be
electrified by the early 2030s. Further, in August 2021, Nissan set
an ambitious target that 40 percent of its U.S. vehicle sales by
2030 will be fully electric, with even more to be electrified.'').
    \1115\ See, e.g., Tesla, Docket No. NHTSA-2021-0053-1480-A1, at
6 (commenting that ``NHTSA should set standards that are technology
forcing'' and that ``this technology forcing component compels NHTSA
to adopt Alternative 3 with additional stringency to set the country
on a pathway to encourage widespread deployment of ZEVs.''); Lucid,
Docket No. NHTSA-2021-0053-1584, at 4 (stating that ``Alternative 3
would meet the statutory requirement to set fuel efficiency
standards at the maximum feasible level, push the automobile
industry away from continued reliance on ICE vehicles, and ensure
its focus remains on increasing electrification,'' and pointing to
NHTSA's conclusions in the NPRM that Alternative 3 likely best met
the need of the U.S. to conserve energy.); Rivian, Docket No. NHTSA-
2021-0053-1562, at 7 (stating that current EV sales trajectories
indicated that much more electrification was possible, stating that
``The industry is ready to meet new challenges, and this is a moment
for doubling down on the ambition of our fuel economy standards.'').
    \1116\ See, e.g., ICCT, Docket No. NHTSA-2021-0053-1581, at 13
(``The proposed CAFE standards may not ensure even the modeled 14.4
[percent] market share of electric vehicles, as conventional
technology could be implemented at much higher rates than modeled
for the proposed rule instead of increasing electric vehicle share
to 14.4 [percent]. Without the additional stringency of Alternative
3, the standards for years 2027-2030 will have to be that much more
ambitious in order to meet the target set by the President and
achieve fuel consumption reductions that are clearly feasible and
consistent with NHTSA's statutory mandate.''); Securing America's
Future Energy, Docket No. NHTSA-2021-0053-1513, at 7 (stating that
the NPRM had not established that automakers were incapable of
meeting Alternative 3, and that ``For there to be any possibility of
EV sales approaching President Biden's goal, NHTSA must consider a
more stringent standard.''); Tesla, Docket No. NHTSA-2021-0053-1480-
A1, at 4 (stating that Alternative 3 would result in more
electrification and be consistent with the President's call for more
fleet electrification.); Rivian, Docket No. NHTSA-2021-0053-1562, at
3 (Alternative 2 would be ``inconsistent with the . . . Biden
Administration's stated goals and priorities . . . .''); Our
Children's Trust, Docket No. NHTSA-2021-0053-1587, at 2 (``Many
studies have shown that the U.S. vehicle fleet to be regulated by
this CAFE standard can and should be 100 [percent] electric by
2030,'' and ``This rule should be on track to require the industry
to do so.'').
    \1117\ See, e.g., Nissan, Docket No NHTSA-2021-0053-0022, at 7
(stating that the proposed standards would actually require more
electrification than NHTSA estimated, and that because ``the level
of EV market development and implementation of critical EV market
policies remains uncertain, considering more stringent standards
than those proposed is premature during this rulemaking time
period.''); Stellantis, Docket No. NHTSA-2021-0053-1527, at 13
(stating that to meet even Alternative 2, ``significant market
penetration of strong electrification (e.g., hybrid, PHEV, or FCEV)
is needed,'' because 8 percent year over year increases
``significantly outpaces historical improvements achieved with
internal combustion engine technology'' and ``Eleven of fourteen
major automakers have fallen behind EPA's MY2019 standards as they
have been adding technology since 2012.''); Kia, Docket No. NHTSA-
2021-0052-1525, at 3 (stating that 8 percent increases were
``unprecedented'' and ``with virtually no lead-time and without the
inclusion of all vehicle types (specifically, dedicated EV
platforms)--will be a challenge to meet at a manageable price for
all consumers.''); AFPM, Docket No. NHTSA-2021-0053-1530, at 1-2
(stating that the proposal would have set CAFE standards ``at a
level that is not feasibly achievable by ICEVs, effectively
establishing a partial EV mandate.''). Mr. Kreucher also commented
that electric vehicles do not pay back in fuel savings over their
lifetimes, and do not result in genuine climate benefits. Walter
Kreucher, Docket No. NHTSA-2021-0053-0013, at 12.
    \1118\ See, e.g., Ford, Docket No. NHTSA-2021-0053-1545, at 1
(stating that further fuel efficiency improvements to ICE vehicles
``will be marginal, and will come at high cost. Ford requests that
the agencies . . . ensure that resources and investment are not
diverted from our primary objective: Fulfilling President Biden's
goal of achieving 40-50 [percent] ZEV sales by 2030.''); GM, Docket
No. NHTSA-2021-0053-1523, at 2, 4 (stating that ``The standards
should not force industry to split its resources between investments
in legacy propulsion technologies and electric vehicles, as this
will slow down the nation's progress toward its climate
commitments'' and that ``Every dollar spent propping up legacy
engines is a dollar not spent on the investments necessary for
future battery electric vehicles.''); Stellantis, Docket No. NHTSA-
2021-0053-1527, at 12 (arguing that even if manufacturers could meet
the proposed MYs 2024-2026 standards with conventional ICE
technology, ``it would make little economic sense to pursue a
duplicate ICE investment path only to abandon it a few short years
later to meet 2030 electrification goals.''); ZETA, Docket No.
NHTSA-2021-0053-1510, at 2 (``More stringent standards will
incentivize all auto manufacturers to produce more EVs--rather than
strive to make inherently inefficient ICEVs marginally more
efficient.''); AVE, Docket No. NHTSA-2021-0053-1488-A1, at 5
(stating that the NPRM had cited automaker announcements about
electrification but ``NHTSA does not, however, cite recent
announcements that indicate several OEMs would not be making new
investments in ICE architectures. NHTSA should account for the
impact these decisions could have on overall fuel economy
performance.'').
    \1119\ See, e.g., Auto Innovators, Docket No. NHTSA-2021-0053-
1492, at 12 (stating that in order to ``grow EV sales through MY
2026 and significantly expand those sales beyond MY 2026,'' the
United States would need (1) significant investments in refueling
infrastructure, (2) consumer purchase incentives from the
government, (3) government requirements that private and commercial
fleets adopt electric vehicles, (4) government development of
domestic supply chains, (5) a nationwide low carbon fuel standard,
(6) government creation of a battery and vehicle component recycling
system, (7) government investment in R&D, (8) government education
of consumers, (9) government efforts to improve the availability,
variety, and affordability of EVs, and (10) for all parties to
``hold ourselves collectively accountable to metrics and milestones
that align with state and nationwide targets of EVs.''); UAW, Docket
No. NHTSA-2021-0053-0931, at 2-3 (stating that ``The achievability
of these standards and their impact on the U.S. auto industry will
depend on additional [government intervention and] policies that
promote domestic manufacturing and support quality jobs.'').
    \1120\ See comments discussed and responded to in Section
VI.A.5.e).

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

Many comments, as discussed elsewhere,\1121\ either agreed or disagreed
with NHTSA's inclusion of State ZEV requirements in the analytical
baseline. Many comments also either agreed or disagreed with NHTSA's
statements in the NPRM that manufacturer announcements about future
electrification or corporate zero-emissions targets, or actual rollout
of new electric vehicle models, were evidence of manufacturer
capability to raise fuel economy levels in a way that seemed likely to
be economically practicable.\1122\
---------------------------------------------------------------------------

    \1121\ See Sections IV.B and VI.A.
    \1122\ See Section VI.A.
---------------------------------------------------------------------------

    In response, NHTSA has grappled extensively with how to consider
these comments as we consider what levels of CAFE standards would be
maximum feasible in MYs 2024-2026. Recognizing the 49 U.S.C. 32902(h)
prohibition, NHTSA has limited electrification as a technology option
in our analysis of how manufacturers might respond to the different
regulatory alternatives during the rulemaking time frame. NHTSA
therefore does not consider the fuel economy of electric vehicles in
setting maximum feasible CAFE standards, consistent with Congress'
direction. However, it remains a compliance option that many automakers
are pursuing, and moreover, it would seem absurd to ignore the fact
that NHTSA is setting these CAFE standards in the context of a much
larger conversation about the future of the U.S. light-duty vehicle
fleet, and for that matter, because of the nexus to climate change, the
future of the planet and its inhabitants.
    We acknowledge the comments from industry about what additional
government support (such as infrastructure improvements and consumer
purchase incentives for electric vehicles) would be desirable in their
efforts to reach those goals, but of course many of those requests are
outside of NHTSA's authority, and outside the scope of this final rule.
    With regard to the economic practicability factor, the agency
attempts to evaluate where the tipping point in the balancing of
factors might be through a variety of metrics, examined in more detail
below. If the amounts of technology or per-vehicle cost increases
required to meet the standards appeared to be beyond what we believe
the market could bear; or sales and employment appear to be unduly
impacted, the agency could have decided that the standards represented
by a regulatory alternative under consideration may not be economically
practicable. Even though NHTSA recognizes that the amount of lead time
available before MY 2024 is less than what was provided in the 2012
rule, as will be discussed further below, NHTSA believes that the
evidence suggests that the final standards are still economically
practicable, even though they will be more challenging for some
portions of the industry than others. CAFE standards can also help
support industry in their intention to transition to a higher-fuel-
economy fleet by requiring ongoing improvements even if demand for more
fuel economy flags unexpectedly.
    We underscore again, as throughout this preamble, that the modeling
analysis does not dictate the ``answer,'' it is merely one source of
information among others that aids the agency's balancing of the
standards. We similarly underscore that there is no single bright line
beyond which standards might be economically impracticable, and that
these metrics are not intended to suggest one; they are simply ways to
think about the information before us.
    One way that economic practicability may be evaluated is in terms
of how much technology manufacturers would have to apply to meet a
given regulatory alternative. Technology application can be considered
as ``which technologies, and when''--both the technologies that NHTSA's
analysis suggests would be used, and how that application occurs given
manufacturers' product lifecycles. NHTSA agrees with commenters who
suggested that the need of the U.S. to conserve energy may encourage
the agency to be more technology-forcing in its balancing, and finds,
as discussed in Section VI.A, that technological feasibility is not
limiting in this rulemaking time frame given the state of technology in
the industry. That said, regulatory alternatives that can only be
achieved by the extensive application of advanced technologies (that
may have known or unknown consumer acceptance issues) may not be
economically practicable in this time frame, and may thus be beyond
maximum feasible.\1123\
---------------------------------------------------------------------------

    \1123\ NHTSA does not mean to preclude the possibility that
future fuel economy standards may be even more technology-forcing
than the ones promulgated in this final rule, because we anticipate
that, among other things, consumer acceptance toward advanced fuel
economy-improving technologies will continue to grow, as it is
clearly doing at the present time.
---------------------------------------------------------------------------

    In terms of the levels of technology required and which
technologies those may be, NHTSA's analysis estimates manufacturers'
product ``cadence,'' representing them in terms of estimated schedules
for redesigning and ``freshening'' vehicles, and assuming that
significant technology changes will be implemented during vehicle
redesigns--as they historically have been. Once applied, a technology
will be carried forward to future model years until superseded by a
more advanced technology. NHTSA does not consider model years in
isolation in the analysis, because doing so would be inconsistent with
how industry responds to standards, and thus would not accurately
reflect practicability. If manufacturers are already applying
technology widely and intensively to meet standards in earlier years,
requiring them to add yet more technology in the model years subject to
the rulemaking may be less economically practicable; conversely, if the
preceding model years require less technology, more technology during
the rulemaking time frame may be more economically practicable. The
tables below illustrate how the agency has modeled that process of
manufacturers applying technologies to comply with different
alternative standards. The TSD accompanying this document described the
technologies and corresponding input estimates (of, e.g., efficacy and
cost) in detail in Chapters 2 and 3. The accompanying FRIA and
appendices provide extensive detail regarding the estimated application
of specific technologies to each manufacturers' fleets of passenger
cars and light trucks in each model year. Finally, the underlying model
outputs available on NHTSA's website provide estimates of the potential
to apply specific technologies to specific vehicle model/configurations
in each model year. In response to the commenters who stated that the
proposed standards would require more electrification (i.e., in
particular, BEVs) than the NPRM showed, that is not what NHTSA's
analysis finds. The following two tables show average incremental
application rates--that is, levels beyond those projected under the No-
Action Alternative--by regulatory alternative for selected
technologies, including electrification technologies. For example, our
analysis indicates that under the proposed standards (Alternative 2),
the application of strong HEVs (HEVs) to passenger cars in MY 2026
could increase by 10 percent (of total passenger car production)
compared to the levels projected to occur under the No-Action
Alternative, and by 14 and 17 percent, respectively, under Alternative
2.5 and Alternative 3:

[GRAPHIC] [TIFF OMITTED] TR02MY22.235

    For light trucks, increases in estimated SHEV application show
broadly similar trends, impacting an additional 17 percent of the
overall light truck market by MY 2026 under the most stringent
regulatory alternative considered here:

[GRAPHIC] [TIFF OMITTED] TR02MY22.236

    The estimated increases in technology application shown in the
preceding two tables are all computed relative to the No-Action
Alternative, under which considerable fuel-saving technology is applied
beyond that already present on the MY 2020 fleet used as the baseline
for this analysis. As discussed above and in the FRIA and TSD
accompanying this document, the No-Action Alternative includes fuel-
saving technology applied in response to baseline (set in 2020) CAFE
and CO2 standards, fuel prices, agreements some
manufacturers have reached with California regarding national
CO2 levels to be achieved through MY 2026, and ZEV mandates
in place in California and other States. The effects of this baseline
application of technology are not attributable to this action, and
NHTSA has therefore excluded these from the agency's estimates of the
incremental benefits and costs that could result from each Action
alternative considered here. Some manufacturers and other stakeholders
have called for NHTSA to consider the accumulated impacts of successive
actions, logically implying that NHTSA should be reporting on
technologies deployed since DOT first imposed fuel economy standards in
the late 1970s, such as front-wheel drive configurations, unibody
construction, and 4-speed automatic transmissions. NHTSA disagrees that
such an accounting would be informative toward the decisions regarding
tomorrow's fuel economy standards. Nevertheless, within its context,
which starts with the MY 2020 fleet, our analysis does account for
technology present in the MY 2020 fleet, and any additional technology
estimated to potentially be applied under the No-Action Alternative.
Including this technology results in the estimated technology market
shares (also referred to as technology [market] penetration rates)
summarized in the following two tables:
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[GRAPHIC] [TIFF OMITTED] TR02MY22.238

BILLING CODE 4910-59-C
    As the tables illustrate, Alternative 2, Alternative 2.5, and
Alternative 3 appear to require rapid deployment of fuel efficiency
technology across a variety of vehicle systems--body improvements due
to weight reduction and improved aerodynamic drag, engine advancements,
and electrification.\1124\ However, importantly, the aggressive
application that is simulated to occur between MY 2020 (which NHTSA
observed and is the starting point of this analysis) and MY 2023 occurs
in all of the alternatives, for both cars and light trucks. This
reflects technology application by manufacturers participating in the
California Framework Agreements and existing compliance positions (in
some fleets) across the industry to improve fuel economy in the near-
term.
---------------------------------------------------------------------------

    \1124\ While these technology pathways reflect NHTSA's statutory
restrictions under EPCA/EISA, it is worth noting again that they
represent only one possible solution. In the simulations that
support the Final SEIS, PHEV market share grows by less, and is
mostly offset by an increase in BEV market share.
---------------------------------------------------------------------------

    As the results summarized above showed, while NHTSA's analysis
suggests some increase in SHEV penetration rates between alternatives 2
and 3, PHEVs and BEVs are (logically) limited--but in response to the
comments about the standards requiring too much electrification,
widespread compliance can be achieved with minimal further application
of PHEVs or BEVs for any of the regulatory alternatives considered in
this final rule. SHEV may still have plenty of room to grow in the
market to reach the levels suggested by the analysis, but hybrid
offerings have been increasing rapidly in number and variety, and some
new offerings have been so popular that manufacturers cannot keep up
with

demand,\1125\ which seems to bode well for future growth opportunities.
---------------------------------------------------------------------------

    \1125\ See, e.g., https://www.reuters.com/business/autos-transportation/ford-cut-orders-hybrid-pick-up-maverick-wsj-2022-01-24/ (accessed: March 15, 2022).
---------------------------------------------------------------------------

    Of course, CAFE standards are performance-based, and NHTSA does not
dictate specific technology paths for meeting them, so it is entirely
possible (even entirely foreseeable) that individual manufacturers and
industry as a whole will take a different path from the one that NHTSA
presents here. Nonetheless, this is a path toward compliance, relying
on known, existing technology, that may (if used) address some of the
consumer acceptance concerns raised by industry commenters about the
future levels of electrification to which they are all committing.
However, if automakers would prefer to rely more heavily on BEVs, for
example, for CAFE compliance, and less heavily on the SHEVs that we
show in this analysis, they are free to do so.
    NHTSA also recognizes the industry comments suggesting that further
investments in improving vehicle fuel economy with ICE technologies are
not investments in electrification. Other comments suggested that ICE
technologies still had room to improve and could be added cost-
effectively during the rulemaking time frame.\1126\ As the tables above
showed, Alternatives 2, 2.5, and 3 are all estimated to require fairly
widespread deployment of advanced AERO and MR4 (although particularly
in the case of MR4, this may be an artifact of the statutory
restrictions reflected in the ``standard-setting'' modeling runs), as
well as additional application of SHEVs. While, again, CAFE standards
are performance-based and manufacturer technology solutions to meet the
standards will certainly be different from what NHTSA presents here,
NHTSA believes that these levels of vehicle technology and strong
hybrid penetration are reasonable in the rulemaking time frame. NHTSA
absolutely disagrees that these investments in improving vehicle
technologies and hybrids, if actually made, would be ``wasted,'' as
some comments suggest. Even if 50 percent of the new vehicle fleet was
BEV, 50 percent of that same fleet would still not be BEV, and much
higher percentages of the on-road fleet as a whole would continue not
to be BEV for some time. NHTSA believes it is consistent with the need
of the U.S. to conserve energy for standards to encourage new vehicles
across the fleet to continue improving, and that it is particularly
consistent with equity concerns for consumers who purchase any vehicle
to be able to benefit from the reduced fuel costs that more stringent
CAFE standards could facilitate, even if they are not yet willing or
able to purchase a BEV. Moreover, improving the fuel efficiency of new
vehicles has effects over time, not just at point of first sale, on
consumer fuel savings. Somewhat-more-expensive-but-more-efficient new
vehicles eventually become more-efficient used vehicles, which may be
purchased by consumers who may be put off by higher new vehicle prices.
The benefits have the potential to continue across the fleet and over
time, for all consumers regardless of their current purchasing power.
---------------------------------------------------------------------------

    \1126\ See, e.g., ICCT, Docket No. NHTSA-2021-0053-1581, at 12-
13. While NHTSA discusses ICCT's comments on this topic in more
detail in Section III above, NHTSA agrees with the basic principle
that non-electric fuel economy may still be improved.
---------------------------------------------------------------------------

    We are also cautiously optimistic that if automakers do continue to
improve the fuel economy of their non-BEV vehicles, that it may
actually improve fleetwide fuel consumption over time, given that the
evidence suggests that ICE VMT has been than BEV VMT on average thus
far. Many higher-fuel-economy ICEs (with or without SHEVs) may save
more fuel as they drive through their lifetimes, than relatively fewer
higher-fuel-economy ICEs and relatively few BEVs. Thus, although
(again) CAFE standards are performance-based and NHTSA does not dictate
a technology path, there may be energy conservation benefits beyond
just the average fuel economy level from setting standards that lead to
more technology applied to more vehicles across the fleets.
    Another facet of automaker comments about their intent to invest in
electrification rather than improving the fuel economy of non-electric
models is simply the capital investments and R&D dollars expected to be
directed to electrification--and thus, commenters suggested,
unavailable for other uses. For example, Auto Innovators stated that
its members had collectively committed to spending $330 billion toward
reaching the 2030 electrification goals, as part of arguing that CAFE
standards should require no further investment in improving the fuel
economy of the rest of the new vehicle fleet.
    In response, NHTSA's analysis seeks to account for manufacturers'
capital and resource constraints in several ways--through the
restriction of technology application to refreshes and redesigns,
through the phase-in caps applied to certain technologies, and through
the explicit consideration of vehicle components (like powertrains) and
technologies (like platforms based on advanced materials) that are
shared by models throughout a manufacturer's portfolio. NHTSA is aware
that there is a significant difference in the level of capital and
resources required to implement one or more new technologies on a
single vehicle model, and the level of capital and resources required
to implement those same technologies across the entire vehicle fleet.
NHTSA realizes that it would not be economically practicable to expand
some of the most advanced technologies to every vehicle in the fleet
within the rulemaking time frame, although it should be possible to
increase the application of advanced technologies across the fleet in a
progression that accounts for those resource constraints. That is what
NHTSA's analysis tries to do and what our selection of Alternative 2.5
reflects. While the tables above do not provide information at
sufficient granularity, the per-vehicle cost tables that follow help to
illustrate that technology is added at redesigns (as evidenced by
increases in per-vehicle cost from one model year to the next for
individual manufacturers), which helps ensure the practicability of the
technology changes. Further, as always, manufacturers remain free to
meet the standards using whatever technologies they choose. Thus, a
decision to invest available research and development capital in BEV
technology instead of advanced ICE technologies (or vice versa) is a
compliance choice, not a requirement of this rule.
    Hundreds of billions of dollars are large sums, but they are the
collective effect of many decisions about per-vehicle costs. Another
consideration for economic practicability is the extent to which new
standards could increase the average cost to acquire new vehicles,
because even insofar as the underlying application of technology leads
to reduced outlays for fuel over the useful lives of the affected
vehicles, these per-vehicle cost increases provide both a measure of
the degree of effort faced by manufacturers, and also the degree of
adjustment, in the form of potential vehicle price increases, that will
ultimately be required of vehicle purchasers. Table VI-16, Table VI-17,
and Table VI-18 show the agency's estimates of average cost increase
under the Preferred Alternative for passenger cars and light trucks,
respectively. Because our analysis includes estimates of manufacturers'
indirect costs and profits, as well as civil penalties that some
manufacturers (as allowed under

EPCA/EISA) might elect to pay in lieu of achieving compliance with CAFE
standards, we report cost increases as estimated average increases in
vehicle price (as MSRP). These are average values, and the agency does
not expect that the prices of every vehicle would increase by the same
amount; rather, the agency's underlying analysis shows unit costs
varying widely between different vehicle models. For example, a small
SUV that replaces an advanced internal combustion engine with a plug-in
hybrid system may incur additional production costs in excess of
$10,000, while a comparable SUV that replaces a basic engine with an
advanced internal combustion engine incurs a cost closer to $2,000.
While we recognize that manufacturers will distribute regulatory costs
throughout their fleet to maximize profit, we have not attempted to
estimate strategic pricing, having insufficient data (which would
likely be confidential business information (CBI)) on which to base
such an attempt. Additionally, even recognizing that manufacturers will
distribute regulatory costs throughout their fleet, NHTSA still
believes that average per-vehicle cost is illustrative of the
affordability implications of new standards, as raised by NADA and
other commenters. If the per-vehicle cost increases seem consistent
with those previously found to be economically practicable, given what
we estimate about conditions during the rulemaking time frame, it will
seem more likely that the standards causing those increases are
economically practicable.
    Relative to the vehicles that will be built anyway in the absence
of further regulatory action by NHTSA, NHTSA judges these cost
increases to be possible for the market to bear. Moreover, cost
increases will be offset by fuel savings, which consumers will
experience over the lifetime of the vehicle, if not concurrent with the
upfront increase in purchase price. Further, as discussed above, the
time period during which these technology costs would be paid off
through reduced fuel expenditures aligns well with average vehicle
financing periods, indicating that many consumers will experience the
net fuel economy savings immediately. NADA commented that eventual fuel
savings are not relevant to auto lending decisions, and thus do not
improve vehicle affordability, but again, NHTSA believes that the
additional cost attributable to the CAFE standards is feasible,
particularly given the potential for fuel expenditure savings to accrue
during vehicle financing periods, and notes that even with average
MSRPs at historically high levels,\1127\ vehicles are still selling,
often with dealer ``market adjustments'' that push the vehicle prices
well over MSRP.\1128\ Whereas in the 2020 final rule, NHTSA expressed
concern about what appeared to be a growing trend of consumers finding
themselves upside down on their auto loans, but as vehicle residual
value continues to rise, NHTSA believes this may be less of an issue
going forward unless vehicle prices collapse unexpectedly, which seems
unlikely. Some of this is a function of limited vehicle supply, but
even in that context, as discussed previously, nearly every
manufacturer has already indicated their intent to continue introducing
advanced technology vehicles between now and MY 2026. Again, NHTSA
believes that manufacturers introduce new vehicles (and technologies)
expecting that there is a market for them--if not immediately, then in
the near future, because for-profit companies cannot afford to lose
money indefinitely--and dealers currently seem able to accommodate
consumers despite considerable price increases, so perhaps the
situation is not as dire as NADA argued in its comments. This trend
suggests that manufacturers believe that at least some cost increases
should be manageable for consumers.
---------------------------------------------------------------------------

    \1127\ https://www.kbb.com/car-news/average-new-car-sales-price-now-over-46000/ (accessed March 15, 2022).
    \1128\ https://www.forbes.com/wheels/news/car-buying-advice-navigate-shortage/ (accessed March 15, 2022).
---------------------------------------------------------------------------

    The tables below show additional technology costs estimated to be
incurred under each action alternative as compared to the No-Action
Alternative.
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[GRAPHIC] [TIFF OMITTED] TR02MY22.240

[GRAPHIC] [TIFF OMITTED] TR02MY22.241

BILLING CODE 4910-59-C
    While it is clear from the tables that results vary by
manufacturer, by year, and by fleet,\1129\ the average results are
still informative. Average per-vehicle cost increases for MY 2024, for
all alternatives, are well under $1,000; for MY 2025, there appears to
be a significant inflection point between Alternatives 2.5 and 3; and
for MY 2026, that inflection point remains, and seems especially
pronounced for light trucks. As discussed in Section VI.A, while NHTSA
has no bright-line rule regarding the point at which per-vehicle cost
becomes economically impracticable, while the difference in cost
between Alternatives 2 and 2.5 may be manageable, the difference
between Alternatives 2 and 3 is more than 50-60 percent, and the number
of cases in which manufacturers' average MY 2026 costs appear to
increase beyond $2,000 per vehicle increases noticeably between
Alternatives 2.5 and 3.
---------------------------------------------------------------------------

    \1129\ Honda commented to the NPRM that NHTSA should consider a
slower rate of increase in stringency for passenger cars rather than
light trucks, because the regulatory burden on passenger cars was
higher, the MSRP tended to be lower (and thus have more difficulty
passing forward regulatory costs), and market share had declined in
recent years. Honda, Docket No. NHTSA-2021-0053-1501, at 7. In
response, while per-vehicle costs for all action alternatives look
somewhat higher in some years for passenger cars as compared to
light trucks, the burden seems to even out by MY 2026. NHTSA does
not believe that the evidence suggests that a slower rate of
increase for passenger cars is necessary at this time.
---------------------------------------------------------------------------

    The table also illustrates that, in some respects, economic
practicability points in the opposite direction than the need of the
U.S. to conserve energy. Weighing the competing considerations, NHTSA
believes that the large increase in the average per-vehicle cost
between Alternatives 1 and 2 is worth the energy conservation benefits
of choosing higher standards. The average per-vehicle cost increase
between Alternatives 2 and 2.5 is smaller, and thus still worth the
increased energy conservation benefits. The per-vehicle cost increase
between Alternative 2.5 and 3, however, does not seem economically
practicable in the rulemaking time frame, and it is within NHTSA's
discretion to forgo additional energy conservation benefits if NHTSA
believes that more stringent standards would be economically
impracticable, and thus, beyond maximum feasible.
    The estimated price increases shown in the preceding three tables
are all computed relative to the No-Action Alternative, under which
considerable fuel-saving technology is applied beyond that already
present on the MY 2020 fleet, using this analysis as a starting point.
Nevertheless, within its context, which starts with the MY 2020 fleet,
our analysis does provide estimates of impacts attributable to
technology applied in the baseline--that is, technology beyond that
present in the MY 2020 fleet. For new vehicle prices, doing so results
in the following estimated average price increases relative to the
continued reliance on MY 2020 technologies:

[GRAPHIC] [TIFF OMITTED] TR02MY22.242

    With regard to timing of technology application, as discussed in
Section VI.A, some commenters also disagreed with NHTSA's suggestion in
the NPRM that while the MY 2024 standards provide less lead time for an
increase in stringency than was provided by the standards set in 2012,
the less-stringent CAFE standards for MYs 2021-2023 should provide a
relative ``break'' for compliance purposes. In the context of
determining how to balance the statutory factors, UAW argued that
Alternative 2 represented a ``significant and more rapid increase in
stringency levels over the term of the regulations, particularly in
comparison to current standards,'' so UAW opposed ``alternative
proposals that would increase stringency levels beyond those proposed
in Alternative 2, including the proposal to increase the stringency of
Alternative 2 in 2026 by an additional 2 [percent] [i.e., Alternative
2.5].'' \1130\ UAW stated that ``[a] drastic increase in standards for
MY 2026 could undermine the overall achievability of regulations,
discount the lead time required for automotive product planning, and
fail to acknowledge the industry disruptions of recent years. After
all, automakers are currently operating under the SAFE standards put in
place by the last administration.'' \1131\ JLR stated that Alternative
2.5 was not viable for them, because their product plans were already
set through MY 2026 and they had been planning for, at most, the 2012
targets.\1132\
---------------------------------------------------------------------------

    \1130\ UAW, Docket No. NHTSA-2021-0053-0931, at 2.
    \1131\ Id.
    \1132\ JLR, Docket No. NHTSA-2021-0053-1505, at 4.
---------------------------------------------------------------------------

    However, other commenters argued that the less-stringent CAFE
standards for MYs 2021-2023 would provide automakers, especially those
who had not deviated from planning to meet the standards set forth in
2012 or those who had signed onto the California Framework Agreements,
an opportunity to over-comply in CAFE space to ease future compliance
obligations. Consumer Reports commented that ``[a]utomakers had agreed
to [the Obama] levels of stringency in 2012 and had plans in place to
meet them as recently as last year. With extra credits earned under the
weak SAFE rule, they should easily be able to catch up. NHTSA should
set the stringency in 2026 at least as strong as their Alternative 3.
The U.S. is behind the curve on our climate commitments, and only
setting aggressive CAFE targets will allow us to catch up.'' \1133\
ACEEE agree that ``[s]etting stringency to maximize fuel savings can
also help us reach the fuel savings we would have reached if the 2012
Final Rule were fully implemented.'' \1134\
---------------------------------------------------------------------------

    \1133\ Consumer Reports, Docket No. NHTSA-2021-0053-1576-A9, at
5.
    \1134\ ACEEE, Docket No. NHTSA-2021-0053-0074, at 4-5.
---------------------------------------------------------------------------

    NHTSA cannot and does not consider the availability of credits in
determining what levels of standards would be maximum feasible, so
NHTSA does not mean to say that NHTSA believes that Alternative 2.5 is
feasible for MYs 2024-2026 because manufacturers will be earning
overcompliance credits in CAFE space during MYs 2021-2023. It is
important, however, to consider the following facts (and would be
absurd not to do so). First, in a world in which we are only
considering CAFE standards, if the standards in the years immediately
preceding the rulemaking time frame do not require significant
additional technology application, then more technology should
theoretically be available for meeting the standards during the
rulemaking time frame. Second, if we reasonably believe that
manufacturers' public statements indicate that they will be applying at
least some of that technology regardless of the stringency of MY 2021-
2023 CAFE standards, those manufacturers should be better positioned to
comply

with the MY 2024-2026 standards--not because they have credits in the
bank, but because their vehicles already have more technology on them,
and their fleet fuel economy is simply higher than it would otherwise
have been. This is what reassures NHTSA that the lead time for these
standards is adequate. As discussed in Section VI.A, while automakers
may have recently been selling relatively larger, heavier, lower-fuel-
economy vehicles, we do not think that from a technology perspective,
they really left the path laid out in 2012. JLR's comment above
supports this idea--their product plans are set and they had been
planning for, at most, the 2012 targets.
    NHTSA recognizes that lead time here is less than past rulemakings
have provided, and that the economy and the country are in the process
of recovering from a global pandemic. NHTSA also recognizes that at
least parts of the industry are nonetheless making announcement after
announcement of new forthcoming advanced technology, high-fuel-economy
vehicle models, and does not believe that they would be doing so if
they thought there was no market at all for them. As discussed above,
many industry comments trumpeted their own commitments and
announcements while simultaneously expressing concern and uncertainty
about consumer demand for the vehicles being committed to and
announced. Perhaps some of the introductions are driven by industry
perceptions of future regulation, but the fact remains that the
introductions are happening even in the face of that uncertainty, and
uncertainty about future government assistance with that transition.
CAFE standards can help to buttress this momentum by continuing to
require the fleets as a whole to improve their fuel economy levels
steadily over the coming years, so that a handful of advanced
technology vehicles do not inadvertently allow backsliding in the
majority of the fleet that will continue to be powered by internal
combustion for likely the next 5-10 years. CAFE standards that increase
steadily may help industry make this transition more smoothly.
    Moreover, the standards represented by Alternative 2.5 actually
give industry slightly more lead time to meet targets equivalent to
those set forth in 2012. The figures below show when several of the
different regulatory alternatives considered in this final rule would
reach parity with the targets set forth in 2012. As shown, Alternative
1 would never reach the levels set forth in 2012, while Alternatives 2
and 2.5 would get there with slightly extra lead time for passenger
cars and slightly more extra lead time for light trucks, and
Alternative 3 would get there early as compared to 2012.
[GRAPHIC] [TIFF OMITTED] TR02MY22.243

[GRAPHIC] [TIFF OMITTED] TR02MY22.244

[GRAPHIC] [TIFF OMITTED] TR02MY22.245

[GRAPHIC] [TIFF OMITTED] TR02MY22.246

    If manufacturers were planning their fleets from a technology
perspective to meet the 2012 targets for MY 2025, but feel that they
``got off track'' in compliance terms by selling larger, heavier,
lower-fuel-economy vehicles over the last several model years relative
to what the 2012 rule expected them to sell, then the figures above are
instructive. As mentioned above, while Alternative 3 would reach parity
with the 2012 targets ``early''--for passenger cars and light trucks,
Alternatives 2 and 2.5 actually provide slightly more lead time for
trucks--Alternative 2 would reach parity with the 2012 targets ``on
time,'' in 2025, for passenger cars, and in 2026 for light trucks,
while Alternative 2.5 pushes trucks just slightly faster. Alternative
2.5 thus acknowledges industry concerns about lead time, because
Alternative 2.5 provides more time to reach the 2012 targets, but also
helps to reconcile those expressed concerns with evidence that
companies have planned for 2012 targets and appear to be moving
voluntarily toward more stringent standards.
    Many industry and other commenters objected to NHTSA suggesting in
the NPRM that the California Framework Agreements or automakers' public
commitments to electrification, decarbonization, and higher fuel
economy vehicles were relevant to economic practicability, as discussed
in Section VI.A, and thus how NHTSA considered them in determining
maximum feasible standards. Yet at the same time, many of those
commenters vaunted these commitments in their comments to the NPRM, as
noted above.
    Manufacturers that agreed with CARB to increase their emissions
performance during those model years are contractually bound to apply
sufficient technology to meet those higher levels, and specifically,
electrification technology which NHTSA does not model as part of its
standard-setting analysis, due to the 49 U.S.C. 32902(h) restrictions
for MYs 2024-2026. As noted above, however, some, though not all, of
the non-electrification technology will both reduce emissions and
improve fuel economy, and is thus relevant to NHTSA's assessment of
technological feasibility and economic practicability. NHTSA interprets
these agreements as binding because they are contracts, but also as
evidence that the participating companies believe that applying that
additional technology is practicable, because for-profit companies can
reasonably be relied upon to make decisions that maximize their profit.
Companies who did not agree with CARB to meet higher emission reduction
targets may apply equivalent technology during MYs 2021-2023, but they,
too, will get the relative ``break'' in CAFE obligations mentioned
above, and have additional time to plan for the higher stringency
increases in subsequent years. Those manufacturers can opt to employ
more modest technologies to improve fuel economy (beyond their legal
requirements) to be in a stronger fuel economy position heading into
more challenging years, or concentrate their research and development
resources on the next generation of higher fuel economy

vehicles that will be needed to meet the proposed standards in MYs
2024-2026 (and beyond), rather investing in more modest improvements in
the near-term. As always, the CAFE program leaves it to automakers to
determine how they wish to achieve compliance.
    Changes in costs for new vehicles are not the only costs that NHTSA
considers in balancing the statutory factors--fuel costs for consumers
are relevant to the need of the United States to conserve energy, and
NHTSA believes that consumers themselves weigh expected fuel savings
against increases in purchase price for vehicles with higher fuel
economy. Fuel costs (or savings) continue to be the largest source of
benefits for CAFE standards, and GHG reduction benefits, which are also
part of the need of the U.S. to conserve energy, are also increasing.
E.O. 12866 and Circular A-4 also direct agencies to consider maximizing
net benefits in rulemakings whenever possible and consistent with
applicable law. Thus, because it can be relevant to balancing the
statutory factors and because it is directed by E.O. 12866 and OMB
guidance, NHTSA also considers the net benefits attributable to the
different regulatory alternatives, as shown in Table VI-20.
[GRAPHIC] [TIFF OMITTED] TR02MY22.247

BILLING CODE 4910-59-C
    Section VI.A discussed a number of comments received on net
benefits and whether it was a valid consideration in determining
maximum feasible standards, along with the agency's response. South
Coast AQMD argued that it was unreasonable for NHTSA to balance the
factors in the NPRM by stating that ``it is reasonable to consider
choosing the regulatory alternative that produces the largest reduction
in fuel consumption, while remaining net beneficial,'' because that
approach elevated economic practicability as the decisive factor and
rested on a cost-benefit analysis that ``is riddled with uncertainty.''
\1135\ Mr. Douglas also argued that NHTSA relied too heavily in the
proposal on its cost-benefit analysis and quantitative approaches,
``which attempt to determine the maximum feasible level of stringency
by focusing almost exclusively on the precise extent of technological
and economic barriers,'' \1136\ and stated that ``cost-benefit analysis
is a useless quantitative approach unless we assign an extraordinarily
high value to the social cost of carbon,'' because otherwise too little
value is placed on ``unquantifiable, extraordinarily precious benefits
that are the fundamental goals of environmental preservation . . . .''
\1137\ AFPM also argued with the validity of the cost-benefit analysis,
but by noting that if fuel prices were overstated, it could ``entirely
negate the stated $1 billion net benefit,'' and that ``minor changes to
[fuel prices, vehicle miles traveled, scrappage rate, and/or the social
cost of carbon] could push the Proposal from a small net benefit to a
large net cost.'' \1138\ Other commenters suggested that analytical
changes (that would lead to changes in the point at which net benefits
were maximized) would make it clear in the final rule that Alternative
3 was net beneficial and therefore maximum feasible.\1139\
---------------------------------------------------------------------------

    \1135\ South Coast AQMD, Docket No. NHTSA-2021-0053-1477, at 6.
    \1136\ Peter Douglas, Docket No. NHTSA-2021-0053-0085, at 3.
    \1137\ Id. at 19.
    \1138\ AFPM, Docket No. NHTSA-2021-0053-1530, at 16-17.
    \1139\ See, e.g., California Attorney General et al., Docket No.
NHTSA-2021-0053-1499, at 2; CBD et al., Docket No. NHTSA-2021-0053-
1572, at 1; CARB, Docket No. NHTSA-2021-0053-1521, at 2-3.
---------------------------------------------------------------------------

    While maximizing net benefits is a valid decision criterion for
choosing among alternatives, provided that appropriate consideration is
given to impacts that cannot be monetized, we agree it is not the only
reasonable decision perspective, and that what we include in our cost-
benefit analysis affects our estimates of net benefits. At the outset,
we note that the net benefits for the alternatives under consideration
here do not vary greatly amongst themselves, as was also the case in
the 2020 final rule, particularly given the overall costs and benefits
associated with those regulatory alternatives. We also note that
important benefits cannot be monetized--including the full health and
welfare benefits of reducing climate and other pollution, which means
the benefits estimates are underestimates. Thus, given the
uncertainties associated with many aspects of this analysis, NHTSA does
not rely solely on net benefit maximization, and instead considers it
as one piece of information that contributes to how we balance the
statutory factors, in our discretionary judgment. NHTSA recognizes that
the need of the U.S. to conserve fuel weighs importantly in the overall
balancing of factors, and thus believes that it is reasonable to at
least consider choosing the regulatory alternative that produces the
largest reduction in fuel consumption, while remaining net beneficial.
Of course, the benefit-cost analysis is not the sole factor that NHTSA
considers in determining the maximum feasible stringency, though it
informs NHTSA's conclusion that Alternative 2.5 is the maximum feasible
stringency. While Alternative 1 produces higher net benefits, it also
continues to allow fuel consumption and accompanying disbenefits that
could have been avoided in a cost-beneficial manner. And while
Alternative 3 achieves greater reductions in fuel consumption than
Alternative 2, it shows lower net benefits under a 7 percent discount
rate. Alternative 3 also, as detailed above, adds technology costs of
over $2,000 per vehicle for more manufacturers as compared to the
baseline, while Alternative 2.5 has somewhat lower costs and greater
lead time for the largest increase in standards for MY 2026.

    Below, NHTSA discusses the sensitivity analysis presented in the
FRIA, which demonstrates the effect that different assumptions would
have on the costs and benefits associated with the standards.
    As also discussed in Section VI.A, NHTSA estimates that Alternative
2.5 will result in significant additional technology application while
producing only a slight decline (of about 1 percent over the entire
period covered by MYs 2020-2026) in new vehicle sales as compared to
the No-Action Alternative, as a consequence of the higher retail prices
that result from that additional technology application. NHTSA does not
believe that this very minor estimated change in new vehicle sales over
the period covered by the rule is a persuasive reason to choose another
regulatory alternative. Similarly, the estimated labor impacts within
the automotive industry provide no evidence that another alternative
should be preferred, and in fact, employment increases with alternative
stringency according to the final rule analysis.\1140\
---------------------------------------------------------------------------

    \1140\ See FRIA Chapter 6.3.3, Table 6-1.
---------------------------------------------------------------------------

    As with any analysis of sufficient complexity, there are a number
of critical assumptions here that introduce uncertainty about
manufacturer compliance pathways, consumer responses to fuel economy
improvements and higher vehicle prices, and future valuations of the
consequences from higher CAFE standards. While NHTSA considers dozens
of sensitivity cases to measure the influence of specific parametric
assumptions and model relationships, only a small number of them
demonstrate meaningful impacts to net benefits under the final
standards.
    Looking at these cases more closely, the majority of both costs and
benefits that occur under the standards accrue to buyers of new cars
and trucks, rather than society in general (assuming that technology
costs are passed down to consumers as higher prices, as we do in our
analysis). It then follows that the assumptions that exert the greatest
influence over private costs and benefits also exert the greatest
influence over net benefits--chief among these is the assumed
trajectory of future fuel prices, specifically gasoline. NHTSA
considers the ``High Oil Price'' and ``Low Oil Price'' cases from AEO
2021 as bounding cases, though they are asymmetrical (while the low
case is only about 25 percent lower than the Reference case on average,
the high case is almost 50 percent higher on average). The sensitivity
cases suggest that fuel prices exert considerable influence on net
benefits--where higher and lower prices not only determine the dollar
value of each gallon saved, but also how market demand responds to
higher levels of fuel economy in vehicle offerings. For Alternative
2.5, under the low case, at 3 percent SC-GHG DR, net benefits become
negative and exceed $14 billion, but increase to almost (positive) $60
billion in the high case (the largest increase among any sensitivity
cases run for this final rule). This suggests that the net benefits
resulting from this final rule are dependent upon the future price of
gasoline being at least as high as the AEO 2021 Reference Case
projects.
    Another critical uncertainty that affects private benefits is the
future cost of advanced electrification technologies, specifically
batteries. These emerging technologies provide both the greatest fuel
savings to new car buyers and impose the highest technology costs (at
the moment). While the costs to produce large vehicle batteries have
been declining, they are still expensive relative to advancements in
internal combustion engines and transmissions. However, the analysis
projects continued cost learning over time and shows battery electric
vehicles reaching price parity with conventional vehicles in the 2030s
for most market segments--after which market adoption of BEVs
accelerates--although other estimates show price parity occurring
sooner. Electrification is also a viable compliance strategy, as
partially or fully electric vehicles benefit from generous compliance
incentives that improve their estimated fuel economy relative to
measured energy consumption. As such, the assumption about future
battery costs has the ability to influence compliance costs to
manufacturers and prices to consumers, the rate of electric vehicle
adoption in the market, and thus the emissions associated with their
operation. NHTSA considered two different mechanisms to affect battery
costs: Higher/lower direct costs, and faster/slower cost learning
rates. The two mechanisms that reduce cost (whether by faster cost
learning or lower direct costs) both increase net benefits relative to
the central case, though lowering initial direct costs by 20 percent
had a greater effect than increasing the learning rate by 20 percent.
Increasing cost (though either mechanism) by 20 percent produced a
similar effect, but in the opposite direction (reducing net benefits).
However, none of those cases exerted a level of influence that compares
to alternative fuel price assumptions.
    There is one assumption that significantly affects the analysis
without influencing the benefits and costs that accrue to new car
buyers: The social cost of damages attributable to greenhouse gas
emissions. The central analysis uses a SC-GHG cost based on the 3
percent discount rate for both the 3 percent and the 7 percent social
discount rate cases. Of course, the magnitude of the SC-GHG estimate
used affects the monetization of the benefits of reducing greenhouse
gas emissions. Using the highest SC-GHG, based on the 95th percentile
estimate, pushes net benefits above $70 billion under Alternative 2.5
at a 3 percent social discount rate and to approximately $60 billion at
a 7 percent social discount rate. The 95th percentile estimate, drawn
from the possible climate impact outcomes in the underlying modeling,
helps decision-makers understand the value of reducing greenhouse gas
emissions if the damages caused by climate change are in reality
significantly higher than the ``best guess'' projections of those
damages.
    Other sensitivity cases examine inputs that have also engendered
much discussion over the past several rounds of rulemaking. Varying the
rebound effect, for example, from five to 15 percent around the
reference case value of 10 percent resulted in net costs ranging from
$3 billion (five percent rebound) to $12 billion (15 percent rebound).
Altering the price elasticity of demand that influences the sales and
scrappage responses had a similarly small effect on net benefits; a
price elasticity of -0.1 produced a net cost estimate of $2 billion,
while increasing this elasticity parameter to -0.5 resulted in net
costs of $9 billion. With battery costs, despite the extensive
discussion and uncertainty over these values, they do not exert a level
of influence in the analysis that significantly alters the analytical
findings. Regardless of net benefits, NHTSA would still conclude that
Alternative 2.5 is economically practicable, based on per-vehicle
costs, technology levels estimated to be required to meet the
standards, and the slight additional lead time provided as compared to
Alternative 3.
    As also discussed in Section VI.A, many commenters raised the issue
of harmonization. Many industry commenters suggested that CAFE
standards would not be economically practicable, and thus would be
beyond maximum feasible, if they required any technology investments
beyond what EPA's recently finalized GHG standards for MYs 2024-2026
would require. Consequently, these commenters suggested that
Alternative 3 was beyond maximum feasible, and even Alternative

2 was beyond maximum feasible, because its stringency was not uniformly
below EPA's stringency when all EPA flexibilities and NHTSA statutory
restrictions on flexibilities were accounted for.\1141\ Some of these
commenters, as described above, further argued that because
Alternatives 2 and higher were ``too stringent'' compared to EPA's
standards, that they would require application of additional electric
vehicles beyond what EPA's standards would require.\1142\
---------------------------------------------------------------------------

    \1141\ See, e.g., Auto Innovators, Docket No. NHTSA-2021-0053-
1492, at 15, 32, 51; Stellantis, Docket No. NHTSA-2021-0053-1527, at
2; Hyundai, Docket No. NHTSA-2021-0053-1512, at 5-6; Mercedes-Benz,
Docket No. NHTSA-2021-0053-0952, at 3; AVE, Docket No. NHTSA-2021-
0053-1488-A1, at 3.
    \1142\ See, e.g., Stellantis, Docket No. NHTSA-2021-0053-1527,
at 3.
---------------------------------------------------------------------------

    These commenters also generally objected to inclusion of State ZEV
standards in NHTSA's analytical baseline, as discussed in Sections IV.B
and VI.A. Conversely, California Attorney General et al. argued that
they did not believe that NHTSA having added California's ZEV standards
in the baseline was inherently dispositive for NHTSA's determination of
maximum feasible standards, because ``The technological feasibility,
economic practicability, and energy conservation factors . . . strongly
favor NHTSA's proposed standards'' already.\1143\ California Attorney
General et al. noted that simply ``by including California's ZEV
standards in the . . . baseline, NHTSA has already demonstrated that
the proposed changes to the CAFE standards and the California ZEV
standards will not interfere with each other and that it is entirely
feasible for automakers to comply with both.'' \1144\
    In response, as discussed in Section VI.A, NHTSA has carefully
considered the effect of State ZEV standards as other legal
requirements facing automakers during the rulemaking time frame and
agrees with California Attorney General et al. that it appears to be
feasible for automakers to comply with both. NHTSA has carefully
considered the EPA GHG standards, and disagrees that CAFE standards
must account precisely for each and every difference between the two
programs and be calculated to avoid any additional need for technology
outlay whatsoever. As explained in Section VI.A, NHTSA's statutory
mandate is to set maximum feasible standards, considering the four
statutory factors. In considering the effect of other motor vehicle
standards of the Government on fuel economy, NHTSA considers whether
any of those effects affect the maximum feasible determination.
Pursuant to this directive, NHTSA has evaluated the feasibility of
complying with the revised CAFE standards in the context of EPA's
standards, and concluded that complying with both standards is
feasible. As discussed above, even when the standards of the two
programs are coordinated closely, it is still foreseeable that there
could be situations in which different agencies' programs could be
binding for different manufacturers in different model years. This was
true for the 2012 final rule and it is true for the revised programs.
Regardless of which agency's standards are binding given a
manufacturer's chosen compliance path, manufacturers will choose a path
that complies with both standards, and in doing so, will still be able
to build a single fleet of vehicles--even if it is not exactly the
fleet that the manufacturer might have preferred to build. This remains
the case today.
    NHTSA does not believe that it is a reasonable interpretation of
Congress' direction to set ``maximum feasible'' standards at ``the fuel
economy level at which no manufacturer need ever apply any additional
technology or spend any additional dollar beyond what EPA's standards,
with their many flexibilities, would require.'' NHTSA disagrees that
avoiding inconsistency with EPA's programs requires NHTSA standards to
impose zero additional costs. Rather, NHTSA must fulfill its statutory
mandate to set maximum feasible fuel economy standards. NHTSA evaluated
whether it would be feasible for manufacturers complying with EPA's
standards to achieve the level of fuel economy that NHTSA has
identified as maximum feasible, and has determined that it is. Further,
the technological improvements to which automakers have committed in
the coming years will, no doubt, facilitate their compliance with CAFE
standards, even if they are not credited as heavily as in the GHG
program.
    NHTSA interprets ``maximum feasible'' instead, as it has done
previously, as requiring a balancing of the relevant factors, rather
than letting a single factor drive the decision entirely. The purpose
of EPCA is energy conservation, and NHTSA is interpreting the need to
conserve energy to be largely driven by fuel savings, energy security,
and environmental concerns. Therefore, it makes sense to interpret
EPCA's factors as asking the agency to push stringency as far as
possible before it appears that standards may not be economically
practicable or technologically feasible. NHTSA is also directed by
statute to consider ``other motor vehicle standards of the Government''
and their effect on fuel economy in assessing what is maximum feasible.
If compliance with other motor vehicle standards of the Government made
certain fuel economy-improving technologies infeasible or less
effective, for example, then NHTSA would be obligated to take that into
account in determining what CAFE standards were maximum feasible. NHTSA
has conducted the required weighing of the statutory factors, and in
doing so the agency has concluded that Alternative 2.5 is maximum
feasible. In drawing this conclusion, NHTSA has considered other motor
vehicle standards of the Government and concluded they will not make
compliance with Alternative 2.5 infeasible.
    Thus, again, in re-evaluating all of the factors that NHTSA
considers in determining maximum feasible CAFE standards, the agency
was compelled to balance what we believe is a credible case for
choosing Alternative 3 as opposed to Alternative 2.5. In doing so,
NHTSA must balance the four statutory factors. Alternative 2.5 and
Alternative 3 each produce significant reductions in fuel use, and
while Alternative 3 is estimated to result in more savings, it could
require technology application well beyond what EPA's GHG standards and
State ZEV standards will require. Alternative 3 is less economically
practicable for the model years addressed by this rule, when
considering per-vehicle costs, technology application rates, and lead
time. Even though Alternative 3 maximizes energy conservation, and
NHTSA believes it is technologically feasible, economic practicability
tips the balance for the agency to Alternative 2.5. Alternative 2.5 is
an aggressive but achievable set of standards that NHTSA has concluded
represents the right balancing for MYs 2024-2026--it is technologically
feasible; and it continues to push fuel economy improvements,
bolstering the industry's trajectory toward higher future standards by
keeping stringency high in the mid-term. It meets the need of the U.S.
to conserve energy, but in our estimation, not beyond the point of
economic practicability; and we believe that it is complementary to
other motor vehicle standards of the Government and feasible to achieve
in the context of those other standards. For these reasons, NHTSA
concludes that Alternative 2.5 is maximum feasible for MYs 2024-2026.

VII. Compliance and Enforcement

A. Complying With the NHTSA CAFE Program

1. Overview
    NHTSA's CAFE enforcement program is largely established by statute,
EPCA, as amended by EISA, and is very prescriptive with regard to
enforcement. EPCA and EISA also clearly specify a number of
flexibilities that are available to manufacturers to help them comply
with the CAFE standards. Some of those flexibilities are constrained by
statute--for example, while Congress required that NHTSA allow
manufacturers to transfer credits earned for over-compliance from their
car fleet to their truck fleet and vice versa, Congress also limited
the amount by which manufacturers could increase their CAFE levels
using those transfers. NHTSA believes Congress balanced the energy-
saving purposes of the statute against the benefits of certain
flexibilities and incentives and intentionally placed some limits on
certain statutory flexibilities and incentives. With that goal in mind,
of maximizing compliance flexibility while also implementing EPCA/
EISA's overarching purpose of energy conservation as fully as possible,
NHTSA has crafted the credit transfer and trading regulations
authorized by EISA to ensure that total fuel savings are preserved when
manufacturers exercise their statutorily provided compliance
flexibilities.
    In addition, NHTSA and EPA have previously developed other
compliance flexibilities and incentives for the CAFE program consistent
with the statutory provisions regarding EPA's calculation of
manufacturers' fuel economy levels. As discussed in the following
sections, NHTSA is finalizing requirements for this final rule under
EPA's program to be applied as fuel economy ``adjustments'' or
``improvement values'' for the CAFE program. These include: (1)
Technologies that cannot be measured or cannot be fully measured on the
2-cycle test procedure, i.e., ``off-cycle'' technologies; (2) AC
efficiency improvements that also improve fuel economy but cannot be
measured on the 2-cycle test procedure, and; (3) full-size pickup
trucks, such as hybridization, or full-size pickup trucks that
overperform their fuel economy stringency target values by greater than
a specified amount. More specifically, NHTSA is finalizing incentives
in these areas increasing the benefits manufacturers can claim for off-
cycle menu technologies from 10 g/mile to 15 g/mile and adding
definitions for technologies on the menu. Also, NHTSA is reinstituting
previously deleted compliance incentives for advance full sized pickup
trucks to start again in MY 2023, and extend through MY 2024. In
addition, NHTSA is also finalizing several administrative processes to
its off-cycle program including deadlines and greater oversight to
ensure timely accounting of these incentives for CAFE compliance.
Finally, NHTSA is providing clarifications to its criteria for
classifying light trucks in the CAFE program to be added to its
upcoming compliance test procedure.
    To help explain how the compliance changes being finalized affect
the CAFE program, the following sections outline how NHTSA determines
how manufacturers comply with CAFE standards for each model year, and
how manufacturers may use compliance flexibilities, or alternatively,
address noncompliance through civil penalties. Moreover, it explains
how manufacturers submit data and information to the agency for
compliance purposes. This includes a detailed discussion of NHTSA's
standardized CAFE reporting and credit transactions templates and its
requirements for manufacturers to provide information and the
documentation associated with credit trades. These reporting templates
and requirements were adopted as a part of the 2020 final rule and
revised in the proposals for the 2021 NPRM.\1145\ In this rulemaking,
NHTSA is finalizing the changes to its reporting and credit templates
and issuing a new template to clarify the required costing information
for credit trades. These new requirements are intended to streamline
reporting and data collection from manufacturers, in addition to
helping the agency use the best available data to inform CAFE program
decision makers for future rulemakings, and when considering additional
or revised flexibilities and incentives.
---------------------------------------------------------------------------

    \1145\ 86 FR 49602 (Sept. 3, 2021).
---------------------------------------------------------------------------

2. Light Duty CAFE Compliance Data for MYs 2011-2021
    As the first step to understanding compliance with the CAFE
program, NHTSA receives CAFE reports from manufacturers and evaluates
the information in these reports. NHTSA uses compliance data in part to
identify industry trends for policy makers as discussed above, then to
conduct verification testing and audits and finally to provide
aggregated reporting to uphold its commitment for public transparency.
For this final rule, NHTSA is releasing aggregated CAFE compliance data
for model years 2011 through 2021 using final compliance data for MYs
2011 through 2017,\1146\ projections from end-of-the-model year reports
submitted by manufacturers for MYs 2018 and 2019,\1147\ and projections
from manufacturers' mid model year reports for MY 2020 and 2021.\1148\
Projections from the mid-year and end-of-the-model year reports may
differ from EPA-verified final CAFE values either because of differing
test results or final sales-volume figures. MY 2011 was selected as the
start of the data because it represents the first compliance model year
for which manufacturers were permitted to trade and transfer
credits.\1149\ The data go up to MY 2021, because this was the most
recent year compliance reports have been accessed for their
completeness. Figure VII-1 through Figure VII-4 provide a graphical
overview of the actual and projected compliance data for MYs 2011-
2021.\1150\
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    \1146\ Final compliance data have been verified by EPA and are
published on the NHTSA's Public Information Center (PIC) site. MY
2017 is currently the most-recent model year verified by EPA.
    \1147\ MY 2018 data come from information received in
manufacturers' final reports submitted to EPA according to 40 CFR
600.512-12.
    \1148\ Manufacturers' mid-model year CAFE reports are submitted
to NHTSA in accordance with 49 CFR part 537. At the time of the
analysis, end of the model year data had not yet been submitted for
MY 2020 or 2021.
    \1149\ 49 CFR 535.6(c).
    \1150\ As mentioned previously, the figures include estimated
values for certain model years based on the most up to date
information provided to NHTSA from manufacturers.
---------------------------------------------------------------------------

    In the figures, an overview is provided for the total fuel economy
performance of the industry (the combination of all passenger cars and
light trucks produced for sale during the model year) as a single
fleet, and for each of the three CAFE compliance fleets: Domestic
passenger car, import passenger car, and light truck fleets.

For each of the graphs, a sale-production weighting is applied to
determine the average total or fleet Base CAFE
performances.1151 1152 1153 The graphs do not include
adjustments for full-size pickup trucks because manufactures have yet
to reach the required market threshold to utilize the incentive.
---------------------------------------------------------------------------

    \1151\ In the figures, the label ``2-Cycle CAFE'' represents the
maximum increase each year in the average fuel economy set to the
limitation ``cap'' for manufacturers attributable to dual-fueled
automobiles as prescribed in 49 U.S.C. 32906. The label ``AC/OC
contribution'' represents the increase in the average fuel economy
adjusted for AC and off-cycle FCIVs as prescribed by 40 CFR 600.510-
12.
    \1152\ Consistent with applicable law, NHTSA established
provisions starting in MY 2017 allowing manufacturers to increase
compliance performance based on fuel consumption benefits gained by
technologies not accounted for during normal 2-cycle EPA compliance
testing (called ``off-cycle technologies'' for technologies such as
stop-start systems) as well as for AC systems with improved
efficiencies and for hybrid or electric full-size pickup trucks.
    \1153\ Adjustments for earned credits include those that have
been adjusted for fuel saving using the manufacturers CAFE values
for the model years in which they were earned and adjusted to the
average CAFE values for the fleets they exist within.
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    The figures also show how many credits remain in the market each
model year. One complicating factor for presenting credits is that the
mpg-value of a credit is contingent where it was earned and applied.
Therefore, the actual use of the credits for MY 2018 and beyond will be
uncertain until compliance for those model years is completed. Also,
since credits can be retained for up to six model years after they were
earned or applied retroactively to the previous 3 model years, it is
impossible to know the final application of credits for MY 2020 until
MY 2023 compliance data are finalized. Instead of attempting to project
how credits would be generated and used, the agency opted to value each
credit based on its actual value when earned, by estimating the value
when applied assuming it was applied to the overall average fleet and
across all vehicles. In the figures, two different approaches were used
to represent the mpg value of credits used to offset shortages (shown
as CAFE after credit allocation in the figures). The mpg shortages for
MYs 2011-2017 are based upon actual compliance values from EPA and the
credit allocations or fines manufacturers instructed NHTSA to adjust
and apply to resolve compliance shortages. For MYs 2018-2021, NHTSA
used a different approach for representing the mpg shortages, deriving
them from projected estimates adjusted for fuel savings calculated from
the projected fleet average performances and standards for each model
year and fleet. To represent the mpg value of manufacturers' remaining
banked credits in the figures (shown as Credits in the Market) the same
weighting approach was also applied to these credits based upon the
fleet averages. For MYs 2011-2017, the remaining banked credits include
those currently existing in manufacturers' credit accounts adjusted for
fuel savings and subtracting any expired credits for each year. This
approach was taken to represent these credits for the actual value that
would likely exist if the credits were applied for compliance purposes.
Without adjusting the banked credits, our analysis would provide an
unrealistic value of the true worth of these credits when used for
compliance. For MYs 2018-2021, the mpg value of the remaining banked
credits is shown slightly differently where the value represents the
difference between the adjusted credits carried forward from previous
model years (minus expiring credits) and the projected earned credits
minus any expected credit shortages. Since all the credits in these
model years were adjusted using the same approach it was possible to
subtract the credit amounts. However, readers are reminded that for MYs
2018-2021 since the final CAFE reports have yet to be issued, the
credit allocation process has not started, and the data shown in the
graphs are a projection of potential overall compliance. Consequently,
the credits included for MYs 2018-2021 are separated from earlier model
years by a dashed line to highlight that there is a margin of
uncertainty in the estimated values. Projecting how and where credits
will be used is difficult for a number of reasons, such as not knowing
which flexibilities manufacturers will utilize and the fact that
credits are not valued the same across different fleets. As such, the
agency reminds readers that the projections may not align with how
manufacturers will actually approach compliance for these years.
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BILLING CODE 4910-59-C
    Table VII-1 provides the numerical CAFE performance values and
standards for MYs 2011-2021 as shown in the figures.
    As shown in Figure VII-1, manufacturers' fuel economy performance
(2-cycle CAFE plus AMFA) for the total fleet was better than the fleet-
wide target through MY 2015. On average, the total fleet exceeded the
standards by approximately 0.9 mpg for MYs 2011 to 2015. As shown in
Figure VII-2 through Figure VII-4, domestic and import passenger cars
exceeded standards on average by 2.1 mpg and 2.3 mpg, respectively. By
contrast, light truck manufacturers on average fell below the standards
by 0.3 mpg over the same time period.
    For MYs 2016 through 2021, Figure VII-1 shows that the total fleet
Base CAFE (including 2-Cycle CAFE plus AC and OC benefits) falls below
and appears to remain below the fleet CAFE standards for these model
years.\1154\ The projected compliance shortfall (i.e., the difference
between CAFE performance values and the standards) remains constant and
reaches its greatest difference between MYs 2019 and 2021. Compliance
becomes even more complex when observing individual compliance fleets
over these years. Only domestic passenger car fleets collectively
appear to exceed CAFE standards while import passenger car fleets
appear to have the greatest compliance shortages. In MY 2020, the
import passenger car fleet appear to reach its highest compliance
shortfall equal to 3.9 mpg.
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    \1154\ Until MY 2023 compliance, the last year where earned
credits can be retroactively applied to MY 2020, NHTSA will be
unable to make a determination about the fleet's overall compliance
over this timespan.
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    The graphs provide an overall representation of the average values
for each fleet, although they are less helpful for evaluating
compliance with the minimum domestic passenger car standards given
statutory prohibitions on manufacturers using traded or transferred
credits to meet those standards.\1155\ NHTSA notes that several
manufacturers have already reported insufficient earned credits and may
have to make fine payments if they fail to reach the minimum domestic
passenger car standards.
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    \1155\ In accordance with 49 CFR 536.9(c), transferred or traded
credits may not be used, pursuant to 49 U.S.C. 32903(g)(4) and
(f)(2), to meet the domestically manufactured passenger automobile
minimum standard specified in 49 U.S.C. 32902(b)(4) and in 49 CFR
531.5(d).
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    In summary, MY 2016 is the last compliance model year that
passenger cars complied with CAFE standards relying solely on Base CAFE
performance. Prior to this timeframe, passenger car manufacturers
especially those building domestic fleets could and did exceed CAFE
standards. MY 2016 marked the first time in the history of the CAFE
program where compliance for passenger car manufacturers fell below
standards thereby increasing shortfalls and forcing manufacturers to
rely heavily upon credit flexibilities. Despite higher shortfalls,
domestic passenger car manufacturers have continued to generate credits
and increase their total credit holdings. The projections show that for
MYs 2018-2021, domestic passenger car fleets will transition from
generating to using credits but will maintain sizable amounts of banked
credits sufficient to sustain compliance shortfalls in other regulatory
fleets within statutory requirements. Figure VII-3 shows residual
available banked credits even as far as MY 2021. Domestic passenger car
credits and their off-cycle credits will play an important role in
sustaining manufacturers in complying with CAFE standards.
    From the projections, it appears that based on the number of
remaining domestic passenger credits in the market and the rate at
which they are being used, there will be insufficient credits to cover
the shortfalls in other compliance fleets in years following MY 2020.
Figure VII-1 shows that the total remaining combined credits for the
industry is expected to decline starting in MY 2018. Import passenger
cars and light truck fleets will play a major role in the decline and
possible depletion of all available credits to resolve shortfalls after
MY 2020. Several factors exist that could produce this outcome. First,
increasing credit shortages are occurring in the import passenger car
and light truck fleets especially since the reduction and then
termination of AMFA incentives in MY 2019 (a major contributor for
light trucks). Next, residual banked credits for the light truck fleet
are expected to be exhausted starting in MY 2018 and for import
passenger cars in MY 2020. Finally, the use of AC/OC benefits for
import passenger cars and lights trucks is not a significant factor for
these fleets in complying with CAFE standards. Manufacturers will need
to change their production strategies or introduce substantially more
fuel saving technologies to sustain compliance in the future.
    Figure VII-5 provides a historical overview of the industry's use
of CAFE credit flexibilities and fine payments for addressing
compliance shortfalls.\1156\ As mentioned, MY 2017 is the last model
year for which CAFE compliance determinations are completed, and credit
application and civil penalty payment determinations finalized. As
shown in the figure, for MYs 2011-2015, manufacturers generally
resolved credit shortfalls by carrying forward earned credits from
previous years. However, since 2011, the rise in manufacturers
executing credit trades has become increasingly common and, in MY 2017,
credit trades were the most frequently used flexibility for achieving
compliance. Credit transfers have also become increasingly more
prevalent for manufacturers. As a note to readers, credit trades in the
figures can also involve credit transfers but are aggregated in the
figure as credit trades to simplify results. In MY 2016, credit
transfers constituted the highest contributor to credit flexibilities
but are starting to decline, signifying that manufacturers are
currently exhausting credit transfers within their own fleets.
Manufacturers only occasionally carry back credits to resolve
performance shortfalls. NHTSA believes that trading credits between
manufacturers and to some degree transferring traded credit across
fleets will be the most commonly used flexibility in complying with
future CAFE standards as started in MY 2017.
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    \1156\ Figure VII-5 includes all credits manufacturers have used
in credit transactions to date. Credits contained in carryback plans
yet to be executed or in pending enforcement actions are not
included in Figure VII-5.
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    Credit trading has generally replaced civil penalty payments as a
compliance mechanism. Only a handful of manufacturers have made civil
penalty payments since the implementation of the credit trading
program. As previously shown, NHTSA believes that manufacturers have
sufficient credits to resolve any import passenger car and light truck
performance shortfalls expected through MY 2020. There were two fine
payments made in MY 2016 and 2017 which fit this exact case. By
statute, manufacturers cannot use traded or transferred credits to
address performance shortfalls for failing to meet the minimum domestic
passenger car standards. Because of this limitation, the fine payments
made in MY 2016 and 2017 came from one manufacturer that had exhausted
all of its earned domestic passenger credits and could not carryback
future credits. NHTSA calculates that there will be 11 instances of
MDPCS between 2018 and 2021 where substantial civil penalty payments
will have to be made.

    In Figure VII-6, additional information is provided on the credit
flexibilities exercised and fine payments made by manufacturers for MYs
2011-2017. The figure includes the GGE for these credit flexibilities
or for paying civil penalties. The figure shows that manufacturers used
carrying forward credits most often to resolve shortfalls. Credit
trades were the second leading benefit to manufacturers in using credit
flexibilities and then followed by credit transfers. In summary,
manufacturers used these flexibilities amounting to the equivalent of
2,952,856 gallons of fuel by carrying forward credits in 2017 and
583,720 gallons of fuel by trading credits in 2017.
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    \1157\ For Figure VII-6; in each year, some flexibilities were
not utilized by manufacturers. For example, carry backed credits
were not utilized in 2011, 2013, 2014, 2015, 2016, or 2017. Transfer
credits were not used in 2011, 2012 or 2013. No civil penalties were
paid in 2015.
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BILLING CODE 4910-59-C
(a) Manufacturers Reports to NHTSA
    EPCA, as amended by EISA, in 49 U.S.C. 32907, requires
manufacturers to submit projections reports to the Secretary of
Transportation explaining how they will comply with the CAFE standards
in advance of the model year for which the report is made; the actions
a manufacturer has taken or intends to take to comply with the
standard; and other information the Secretary requires by
regulation.\1158\ A manufacturer must submit a report containing this
information during the 30-day period before the beginning of each model
year, and during the 30-day period beginning the 180th day of the model
year.\1159\ When a manufacturer determines it is unlikely to comply
with a CAFE standard, the manufacturer must report additional actions
it intends to take to comply and include a statement about whether
those actions are sufficient to ensure compliance.\1160\
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    \1158\ 49 U.S.C. 32907(a).
    \1159\ Id.
    \1160\ Id.
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    To implement these reporting requirements, NHTSA issued 49 CFR part
537, ``Automotive Fuel Economy Reports,'' which specifies three types
of CAFE reports that manufacturers must submit.\1161\ A manufacturer
must first submit a pre-model year (PMY) report containing the
manufacturer's projected compliance information for that upcoming model
year. By regulation, the PMY report must be submitted in December of
the calendar year prior to the corresponding model year.\1162\
Manufacturers must then submit a mid-model year (MMY) report containing
updated information from manufacturers based upon actual and projected
information known midway through the model year. By regulation, the MMY
report must be submitted by the end of July for the applicable model
year.\1163\ Finally, manufacturers must submit a supplementary report
to supplement or correct previously submitted information, as specified
in NHTSA's regulation.\1164\
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    \1161\ See 47 FR 34986 (Aug. 12, 1982).
    \1162\ 49 CFR 537.5(b).
    \1163\ Id.
    \1164\ 49 CFR 537.8.
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    If a manufacturer wishes to request confidential treatment for a
CAFE report, it must submit both a confidential and redacted version of
the report to NHTSA. CAFE reports submitted to NHTSA contain estimated
sales production information, which may be protected as confidential
until the termination of the production period for that model
year.\1165\ NHTSA protects each manufacturer's competitive sales
production strategies for 12 months, but does not permanently exclude
sales production information from public disclosure. Sales production
volumes are part of the information NHTSA routinely makes publicly
available through the CAFE PIC.
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    \1165\ 49 CFR part 512, appx. B(2).
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    The manufacturer reports provide information on light-duty
automobiles such as projected and actual fuel economy standards, fuel
economy performance, and production volumes, as well as information on
vehicle design features (e.g., engine displacement and transmission
class) and other vehicle attribute characteristics (e.g., track width,
wheelbase, and other off-road features for light trucks). Beginning
with

MY 2017, to obtain credit for fuel economy improvement values
attributable to additional technologies, manufacturers must also
provide information regarding AC systems with improved efficiency, off-
cycle technologies (e.g., stop-start systems, high-efficiency lighting,
active engine warm-up), and full-size pickup trucks with hybrid
technologies or with fuel economy performance that is better than
footprint-based targets by specified amounts. This includes identifying
the makes and model types equipped with each technology, the compliance
category those vehicles belong to, and the associated fuel economy
improvement value for each technology.\1166\ In some cases, NHTSA may
require manufacturers to provide supplementary information to justify
or explain the benefits of these technologies and their impact on fuel
consumption or to evaluate the safety implication of the technologies.
These details are necessary to facilitate NHTSA's technical analyses
and to ensure the agency can perform enforcement audits as appropriate.
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    \1166\ NHTSA collects model type information based upon the EPA
definition for ``model type'' in 40 CFR 600.002.
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    NHTSA uses manufacturer submitted PMY, MMY, and supplementary
reports to assist in auditing manufacturer compliance data and
identifying potential compliance issues as early as possible.
Additionally, as part of its footprint validation program, NHTSA
conducts vehicle testing throughout the model year to confirm the
accuracy of the track width and wheelbase measurements submitted in the
reports.\1167\ These tests help the agency better understand how
manufacturers may adjust vehicle characteristics to change a vehicle's
footprint measurement, and ultimately its fuel economy target. NHTSA
also includes a summary of manufacturers' PMY and MMY data in an annual
fuel economy performance report made publicly available on its PIC.
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    \1167\ U.S. Department of Transportation, NHTSA, Laboratory Test
Procedure for 49 CFR part 537, Automobile Fuel Economy Attribute
Measurements (Mar. 30, 2009), available at http://www.nhtsa.gov/DOT/NHTSA/Vehicle%20Safety/Test%20Procedures/Associated%20Files/TP-537-01.pdf (accessed: March 15, 2022).
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    As mentioned, NHTSA uses EPA-verified final-model year (FMY) data
to evaluate manufacturers' compliance with CAFE program requirements
and draw conclusions about the performance of the industry as well as
to conduct verification testing and audits. After manufacturers submit
their FMY data, EPA verifies the information, accounting for NHTSA and
EPA testing, and subsequently forwards the final verified data to
NHTSA.
(b) New CAFE Reporting Templates
(1) CAFE Reporting Templates Adopted in 2020 Final Rule and Revised in
the 2021 NPRM
    NHTSA adopted changes to its CAFE reporting requirements in the
2020 final rule with the intent of streamlining data collection and
reporting for manufacturers while helping the agency obtain the best
available data to inform CAFE program decision-makers. We adopted two
new standardized reporting templates for manufacturers. NHTSA's goal
was to adopt standardized templates to assist manufacturers in
providing the agency with all the necessary data to ensure they comply
with CAFE regulations.
    The first template was designed to simplify reporting CAFE credit
transactions. The template's purpose was to reduce the burden on credit
account holders, encourage compliance, and facilitate quicker NHTSA
credit transaction approval. Before the template, manufacturers would
inconsistently submit information required by 49 CFR 536.8, creating
difficulties in processing credit transactions. Using the template
simplifies CAFE compliance aspects of the credit trading process and
helps to ensure that trading parties follow the requirements for a
credit transaction in 49 CFR 536.8(a).\1168\
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    \1168\ Submitting a properly completed template and accompanying
transaction letter will satisfy the trading requirements in 49 CFR
part 536.
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    The second template was designed to standardize reporting for CAFE
PMY and MMY information, as specified in 49 CFR 537.7(b) and (c), as
well as supplementary information required by 49 CFR 537.8. The
template organizes the required data in a manner consistent with NHTSA
and EPA regulations and simplifies the reporting process by
incorporating standardized responses consistent with those provided to
EPA. The template collects the relevant data, calculates intermediate
and final values in accordance with EPA and NHTSA methodologies, and
aggregates all the final values required by NHTSA regulations in a
single summary worksheet.
    NHTSA believes that the projections reporting template benefits
both the agency and manufacturers by helping to avoid reporting errors,
such as data omissions and miscalculations, and will ultimately
simplify and streamline reporting. The template also allows
manufacturers to enter information to generate the required
confidential versions of CAFE reports specified in 49 CFR part 537 and
to automatically produce the required non-confidential versions by