they have made EPA aware of an issue with the test's original design.
In the MYs 2012-2016 rule, EPA received comments that the Idle Test did
not properly capture the efficiency impact of some of the technologies
on the Efficiency Credit menu list. EPA also received comments that
idle operation is not typical of real-world driving. EPA acknowledges
that both of these comments have merit. At the time of the MY 2012-2016
rule, we expected that many manufacturers would be able to demonstrate
improved efficiency with technologies like forced cabin air
recirculation or electronically-controlled, and variable-displacement
compressors., But under idle conditions, testing by manufacturers has
shown that the benefits from these technologies can be difficult to
quantify. Also, recent data provided by the industry shows that some
vehicles that incorporate higher-efficiency A/C technologies are not
able to consistently reach the CO2 threshold on the current
Idle Test. The available data also indicates that meeting the threshold
tends to be more difficult for vehicles with smaller-displacement
engines.\274\ EPA continues to believe that there are some technologies
that do have their effectiveness demonstrated during idle and that idle
is a significant fraction of real-world operation.\275\
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    \274\ Chapter 5 of the Joint TDS provides details about the
manufacturers' testing of these vehicles.
    \275\ More discussion of real world idle operation can be found
below and in chapter 5 of the joint TSD in the description of stop-
start off cycle credits.
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    Although EPA believes some adjustments in the Idle Test are
warranted and is proposing such adjustments, the agency also believes
that a reasonable degree of verification is still needed, to
demonstrate that that A/C efficiency-improving technologies for which
manufacturers are basing credits are indeed implemented properly and
are reducing A/C-related fuel consumption. EPA continues to believe
that the Idle Test is a reasonable measure of some A/C-related
CO2 emissions as there is significant real-world driving
activity at idle, and it significantly exercises a number of the A/C
technologies from the menu. Therefore, EPA proposes to maintain the use
of Idle Test as a prerequisite for generating Efficiency Credits for
MYs 2014-2016. However, in order to provide reasonable verification
while encouraging the development and use of efficiency-improving
technologies, EPA proposes to revise the CO2 threshold.
Specifically, the agency proposes to scale the magnitude of the
threshold to the displacement of the vehicle's engine, with smaller-
displacement engines having a higher ``grams per minute'' threshold
than larger-displacement engines. Thus, for vehicles with smaller-
displacement engines, the threshold would be less stringent. The
revised threshold would apply for MYs 2014-2016, and can be used
(optionally) instead of the flat gram per minute threshold that applies
for MYs 2014, through 2016.\276\ In addition to revising the threshold,
EPA proposes to relax the average ambient temperature and humidity
requirements, due to the difficulty in controlling the year-round
humidity in test cells designed for FTP testing. EPA requests comment
on the proposed continued use of the Idle Test as a tool to validate
the function of a vehicle's A/C efficiency-improving technologies, and
on the revised CO2 threshold and ambient requirements.
---------------------------------------------------------------------------

    \276\ Chapter 5 of the Joint TSD describes the available data
relevant to testing on the Idle Test and to the design of the
displacement-weighted revised threshold in more detail.
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    As stated above, EPA still considers the Idle Test to be a
reasonable measure of some A/C-related CO2 emissions.
However, there are A/C efficiency-improving technologies that cannot be
fully evaluated with the Idle Test. In addition to proposing the
revised Idle Test, EPA proposes that manufacturers have the option of
reporting results from a new transient A/C test in place of the Idle
Test, for MYs 2014-2016. In the year since the previous GHG rule was
finalized, EPA, CARB, and a consortium of auto manufacturers (USCAR)
have developed a new transient test procedure that can measure the
effect of the operation of the overall A/C system on CO2
emissions and fuel economy. The new test, known as ``AC17'' (for Air
Conditioning, 2017), and described in detail in Chapter 5 of the Joint
TSD, is essentially a combination of the existing SC03 and HWFET test
procedures, which, with the proposed modifications, would exercise the
A/C system (and new technologies) under conditions representing typical
U.S. driving and climate.
    Some aspects of the AC17 test are still being developed and
improved, but the basic procedure is sufficiently complete for EPA to
propose it as a reporting option alternative to the Idle Test threshold
in 2014, and a replacement for the Idle Test in 2017, as a prerequisite
for generating Efficiency Credits. In model years 2014 to 2016, the
AC17 test would be used to demonstrate that a vehicle's A/C system is
delivering the efficiency benefits of the new technologies, and the
menu will still be utilized. Manufacturers would run the AC17 test
procedure on each vehicle platform that incorporates the new
technologies, with the A/C system off and then on, and then report
these test results to the EPA. This reporting option would replace the
need for the Idle Test. In addition to reporting the test results, EPA
will require that manufactures provide detailed vehicle and A/C system
information for each vehicle tested (e.g. vehicle class, model type,
curb weight, engine size, transmission type, interior volume, climate
control type, refrigerant type, compressor type, and evaporator/
condenser characteristics).
    For model years 2017 and beyond, the A/C Idle Test menu and
threshold requirement would be eliminated and be replaced with the AC17
test, as a prerequisite for access to the credit menu. For vehicle
models which manufacturers are applying for A/C efficiency credits, the
AC17 test would be run to validate that the performance and efficiency
of a vehicle's A/C technology is commensurate to the level of credit
for which the manufacturer is applying. To determine whether the
efficiency improvements of these technologies are being realized on the
vehicle, the results of an AC17 test performed on a new vehicle model
would be compared to a ``baseline'' vehicle which does not incorporate
the efficiency-improving technologies. If the difference between the
new vehicle's AC17 test result and the baseline vehicle test result is
greater than or equal to the amount of menu credit for

which the manufacturer is applying, then the menu credit amount would
be generated. However, if the difference in test results did not
demonstrate the full menu-based potential of the technology, a partial
credit could still be generated. This partial credit would be
proportional to how far the difference in results was from the expected
menu-based credit (i.e., the sum of the individual technology credits).
The baseline vehicle is defined as one with characteristics which are
similar to the new vehicle, except that it is not equipped with the
efficiency-improving technologies (or they are de-activated). EPA is
seeking comment on this approach to qualifying for A/C efficiency
credits.
    The AC17 test requires a significant amount of time for each test
(nearly 4 hours) and must be run in expensive SC03-capable facilities.
EPA believes that the purpose of the test--to validate that A/C
CO2 reductions are indeed occurring and hence that the
manufacturer is eligible for efficiency credits--would be met if the
manufacturer performs the new test on a limited subset of test
vehicles. EPA proposes that manufacturers wishing to use the AC17 test
to validate a vehicle's A/C technology be required to test one vehicle
from each platform. For this purpose, ``platform'' would be defined as
a group of vehicles with common body floorplan, chassis, engine, and
transmission.\277\ EPA requests comment on the new test and its
proposed use. EPA also requests comment on using the AC17 test to
quantify efficiency credits, instead of the menu. EPA is also seeking
comment on an option starting in MY 2017, to have the AC17 test be used
in a similar fashion as the Idle Test, such that if the CO2
measurements are below a certain threshold value, then credit would be
quantified based on the menu. EPA also seeks comment on eliminating the
idle test in favor of reporting only the AC17 test for A/C efficiency
credits starting as early as MY 2014.
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    \277\ A single platform may encompass a larger group of fuel
economy label classes or car lines (40 CFR Sec.  600.002-93), such
as passenger cars, compact utility vehicles, and station wagons The
specific vehicle selection requirements for manufacturers using this
testing are laid out in the regulations associated with this NPRM.
---------------------------------------------------------------------------

ii. Potential Future Use of the New A/C Test for Credit Quantification
    As described above, EPA is proposing to use the AC17 test as a
prerequisite to generating A/C Efficiency Credits. The test is well-
suited for this purpose since it can accurately measure the difference
in the increased CO2 emissions that occur when the A/C
system is turned on vs. when it is turned off. This difference in the
``off-on'' CO2 emissions, along with details about the
vehicle and its A/C system design, will help inform EPA as to how these
efficiency-improving technologies perform on a wide variety of vehicle
types.
    However, the test is limited in its ability to accurately quantify
the amount of credit that would be warranted by an improved A/C system
on a particular vehicle. This is because to determine an absolute--
rather than a relative--difference in CO2 effect for an
individual vehicle design would require knowledge of the A/C system
CO2 performance for that exact vehicle, but without those
specific A/C efficiency improvements installed. This would be difficult
and costly, since two test vehicles (or a single vehicle with the
components removed and replaced) would be necessary to quantify this
precisely. Even then, the inherent variability between such tests on
such a small sample in such an approach might not be statistically
robust enough to confidently determine a small absolute CO2
emissions impact between the two vehicles.
    As an alternative to comparing new vehicle AC17 test with a
``baseline'' (described above), in Chapter 5 of the Joint TSD, EPA
discusses a potential method of more accurately quantifying the credit.
This involves comparing the efficiencies of individual components
outside the vehicles, through ``bench'' testing of components
supplemented by vehicle simulation modeling to relate that component's
performance to the complete vehicle. EPA believes that such approaches
may eventually allow the AC17 test to be used as part of a more
complicated series of test procedures and simulations, to accurately
quantify the A/C CO2 effect of an individual vehicle's A/C
technology package. However, EPA believes that this issue is beyond the
scope of this proposed rule since there are many challenges associated
with measuring small incremental decreases in fuel consumption and
CO2 emissions compared to the relatively large overall fuel
consumption rate and CO2 emissions. The agency does
encourage comment, including test data, on how the AC17 test could be
enhanced in order to measure the individual and collective impact of
different A/C efficiency-improving technologies on individual vehicle
designs and thus to quantify Efficiency Credits. EPA especially seeks
comment on a more complex procedure, also discussed in Chapter 5 of the
Joint TSD, that uses a combination of bench testing of components,
vehicle simulation models, and dynamometer testing to quantify
Efficiency Credits. Specifically, the agencies request comment on how
to define the baseline configuration for bench testing. The agencies
also request comment on the use of the Lifecycle Climate Performance
Model (LCCP), or alternatively, the use of an EPA simulation tool to
convert the test bench results to a change in fuel consumption and
CO2 emissions.
iii. A/C Efficiency Fuel Consumption Improvement Values in the CAFE
Program
    As described in section II.F and above, EPA is proposing to use the
AC17 test as a prerequisite to generating A/C Efficiency Credits
starting in MY 2017. EPA is proposing, in coordination with NHTSA, for
the first time under its EPCA authority to allow manufacturers to use
this same test procedure to generate fuel consumption improvement
values for purposes of CAFE compliance based on the use of A/C
efficiency technologies. As described above, the CO2 credits
would be determined from a comparison of the new vehicle compared to an
older ``baseline vehicle.'' For CAFE, EPA proposes to convert the total
CO2 credits due to A/C efficiency improvements from metric
tons of CO2 to a fleetwide CAFE improvement value. The fuel
consumption improvement values are presented to give the reader some
context and explain the relationship between CO2 and fuel
consumption improvements. The fuel consumption improvement values would
be the amount of fuel consumption reduction achieved by that vehicle,
up to a maximum of 0.000563 gallons/mi fuel consumption improvement
value for cars and a 0.000586 gallons/mi fuel consumption improvement
value for trucks.\278\ If the difference between the new vehicle and
baseline results does not demonstrate the full menu-based potential of
the technology, a partial credit could still be generated. This partial
credit would be proportional to how far the difference in results was
from the expected menu-based credit (i.e., the sum of the individual
technology credits). The table below presents the proposed CAFE fuel
consumption improvement values for

each of the efficiency-reducing air conditioning technologies
considered in this proposal. More detail is provided on the calculation
of indirect A/C CAFE fuel consumption improvement values in chapter 5
of the joint TSD. EPA is proposing definitions of each of the
technologies in the table below which are discussed in Chapter 5 of the
draft joint TSD to ensure that the air conditioner technology used by
manufacturers seeking these values corresponds with the technology used
to derive the fuel consumption improvement values.
---------------------------------------------------------------------------

    \278\ Note that EPA's proposed calculation methodology in 40 CFR
600.510-12 does not use vehicle-specific fuel consumption
adjustments to determine the CAFE increase due to the various
incentives allowed under the proposed program. Instead, EPA would
convert the total CO2 credits due to each incentive
program from metric tons of CO2 to a fleetwide CAFE
improvement value. The fuel consumption values are presented to give
the reader some context and explain the relationship between
CO2 and fuel consumption improvements.

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[GRAPHIC] [TIFF OMITTED] TP01DE11.070

[GRAPHIC] [TIFF OMITTED] TP01DE11.071

2. Incentive for Electric Vehicles, Plug-in Hybrid Electric Vehicles,
and Fuel Cell Vehicles
a. Rationale for Temporary Regulatory Incentives for Electric Vehicles,
Plug-in Hybrid Electric Vehicles, and Fuel Cell Vehicles
    EPA has identified two vehicle powertrain-fuel combinations that
have the future potential to transform the light-duty vehicle sector by
achieving near-zero greenhouse gas (GHG) emissions and oil consumption
in the longer term, but which face major near-term market barriers such
as vehicle cost, fuel cost (in the case of fuel cell vehicles), the
development of low-GHG fuel production and distribution infrastructure,
and/or consumer acceptance.
     Electric vehicles (EVs) and plug-in hybrid electric
vehicles (PHEVs) which would operate exclusively or frequently on grid
electricity that could be produced from very low GHG emission
feedstocks or processes.
     Fuel cell vehicles (FCVs) which would operate on hydrogen
that could be produced from very low GHG emissions feedstocks or
processes.
    As in the 2012-2016 rule, EPA is proposing temporary regulatory
incentives for the commercialization of EVs, PHEVs, and FCVs. EPA
believes that these advanced technologies represent potential game-
changers with respect to control of transportation GHG emissions as
they can combine an efficient vehicle propulsion system with the
potential to use motor fuels produced from low-GHG emissions feedstocks
or from fossil feedstocks with carbon capture and sequestration. EPA
recognizes that the use of EVs, PHEVs, and FCVs in the 2017-2025
timeframe, in conjunction with the incentives, will decrease the
overall GHG emissions reductions associated with the program as the
upstream emissions associated with the generation and distribution of
electricity are higher than the upstream emissions associated with
production and distribution of gasoline. EPA accounts for this
difference in projections of the overall program's impacts and benefits
(see Section III.F).\279\
---------------------------------------------------------------------------

    \279\ Also see the Regulatory Impact Analysis.
---------------------------------------------------------------------------

    The tailpipe GHG emissions from EVs, PHEVs operated on grid
electricity, and hydrogen-fueled FCVs are zero, and traditionally the
emissions of the vehicle itself are all that EPA takes into account for
purposes of compliance with standards set under Clean Air Act section
202(a). Focusing on vehicle tailpipe emissions has not raised any
issues for criteria pollutants, as upstream emissions associated with
production and distribution of the fuel are addressed by comprehensive
regulatory programs focused on the upstream sources of those emissions.
At this time, however, there is no such comprehensive program
addressing upstream emissions of GHGs, and the upstream GHG emissions
associated with production and distribution of electricity are higher,
on a national average basis, than the corresponding upstream GHG
emissions of gasoline or other petroleum based fuels.\280\ In the
future, if there were a program to comprehensively control upstream GHG
emissions, then the zero tailpipe levels from these vehicles have the
potential to contribute to very large GHG reductions, and to transform
the transportation sector's contribution to nationwide GHG emissions
(as well as oil consumption). For a discussion of this issue in the
2012-2016 rule, see 75 FR at 25434-438.
---------------------------------------------------------------------------

    \280\ There is significant regional variation with upstream GHG
emissions associated with electricity production and distribution.
Based on EPA's eGRID2010 database, comprised of 26 regions, the
average powerplant GHG emissions rates per kilowatt-hour for those
regions with the highest GHG emissions rates are about 3 times
higher than those with the lowest GHG emissions rates. See http://www.epa.gov/cleanenergy/energy-resources/egrid/index.html.
---------------------------------------------------------------------------

    EVs and FCVs also represent some of the most significant changes in
automotive technology in the industry's history.\281\ For example, EVs
face major consumer barriers such as significantly

higher vehicle cost and lower range. However, EVs also have attributes
that could be attractive to some consumers: Lower and more predictable
fuel price, no need for oil changes or spark plugs, and reducing one's
personal contribution to local air pollution, climate change, and oil
dependence.\282\
---------------------------------------------------------------------------

    \281\ A PHEV is not such a big change since, if the owner so
chooses, it can operate on gasoline.
    \282\ PHEVs and FCVs share many of these same challenges and
opportunities.
---------------------------------------------------------------------------

    Original equipment manufacturers currently offer two EVs and one
PHEV in the U.S. market.\283\ Deliveries of the Nissan Leaf EV, which
has a list price of about $33,000 (before tax credits) and an EPA label
range of 73 miles, began in December 2010 in selected areas, and total
sales through October 2011 are about 8000. The luxury Tesla Roadster
EV, with a list price of $109,000, has been on sale since March 2008
with cumulative sales of approximately 1500. The Chevrolet Volt PHEV,
with a list price of about $41,000 and an EPA label all-electric range
of 35 miles, has sold over 5000 vehicles since it entered the market in
December 2010 in selected markets. At this time, no original equipment
manufacturer offers FCVs to the general public except for some limited
demonstration programs.\284\ Currently, combined EV, PHEV, and FCV
sales represent about 0.1% of overall light-duty vehicle sales.
Additional models, such as the Ford Focus EV, the Mitsubishi i EV, and
the Toyota Prius PHEV, are expected to enter the U.S. market in the
next few months.
---------------------------------------------------------------------------

    \283\ Smart has also leased approximately 100 Smart ED vehicles
in the U.S.
    \284\ For example, Honda has leased up to 200 Clarity fuel cell
vehicles in southern California (see Honda.com) and Toyota has
announced plans for a limited fuel cell vehicle introduction in 2015
(see Toyota.com).
---------------------------------------------------------------------------

    The agency remains optimistic about consumer acceptance of EVs,
PHEVs, and FCVs in the long run, but we believe that near-term market
acceptance is less certain. One of the most successful new automotive
powertrain technologies--conventional hybrid electric vehicles like the
Toyota Prius--illustrates the challenges involved with consumer
acceptance of new technologies, even those that do not involve vehicle
attribute tradeoffs. Even though conventional hybrids have now been on
the U.S. market for over a decade, their market share hovers around 2
to 3 percent or so \285\ even though they offer higher vehicle range
than their traditional gasoline vehicle counterparts, involve no
significant consumer tradeoffs (other than cost), and have reduced
their incremental cost to a few thousand dollars. The cost and consumer
tradeoffs associated with EVs, PHEVs, and FCVs are more significant
than those associated with conventional hybrids. Given the long
leadtimes associated with major transportation technology shifts, there
is value in promoting these potential game-changing technologies today
if we want to retain the possibility of achieving major environmental
and energy benefits in the future.
---------------------------------------------------------------------------

    \285\ Light-Duty Automotive Technology, Carbon Dioxide
Emissions, and Fuel Economy Trends: 1975 Through 2010, EPA-420-R-10-
023, November 2010, www.epa.gov/otaq/fetrends.htm.
---------------------------------------------------------------------------

    In terms of the relative relationship between tailpipe and upstream
fuel production and distribution GHG emissions, EVs, PHEVs, and FCVs
are very different than conventional gasoline vehicles. Combining
vehicle tailpipe and fuel production/distribution sources, gasoline
vehicles emit about 80 percent of these GHG emissions at the vehicle
tailpipe with the remaining 20 percent associated with ``upstream''
fuel production and distribution GHG emissions.\286\ On the other hand,
vehicles using electricity and hydrogen emit no GHG (or other
emissions) at the vehicle tailpipe, and therefore all GHG emissions
associated with powering the vehicle are due to fuel production and
distribution.\287\ Depending on how the electricity and hydrogen fuels
are produced, these fuels can have very high fuel production/
distribution GHG emissions (for example, if coal is used with no GHG
emissions control) or very low GHG emissions (for example, if renewable
processes with minimal fossil energy inputs are used, or if carbon
capture and sequestration is used). For example, as shown in the
Regulatory Impact Analysis, today's Nissan Leaf EV would have an
upstream GHG emissions value of 161 grams per mile based on national
average electricity, and a value of 89 grams per mile based on the
average electricity in California, one of the initial markets for the
Leaf.
---------------------------------------------------------------------------

    \286\ Fuel production and distribution GHG emissions have
received much attention because there is the potential for more
widespread commercialization of transportation fuels that have very
different GHG emissions characteristics in terms of the relative
contribution of GHG emissions from the vehicle tailpipe and those
associated with fuel production and distribution. Other GHG
emissions source categories include vehicle production, including
the raw materials used to manufacture vehicle components, and
vehicle disposal. These categories have not been included in EPA
motor vehicle emissions regulations for several reasons: These
categories are less important from an emissions inventory
perspective, they raise complex accounting questions that go well
beyond vehicle testing and fuel-cycle analysis, and in general there
are fewer differences across technologies.
    \287\ The Agency notes that many other fuels currently used in
light-duty vehicles, such as diesel from conventional oil, ethanol
from corn, and compressed natural gas from conventional natural gas,
have tailpipe GHG and fuel production/distribution GHG emissions
characteristics fairly similar to that of gasoline from conventional
oil. See 75 FR at 25437. The Agency recognizes that future
transportation fuels may be produced from renewable feedstocks with
lower fuel production/distribution GHG emissions than gasoline from
oil.
---------------------------------------------------------------------------

    Because these upstream GHG emissions values are generally higher
than the upstream GHG emissions values associated with gasoline
vehicles, and because there is currently no national program in place
to reduce GHG emissions from electric powerplants, EPA believes it is
appropriate to consider the incremental upstream GHG emissions
associated with electricity production and distribution. But, we also
think it is appropriate to encourage the initial commercialization of
EV/PHEV/FCVs as well, in order to retain the potential for game-
changing GHG emissions and oil savings in the long term.
    Accordingly, EPA proposes to provide temporary regulatory
incentives for EVs, PHEVs (when operated on electricity) and FCVs that
will be discussed in detail below. EPA recognizes that the use of EVs,
PHEVs, and FCVs in the 2017-2025 timeframe, in conjunction with the
incentives, will decrease the overall GHG emissions reductions
associated with the program as the upstream emissions associated with
the generation and distribution of electricity are higher than the
upstream emissions associated with production and distribution of
gasoline. EPA accounts for this difference in projections of the
overall program's impacts and benefits (see Section III.F). EPA
believes that the relatively minor impact on GHG emissions reductions
in the near term is justified by promoting technologies that have
significant transportation GHG emissions and oil consumption game-
changing potential in the longer run, and that also face major market
barriers in entering a market that has been dominated by gasoline
vehicle technology and infrastructure for over 100 years.
    EPA will review all of the issues associated with upstream GHG
emissions, including the status of EV/PHEV/FCV commercialization, the
status of upstream GHG emissions control programs, and other relevant
factors.
b. MYs 2012-2016 Light-Duty Vehicle Greenhouse Gas Emissions Standards
    The light-duty vehicle greenhouse gas emissions standards for model
years 2012-2016 provide a regulatory incentive for electric vehicles
(EVs), fuel cell vehicles (FCVs), and for the electric portion of
operation of plug-in hybrid

electric vehicles (PHEVs). See generally 75 FR at 25434-438. This is
designed to promote advanced technologies that have the potential to
provide ``game changing'' GHG emissions reductions in the future. This
incentive is a 0 grams per mile compliance value (i.e., a compliance
value based on measured vehicle tailpipe GHG emissions) up to a
cumulative EV/PHEV/FCV production cap threshold for individual
manufacturers. There is a two-tier cumulative EV/PHEV/FCV production
cap for MYs 2012-2016: The cap is 300,000 vehicles for those
manufacturers that sell at least 25,000 EVs/PHEVs/FCVs in MY 2012, and
the cap is 200,000 vehicles for all other manufacturers. For
manufacturers that exceed the cumulative production cap over MYs 2012-
2016, compliance values for those vehicles in excess of the cap will be
based on a full accounting of the net fuel production and distribution
GHG emissions associated with those vehicles relative to the fuel
production and distribution GHG emissions associated with comparable
gasoline vehicles. For an electric vehicle, this accounting is based on
the vehicle electricity consumption over the EPA compliance tests,
eGRID2007 national average powerplant GHG emissions factors, and
multiplicative factors to account for electricity grid transmission
losses and pre-powerplant feedstock GHG related emissions.\288\ The
accounting for a hydrogen fuel cell vehicle would be done in a
comparable manner.
---------------------------------------------------------------------------

    \288\ See 40 CFR 600.113-12(m).
---------------------------------------------------------------------------

    Although EPA also proposed a vehicle incentive multiplier for MYs
2012-2016, the agency did not finalize a multiplier. At that time, the
Agency believed that combining the 0 gram per mile and multiplier
incentives would be excessive.
    The 0 grams per mile compliance value decreases the GHG emissions
reductions associated with the 2012-2016 standards compared to the same
standards and no 0 grams per mile compliance value. It is impossible to
know the precise number of vehicles that will take advantage of this
incentive in MYs 2012-2016. In the preamble to the final rule, EPA
projected the decrease in GHG emissions reductions that would be
associated with a scenario of 500,000 EVs certified with a compliance
value of 0 grams per mile. This scenario would result in a projected
decrease of 25 million metric tons of GHG emissions reductions, or less
than 3 percent of the total projected GHG benefits of the program of
962 million metric tons. This GHG emissions impact could be smaller or
larger, of course, based on the actual number of EVs that would certify
at 0 grams per mile.
    In the preamble to the final rule, EPA stated that it would
reassess this issue for rulemakings beginning in MY 2017 based on the
status of advanced vehicle technology commercialization, the status of
upstream GHG control programs, and other relevant factors.
c. Supplemental Notice of Intent
    In our most recent Supplemental Notice of Intent,\289\ EPA stated
that: ``EPA intends to propose an incentive multiplier for all electric
vehicles (EVs), plug-in hybrid electric vehicles (PHEVs), and fuel cell
vehicles (FCVs) sold in MYs 2017 through 2021. This multiplier approach
means that each EV/PHEV/FCV would count as more than one vehicle in the
manufacturer's compliance calculation. EPA intends to propose that EVs
and FCVs start with a multiplier value of 2.0 in MY 2017, phasing down
to a value of 1.5 in MY 2021. PHEVs would start at a multiplier value
of 1.6 in MY 2017 and phase down to a value of 1.3 in MY 2021. These
multipliers would be proposed for incorporation in EPA's GHG program *
* *. As an additional incentive for EVs, PHEVs and FCVs, EPA intends to
propose allowing a value of 0 g/mile for the tailpipe compliance value
for EVs, PHEVs (electricity usage) and FCVs for MYs 2017-2021, with no
limit on the quantity of vehicles eligible for 0 g/mi tailpipe
emissions accounting. For MYs 2022-2025, 0 g/mi will only be allowed up
to a per-company cumulative sales cap based on significant penetration
of these advanced vehicles in the marketplace. EPA intends to propose
an appropriate cap in the NPRM.''
---------------------------------------------------------------------------

    \289\ 76 Federal Register 48758 (August 9, 2011).
---------------------------------------------------------------------------

d. Proposal for MYs 2017-2025
    EPA is proposing the following temporary regulatory incentives for
EVs, PHEVs, and FCVs consistent with the discussion in the August 2011
Supplemental Notice of Intent.
    For MYs 2017 through 2021, EPA is proposing two incentives. The
first proposed incentive is to allow all EVs, PHEVs (electric
operation), and FCVs to use a GHG emissions compliance value of 0 grams
per mile. There would be no cap on the number of vehicles eligible for
the 0 grams per mile compliance value for MYs 2017 through 2021.
    The second proposed incentive for MYs 2017 through 2021 is a
multiplier for all EVs, PHEVs, and FCVs, which would allow each of
these vehicles to ``count'' as more than one vehicle in the
manufacturer's compliance calculation.\290\ While the Agency rejected a
multiplier incentive in the MYs 2012-2016 final rule, we are proposing
a multiplier for MYs 2017-2021 because, while advanced technologies
were not necessary for compliance in MYs 2012-2016, they are necessary,
for some manufacturers, to comply with the GHG standards in the MYs
2022-2025 timeframe. A multiplier for MYs 2017-2021 can also promote
the initial commercialization of these advanced technologies. In order
for a PHEV to be eligible for the multiplier incentive, EPA proposes
that PHEVs be required to be able to complete a full EPA highway test
(10.2 miles), without using any conventional fuel, or alternatively,
have a minimum equivalent all-electric range of 10.2 miles as measured
on the EPA highway cycle. EPA seeks comment on whether this minimum
range (all-electric or equivalent all-electric) should be lower or
higher, or whether the multiplier should vary based on range or on
another PHEV metric such as battery capacity or ratio of electric motor
power to engine or total vehicle power. The specific proposed
multipliers are shown in Table III-15.
---------------------------------------------------------------------------

    \290\ In the unlikely case where a PHEV with a low electric
range might have an overall GHG emissions compliance value that is
higher than its compliance target, EPA proposes that the automaker
can choose not to use the multiplier.

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[GRAPHIC] [TIFF OMITTED] TP01DE11.072

    EPA also requests comments on the merits of providing similar
multiplier incentives to dedicated and/or dual fuel compressed natural
gas vehicles.
    For MYs 2022 through 2025, EPA is proposing one incentive--the 0
grams per mile GHG emissions compliance incentive for EVs, PHEVs
(electric operation), and FCVs up to a per-company cumulative
production cap threshold for those model years. EPA is proposing a two-
tier, per-company cap based on cumulative production in prior years,
consistent with the general approach that was adopted in the rulemaking
for MYs 2012-2016. For manufacturers that sell 300,000 or more EV/PHEV/
FCVs combined in MYs 2019-2021, the proposed cumulative production cap
would be 600,000 EV/PHEV/FCVs for MYs 2022-2025. Other automakers would
have a proposed cumulative production cap of 200,000 EV/PHEV/FCVs in
MYs 2022-2025.
    This proposed cap design is appropriate as a way to encourage
automaker investment in potential GHG emissions game-changing
technologies that face very significant cost and consumer barriers. In
addition, as with the rulemaking for MYs 2012-2016, EPA believes it is
important to both recognize the benefit of early leadership in
commercialization of these technologies, and encourage additional
manufacturers to invest over time. Manufacturers are unlikely to do so
if vehicles with these technologies are treated for compliance purposes
to be no more advantageous than the best conventional hybrid vehicles.
Finally, we believe that the proposed cap design provides a reasonable
limit to the overall decrease in program GHG emissions reductions
associated with the incentives, and EPA is being transparent about
these GHG emissions impacts (see later in this section and also Section
III.F).
    EPA recognizes that a central tension in the design of a proposed
cap relates to certainty and uncertainty with respect to both
individual automaker caps and the overall number of vehicles that may
fall under the cap, which determines the overall decrease in GHG
emissions reductions. A per-company cap as described above would
provide clear certainty for individual manufacturers at the time of the
final rule, but would yield uncertainty about how many vehicles
industry-wide would take advantage of the 0 grams per mile incentive
and therefore the overall impact on GHG emissions. An alternative
approach would be an industry-wide cap where EPA would establish a
finite limit on the total number of vehicles eligible for the 0 grams
per mile incentive, with a method for allocating this industry-wide cap
to individual automakers. An industry-wide cap would provide certainty
with respect to the maximum number of vehicles and GHG emissions impact
and would reward those automakers who show early leadership. If EPA
were to make a specific numerical allocation at the time of the final
rule, automakers would have certainty, but EPA is concerned that we may
not have sufficient information to make an equitable allocation for a
timeframe that is over a decade away. If EPA were to adopt an
allocation formula in the final rule that was dependent on future sales
(as we are proposing above for the per-company cap), automakers would
have much less certainty in compliance planning as they would not know
their individual caps until some point in the future.
    To further assess the merits of an industry-wide cap approach, EPA
also seeks comment on the following alternative for an industry-wide
cap. EPA would place an industry-wide cumulative production cap of 2
million EV/PHEV/FCVs eligible for the 0 grams per mile incentive in MYs
2022-2025. EPA has chosen 2 million vehicles because, as shown below,
we project that this limits the maximum decrease in GHG emissions
reductions to about 5 percent of total program GHG savings. EPA would
allocate this 2 million vehicle cap to individual automakers in
calendar year 2022 based on cumulative EV/PHEV/FCV sales in MYs 2019-
2021, i.e., if an automaker sold X percent of industry-wide EV/PHEV/FCV
sales in MYs 2019-2021, that automaker would get X percent of the 2
million industry-wide cumulative production cap in MYs 2022-2025 (or
possibly somewhat less than X percent, if EPA were to reserve some
small volumes for those automakers that sold zero EV/PHEV/FCVs in MYs
2019-2021).
    For both the proposed per-company cap and the alternative industry-
wide cap, EPA proposes that, for production beyond the cumulative
vehicle production cap for a given manufacturer in MY 2022 and later,
compliance values would be calculated according to a methodology that
accounts for the full net increase in upstream GHG emissions relative
to that of a comparable gasoline vehicle. EPA also asks for comment on
various approaches for phasing in from a 0 gram per mile value to a
full net increase value, e.g., an interim period when the compliance
value might be one-half of the net increase.
    EPA also seeks comments on whether any changes should be made for
MYs 2012-2016, i.e., whether the compliance value for production beyond
the cap should be one-half of the net increase in upstream GHG
emissions, or whether the current cap for MYs 2012-2016 should be
removed.
    EPA is not proposing any multiplier incentives for MYs 2022 through
2025. EPA believes that the 0 gram per mile compliance value, with
cumulative

vehicle production cap, is a sufficient incentive for MYs 2022-2025.
    One key issue here is the appropriate electricity upstream GHG
emissions factor or rate to use in future projections of EV/PHEV
emissions based on the net upstream approach. In the following example,
we use a 2025 nationwide average electricity upstream GHG emissions
rate (powerplant plus feedstock extraction, transportation, and
processing) of 0.574 grams GHG/watt-hour, based on simulations with the
EPA Office of Atmospheric Program's Integrated Planning Model
(IPM).\291\ For the example below, EPA is using a projected national
average value from the IPM model, but EPA recognizes that values
appropriate for future vehicle use may be higher or lower than this
value. EPA is considering running the IPM model with a more robust set
of vehicle and vehicle charging-specific assumptions to generate a
better electricity upstream GHG emissions factor for EVs and PHEVs for
our final rulemaking, and, at minimum, intends to account for the
likely regional sales variation for initial EV/PHEV/FCVs, and different
scenarios for the relative frequency of daytime and nighttime charging.
EPA seeks comment on whether there are additional factors that we
should try to include in the IPM modeling for the final rulemaking.
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    \291\ Technical Support Document, Chapter 4.
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    EPA proposes a 4-step methodology for calculating the GHG emissions
compliance value for vehicle production in excess of the cumulative
production cap for an individual automaker. For example, for an EV in
MY 2025, this methodology would include the following steps and
calculations:
     Measuring the vehicle electricity consumption in watt-
hours/mile over the EPA city and highway tests (for example, a midsize
EV in 2025 might have a 2-cycle test electricity consumption of 230
watt-hours/mile)
     Adjusting this watt-hours/mile value upward to account for
electricity losses during electricity transmission (dividing 230 watt-
hours/mile by 0.93 to account for grid/transmission losses yields a
value of 247 watt-hours/mile)
     Multiplying the adjusted watt-hours/mile value by a 2025
nationwide average electricity upstream GHG emissions rate of 0.574
grams/watt-hour at the powerplant (247 watt-hours/mile multiplied by
0.574 grams GHG/watt-hour yields 142 grams/mile)
     Subtracting the upstream GHG emissions of a comparable
midsize gasoline vehicle of 39 grams/mile \292\ to reflect a full net
increase in upstream GHG emissions (142 grams/mile for the EV minus 39
grams/mile for the gasoline vehicle yields a net increase and EV
compliance value of 103 grams/mile).\293\
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    \292\ A midsize gasoline vehicle with a footprint of 46 square
feet would have a MY 2025 GHG target of about 140 grams/mile;
dividing 8887 grams CO2/gallon of gasoline by 140 grams/
mile yields an equivalent fuel economy level of 63.5 mpg; and
dividing 2478 grams upstream GHG/gallon of gasoline by 63.5 mpg
yields a midsize gasoline vehicle upstream GHG value of 39 grams/
mile. The 2478 grams upstream GHG/gallon of gasoline is calculated
from 21,546 grams upstream GHG/million Btu (EPA value for future
gasoline based on DOE's GREET model modified by EPA standards and
data; see docket memo to MY 2012-2016 rulemaking titled
``Calculation of Upstream Emissions for the GHG Vehicle Rule'') and
multiplying by 0.115 million Btu/gallon of gasoline.
    \293\ Manufacturers can utilize alternate calculation
methodologies if shown to yield equivalent or superior results and
if approved in advance by the Administrator.
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    The full accounting methodology for FCVs and the portion of PHEV
operation on grid electricity would use this same approach. The
proposed regulations contain EPA's proposed method to determine the
compliance value for PHEVs, and EPA proposes to develop a similar
methodology for FCVs if and when the need arises.\294\ Given the
uncertainty about how hydrogen would be produced, if and when it were
used as a transportation fuel, EPA seeks comment on projections for the
fuel production and distribution GHG emissions associated with hydrogen
production for various feedstocks and processes.
---------------------------------------------------------------------------

    \294\ 40 CFR 600.113-12(m).
---------------------------------------------------------------------------

    EPA is fully accounting for the upstream GHG emissions associated
with all electricity used by EVs and PHEVs (and any hydrogen used by
FCVs), both in our regulatory projections of the impacts and benefits
of the program, and in all GHG emissions inventory accounting.
    EPA seeks public comment on the proposed incentives for EVs, PHEVs,
and FCVs described above.
e. Projection of Impact on GHG Emissions Reductions Due to Incentives
    EPA believes it is important to project the impact on GHG emissions
that will be associated with the proposed incentives (both 0 grams per
mile and the multiplier) for EV/PHEV/FCVs over the MYs 2017-2025
timeframe. Since it is impossible to know precisely how many EV/PHEV/
FCVs will be sold in the MYs 2017-2025 timeframe that will utilize the
proposed incentives, EPA presents projections for two scenarios: (1)
The number of EV/PHEV/FCVs that EPA's OMEGA technology and cost model
predicts based exclusively on its projections for the most cost-
effective way for the industry to meet the proposed standards, and (2)
a scenario with a greater number of EV/PHEV/FCVs, based not only on
compliance with the proposed GHG and CAFE standards, but other factors
such as the proposed cumulative production caps and manufacturer
investments. For this analysis, EPA assumes that EVs and PHEVs each
account for 50 percent of all EV/PHEV/FCVs. EPA seeks comment on
whether there are other scenarios which should be evaluated for this
purpose in the final rule.

[GRAPHIC] [TIFF OMITTED] TP01DE11.073

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    \295\ The number of metric tons represents the number of
additional tons that would be reduced if the standards stayed the
same and there was no 0 gram per mile compliance value.
    \296\ The percentage change represents the ratio of the
cumulative decrease in GHG emissions reductions from the prior
column to the total cumulative GHG emissions reductions associated
with the proposed standards and the proposed 0 gram per mile
compliance value.
---------------------------------------------------------------------------

    EPA projects that the cumulative GHG emissions savings of the
proposed MYs 2017-2025 standards, on a model year lifetime basis, is
approximately 2 billion metric tons. Table III-16 projects that the
likely decrease in cumulative GHG emissions reductions due to the EV/
PHEV/FCV incentives for MYs 2017-2025 vehicles is in the range of 80 to
110 million metric tons, or about 4 to 5 percent.
    It is important to note that the above projection of the impact of
the EV/PHEV/FCV incentives on the overall program GHG emissions
reductions assumes that there would be no change to the standard even
if the EV 0 gram per mile incentive were not in effect, i.e., that EPA
would propose exactly the same standard if the 0 gram per mile
compliance value were not allowed for any EV/PHEV/FCVs. While EPA has
not analyzed such a scenario, it is clear that not allowing a 0 gram
per mile compliance value would change the technology mix and cost
projected for the proposed standard.
    It is also important to note that the projected impact on GHG
emissions reductions in the above table are based on the 2025
nationwide average electricity upstream GHG emissions rate (powerplant
plus feedstock) of 0.574 grams GHG/watt-hour discussed above (based on
simulations with the EPA's Integrated Planning Model (IPM) for
powerplants in 2025, and a 1.06 factor to account for feedstock-related
GHG emissions).
    EPA recognizes two factors which could significantly reduce the
electricity upstream GHG emissions factor by calendar year 2025. First,
there is a likelihood that early EV/PHEV/FCV sales will be much more
concentrated in parts of the country with lower electricity GHG
emissions rates and much less concentrated in regions with higher
electricity GHG emissions rates. This has been the case with sales of
hybrid vehicles, and is likely to be more so with EVs in particular.
Second, there is the possibility of a future comprehensive program
addressing upstream emissions of GHGs from the generation of
electricity. Other factors which could also help in this regard include
technology innovation and lower prices for some powerplant fuels such
as natural gas.
    On the other hand, EPA also recognizes factors which could increase
the appropriate electricity upstream GHG emissions factor in the
future, such as a consideration of marginal electricity demand rather
than average demand and use of high-power charging. The possibility
that EVs won't displace gasoline vehicle use on a 1:1 basis (i.e.,
multi-vehicle households may use EVs for more shorter trips and fewer
longer trips, which could lead to lower overall travel for typical EVs
and higher overall travel for gasoline vehicles) could also reduce the
overall GHG emissions benefits of EVs.
    EPA seeks comment on information relevant to these and other
factors which could both decrease or increase the proper electricity
upstream GHG emissions factor for calendar year 2025 modeling.

3. Incentives for ``Game-Changing'' Technologies Including Use of
Hybridization and Other Advanced Technologies for Full-Size Pickup
Trucks
    As explained in section II. C above, the agencies recognize that
the standards under consideration for MY 2017-2025 will be challenging
for large trucks, including full size pickup trucks that are often used
for commercial purposes and have generally higher payload and towing
capabilities, and cargo volumes than other light-duty vehicles. In
Section II.C and Chapter 2 of the joint TSD, EPA and NHTSA describe how
the slope of the truck curve has been adjusted compared to the 2012-
2016 rule to reflect these disproportionate challenges. In Section
III.B, EPA describes the progression of the truck standards. In this
section, EPA describes a proposed incentive for full size pickup
trucks, proposed by EPA under both section 202 (a) of the CAA and
section 32904 (c) of EPCA, to incentivize advanced technologies on this
class of vehicles. This incentive would be in the form of credits under
the EPA GHG program, and fuel consumption improvement values
(equivalent to EPA's credits) under the CAFE program.
    The agencies' goal is to incentivize the penetration into the
marketplace of ``game changing'' technologies for these pickups,
including their hybridization. For that reason, EPA is proposing
credits for manufacturers that hybridize a significant quantity of
their full size pickup trucks, or use other technologies that
significantly reduce CO2 emissions and fuel consumption.
This proposed credit would be available on a per-vehicle basis for mild
and strong HEVs, as well as for use of other technologies that
significantly improve the efficiency of the full sized pickup class. As
described in section II.F. and III.B.10, EPA, in coordination with
NHTSA, is also proposing that manufacturers be able to include ``fuel
consumption improvement values'' equivalent to EPA CO2
credits in the CAFE program. The gallon per mile values equivalent to
EPA proposed CO2 credits are also provided below, in
addition to the proposed CO2 credits.\297\ These credits and
fuel consumption improvement values provide the incentive to begin
transforming this challenged category of vehicles toward use of the
most advanced technologies.
---------------------------------------------------------------------------

    \297\ Note that EPA's proposed calculation methodology in 40 CFR
600.510-12 does not use vehicle-specific fuel consumption
adjustments to determine the CAFE increase due to the various
incentives allowed under the proposed program. Instead, EPA would
convert the total CO2 credits due to each incentive
program from metric tons of CO2 to a fleetwide CAFE
improvement value. The fuel consumption values are presented to give
the reader some context and explain the relationship between
CO2 and fuel consumption improvements.
---------------------------------------------------------------------------

    Access to this credit is conditioned on a minimum penetration of
the technologies in a manufacturer's full size pickup truck fleet. The
proposed penetration rates can be found in Table 5-26 in the TSD. EPA
is seeking comment on these penetration rates and how they should be
applied to a manufacturer's truck fleet.
    To ensure its use for only full sized pickup trucks, EPA is
proposing a specific definition for a full sized pickup truck based on
minimum bed size and minimum towing capability. The specifics of this
proposed definition can be found in Chapter 5 of the draft joint TSD
(see Section 5.3.1) and in the draft regulations at 86.1866-12(e). This
proposed definition is meant to ensure that the larger pickup trucks
which provide significant utility with respect to payload and towing
capacity as well as open beds with large cargo capacity are captured by
the definition, while smaller pickup trucks which have more limited
hauling, payload and/or towing are not covered by the proposed
definition. For this proposal, a full sized pickup truck would be
defined as meeting requirements 1 and 2, below, as well as either
requirement 3 or 4, below:
    1. The vehicle must have an open cargo box with a minimum width
between the wheelhouses of 48 inches measured as the minimum lateral
distance between the limiting interferences (pass-through) of the
wheelhouses. The measurement would exclude the transitional arc, local
protrusions, and depressions or pockets, if present.\298\ An open cargo
box means a vehicle where the cargo bed does not have a permanent roof
or cover. Vehicles sold with detachable covers are considered ``open''
for the purposes of these criteria.
---------------------------------------------------------------------------

    \298\ This dimension is also known as dimension W202 as defined
in Society of Automotive Engineers Procedure J1100.
---------------------------------------------------------------------------

    2. Minimum open cargo box length of 60 inches defined by the lesser
of the pickup bed length at the top of the body (defined as the
longitudinal distance from the inside front of the pickup bed to the
inside of the closed endgate; this would be measured at the height of
the top of the open pickup bed along vehicle centerline and the pickup
bed length at the floor) and the pickup bed length at the floor
(defined as the longitudinal distance from the inside front of the
pickup bed to the inside of the closed endgate; this would be measured
at the cargo floor surface along vehicle centerline).\299\
---------------------------------------------------------------------------

    \299\ The pickup body length at the top of the body is also
known as dimension L506 in Society of Automotive Engineers Procedure
J1100. The pickup body length at the floor is also known as
dimension L505 in Society of Automotive Engineers Procedure J1100.
---------------------------------------------------------------------------

    3. Minimum Towing Capability--the vehicle must have a GCWR (gross
combined weight rating) minus GVWR (gross vehicle weight rating) value
of at least 5,000 pounds.\300\
---------------------------------------------------------------------------

    \300\ Gross combined weight rating means the value specified by
the vehicle manufacturer as the maximum weight of a loaded vehicle
and trailer, consistent with good engineering judgment. Gross
vehicle weight rating means the value specified by the vehicle
manufacturer as the maximum design loaded weight of a single
vehicle, consistent with good engineering judgment. Curb weight is
defined in 40 CFR 86.1803, consistent with the provisions of 40 CFR
1037.140.
---------------------------------------------------------------------------

    4. Minimum Payload Capability--the vehicle must have a GVWR (gross
vehicle weight rating) minus curb weight value of at least 1,700
pounds.
    As discussed above, this proposed definition is intend to cover the
larger pickup trucks sold in the U.S. today (and for 2017 and later)
which have the unique attributes of an open bed, and larger towing and/
or payload capacity. This proposed incentive will encourage the
penetration of advanced, low CO2 technologies into this
market segment. The proposed definition would exclude a number of
smaller-size pickup trucks sold in the U.S. today (examples are the
Dodge Dakota, Nissan Frontier, Chevrolet Colorado, Toyota Tacoma and
Ford Ranger). These vehicles generally have smaller boxes (and thus
smaller cargo capacity), and lower payload and towing ratings. EPA is
aware that some configurations of these smaller pickups trucks can
offer towing capacity similar to the larger pickups. As discussed in
the draft Joint TSD Section 5.3.1, EPA is seeking comment on expanding
the scope of this credit to somewhat smaller pickups (with a minimum
distance between the wheel wells of 42 inches, but still with a minimum
box length of 60 inches), provided they have the towing capabilities of
the larger full-size trucks (for example a minimum towing capacity of
6,000 pounds). EPA believes this could incentivize advanced
technologies (such as HEVs) on pickups which offer some of the utility
of the larger vehicles, but overall have lower CO2 emissions
due to the much lighter mass of the vehicle. Providing an advanced
technology incentive credit for a vehicle which offers consumers much
of the utility of a larger pickup truck but with overall lower
CO2 performance would promote the overall objective of the
proposed standards.

    EPA proposes that mild HEV pickup trucks would be eligible for a
per-truck 10 g/mi CO2 credit (equal to 0.0011 gal/mi for a
25 mpg truck) during MYs 2017-2021 if the mild HEV technology is used
on a minimum percentage of a company's full sized pickups. That minimum
percentage would be 30 percent of a company's full sized pickup
production in MY 2017 with a ramp up to at least 80 percent of
production in MY 2021.
    EPA is also proposing that strong HEV pickup trucks would be
eligible for a per-truck 20 g/mi CO2 credit (equal to 0.0023
gal/mi for a 25 mpg truck) during MYs 2017-2025 if the strong HEV
technology is used on a minimum percentage of a company's full sized
pickups. That minimum percentage would be 10 percent of a company's
full sized pickup production in each year over the model years 2017-
2025.
    To ensure that the hybridization technology used by manufacturers
seeking one of these credits meets the intent behind the incentives,
EPA is proposing very specific definitions of what qualifies as a mild
and a strong HEV for these purposes. These definitions are described in
detail in Chapter 5 of the draft joint TSD (see section 5.3.3).
    Because there are other technologies besides mild and strong
hybrids which can significantly reduce GHG emissions and fuel
consumption in pickup trucks, EPA is also proposing performance-based
incentive credits, and equivalent fuel consumption improvement values
for CAFE, for full size pickup trucks that achieve an emission level
significantly below the applicable CO2 target.\301\ EPA
proposes that this credit be either 10 g/mi CO2 (equivalent
to 0.0011 gal/mi for the CAFE program) or 20 g/mi CO2
(equivalent to 0.0023 gal/mi for the CAFE program) for pickups
achieving 15 percent or 20 percent, respectively, better CO2
than their footprint based target in a given model year. Because the
footprint target curve has been adjusted to account for A/C related
credits, the CO2 level to be compared with the target would
also include any A/C related credits generated by the vehicles. EPA
provides further details on this performance-based incentive in Chapter
5 of the draft joint TSD (see Section 5.3). The 10 g/mi (equivalent to
0.0011 gal/mi) performance-based credit would be available for MYs 2017
to 2021 and a vehicle meeting the requirements would receive the credit
until MY 2021 unless its CO2 level or fuel consumption
increases. The 10 g/mi credit is not available after 2021 because the
post-2021 standards quickly overtake a 15% overcompliance. Earlier in
the program, an overcompliance lasts for more years, making the credit/
value appropriate for a longer period. The 20 g/mi CO2
(equivalent to 0.0023 gal/mi) performance-based credit would be
available for a maximum of 5 consecutive years within the model years
of 2017 to 2025 after it is first eligible, provided its CO2
level and fuel consumption does not increase. Subsequent redesigns can
qualify for the credit again. The credits would begin in the model year
of introduction, and (as noted) could not extend past MY 2021 for the
10 g/mi credit (equivalent to 0.0011 gal/mi) and MY 2025 for the 20 g/
mi credit (equivalent to 0.0023 gal/mi).
---------------------------------------------------------------------------

    \301\ The 15 and 20 percent thresholds would be based on
CO2 performance compared to the applicable CO2
vehicle footprint target for both CO2 credits and
corresponding CAFE fuel consumption improvement values. As with A/C
and off-cycle credits, EPA would convert the total CO2
credits due to the pick-up incentive program from metric tons of
CO2 to a fleetwide equivalent CAFE improvement value.
---------------------------------------------------------------------------

    As with the HEV-based credit, the performance-based credit/value
requires that the technology be used on a minimum percentage of a
manufacturer's full-size pickup trucks. That minimum percentage for the
10 g/mi GHG credit (equivalent to 0.0011 gal/mi fuel consumption
improvement value) would be 15 percent of a company's full sized pickup
production in MY 2017 with a ramp up to at least 40 percent of
production in MY 2021. The minimum percentage for the 20 g/mi credit
(equivalent to 0.0011 gal/mi fuel consumption improvement value) would
be 10 percent of a company's full sized pickup production in each year
over the model years 2017-2025. These minimum percentages are set to
encourage significant penetration of these technologies, leading to
long-term market acceptance.
    Importantly, the same vehicle could not receive credits (or
equivalent fuel consumption improvement values) under both the HEV and
the performance-based approaches. EPA requests comment on all aspects
of this proposed pickup truck incentive credit, including the proposed
definitions for full sized pickup truck and mild and strong HEV.
4. Treatment of Plug-in Hybrid Electric Vehicles, Dual Fuel Compressed
Natural Gas Vehicles, and Ethanol Flexible Fuel Vehicles for GHG
Emissions Compliance
a. Greenhouse Gas Emissions
i. Introduction
    This section addresses proposed approaches for determining the
compliance values for greenhouse gas (GHG) emissions for those vehicles
that can use two different fuels, typically referred to as dual fuel
vehicles under the CAFE program. Three specific technologies are
addressed: Plug-in hybrid electric vehicles (PHEVs), dual fuel
compressed natural gas (CNG) vehicles, and ethanol flexible fuel
vehicles (FFVs).\302\ EPA's underlying principle is to base compliance
values on demonstrated vehicle tailpipe CO2 emissions
performance. The key issue with vehicles that can use more than one
fuel is how to weight the operation (and therefore GHG emissions
performance) on the two different fuels. EPA proposes to do this on a
technology-by-technology basis, and the sections below will explain the
rationale for choosing a particular approach for each vehicle
technology.
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    \302\ EPA recognizes that other vehicle technologies may be
introduced in the future that can use two (or more) fuels. For
example, the original FFVs were designed for up to 85% methanol/15%
gasoline, rather than the 85% ethanol/15% gasoline for which current
FFVs are designed. EPA has regulations that address methanol
vehicles (both FFVs and dedicated vehicles), and, for GHG emissions
compliance in MYs 2017-2025, EPA is proposing to treat methanol
vehicles in the same way as ethanol vehicles.
---------------------------------------------------------------------------

    EPA is proposing no changes to the tailpipe GHG emissions
compliance approach for dedicated vehicles, i.e., those vehicles that
can use only one fuel. As finalized for MY 2016 and later vehicles in
the 2012-2016 rule, tailpipe CO2 emissions compliance levels
are those values measured over the EPA 2-cycle city/highway tests.\303\
EPA is proposing provisions for how and when to also account for the
upstream fuel production and distribution related GHG emissions
associated with electric vehicles, fuel cell vehicles, and the electric
portion of plug-in hybrid electric vehicles, and these provisions are
discussed in Section III.C.2 above.
---------------------------------------------------------------------------

    \303\ For dedicated alternative fuel vehicles. See 75 at FR
25434.
---------------------------------------------------------------------------

ii. Plug-In Hybrid Electric Vehicles
    PHEVs can operate both on an on-board battery that can be charged
by wall electricity from the grid, and on a conventional liquid fuel
such as gasoline. Depending on how these vehicles are fueled and
operated, PHEVs

could operate exclusively on grid electricity, exclusively on the
conventional fuel, or any combination of both fuels. EPA can determine
the CO2 emissions performance when operated on the battery
and on the conventional fuel. But, in order to generate a single
CO2 emissions compliance value, EPA must adopt an approach
for determining the appropriate weighting of the CO2
emissions performance on grid electricity and the CO2
emissions performance on gasoline.
    EPA is proposing no changes to the Society of Automotive Engineers
(SAE) cycle-specific utility factor approach for PHEV compliance and
label emissions calculations first adopted by EPA in the joint EPA/DOT
final rulemaking establishing new fuel economy and environment label
requirements for MY 2013 and later vehicles.\304\ This utility factor
approach is based on several key assumptions. One, PHEVs are designed
such that the first mode of operation is all-electric drive or electric
assist. Every PHEV design with which EPA is familiar is consistent with
this assumption. Two, PHEVs will be charged once per day. While this
critical assumption is unlikely to be met by every PHEV driver every
day, EPA believes that a large majority of PHEV owners will be highly
motivated to re-charge as frequently as possible, both because the
owner has paid a considerably higher initial vehicle cost to be able to
operate on grid electricity, and because electricity is considerably
cheaper, on a per mile basis, than gasoline. Three, it is reasonable to
assume that future PHEV drivers will retain driving profiles similar to
those of past drivers on which the utility factors were based. More
detailed information on the development of this utility factor approach
can be obtained from the Society of Automotive Engineers.\305\ EPA will
continue to reevaluate the appropriateness of these assumptions over
time.
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    \304\ 76 FR 39504-39505 (July 6, 2011) and 40 CFR 600.116-12(b).
    \305\ http://www.SAE.org, specifically SAE J2841 ``Utility
Factor Definitions for Plug-In Hybrid Electric Vehicles Using Travel
Survey Data,'' September 2010.
---------------------------------------------------------------------------

    Based on this approach, and PHEV-specific specifications such as
all-electric drive or equivalent all-electric range, the cycle-specific
utility factor methodology yields PHEV-specific values for projected
average percent of operation on grid electricity and average percent of
operation on gasoline over both the city and highway test cycles. For
example, the Chevrolet Volt PHEV, the only original equipment
manufacturer (OEM) PHEV in the U.S. market today, which has an all-
electric range of 35 miles on EPA's fuel economy label, has city and
highway cycle utility factors of about 0.65, meaning that the average
Volt driver is projected to drive about 65 percent of the miles on grid
electricity and about 35 percent of the miles on gasoline. Each PHEV
will have its own utility factor.
    Based on this utility factor approach, EPA calculates the GHG
emissions compliance value for an individual PHEV as the sum of (1) the
GHG emissions value for electric operation (either 0 grams per mile or
a non-zero value reflecting the net upstream GHG emissions accounting
depending on whether automaker EV/PHEV/FCV production is below or above
its cumulative production cap as discussed in Section III.C.2 above)
multiplied by the utility factor, and (2) the tailpipe CO2
emissions value on gasoline multiplied by (1 minus the utility factor).
iii. Dual Fuel Compressed Natural Gas Vehicles
    Dual fuel CNG vehicles operate on either compressed natural gas or
gasoline, but not both at the same time, and have separate tanks for
the two fuels.\306\ There are no OEM dual fuel CNG vehicles in the U.S.
market today, but some manufacturers have expressed interest in
bringing them to market during the rulemaking time frame. Under current
EPA regulations through MY 2015, GHG emissions compliance values for
dual fuel CNG vehicles are based on a methodology that provides
significant GHG emissions incentives equivalent to the ``CAFE credit''
approach for dual and flexible fuel vehicles. For MY 2016, current EPA
regulations utilize a methodology based on demonstrated vehicle
emissions performance and real world fuels usage, similar to that for
ethanol flexible fuel vehicles discussed below.
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    \306\ EPA considers ``bi-fuel'' CNG vehicles to be those
vehicles that can operate on a mixture of CNG and gasoline. Bi-fuel
vehicles would not be eligible for this treatment, since they are
not designed to allow the use of CNG only.
---------------------------------------------------------------------------

    EPA proposes to develop a new approach for dual fuel CNG vehicle
GHG emissions compliance that is very similar to the utility factor
approach developed and described above for PHEVs, and for this new
approach to take effect with MY 2016. As with PHEVs, EPA believes that
owners of dual fuel CNG vehicles will preferentially seek to refuel and
operate on CNG fuel as much as possible, both because the owner paid a
much higher price for the dual fuel capability, and because CNG fuel is
considerably cheaper than gasoline on a per mile basis. EPA notes that
there are some relevant differences between dual fuel CNG vehicles and
PHEVs, and some of these differences might weaken the case for using
utility factors for dual fuel CNG vehicles. For example, a dual fuel
CNG vehicle might be able to run on gasoline when both fuels are
available on board (depending on how the vehicle is designed), it may
be much more inconvenient for some private dual fuel CNG vehicle owners
to fuel every day relative to PHEVs, and there are many fewer CNG
refueling stations than electrical charging facilities.\307\ On the
other hand, there are differences that could strengthen the case as
well, e.g., many dual fuel CNG vehicles will likely have smaller
gasoline tanks given the expectation that gasoline will be used only as
an ``emergency'' fuel, and it may be easier for a dual fuel CNG vehicle
to be refueled during the day than a PHEV (which is most conveniently
refueled at night with a home charging unit).
---------------------------------------------------------------------------

    \307\ EPA assumes that most PHEV owners will charge at home with
electrical charging equipment that they purchase and install for
their own use.
---------------------------------------------------------------------------

    Taking all these considerations into account, EPA believes that the
merit of using a utility factor-based approach for dual fuel CNG
vehicles is similar to that of doing so for PHEVs, and we propose to
develop a similar methodology for dual fuel CNG vehicles. For example,
applying the current SAE fleet utility factor approach developed for
PHEVs to a dual fuel CNG vehicle with a 150-mile CNG range would result
in a compliance assumption of about 95 percent operation on CNG and
about 5 percent operation on gasoline.\308\ EPA is proposing to
directly extend the PHEV utility factor methodology to dual fuel CNG
vehicles, using the same assumptions about daily refueling. EPA invites
comment on this proposal, including the appropriateness of the
assumptions described above for dual fuel CNG vehicles.
---------------------------------------------------------------------------

    \308\ See SAE J2841 ``Utility Factor Definitions for Plug-In
Hybrid Electric Vehicles Using Travel Survey Data,'' September 2010,
available at http://www.SAE.org, which we are proposing to use for
dual fuel CNG vehicles as well.
---------------------------------------------------------------------------

    Further, for MYs 2012-2015, EPA is also proposing to allow the
option, at the manufacturer's discretion, to use the proposed utility
factor-based methodology for MYs 2016-2025 discussed above. The
rationale for providing this option is that some manufacturers are
likely to reach the maximum allowable GHG emissions credits (based on
the statutory CAFE credits) through their production of

ethanol FFVs, and therefore would not be able to gain any GHG emissions
compliance benefit even if they produced dual fuel CNG vehicles that
demonstrated superior GHG emissions performance.
    In determining eligibility for the utility factor approach, EPA may
consider placing additional constraints on the designs of dual fuel CNG
vehicles to maximize the likelihood that consumers will routinely seek
to use CNG fuel. Options include, but are not limited to, placing a
minimum value on CNG tank size or CNG range, a maximum value on
gasoline tank size or gasoline range, a minimum ratio of CNG-to-
gasoline range, and requiring an onboard control system so that a dual
fuel CNG vehicle is only able to access the gasoline fuel tank if the
CNG tank is empty. EPA seeks comments on the merits of these additional
eligibility constraints for dual fuel CNG vehicles.
iv. Ethanol Flexible Fuel Vehicles
    Ethanol FFVs can operate on E85 (a blend of 15 percent gasoline and
85 percent ethanol, by volume), gasoline, or any blend of the two.
There are many ethanol FFVs in the market today.
    In the final rulemaking for MY 2012-2016, EPA promulgated
regulations for MYs 2012-2015 ethanol FFVs that provided significant
GHG emissions incentives equivalent to the long-standing ``CAFE
credits'' for ethanol FFVs under EPCA, since many manufacturers had
relied on the availability of these credits in developing their
compliance strategies.\309\ Beginning in MY 2016, EPA ended the GHG
emissions compliance incentives and adopted a methodology based on
demonstrated vehicle emissions performance. This methodology
established a default value assumption where ethanol FFVs are operated
100 percent of the time on gasoline, but allows manufacturers to use a
relative E85 and gasoline vehicle emissions performance weighting based
either on national average E85 and gasoline sales data, or
manufacturer-specific data showing the percentage of miles that are
driven on E85 vis-[agrave]-vis gasoline for that manufacturer's ethanol
FFVs.\310\ EPA is not proposing any changes to this methodology for MYs
2017-2025.
---------------------------------------------------------------------------

    \309\ 75 FR at 25432-433.
    \310\ 75 FR at 25433-434.
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    EPA believes there is a compelling rationale for not adopting a
utility factor-based approach, as discussed above for PHEVs and dual
fuel CNG vehicles, for ethanol FFVs. Unlike with PHEVs and dual fuel
CNG vehicles, owners of ethanol FFVs do not pay any more for the E85
fueling capability. Unlike with PHEVs and dual fuel CNG vehicles,
operation on E85 is not cheaper than gasoline on a per mile basis, it
is typically the same or somewhat more expensive to operate on E85.
Accordingly, there is no direct economic motivation for the owner of
ethanol FFVs to seek E85 refueling, and in some cases there is an
economic disincentive. Because E85 has a lower energy content per
gallon than gasoline, an ethanol FFV will have a lower range on E85
than on gasoline, which provides an additional disincentive. The data
confirm that, on a national average basis in 2008, less than one
percent of ethanol FFVs used E85 fuel.\311\
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    \311\ 75 FR 14762 (March 26, 2010).
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    If, in the future, this situation were to change (e.g., if E85 were
less expensive, on a per mile basis), then EPA could reconsider its
approach to this issue.
b. Procedures for CAFE Calculations for MY 2020 and Later
    49 U.S.C. 32905 specifies how the fuel economy of dual fuel
vehicles is to be calculated for the purposes of CAFE through the 2019
model year. The basic calculation is a 50/50 harmonic average of the
fuel economy for the alternative fuel and the conventional fuel,
irrespective of the actual usage of each fuel. In addition, the fuel
economy value for the alternative fuel is significantly increased by
dividing by 0.15 in the case of CNG and ethanol and by using a
petroleum equivalency factor methodology that yields a similar overall
increase in the CAFE mpg value for electricity.\312\ In a related
provision, 49 U.S.C. 32906, the amount by which a manufacturer's CAFE
value (for domestic passenger cars, import passenger cars, or light-
duty trucks) can be improved by the statutory incentive for dual fuel
vehicles is limited by EPCA to 1.2 mpg through 2014, and then gradually
reduced until it is phased out entirely starting in model year
2020.\313\ With the expiration of the special calculation procedures in
49 U.S.C. 32905 for dual fueled vehicles, the CAFE calculation
procedures for model years 2020 and later vehicles need to be set under
the general provisions authorizing EPA to establish testing and
calculation procedures.\314\
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    \312\ 49 U.S.C. 32905.
    \313\ 49 U.S.C. 32906. NHTSA interprets section 32906(a) as not
limiting the impact of duel fueled vehicles on CAFE calculations
after MY2019.
    \314\ 49 U.S.C. 32904(a), (c).
---------------------------------------------------------------------------

    With the expiration of the specific procedures for dual fueled
vehicles, there is less need to base the procedures on whether a
vehicle meets the specific definition of a dual fueled vehicle in EPCA.
Instead, EPA's focus is on establishing appropriate procedures for the
broad range of vehicles that can use both alternative and conventional
fuels. For convenience, this discussion uses the term dual fuel to
refer to vehicles that can operate on an alternative fuel and on a
conventional fuel.
    EPA sees two potential approaches for dual fuel vehicle CAFE
calculations for model years 2020 and later. EPA requests comment on
the two options discussed here, and we welcome comments on other
potential options as well.
    Determining the fuel economy of the vehicle for purposes of CAFE
requires a determination on how to weight the fuel economy performance
on the alternative fuel and the fuel economy performance on the
conventional fuel. For PHEVs, dual-fuel CNG vehicles, and FFVs, EPA
proposes to apply the same weighting for CAFE purposes as for purposes
of GHG emissions compliance values. EPA proposes that, for PHEVs and
dual-fuel CNG vehicles, the fuel economy weightings will be determined
using the SAE utility factor methodology, while for ethanol FFVs,
manufacturers can choose to use a default based on 100% gasoline
operation, or can choose to base the fuel economy weightings on
national average E85 and gasoline use, or on manufacturer-specific data
showing the percentage of miles that are driven on E85 vis-[agrave]-vis
gasoline for that manufacturer's ethanol FFVs. Where the two options
differ is whether the 0.15 divisor or similar adjustment factor is
retained or not. EPA believes that there are legitimate arguments both
for and against retaining the adjustment factors.
    EPA proposes to continue to use the 0.15 divisor for CNG and
ethanol, and the petroleum equivalency factor for electricity, both of
which the statute requires to be used through 2019, for model years
2020 and later. EPA believes there are two primary arguments for
retaining the 0.15 divisor and petroleum equivalency factor. One, this
approach is directionally consistent with the overall petroleum
reduction goals of EPCA and the CAFE program, because it continues to
encourage manufacturers to build vehicles capable of operating on fuels
other than petroleum. Two, the 0.15 divisor and petroleum equivalency
factor are used under EPCA to calculate CAFE compliance values for
dedicated alternative fuel vehicles, and retaining this approach for
dual fuel vehicles would maintain consistency, for MY 2020 and later,
between the approaches for dedicated alternative fuel vehicles and for
the alternative fuel portion of

dual fuel vehicle operation. Opting not to provide the 0.15 divisor or
PEF for the alternative fuel portion of these vehicles' operation may
discourage manufacturers from building vehicles capable of operating on
both gasoline/diesel and alternative fuels, and thus potentially
discourage important ``bridge'' technologies that may help consumers
overcome current concerns about advanced technology vehicles.
    EPA recognizes that this proposed calculation procedure would
continue to provide, directionally, an increase in fuel economy values
for the vehicles previously covered by the special calculation
procedures in 49 U.S.C. 32905, and that Congress chose both to end the
specific calculation procedures in that section and over time to reduce
the benefit for CAFE purposes of the increase in fuel economy mandated
by those special calculation procedures. However, the proposed
provisions differ significantly in important ways from the special
calculation provisions mandated by EPCA. Most importantly, they are
changed to reflect actual usage rates of the alternative fuel and do
not use the artificial 50/50 weighting previously mandated by 49 U.S.C.
32905. In practice this means the primary vehicles to benefit from the
proposed provision will be PHEVs and dual-fuel CNG vehicles, and not
FFVs, while the primary source of benefit to manufacturers under the
statutory provisions came from FFVs. Changing the weighting to better
reflect real world usage is a major change from that mandated by 49
U.S.C. 32905, and it orients the calculation procedure more to the real
world impact on petroleum usage, consistent with the statute's
overarching purpose of energy conservation. In addition, as noted
above, Congress clearly continued the calculation procedures for
dedicated alternative fuel vehicles that result in increased fuel
economy values. This proposed approach is consistent with this, as it
uses the same approach for calculating fuel economy on the alternative
fuel when there is real world usage of the alternative fuel. Since the
proposed provisions are quite different in effect from the specified
provisions in 49 U.S.C. 32905, and are consistent with the calculation
procures for dedicated vehicles that use the same alternative fuel, EPA
believes this proposal would be an appropriate exercise of discretion
under the general authority provided in 49 U.S.C. 32904.
    An alternative option to the above proposal, and about which EPA
seeks comment, is to not adopt the 0.15 divisor and petroleum
equivalency factor for model years 2020 and later. The fuel economy for
the CNG portion of a dual fuel CNG vehicle, E85 portion of FFVs, and
the electric portion of a PHEV would be determined strictly on an
energy-equivalent basis, without any adjustment based on the 0.15
divisor or petroleum equivalency factor. For E85 FFVs, the manufacturer
would almost certainly use the gasoline fuel economy value only because
gasoline has higher energy content and fuel economy than E85.\315\ This
approach would place less emphasis on conservation of petroleum and
more on conservation of energy for dual fuel vehicles. It would also
place more emphasis on Congress' decision to reduce over time the
impact on CAFE from the increased fuel economy values derived from the
specified calculation procedures in 49 U.S.C. 32905, and less emphasis
on aligning the incentives for dual fuel alternative fuel vehicles with
the incentives for dedicated alternative fuel vehicles.\316\ EPA
invites comment on both approaches.
---------------------------------------------------------------------------

    \315\ Manufacturers can also choose to base the fuel economy
weightings on national average E85 and gasoline use, or on
manufacturer-specific data showing the percentage of miles that are
driven on E85 vis-[agrave]-vis gasoline for that manufacturer's
ethanol FFVs, but since E85 fuel economy ratings are based on miles
per gallon of E85, not adjusted for energy equivalency with
gasoline, E85 mpg values are lower than gasoline mpg values, which
makes this a non-option.
    \316\ Incentives for dedicated alternative fuel vehicles would
not be affected by changes to incentives for dual fueled vehicles.
Dedicated alternative fuel vehicles would continue to use the 0.15
divisor or petroleum equivalency factor.
---------------------------------------------------------------------------

5. Off-Cycle Technology Credits
    For MYs 2012-2016, EPA provided an option for manufacturers to
generate credits for employing new and innovative technologies that
achieve CO2 reductions which are not reflected on current 2-
cycle test procedures. For this proposal, EPA, in coordination with
NHTSA, is proposing to apply the off-cycle credits and equivalent fuel
consumption improvement values to both the GHG and CAFE programs. This
proposed expansion is a change from the 2012-16 final rule where EPA
only provided the off-cycle credits for the GHG program. For MY 2017
and later, EPA is proposing that manufacturers may continue to use off-
cycle credits for GHG compliance and begin to use fuel consumption
improvement values (essentially equivalent to EPA credits) for CAFE
compliance. In addition, EPA is proposing a set of defined (e.g.
default) values for identified off-cycle technologies that would apply
unless the manufacturer demonstrates to EPA that a different value for
its technologies is appropriate. The proposed changes to incorporate
off-cycle technologies for the GHG program are described in Section
III.C.5.a-b below, and for the CAFE program are described in Section
III.C.5.c below.
a. Off-Cycle Credit Program Adopted in MY 2012-2016 Rule
    In the MY 2012-2016 Final Rule, EPA adopted an optional credit
opportunity for new and innovative technologies that reduce vehicle
CO2 emissions, but for which the CO2 reduction
benefits are not significantly captured over the 2-cycle test procedure
used to determine compliance with the fleet average standards (i.e.,
``off-cycle'').\317\ EPA indicated that eligible innovative
technologies are those that may be relatively newly introduced in one
or more vehicle models, but that are not yet implemented in widespread
use in the light-duty fleet, and which provide novel approaches to
reducing greenhouse gas emissions. The technologies must have
verifiable and demonstrable real-world GHG reductions.\318\ EPA adopted
the off-cycle credit option to provide an incentive to encourage the
introduction of these types of technologies, believing that bona fide
reductions from these technologies should be considered in determining
a manufacturer's fleet average, and that a credit mechanism is an
effective way to do this. This optional credit opportunity is currently
available through the 2016 model year.
---------------------------------------------------------------------------

    \317\ 75 FR 25438-440,
    \318\ See 40 CFR 1866.12 (d); 75 FR at 25438.
---------------------------------------------------------------------------

    EPA finalized a two-tiered process for OEMs to demonstrate that
CO2 reductions of an innovative and novel technology are
verifiable and measureable but are not captured by the 2-cycle test
procedures. First, a manufacturer must determine whether the benefit of
the technology could be captured using the 5-cycle methodology
currently used to determine fuel economy label values. EPA established
the 5-cycle test methods to better represent real-world factors
impacting fuel economy, including higher speeds and more aggressive
driving, colder temperature operation, and the use of air conditioning.
If this determination is affirmative, the manufacture must follow the
5-cycle procedures.
    If the manufacturer finds that the technology is such that the
benefit is not adequately captured using the 5-cycle approach, then the
manufacturer would have to develop a robust methodology, subject to EPA
approval, to demonstrate the benefit and determine the appropriate
CO2 gram per mile credit. This case-by-case, non-5-cycle
credits approach includes an opportunity for public comment as part of
the approval

process. The demonstration program must be robust, verifiable, and
capable of demonstrating the real-world emissions benefit of the
technology with strong statistical significance. Whether the approach
involves on-road testing, modeling, or some other analytical approach,
the manufacturer is required to present a proposed methodology to EPA.
EPA will approve the methodology and credits only if certain criteria
are met. Baseline emissions and control emissions must be clearly
demonstrated over a wide range of real world driving conditions and
over a sufficient number of vehicles to address issues of uncertainty
with the data. Data must be on a vehicle model-specific basis unless a
manufacturer demonstrated model specific data was not necessary. See
generally 75 FR at 25438-40.
b. Proposed Changes to the Off-cycle Credits Program
    EPA has been encouraged by automakers' interest in off-cycle
credits since the program was finalized. Though it is early in the
program, several manufacturers have shown interest in introducing off-
cycle technologies which are in various stages of development and
testing. EPA believes that continuing the option for off-cycle credits
would further encourage innovative strategies for reducing
CO2 emissions beyond those measured by the 2-cycle test
procedures. Continuing the program provides manufacturers with
additional flexibility in reducing CO2 to meet increasingly
stringent CO2 standards and to encourage early penetration
of off-cycle technologies into the light duty fleet. Furthermore,
extending the program may encourage automakers to invest in off-cycle
technologies that could have the benefit of realizing additional
reductions in the light-duty fleet over the longer-term. Therefore, EPA
is proposing to extend the off-cycle credits program to 2017 and later
model years.
    In implementing the program, some manufacturers have expressed
concern that a drawback to using the program is uncertainty over which
technologies may be eligible for off-cycle credits plus uncertainties
resulting from a case-by-case approval process. Current EPA eligibility
criteria require technologies to be new, innovative, and not in
widespread use in order to qualify for credits. Also, the MY 2012-2016
Final Rule specified that technologies must not be significantly
measurable on the 2-cycle test procedures. As discussed below, EPA
proposes to significantly modify the eligibility criteria, as the
current criteria are not well defined and have been a source of
uncertainty for manufacturers, thereby interfering with the goal of
providing an incentive for the development and use of additional
technologies to achieve real world reductions in CO2
emissions. The focus will be on whether or not add-on technologies can
be demonstrated to provide off-cycle CO2 emissions
reductions that are not sufficiently reflected on the 2-cycle tests.
    In addition, as described below in section III.C.5.b.i, EPA is
proposing that manufacturers would be able to generate credits by
applying technologies listed on an EPA pre-defined and pre-approved
technology list starting with MY 2017. These credits would be verified
and approved as part of certification with no prior approval process
needed. We believe this new option would significantly streamline and
simplify the program for manufacturers choosing to use it and would
provide manufacturers with certainty that credits may be generated
through the use of pre-approved technologies. For credits not based on
the pre-defined list, EPA is proposing to streamline and better define
a step-by-step process for demonstrating emissions reductions and
applying for credits. EPA is proposing that these procedural changes to
the case-by-case approach would be effective for new credit
applications for both the remaining years of the MY 2012-2016 program
as well as for MY 2017 and later credits that are not based on the pre-
defined list.
    As discussed in section II.F and III.B.10, EPA, in coordination
with NHTSA, is also proposing that manufacturers be able to include
fuel consumption reductions resulting from the use of off-cycle
technologies in their CAFE compliance calculations. Manufacturers would
generate ``fuel consumption improvement values'' essentially equivalent
to EPA credits, for use in the CAFE program. The proposed changes to
the CAFE program to incorporate off-cycle technologies are discussed
below in section III.5.c.
i. Pre-Defined Credit List for MY 2017 and Later
    As noted above, EPA proposes to establish a list of off-cycle
technologies from which manufacturers could select to earn a pre-
defined level of CO2 credits in MY 2017 and later. Both
technologies and credit values based on the list would be pre-approved.
The manufacturer would demonstrate in the certification process that
their technology meets the definition of the technology in the list.
Table III-17 provides an initial proposed list of the technologies and
per vehicle credit levels for cars and light trucks. EPA has used a
combination of available activity data from the MOVES model, vehicle
and test data, and EPA's vehicle simulation tool to estimate a proposed
credit value EPA believes to be appropriate. In particular, this
vehicle simulation tool was used to determine the credit amount for
electrical load reduction technologies (e.g. high efficiency exterior
lighting, engine heat reconvery, and solar roof panels) and active
aerodynamic improvements. Chapter 5 of the joint TSD provides a
detailed description of how these technologies are defined and how the
proposed credits levels were derived.

[GRAPHIC] [TIFF OMITTED] TP01DE11.074

    Two technologies on the list--active aerodynamic improvements and
stop start--are in a different category than the other technologies on
the list. Both of these technologies are included in the agencies'
modeling analysis of technologies projected to be available for use in
achieving the reductions needed for the standards. We have information
on their effectiveness, cost, and availability for purposes of
considering them along with the various other technologies we consider
in determining the appropriate CO2 emissions standard. These
technologies are among those listed in Chapter 3 of the joint TSD and
have measureable benefit on the 2-cycle test. However in the context of
off-cycle credits, stop start is any technology which enables a vehicle
to automatically turn off the engine when the vehicle comes to a rest
and restart the engine when the driver applies pressure to the
accelerator or releases the brake. This includes HEVs and PHEVs (but
not EVs). In addition, active grill shutters is just one of various
technologies that can be used as part of aerodynamic design
improvements (as part of the ``aero2'' technology). The modeling and
other analysis developed for determining the appropriate emissions
standard includes these technologies, using the effectiveness values on
the 2-cycle test. This is consistent with our consideration of all of
the other technologies included in these analyses. Including them on
the list for off-cycle credit generation, for purposes of compliance
with the standard, would recognize that these technologies have a
higher degree of effectiveness in reducing real-world CO2
emissions than is reflected in their 2-cycle effectiveness. EPA has
taken into account the generation of off-cycle credits by these two
technologies in determining the appropriateness of the proposed GHG
standards, considering the amount of credit, the projected degree of
penetration of these technologies, and other factors. Section III.D has
a more detailed discussion on the feasibility of the standards within
the context of the flexibilities (such as off-cycle credits) proposed
in this rule. As discussed in section III.D, EPA plans to incorporate
the off-cycle credits for these two technologies in the cost analysis
for the final rule (which EPA anticipates would slightly reduce costs
with no change to benefits). EPA requests comments on this approach for
stop start and active aerodynamic improvements.
    Although EPA believes that there is sufficient information to
estimate performance of other listed technologies for purposes of a
credit program, EPA does not believe it appropriate to reflect these
technologies in setting the level of standards at this point. There
remains significant uncertainty as to the extent listed technologies
other than stop start and active aerodynamic improvements may be used
across the light duty fleet and (in some instances) costs of the
technologies. Including them in the

standard setting, as is done with A/C control technology, calls for a
reasonable projection of the penetration of these technologies across
the fleet and over time, along with reasonable estimates of their cost.
EPA does not have adequate data at this point in time to make such
fleet wide projections for other technologies on the list, or for other
technologies addressed by the case-by-case approach. As in the 2012-
2016 rule, the use of these technologies continues to be not nearly so
well developed and understood for purposes of consideration in setting
the standards. See 75 FR at 25438. Technologies that are considered by
EPA in setting the standard, as discussed in section III.D and in
Chapter 3 of the TSD, may not generate off-cycle credits under this
approach, except for active aerodynamic improvements and stop
start.\319\ This would amount to the double counting discussed at 75 FR
25438, as EPA has already considered these technologies and assigned
them an emission reduction effectiveness for purposes of standard
setting, and has enough information on effectiveness, cost, and
applicability to project their use for purposes of standard setting.
EPA will reassess the list above for the Final Rule, based on
additional information that becomes available during the comment
period. It may also be appropriate to reconsider this approach as part
of the mid-term evaluation as information on these technologies'
applicability, costs, and performance becomes more robust.
---------------------------------------------------------------------------

    \319\ Section III.D provides EPA projected technology
penetration rates. Technologies projected to be used to meet the
standards would not be eligible for off-cycle credits, with the
exception of stop start and active aerodynamic improvements.
---------------------------------------------------------------------------

    EPA proposes to cap the amount of credits a manufacturer could
generate using the above list to 10 g/mile per year on a combined car
and truck fleet-wide average basis. The cap would not apply on a
vehicle model basis, allowing manufacturers the flexibility to focus
off-cycle technologies on certain vehicle models and generate credits
for that vehicle model in excess of 10 g/mile. EPA is proposing a
fleet-wide cap because the proposed credits are based on limited data,
and also EPA recognizes that some uncertainty is introduced when
credits are provided based on a general assessment of off-cycle
performance as opposed to testing on the individual vehicle models.
Also, as discussed in Chapter 5 of the draft TSD, EPA believes the
credits proposed are based on conservative estimates, providing
additional assurance that the list would not result in an overall loss
of CO2 benefits. EPA proposes that manufacturers wanting to
generate credits in excess of the 10 g/mile limit for these listed
technologies could do so by generating necessary data and going through
the credit approval process described below in Section III.C.5.b.iii
and iv.
    As noted above, EPA proposes to make the list available for credit
generation starting in MY 2017. Prior to MY 2017, manufacturers would
need to demonstrate off-cycle emissions reductions in order to generate
credits for off-cycle technologies, including those on the list.
Requirements for demonstrating off-cycle credits not based on the list
are described below. Manufacturers may also opt to generate data for
listed technologies in MY 2017 and later where they are able to
demonstrate a credit value greater than that provided on the list.
    Prior to MY 2017, EPA would continue to evaluate off-cycle
technologies. Based on data provided by manufacturers for non-listed
technologies, and other available data, EPA would consider adding
technologies to the list through rulemaking. EPA could also issue
guidance in the future for additional off-cycle technologies,
indicating the level of credits that EPA expects could be approved for
any manufacturer through the case-by-case approach, helping to
streamline the case-by-case approach until a rulemaking was conducted
to update the list. If the CO2 reduction benefits of a
technology have been established through manufacturer data and testing,
EPA believes that it would be appropriate to list the technology and a
conservative associated credit value.
    Since one purpose of the off-cycle credits is to encourage market
penetration of the technologies (see 75 FR at 25438), EPA also proposes
to require minimum penetration rates for several of the listed
technologies as a condition for generating credit from the list as a
way to further encourage their widespread adoption by MY 2017 and
later. The proposed minimum penetration rates for the various
technologies are provided in Table III-17. At the end of the model year
for which the off-cycle credit is claimed, manufacturers would need to
demonstrate that production of vehicles equipped with the technologies
for that model year exceeded the percentage thresholds in order to
receive the listed credit. EPA proposes to set the threshold at 10
percent of a manufacturer's overall combined car and light truck
production except for technologies specific to HEVs/PHEVs/EVs and
exhaust heat recovery. EPA believes 10 percent is an appropriate
threshold as it would encourage manufacturers to develop technologies
for use on larger volume models and bring the technologies into the
mainstream. On the other hand, EPA is not proposing a larger value
because EPA does not want to discourage the use of technologies. For
solar roof panels (solar control) and electric heater circulation
pumps, which are HEV/PHEV/EV-specific, EPA is not proposing a minimum
penetration rate threshold for credit generation. Hybrids and EVs may
be a small subset of a manufacturer's fleet, less than 10 percent in
some cases, and EPA does not believe establishing a threshold for
hybrid-based technologies would be useful and could unnecessarily
impede the introduction of these technologies. EPA is also not
proposing to apply a minimum penetration threshold to exhaust heat
recovery because the threshold could impede rather than encourage the
development of the technology due to its relatively early stage of
development and potentially high cost. EPA requests comments on
applying this type of threshold, the appropriateness of 10 percent as
the threshold for several of the listed technologies, and the proposed
treatment of HEV/PHEV/EV specific technologies and exhaust heat
recovery.
ii. Proposed Technology Eligibility Criteria
    EPA proposes to remove the criteria in the 2012-2016 rule that off-
cycle technologies must be `new, innovative, and not widespread'
because these terms are imprecise and have created implementation
issues and uncertainty in the program. For example, it is unclear if
technologies developed in the past but not used extensively would be
considered new, if only the first one or two manufacturers using the
technology would be eligible or if all manufacturers could use a
technology to generate credits, or if credits for a technology would
sunset after a period of time. It has also been unclear if a technology
such as active aerodynamics would be eligible since it provides a small
measurable reduction on the 2-cycle test but provides additional
reductions off-cycle, especially during high speed driving. These
criteria have interfered with the goal of providing an incentive for
the development and use of off-cycle technology that reduces
CO2 emissions. EPA proposes this approach for new MY 2012-
2016 credits as well as for MY 2017-2025.
    EPA believes it is appropriate to provide credit opportunities for
technologies that achieve real world

reductions beyond those measured under the two-cycle test without
further making (somewhat subjective) judgments regarding the newness
and innovativeness of the technology. Instead, EPA proposes to provide
off-cycle credits for any technologies that are added to a vehicle
model that are demonstrated to provide significant incremental off-
cycle CO2 reductions, like those on the list. The proposed
technology demonstration and step-by-step application process is
described in detail below in section III.C.5.b.ii. EPA is proposing to
clarify that technologies providing small reductions on the 2-cycle
tests but additional significant reductions off-cycle could be eligible
to generate off-cycle credits. EPA thus proposes to remove the ``not
significantly measurable over the 2-cycle test'' criteria. EPA proposes
that, instead, manufacturers must be able to make a demonstration
through testing with and without the off-cycle technology.
    As noted above, EPA proposes that technologies included in EPA's
assessment in this rulemaking of technology for purposes of developing
the standard would not be allowed to generate off-cycle credits, as
their cost and effectiveness and expected use are already included in
the assessment of the standard. (As explained above, the agencies have
done so with respect to stop start and active aerodynamic improvements
by including the projected level of credits in determining the
appropriateness of the proposed standards.) EPA proposes that
technologies integral or inherent to the basic vehicle design including
engine, transmission, mass reduction, passive aerodynamic design, and
base tires would not be eligible for credits. For example,
manufacturers would not be able to generate off-cycle credits by moving
to an eight-speed transmission. EPA believes that it would be difficult
to clearly establish an appropriate A/B test (with and without
technologies) for technologies so integral to the basic vehicle design.
EPA proposes to limit the off-cycle program to technologies that can be
clearly identified as add-on technologies conducive to A/B testing.
Further, EPA would not provide credits for a technology required to be
used by Federal law, such as tire pressure monitoring systems, as EPA
would consider such credits to be windfall credits (i.e. not generated
as a result of the rule). The base versions of such technologies would
be considered part of the base vehicle. However, if a manufacturer
demonstrates that an improvement to such technologies provides
additional off-cycle benefits above and beyond a system meeting minimum
Federal requirements, those incremental improvements could be eligible
for off-cycle credits, assuming an appropriate quantification of
credits is demonstrated.
    By proposing to remove the ``new, innovative, not widespread use''
criteria in the present rule, EPA is also making clear that once
approved, EPA does not intend to sunset a technology's credit
eligibility or deny credits to other vehicle applications using the
technology, as may have been implied by those criteria under the MY
2012-2016 program. EPA believes, at this time, that it should encourage
the wider use of technologies with legitimate off-cycle emissions
benefits. Manufacturers demonstrating through the EPA approval process
that the technology is effective on additional vehicle models would be
eligible for credits. Limiting the application of a technology or
sunsetting the availability of credits during the 2017-2025 time frame
would be counterproductive because it would remove part of the
incentive for manufacturers to invest in developing and deploying off-
cycle technologies, some of which may be promising but have
considerable development costs associated with them. Also, approving a
technology only to later disallow it could lead to a manufacturer
discontinuing the use of the technology even if it remained a cost
effective way to reduce emissions. EPA also believes that this approach
provides an incentive for manufacturers to continue to improve
technologies without concern that they will become ineligible for
credits at some future time. EPA requests comments on all aspects of
the above approach for the off-cycle credits program criteria.
iii. Demonstrating Off-Cycle Emissions Reductions
5-Cycle Testing
    EPA is retaining a two-tiered process for demonstrating the
CO2 reductions of off-cycle technologies (in those instances
when a manufacturer is not using the default value provided by the
rule), but is clarifying several of the requirements. The process
described below would be used for all credits not based on the pre-
defined list described in Section III.C.5.i, above. As noted above, the
proposed approach would replace the requirement in the 2012-2016 rule
that technology must not be ``significantly measurable'' over the 2-
cycle test. See section 86. 1866-12 (d) (ii). This criterion has been
problematic because several technologies provide some benefit on the 2-
cycle test but much greater benefits off-cycle. Under today's proposal,
technologies would need to be demonstrated to provide significant
incremental off-cycle benefits above and beyond those provided over the
2-cycle test (examples are shown below). EPA proposes this approach for
new MY 2012-2016 credits as well as for MY 2017-2025.
    The 5-cycle test procedures would remain the starting point for
demonstrating off-cycle emissions reductions. The MY 2012-2016
rulemaking established general 5-cycle testing requirements and EPA is
proposing several provisions to delineate what EPA would expect as part
of a 5-cycle based demonstration. Manufacturers requested clarification
on the amount of 5-cycle testing that would be needed to demonstrate
off-cycle credits, and EPA is proposing the following as part of the
step-by-step methodology manufacturers would follow to generate
credits. In addition to the general 5-cycle demonstration requirements
of the MY 2012-2016 program, EPA proposes to specifically require
model-based verification of 5-cycle results where off-cycle reductions
are small and could be a product of testing variability. EPA is also
proposing to specifically require that all applications include an
engineering analysis for why the technology provides off-cycle
emissions reductions. EPA proposes to specify that manufacturers would
run an initial set of three 5-cycle tests with and without the
technology providing the off-cycle CO2 reduction. Testing
must be conducted on a representative vehicle, selected using good
engineering judgment, for each vehicle model. EPA proposes that
manufacturers could bundle off-cycle technologies together for testing
in order to reduce testing costs and improve their ability to
demonstrate consistently measurable reductions over the tests. If these
A/B 5-cycle tests demonstrate an off-cycle benefit of 3 percent or
greater, comparing average test results with and without the off-cycle
technology, the manufacturer would be able to use the data as the basis
for credits. EPA has long used 3 percent as a threshold in fuel economy
confirmatory testing for determining if a manufacturer's fuel economy
test results are comparable to those run by EPA.\320\
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    \320\ 40 CFR 600.008 (b)(3).
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    If the initial three sets of 5-cycle results demonstrate a
reduction of less than a 3 percent difference in the 5-cycle results
with and without the off-cycle technology, the manufacturer

would have to run two additional 5-cycle tests with and without the
off-cycle technologies and verify the emission reduction using the EPA
Light-duty Simulation Tool described below. If the simulation tool
supports credits that are less than 3 percent of the baseline 2-cycle
emissions, then EPA would approve the credits based on the test
results. As outlined below, credits based on this methodology would be
subject to a 60 day EPA review period starting when EPA receives a
complete application, which would not include a public review.
    EPA believes that small off-cycle credit claims (i.e., less than 3
percent of the vehicle model 2-cycle CO2 level) should be
supported with modeling and engineering analysis. EPA is proposing the
approach above for a number of reasons. Emissions reductions of only a
few grams may not be statistically significant and could be the product
of gaming. Also, manufacturers have raised test-to-test variability as
an issue for demonstrating technologies through 5-cycle testing.
Modeling and engineering analyses can help resolve these questions. EPA
also requests comments on allowing manufacturers to use the EPA
simulation tool and engineering analysis in lieu of additional 5-cycle
testing. For some technologies providing very small incremental
benefits, it may not be possible to accurately measure their benefit
with vehicle testing.
Demonstrations Not Based on 5-Cycle Testing
    In cases where the benefit of a technological approach to reducing
CO2 emissions cannot be adequately represented using 5-cycle
testing, manufacturers will need to develop test procedures and
analytical approaches to estimate the effectiveness of the technology
for the purpose of generating credits. See 75 FR at 25440. EPA is not
proposing to make significant changes to this aspect of the program. If
the 5-cycle process is inadequate for the specific technology being
considered by the manufacturer (i.e., the 5-cycle test does not
demonstrate any emissions reductions), then an alternative approach may
be developed by the manufacturer and submitted to EPA for approval. The
demonstration program must be robust, verifiable, and capable of
demonstrating the real-world emissions benefit of the technology with
strong statistical significance. The methodology developed and
submitted to EPA would be subject to public review as explained at 75
FR 25440 and in 86.1866(d)(2)(ii).
    EPA has identified two general situations where manufacturers would
need to develop their own demonstration methodology. The first is a
situation where the technology is active only during certain operating
conditions that are not represented by any of the 5-cycle tests. To
determine the overall emissions reductions, manufacturers must
determine not only the emissions impacts during operation but also
real-world activity data to determine how often the technology is
utilized during actual, in-use driving on average across the fleet. EPA
has identified some of these types of technologies and has calculated a
default credit for them, including items such as high efficiency (e.g.,
LED) lights and solar panels on hybrids. See Table III-17 above. In
their demonstrations, manufacturers may be able to apply the same type
of methodologies used by EPA as a basis for these default values (see
TSD Chapter 5).
    The second type of situation where manufacturers would need to
develop their own demonstration data would be for technologies that
involve action by the driver to make the technology effective in
reducing CO2 emissions. EPA believes that driver interactive
technologies face the highest demonstration hurdle because
manufacturers would need to provide actual real-world usage data on
driver response rates. Such technologies would include ``eco buttons''
where the driver has the option of selecting more fuel efficient
operating modes, traffic avoidance systems, and more advanced tire
pressure monitor systems (i.e., technologies that go beyond the minimum
Federal requirements) notifying the driver to fill their tires more
often.\321\ EPA proposes that data would need to be from instrumented
vehicle studies and not through driver surveys where results may be
influenced by drivers failure to accurately recall their response
behavior. Systems such as On-star could be one promising way to collect
driver response data if they are designed to do so. Manufacturers might
have to design extensive on-road test programs. Any such on-road
testing programs would need to be statistically robust and based on
average U.S. driving conditions, factoring in differences in geography,
climate, and driving behavior across the U.S. EPA proposes this
approach for new MY 2012-2016 credits as well as for MY 2017-2025.
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    \321\ A tire pressure monitor system that also automatically
fills the tire without driver interaction would obviously not
involve driver response data for the automatic system, but the
demonstration may involve the driver response rates for the baseline
system to determine an incremental credit.
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EPA Light-Duty Vehicle Simulation Tool
    As explained above and, EPA has developed full vehicle simulation
capabilities in order to support regulations and vehicle compliance by
quantifying the effectiveness of different technologies over a wide
range of engine and vehicle operating conditions. This in-house
simulation tool has been developed for modeling a wide variety of
light, medium, and heavy duty vehicle applications over various driving
cycles. In order to ensure transparency of the models and free public
access, EPA has developed the tool in MATLAB/Simulink environment with
a completely open source code. EPA's first application of the vehicle
simulation tool was for purposes of heavy-duty vehicle compliance and
certification. For the model years 2014 to 2017 final rule for medium
and heavy duty trucks, EPA created the ``Greenhouse gas Emissions
Model'' (GEM), which is used both to assess Class 2b-8 vocational
vehicle and Class \7/8\ combination tractor GHG emissions and fuel
efficiency and to demonstrate compliance with the vocational vehicle
and combination tractor standards. See 76 FR at 57146-147.\322\ EPA
will submit the simulation tool for peer review for the final rule.
Chapter 2 of the Draft RIA has more details of this simulation tool.
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    \322\ See also US EPA, ``Final Rule Making to Establish
Greenhouse Gas Emissions Standards and Fuel Efficiency Standards for
Medium- and Heavy-Duty Engines and Vehicles,'' Heavy-Duty Regulatory
Impact Analysis.give cite to where GEM is written up in the heavy
duty RIA.
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    As mentioned previously, the tool is based on MATLAB/Simulink and
is a forward-looking full vehicle model that uses the same physical
principles as other commercially available vehicle simulation tools
(e.g. Autonomie, AVL-CRUISE, GT-Drive, etc.) to derive the governing
equations. These governing equations describe steady-state and
transient behaviors of each of electrical, engine, transmission,
driveline, and vehicle systems, and they are integrated together to
provide overall system behavior during transient conditions as well as
steady-state operations. In the light-duty vehicle simulation tool,
there are four key system elements that describe the overall vehicle
dynamics behavior and the corresponding fuel efficiency: Electrical,
engine, transmission, and vehicle. The electrical system model consists
of parasitic electrical load and A/C blower fan, both of which were
assumed to be constant. The engine system model is comprised

of engine torque and fueling maps. For the vehicle system, four
vehicles were modeled: Small, mid, large size passenger vehicles, and a
light-duty pick-up truck. The engine maps, transmission gear ratios and
shifting schedules were appropriately sized and adjusted according to
the vehicle type represented by the simulation. This tool is capable of
simulating a wide range of conventional and advanced engines,
transmissions, and vehicle technologies over various driving cycles. It
evaluates technology package effectiveness while taking into account
synergy (and dis-synergy) effects among vehicle components and
estimates GHG emissions for various combinations of technologies.
Chapter 2 of the Draft Regulatory Impact Analysis provides more details
on this light-duty vehicle simulation tool.
    As discussed in section III.C.1, EPA has used the light-duty
vehicle simulation tool to estimate indirect A/C CO2
emissions from conventional (non-hybrid) vehicles, helping to quantify
the indirect A/C credit. In addition to A/C related CO2
reductions, EPA believes this same simulation tool may be useful in
estimating CO2 reductions from off-cycle technologies.
Currently, the model provides A/B relative comparisons with and without
technologies that can help inform credits estimates. EPA has used it to
estimate credits for some of the technologies in the proposed pre-
defined list, including active aerodynamic improvements. As discussed
above, EPA is proposing to require this simulation tool be used as an
additional way to estimate emissions reductions in cases where the 5-
cycle test results indicate the potential reductions to be small, and
EPA is also requesting comments on using the simulation tool as a basis
for estimating off-cycle credits in lieu of 5-cycle testing.
    There are a number of technologies that could bring additional GHG
reductions over the 5-cycle drive test (or in the real world) compared
to the combined FTP/Highway (or two) cycle test. These are called off-
cycle technologies and are described in chapter 5 of the Joint TSD in
detail. Among them are technologies related to reducing vehicle's
electrical loads, such as High Efficiency Exterior Lights, Engine Heat
Recovery, and Solar Roof Panels. In an effort to streamline the process
for approving off-cycle credits, we have set a relatively conservative
estimate of the credit based on our efficacy analysis. EPA seeks
comment on utilizing the model in order to quantify the credits more
accurately, for example, if actual data of electrical load reduction
and/or on-board electricity generation by one or more of these
technologies is available through data submission from manufacturers.
Similarly, there are technologies that would provide additional GHG
reduction benefits in the 5-cycle test by actively reducing the
vehicle's aerodynamic drag forces. These are referred to as active
aerodynamic technologies, which include but are not limited to Active
Grill Shutters and Active Suspension Lowering. Like the electrical load
reduction technologies, the vehicle simulation tool can be used to more
accurately estimate the additional GHG reductions (therefore the
credits) provided by these active aerodynamic technologies over the 5-
cycle drive test. EPA seeks comment on using the simulation tool in