Naughton, How Ford plans to market the gasoline-electric F-150,
Automotive News (November 30, 2017), http://www.autonews.com/article/20171130/OEM05/171139990/ford-electric-f150-pickup-marketing; and the Workhorse W-15 system includes both an electric
battery pack and gasoline range extender (Workhorse W-15 Pickup,
http://workhorse.com/pickup/ (last accessed April 13, 2018).
---------------------------------------------------------------------------

(4) Air Conditioning Efficiency and Off-Cycle Adjustment Values
    A/C efficiency and off-cycle fuel consumption improvement values
(FCIVs) are compliance flexibilities made available under NHTSA's CAFE
program through EPA's EPCA authority to calculate fuel economy levels
for individual vehicles and for fleets. NHTSA modified its regulations
in the 2012 final rule for MYs 2017 and beyond to reflect the fact that
certain flexibilities, including A/C efficiency improving technologies
and off-cycle technology fuel consumption improvement values (FCIVs),
may be used as part of the determination of a manufacturers' CAFE
level.\853\
---------------------------------------------------------------------------

    \853\ 77 FR 63130-34 (Oct. 15, 2012). Instead of manufacturers
gaining credits as done under the GHG program, a direct adjustment
is made to the manufacturer's fuel economy fleet performance value.
---------------------------------------------------------------------------

    A/C is a virtually standard automotive accessory, with more than
95% of new cars and light trucks sold in the United States equipped
with mobile air conditioning systems. A/C use places load on an engine,
which results in additional fuel consumption; the high penetration rate
of A/C systems throughout the light duty vehicle fleet means that they
can significantly impact the total energy consumed, as well as GHG
emissions resulting from refrigerant leakage.\854\ A number of methods
related to the A/C system components and their controls can be used to
improve A/C system efficiencies.\855\
---------------------------------------------------------------------------

    \854\ Notably, however, manufacturers cannot claim CAFE-related
benefits for reducing A/C leakage or switching to an A/C refrigerant
with a lower global warming potential, because while these
improvements reduce GHGs consistent with the purpose of the CAA,
they generally do not relate to fuel economy and thus are not
relevant to the CAFE program.
    \855\ The approach for recognizing potential A/C efficiency
gains is to utilize, in most cases, existing vehicle technology/
componentry but improve the energy efficiency of the technology
designs and operation. For example, most of the additional air
conditioning-related load on an engine is because of the compressor,
which pumps the refrigerant around the system loop. The less the
compressor operates, the less load the compressor places on the
engine resulting in less fuel consumption and CO2
emissions. Thus, optimizing compressor operation with cabin demand
using more sophisticated sensors, controls and control strategies,
is one path to improving the efficiency of the A/C system. For
further discussion of A/C efficiency technologies, see Section II.D
of this NPRM and Chapter 6 of the accompanying PRIA.
---------------------------------------------------------------------------

    ``Off-cycle'' technologies are those that reduce vehicle fuel
consumption and CO2 emissions but for which the fuel
consumption reduction benefits are not recognized under the 2-cycle
test procedure used to determine compliance with the fleet average
standards. The CAFE city and highway test cycles, also commonly
referred to together as the 2-cycle laboratory compliance tests (or 2-
cycle tests), were developed in the early 1970s when few vehicles were
equipped with A/C systems. The city test simulates city driving in the
Los Angeles area at that time. The highway test simulates driving on
secondary roads (not expressways). The cycles are effective in
measuring improvements in most fuel economy improving technologies;
however, they are unable to measure or underrepresent some fuel economy
improving technologies because of limitations in the test cycles.
    For example, air conditioning is turned off during 2-cycle testing.
Any air conditioning system efficiency improvements that reduce load on
the engine and improve fuel economy cannot be measured on the tests.
Additionally, the city cycle includes less time at idle than today's
real world driving, and the highway cycle is relatively low speed
(average speed of 48 mph and peak speed of 60 mph). Other off-cycle
technologies that improve fuel economy at idle, such as stop start, and
those that improve fuel economy to the greatest extent at expressway
speeds, such as active grille shutters which improve aerodynamics,
receive less than their real-world benefits in the 2-cycle compliance
tests.
    Since EPA established its GHG program for light duty vehicles,
NHTSA and EPA sought to harmonize their respective standards, despite
separate statutory authorities limiting what the agencies could and
could not consider. For example, for MYs 2012-2016, NHTSA was unable to
consider improvements manufacturers made to passenger car A/C
efficiency in calculating compliance.\856\ At that time, NHTSA stated
that the agency's statutory authority did not allow NHTSA to provide
test procedure flexibilities that would account for A/C system and off-
cycle fuel economy improvements.\857\ Thus, NHTSA calculated its
standards in a way that allowed manufacturers to comply with the CAFE
standards using 2-cycle procedures alone.
---------------------------------------------------------------------------

    \856\ 74 FR 49700 (Sept. 28, 2009).
    \857\ At that time, NHTSA stated ``[m]odernizing the passenger
car test procedures, or even providing similar credits, would not be
possible under EPCA as currently written.'' 75 FR 25557 (May 7,
2010).
---------------------------------------------------------------------------

    Of the two agencies, EPA was the first to establish an off-cycle
technology program. For MYs 2012-2016, EPA allowed manufacturers to
request off-cycle credits for ``new and innovative technologies that
achieve GHG reductions that are not reflected on current test
procedures . . .'' \858\ In the subsequent 2017 and beyond rulemaking,
off-cycle technology was no longer required to be new and innovative,
but rather only required to demonstrate improvements not reflected on
test procedures.
---------------------------------------------------------------------------

    \858\ 75 FR 25341 (May 7, 2010).
---------------------------------------------------------------------------

    At that time (starting with MY 2017), NHTSA considered off-cycle
technologies and A/C efficiency improvements when assessing compliance
with the CAFE program. Accounting for off-cycle technologies and A/C
efficiency improvements in the CAFE program allowed manufacturers to
design vehicles with improved fuel

economy, even if the improvements would not show up on the 2-cycle
compliance test. In adding off-cycle and A/C efficiency improvements to
NHTSA's program, the agency was able to harmonize with EPA, which began
accounting for these features in earlier GHG regulations.
(a) Distinguishing ``Credits'' From Air Conditioning Efficiency and
Off-Cycle Benefits
    It is important to note some important differences between
consideration given to A/C efficiency improvement and off-cycle
technologies, and other flexibilities in the CAFE program. NHTSA
accounts for A/C efficiency and off-cycle improvements through EPA test
procedural changes that determine fuel consumption improvement values.
While regarded by some as ``credits'' either as shorthand, or because
there are many terms that overlap between NHTSA's CAFE program and
EPA's GHG program, NHTSA's CAFE program does not give manufacturers
credits for implementing more efficient A/C systems, or introducing
off-cycle technologies.\859\ That is, there is no bankable, tradable or
transferrable credit earned by a manufacturer for implementing more
efficient A/C systems or installing an off-cycle technology. In fact,
the only credits provided for in NHTSA's CAFE program are those earned
by overcompliance with a standard.\860\ What NHTSA does for off-cycle
technologies and A/C efficiency improvements is adjust individual
vehicle compliance values based on the fuel consumption improvement
values of these technologies. As a result, a manufacturer's vehicle as
a whole may exceed its fuel economy target, and be regarded as a
credit-generating vehicle.
---------------------------------------------------------------------------

    \859\ This is not to be confused with EPA's parallel program,
which refers to the GHG's consideration of A/C improvements and off-
cycle technologies as ``credits.''
    \860\ 49 U.S.C. 32903.
---------------------------------------------------------------------------

    Illustrative of this confusion, in the 2016 Alliance/Global
petition, the Petitioners asked NHTSA to avoid imposing unnecessary
restrictions on the use of credits. Alliance/Global referenced language
from an EPA report that stated compliance is assessed by measuring the
tailpipe emissions of a manufacturer's vehicles, and then reducing
vehicle compliance values depending on A/C efficiency improvements and
off-cycle technologies.\861\ This language is consistent with NHTSA's
statement in the 2017 and later final rule, in which explained how the
agencies coordinate and apply off-cycle and A/C adjustments. ``There
will be separate improvement values for each type of credit, calculated
separately for cars and for trucks. These improvement values are
subtracted from the manufacturer's 2-cycle-based fleet fuel consumption
value to yield a final new fleet fuel consumption value, which would be
inverted to determine a final fleet fuel CAFE value.'' \862\
---------------------------------------------------------------------------

    \861\ See Alliance/Global petition at 15.
    \862\ 77 FR 62726 (Oct. 15, 2012).
---------------------------------------------------------------------------

    Alliance/Global say because of this process, ``technology credits
earned in the current model year must be immediately applied toward any
deficits in the current model year. This approach forces manufacturers
to use their credits in a sub-optimal way, and can result in stranded
credits.'' \863\ As explained in this section, NHTSA does not issue
credits to manufacturers for improving A/C efficiency, nor does it
issue credits for implementing off-cycle technologies. EPA does adjust
fuel economy compliance values on a vehicle level for those vehicles
that implement A/C efficiency improvements and off-cycle technologies.
---------------------------------------------------------------------------

    \863\ Id. at 16.
---------------------------------------------------------------------------

    NHTSA therefore proposes to deny Alliance/Global's request because
what the petitioners \864\ refer to as ``technology credits'' are
actually fuel economy adjustment values applied to the fuel economy
measurement of individual vehicles. Thus, these adjustments are not
actually ``credits,'' per the definition of a ``credit'' in EPCA/EISA
and are not subject to the ``carry forward'' and ``carry back''
provisions in 49 U.S.C. 32903.
---------------------------------------------------------------------------

    \864\ The agencies also refer to A/C and off cycle technology
adjustment values as ``credits'' sporadically throughout their
regulations. The agencies propose to amend their respective
regulatory texts to reflect these are adjustments and not actual
credits that can be carried forward or back. For a further
discussion, see above.
---------------------------------------------------------------------------

    To alleviate confusion, and to ensure consistency in nomenclature,
NHTSA is proposing to update language in its regulations to reflect
that the use of the term ``credits'' to refer to A/C efficiency and
off-cycle technology adjustments--should actually be termed fuel
consumption improvement values (FCIVs).
(b) Petition Requests on A/C Efficiency and Off-Cycle Program
Administration
    As discussed above, NHTSA and EPA jointly administer the off-cycle
program. The 2016 Alliance/Global petition requested that NHTSA and EPA
make various adjustments to the off-cycle program; specifically, the
petitioners requested that the agencies should:

     re-affirm that technologies meeting the stated
definitions are entitled to the off-cycle credit at the values
stated in the regulation;
     re-acknowledge that technologies shown to generate more
emissions reductions than the pre-approved amount are entitled to
additional credit;
     confirm that technologies not in the null vehicle set
but which are demonstrated to provide emissions reductions benefits
constitute off-cycle credits; and
     modify the off-cycle program to account for
unanticipated delays in the approval process by providing that
applications based on the 5-cycle methodology are to be deemed
approved if not acted upon by the agencies within a specified
timeframe (for instance 90 days), subject to any subsequent review
of accuracy and good faith.

    With respect to Alliance/Global's request regarding off-cycle
technologies that demonstrate emissions reductions greater than what is
allowable from the menu, today's preferred alternative retains this
capability. As was the case for model years 2017-2021, a manufacturer
is still eligible for a fuel consumption improvement value other than
the default value provided for in the menu, provided the manufacturer
demonstrates the fuel economy improvement.\865\ This would include the
two-tiered process for demonstrating the CO2 reductions and
fuel economy improvement.\866\
---------------------------------------------------------------------------

    \865\ 77 FR 62837 (Oct. 15, 2012).
    \866\ 40 CFR 86.1869-12.
---------------------------------------------------------------------------

    The Alliance/Global's requests to streamline aspects of the A/C
efficiency and off-cycle programs in response to the issues outlined
above have been considered. Among other things, the Alliance/Global
requested the agencies consider providing for a default acceptance of
petitions for off-cycle credits, provided that all required information
has been provided, to accelerate the processing of off-cycle credit
requests. While it is agreed that any continuation of the A/C
efficiency and off-cycle program should incorporate programmatic
improvements, there are significant concerns with the concept of
default accepting petition requests that do not address program issues
like uncertainty in quantifying program benefits, or general program
administration. Comment is requested comment on these issues.
    Additionally, for a discussion of the consideration of inclusion of
the off-cycle program in future CAFE and GHG standards, see Section
X.D.

(c) Petition Requests on Including Air-Conditioning Efficiency
Improvements in the CAFE Calculations for MYs 2010-2016
    For model years 2012 through 2016, NHTSA was unable \867\ to
consider improvements manufacturers made to passenger car A/C
efficiency in calculating CAFE compliance. \868\ However, EPA did
consider passenger car improvements to A/C efficiency for this
timeframe. To allow manufacturers to build one fleet that complied with
both EPA and NHTSA standards, NHTSA adjusted its standards to account
for the differences borne out of A/C efficiency improvements.
Specifically, the agencies converted EPA's g/mi standards to NHTSA mpg
(CAFE) standards. Then, EPA then estimated the average amount of
improvement manufacturers were expected to earn via improved A/C
efficiency. From there, NHTSA took EPA's converted mpg standard and
subtracted the average improvement attributable to improvement in A/C
efficiency. NHTSA set its standard at this level to allow manufacturers
to comply with both standards with similar levels of technology.\869\
---------------------------------------------------------------------------

    \867\ At that time, NHTSA stated ``[m]odernizing the passenger
car test procedures, or even providing similar credits, would not be
possible under EPCA as currently written.'' 75 FR 25557 (May 7,
2010).
    \868\ 74 FR 49700 (Sept. 28, 2009).
    \869\ Id.
---------------------------------------------------------------------------

    In the Alliance/Global petition for rulemaking, the Petitioners
requested that NHTSA and EPA revisit the average efficiency benefit
calculated by EPA applicable to model years 2012 through 2016. The
Alliance/Global argued that A/C efficiency improvements were not
properly acknowledged in the CAFE program, and that manufacturers that
exceeded the A/C efficiency improvements estimated by the agencies. The
Petitioners request that EPA amend its regulations such that
manufacturers would be entitled to additional A/C efficiency
improvement benefits retroactively.
    NHTSA has tentatively decided to retain the structure of the
existing A/C efficiency program, and not extend it to model years 2010
through 2016. Likewise, EPA has tentatively decided not to modify its
regulations to change the way A/C efficiency improvements are accounted
for. It is believed this is appropriate as manufacturers decided what
fuel economy-improving technologies to apply to vehicles based on the
standards as finalized in 2010.\870\ This included deciding whether to
apply traditional tailpipe technologies, or A/C efficiency
improvements, or both. Granting A/C efficiency adjustments to
manufacturers retroactively could result in arbitrarily varying levels
of adjustments granted to manufacturers, similar to the Alliance/Global
request regarding retroactive off-cycle adjustments. Thus, it is
tentatively believed the existing A/C efficiency improvement structure
for model years 2010 through 2016 should remain unchanged.
---------------------------------------------------------------------------

    \870\ In the MY 2017 and beyond rulemaking, NHTSA reaffirmed its
position it would not extend A/C efficiency improvement benefits to
earlier model years. 77 FR 62720 (Oct. 15, 2012).
---------------------------------------------------------------------------

(d) Petition Requests on Including Off-Cycle Improvements in the CAFE
Calculations for MYs 2010-2016
    As described above, NHTSA first allowed manufacturers to generate
off-cycle technology fuel consumption improvement values equivalent to
CO2 off-cycle credits in MY 2017.\871\ In finalizing the
rule covering MYs 2017 and beyond, NHTSA declined to retroactively
extend its off-cycle program to apply to model years 2012 through
2016,\872\ explaining ``NHTSA did not take [off-cycle credits] into
account when adopting the CAFE standards for those model years. As
such, extending the credit program to the CAFE program for those model
years would not be appropriate.'' \873\
---------------------------------------------------------------------------

    \871\ 77 FR 62840 (Oct. 15, 2012).
    \872\ See id.; EPA decided to extend provisions from its MY 2017
and beyond off-cycle program to the 2012-2016 model years.
    \873\ Id.
---------------------------------------------------------------------------

    The Alliance/Global petition for rulemaking asked NHTSA to
reconsider calculating fuel economy for model years 2010 through 2016
to include off-cycle adjustments allowed under EPA's program during
that period. The Petitioners argued that NHTSA incorrectly stated the
agency had taken off-cycle adjustments into consideration when setting
standards for model years 2017 through 2025, but not for model years
2010-2016. The Alliance/Global also argued that because neither NHTSA
nor EPA considered off-cycle adjustments in formulating the stringency
of the 2012-2016 standards, NHTSA should retroactively grant
manufacturers off-cycle adjustments for those model years as EPA did.
Doing so, they say, would maintain consistency between the agencies'
programs.
    Pursuant to the Alliance/Global request, NHTSA has reconsidered the
idea of granting retroactive credits for model years 2010 through 2016.
For the reasons that follow, NHTSA has tentatively decided that
manufacturers should not be granted retroactive off-cycle adjustments
for model years 2010 through 2016.
    Of the two agencies, EPA was the first to establish an off-cycle
technology program. For model years 2012 through 2016, EPA allowed
manufacturers to request off-cycle credits for ``new and innovative
technologies that achieve GHG reductions that are not reflected on
current test procedures. . .'' \874\ In the subsequent 2017 and beyond
rulemaking, NHTSA joined EPA and included an off-cycle program for CAFE
compliance.
---------------------------------------------------------------------------

    \874\ 75 FR 25341, 25344 (May 7, 2010). EPA had also provided an
option for manufacturers to claim ``early'' off-cycle credits in the
2009-2011 time frame.
---------------------------------------------------------------------------

    The Alliance/Global petition cites a statement in the 2012-2016
final rule as affirmation that NHTSA took off-cycle adjustments into
account in formulating the 2012-2016 stringencies, and therefore should
allow manufacturers earn off-cycle benefits in model years that have
already passed. In particular, Alliance/Global point to a general
statement where NHTSA, while discussing consideration of the effect of
other motor vehicle standards of the Government on fuel economy, stated
that that rulemaking resulted in consistent standards across the
program.\875\ The Alliance/Global petition appears to take this
statement as a blanket assertion that NHTSA's consideration of all
``relevant technologies'' included off-cycle technologies. To the
contrary, as quoted above, NHTSA explicitly stated it had not
considered these off-cycle technologies.\876\
---------------------------------------------------------------------------

    \875\ Id.
    \876\ Likewise, EPA stated it had not considered off-cycle
technologies in finalizing the 2012-2016 rule. ``Because these
technologies are not nearly so well developed and understood, EPA is
not prepared to consider them in assessing the stringency of the
CO2 standards.'' Id. at 25438.
---------------------------------------------------------------------------

    The fact that NHTSA had not taken off-cycle adjustments into
consideration in setting its 2012-2016 standards makes granting this
request inappropriate. Doing so would result in a question as to
whether the 2012-2016 standards were maximum feasible under 49 U.S.C.
32902(b)(2)(B). If NHTSA had not considered industry's ability to earn
off-cycle adjustments--an incentive that allows manufacturers to
utilize technologies other than those that were being modeled as part
of NHTSA's analysis--the agency could have concluded more stringent
standards were maximum feasible. Additionally, granting off-cycle
adjustments to manufacturers retroactively raises questions of equity.
NHTSA issued its 2012-2016 standards without an off-cycle program, and
manufacturers had

no reason to suspect that NHTSA would allow the use off-cycle
technologies to meet fuel economy standards. Therefore, manufacturers
made fuel economy compliance decisions with the expectation that they
would have to meet fuel economy standards using on-cycle technologies.
Generating off-cycle adjustments retroactively would arbitrarily reward
(and potentially disadvantage other) manufacturers for compliance
decisions they made without the knowledge such technologies would be
eligible for NHTSA's off-cycle program. Thus, NHTSA has tentatively
decided to deny Alliance/Global's request for retroactive off-cycle
adjustments.
    It is worth noting that in the model years 2017 and later
rulemaking, NHTSA and EPA did include off-cycle technologies in
establishing the stringency of the standards. As Alliance/Global note,
NHTSA and EPA limited their consideration to start-stop and active
aerodynamic features, because of limited technical information on these
technologies. At that time, the agencies stated they ``have virtually
no data on the cost, development time necessary, manufacturability, etc
[sic] of these technologies. The agencies thus cannot project that some
of these technologies are feasible within the 2017-2025 timeframe.''
\877\
---------------------------------------------------------------------------

    \877\ Draft Joint Technical Support Document: Rulemaking for
2017-2025 Light-Duty Vehicle Greenhouse Gas Emission Standards and
Corporate Average Fuel Economy Standards (November 2011). P. 5-57.
---------------------------------------------------------------------------

(d) Light-Duty CAFE Compliance Data for MYs 2011-2018
    This proposal examines how manufacturers could respond to potential
future CAFE and CO2 standards. For the reader's reference,
this section provides a brief overview of how manufacturers have
responded to the progressively increasing CAFE standards for MYs 2011-
2018. NHTSA uses data from CAFE reports submitted by manufacturers to
EPA or directly to NHTSA to evaluate compliance with the CAFE program.
The data for model years 2011 through 2016 include manufacturers' final
compliance data that has been verified by EPA.\878\ The data for model
years 2017 and 2018 include the most recent estimated projections from
manufacturers' pre- and mid-model year (PMY and MMY) reports required
by 49 CFR part 537. Because the PMY and MMY data do not reflect final
vehicle production levels, the final CAFE values may be different than
the manufacturers' PMY and MMY estimates. Model year 2011 was selected
as the start of the data because it represents the first compliance
model year where manufacturers are permitted to trade and transfer
credits. The overview of the data for model years 2011 to 2018 is
important because it gives the public an understanding of current
compliance trends and the potential impacts that these years may have
on the future model years addressed by this rulemaking.
---------------------------------------------------------------------------

    \878\ Volkswagen's model year 2016 final EPA verified compliance
data is excluded due to ongoing enforcement activites by EPA and
NHTSA for Volkswagen diesel vehicles.
---------------------------------------------------------------------------

    Figure X-2 through Figure X-5 provide a graphical overview of fuel
economy performance and standards for model years 2011 to 2018. There
are separate graphs for the total overall industry fleet and each of
the three compliance categories, domestic and import passenger cars and
light trucks. Fuel economy performance is compared against the overall
industry fuel economy standards for each model year. Fuel economy
performance values include any increases from dual-fueled vehicles and
for vehicles equipped with fuel consumption improving
technologies.\879\ \880\ Compliance reflects the actual fuel economy
performance of the fleet, and does not include the application of prior
model year or future model year credits for overcompliance.
---------------------------------------------------------------------------

    \879\ Congress established the Alternative Motor Fuels Act
(AMFA) which allows manufacturers to increase their fleet fuel
economy performance values by producing dual fueled vehicles.
Incentives are allowed for building advanced technology vehicles
such as hybrids and electric vehicles, compressed natural gas
vehicles and building vehicles able to run on dual fuels such as E85
and gasoline. For model years 1993 through 2014, the maximum
increase in CAFE performance for a manufacturer attributable to dual
fueled vehicles is 1.2 miles per gallon for each model year and
thereafter decreases by 0.2 miles per gallon each model year until
ending in 2019 (see 49 U.S.C. 32906).
    \880\ Under EPA's authoirity, NHTSA established provisions
starting in model year 2017 allowing manufacturers to increase fuel
economy performance using the fuel consumption benefits gained by
technolongies not accounted for during normal 2-cycle EPA compliance
testing (i.e, called off-cycle technologies for technologies such as
stop-start systems) as well as for AC systems with improved
efficiencies and for hybrid or electric full size pickup trucks.

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

[GRAPHIC] [TIFF OMITTED] TP24AU18.296

[GRAPHIC] [TIFF OMITTED] TP24AU18.297

[GRAPHIC] [TIFF OMITTED] TP24AU18.298

[GRAPHIC] [TIFF OMITTED] TP24AU18.299

    As shown in the figures, manufacturers fuel economy performance for
the total fleet (the combination of all vehicles produced for sale
during the model year) and for each compliance fleet are better than
CAFE standards through MY 2015. On average, the total fleet exceeds
CAFE standards by approximately 0.9 mpg for MYs 2011 to 2015.
Comparatively, domestic and import passenger cars exceeded standards on
average by 2.1 mpg and 2.3 mpg, respectively. On aveage, light truck
manufacturers fell short of standards by 0.3 mpg on average over MYs
2011-2015.
    For MYs 2016-2018 the overall industry is or is estimated to fall
short of CAFE standards for the overall fleet and for light trucks and
for import passenger cars fleets individually. For MYs 2016-2018, the
total fleet has an average shortfall of 0.5 mpg. The largest individual
shortfalls are 1.4 mpg for the light truck fleet in MY 2016 and 2.8 mpg
for the import passenger car fleet in MY 2018. Domestic passenger car
fleets are

expected to continue to exceed CAFE standards. NHTSA expects that on an
overall industry basis, manufacturers will apply carry forward and
traded CAFE credits to cover the MY 2016-2018 noncompliances.
    Figure X-6 provides a historical overview of the industry's use of
CAFE compliance flexibilities for addressing shortfalls. MY 2015 is the
latest model year for which CAFE compliance is complete. Historically,
manufacturers have generally resolved credit shortfalls first by
carrying forward any earned credits and then applying traded credits.
In model years 2014 and 2015, the amount of credit shortfalls are
almost the same as the amount of carryforward and traded credits.
Manufacturers occastionally carryback credits or opt to transfer earned
credits between their fleets to resolve compliance shortfalls. Trading
credits from another manufacturer and transferring them across fleets
occurs far more frequently. Also, credit trading has taken the place of
civil penalty payments for resolving compliance shortfalls. Only a
handful of manufacturers have had to make civil penalty payments since
the implementation of the credit trading program.\881\
---------------------------------------------------------------------------

    \881\ Only five manufacturers have paid CAFE civil penalties
since credit trading began in 2011. Predominately, Jaguar Land Rover
has paid the largest amount of civil penalties, followed by Volvo.
See Summary of CAFE Civil Penalties Collected, CAFE Public
Information Center, https://one.nhtsa.gov/cafe_pic/CAFE_PIC_Fines_LIVE.html.
[GRAPHIC] [TIFF OMITTED] TP24AU18.300

2. Medium- and Heavy-Duty Technical Amendments
    In today's rule, NHTSA is proposing to make minor technical
revisions to correct typographical mistakes and improper references
adopted in the agency's 2016 Phase 2 medium- and heavy-duty fuel
efficiency rulemaking.\882\ The proposed changes are as follows:
---------------------------------------------------------------------------

    \882\ 81 FR 73478 (Oct. 25, 2016).
---------------------------------------------------------------------------

    1. NHTSA heavy-duty vehicles and engine fuel consumption credit
equations. In each credit equation in 49 CFR 535.7, the minus-sign in
each multiplication factor was omitted in the final version of the rule
sent to the Federal Register. For example, the credit equation in Part
535.7(b)(1) should be specified as, Total MY Fleet FCC (gallons) =
(Std-Act) x (Volume) x (UL) x (10-\2\) instead of (10\2\) as
currently existing. NHTSA is proposing to correct these omissions.
    2. The CO2 to gasoline conversion factor. In 49 CFR 535.6(a)(4)(ii)
and (d)(5)(ii), NHTSA provides the methodology and equations for
converting the CO2 FELs/FCLs for heavy-duty pickups vans
(gram per mile) and for engines (grams per hp-hr) to their gallon-of-
gasoline equivalence. In each equation, NHTSA is proposing to change
the conversion factor to 8,887 grams per gallon of gasoline fuel
instead of a factor of 8,877 as currently existing.
    3. Curb weight definition. In 40 CFR 523.2, the reference in the
definition for curb weight is incorrect. NHTSA is proposing to correct
the definition to incorporate the EPA reference in 40 CFR 86.1803
instead of 49 CFR 571.3.

C. EPA Compliance and Enforcement

    EPA is requesting comment on a variety of ``enhanced
flexibilities'' whereby EPA would make adjustments to current
incentives and credits provisions and potentially add new flexibility
opportunities to broaden the pathways manufacturers would have to meet
standards. Such an approach would support the increased application of
technologies that the automotive industry is developing and deploying
that could potentially lead to further long-term emissions reductions
and allow manufacturers to comply with standards while reducing costs.
    One category of flexibilities such as off-cycle credits and credit
banking involve credits that are based on real world emissions
reductions and do not represent a loss of overall emissions benefits or
a reduction in program stringency, yet offer manufacturers with
potentially lower-cost or more efficient paths to compliance. Another
category of flexibilities described below as incentives, such as
incentives for advanced technologies, hybrid technologies, and
alternative fuels, do

result in a loss of emissions benefit and represent a reduction in the
effective stringency of the standards to the extent the incentives are
used by manufacturers. These incentives would help manufacturers meet a
numerically more stringent standard but would not reduce real-world
CO2 emissions compared to a lower stringency option with
fewer such incentives in the short term. A policy rationale for
providing such incentives, as EPA articulated in the 2012
rulemakings,\883\ is that such provisions could incentivize advanced
technologies with the potential to lead to greater GHG emissions
reductions in the longer-term, where such technologies today are
limited by higher costs, market barriers, infrastructure, and consumer
awareness. Such incentive approaches would also result in rewarding
automakers who invest in certain technological pathways, rather than
being technology neutral.
---------------------------------------------------------------------------

    \883\ See 77 FR 62810-62826, October 15, 2012.
---------------------------------------------------------------------------

    Automakers and other stakeholders have expressed support for this
type of approach. For example, Ford recently stated ``[w]e support
increasing clean car standards through 2025 and are not asking for a
rollback. We want one set of standards nationally, along with
additional flexibility to help us provide more affordable options for
our customers.'' \884\ Honda also recently stated their support for an
approach that would retain the existing standards while extending the
advanced technology multipliers for electrified vehicles, eliminate
automakers' responsibility for the impact of upstream emissions from
the electric grid, and accommodate more off-cycle technologies.\885\
---------------------------------------------------------------------------

    \884\ ``A Measure of Progress'' By Bill Ford, Executive
Chairman, Ford Motor Company, and Jim Hackett, President and CEO,
Ford Motor Company, March 27, 2018, https://medium.com/cityoftomorrow/a-measure-of-progress-bc34ad2b0ed.
    \885\ Honda Release ``Our Perspective--Vehicle Greenhouse Gas
and Fuel Economy Standards,'' April 20, 2018, http://news.honda.com/newsandviews/pov.aspx?id=10275-en.
---------------------------------------------------------------------------

    EPA has received input from automakers and other stakeholders,
including suppliers and alternative fuels industries, supporting a
variety of program flexibilities.\886\ EPA requests comments on the
following and other flexibility concepts, including the scope of the
flexibilities and the range of model years over which such provisions
would be appropriate.
---------------------------------------------------------------------------

    \886\ Memorandum to docket EPA-HQ-OAR-2018-0283 regarding
meetings with the Alliance of Automobile Manufacturers on April 16,
2018 and Global Automakers on April 17, 2018.
---------------------------------------------------------------------------

    The concepts include but are not limited to:
    Advanced Technology Incentives: The current EPA GHG program
provides incentives for electric vehicles, fuel cell vehicles, plug-in
hybrid vehicles, and natural gas vehicles. Currently, manufacturers are
able to use a 0 g/mile emissions factor for all electric powered
vehicles rather than having to account for the GHG emissions associated
with upstream electricity generation up to a per-manufacturer
cumulative production cap for MYs 2022-2025. The program also includes
multiplier incentives that allow manufacturers to count advanced
technology vehicles as more than one vehicle in the compliance
calculations. The current multipliers begin with MY 2017 and end after
MY 2021.\887\ Stakeholders have suggested that these incentives should
be expanded to further support the production of advanced technologies
by allowing manufacturers to continue to use the 0 g/mile emissions
factor for electric powered vehicles rather than having to account for
upstream electricity generation emissions and by extending and
potentially increasing the multiplier incentives. EPA is considering a
range of incentives to further encourage advanced technology vehicles.
Examples of possible incentives and an estimate of their impact on the
stringency of the standards is provided below. Global Automakers
recently recommended a multiplier of 3.5 for EVs and fuel cell vehicles
which falls within the range of the examples provided below.\888\ EPA
requests comments on extending or increasing advanced technology
incentives including the use of 0 g/mile emissions factor for electric
powered vehicles and multiplier incentives, including multipliers in
the range of 2-4.5.
---------------------------------------------------------------------------

    \887\ The current multipliers are for EV/FCVs: 2017-2019--2.0,
2020--1.75, 2021--1.5; for PHEVs and dedicated and dual fuel CNG
vehicles: 2017-2019--1.6, 2020--1.45, 2021--1.3.
    \888\ Memorandum to docket EPA-HQ-OAR-2018-0283 regarding
meetings with the Alliance of Automobile Manufacturers on April 16,
2018 and Global Automakers on April 17, 2018.
---------------------------------------------------------------------------

    Hybrid Incentives: The current program includes incentives for
automakers to use strong and mild hybrids (or technologies that provide
similar emissions benefits) in full size pick-up truck vehicles,
provided the manufacturer meets specified production thresholds.
Currently, the strong hybrid per vehicle credit is 20 g/mile, available
through MY 2025, and the technology must be used on at least 10% of a
company's full-size pickups to receive the credit for the model year.
The program also includes a credit for mild hybrids of 10 g/mi during
MYs 2017-2021. To be eligible a manufacturer would have to show that
the mild hybrid technology is utilized in a specified portion of its
truck fleet beginning with at least 20% of a company's full-size pickup
production in MY 2017 and ramping up to at least 80% in MY 2021.
    EPA received input from automakers that these incentives should be
extended and available to all light-duty trucks (e.g., cross-over
vehicles, minivans, sport utility vehicles, smaller-sized pick-ups) and
not only full size pick-up trucks. Automakers also recommended that the
program's production thresholds should be removed because they
discourage the application of technology since manufacturers cannot be
confident of achieving the sales thresholds. Some stakeholders have
also suggested an additional credit for strong and mild hybrid
passenger cars. EPA seeks comment on whether these incentives should be
expanded along the lines suggested by stakeholders. For example, Global
Automakers recommends a 20 g/mile credit for strong hybrid light trucks
and a 10 g/mile credit for strong hybrid passenger cars. These
incentives could lead to additional product offerings of strong
hybrids, and technologies that offer similar emissions reductions,
which could enable manufacturers to achieve additional long-term GHG
emissions reductions.
    Off-cycle Emission Credits: Starting with MY 2008, EPA started
employing a ``five-cycle'' test methodology to measure fuel economy for
the fuel economy label.\889\ However, for GHG and CAFE compliance, EPA
continues to use the established ``two-cycle'' (city and highway test
cycles, also known as the FTP and HFET) test methodology. As learned
through development of the ``five-cycle'' methodology and prior
rulemakings, there are technologies that provide real-world GHG
emissions and fuel consumption improvements, but those improvements are
not fully reflected on the ``two-cycle'' test. EPA established the off-
cycle credit program to provide an incentive for technologies that
achieve CO2 reductions but normally would not be chosen as a
GHG control strategy, as their GHG benefits are not measured on the
specified 2-cycle test. Automakers as well as auto suppliers have
recommended several changes to the current off-cycle credits program to
help it achieve that goal.\890\

Automakers and suppliers have suggested changes including:
---------------------------------------------------------------------------

    \889\ https://www.epa.gov/vehicle-and-fuel-emissions-testing/dynamometer-drive-schedules.
    \890\ ``Petition for Direct Final Rule with Regard to Various
Aspects of the Corporate Average Fuel Economy Program and the
Greenhouse Gas Program,'' Auto Alliance and Global Automakers, June
20, 2016.
---------------------------------------------------------------------------

     Streamlining the program in ways that would give auto
manufacturers more certainty and make it easier for manufacturers to
earn credits;
     Expanding the current pre-defined off-cycle credit menu to
include additional technologies and increasing credit levels where
appropriate;
     Eliminating or increasing the credit cap on the pre-
defined list of off-cycle technologies and revising the thermal
technology credit cap; and
     A role for suppliers to seek approval of their
technologies.
    Under EPA's existing regulations, there are three pathways by which
a manufacturer may accrue off-cycle technology credits. The first is a
predetermined list or ``menu'' of credit values for specific off-cycle
technologies that may be used beginning for MY 2014.\891\ This pathway
allows manufacturers to use conservative credit values established by
EPA for a wide range of off-cycle technologies, with minimal data
submittal or testing requirements. In cases where additional laboratory
testing can demonstrate emission benefits, a second pathway allows
manufacturers to use 5-cycle testing to demonstrate and justify off-
cycle CO2 credits.\892\ The additional emission tests allow
emission benefits to be demonstrated over some elements of real-world
driving not captured by the GHG compliance tests, including high
speeds, rapid accelerations, and cold temperatures. Under this pathway,
manufacturers submit test data to EPA, and EPA decides whether to
approve the off-cycle credits without soliciting public comment on the
data. The third and last pathway allows manufacturers to seek EPA
approval, through a notice and comment process, to use an alternative
methodology other than the menu of 5-cycle methodology for determining
the off-cycle technology CO2 credits.\893\
---------------------------------------------------------------------------

    \891\ See 40 CFR 86.1869-12(b).
    \892\ See 40 CFR 86.1869-12(c).
    \893\ See 40 CFR 86.1869-12(d).
---------------------------------------------------------------------------

    EPA requests comments on changes to the off-cycle process that
would streamline the program. Currently, under the third pathway,
manufacturers submit an application that includes their methodology to
be used to determine the off-cycle credit value and data that then
undergoes a public review and comment process prior to an EPA decision
regarding the application. Each manufacturer separately submits an
application to EPA that must go through a public review and comment
process even if the manufacturer uses a methodology previously approved
by EPA. For example, under the current program, multiple manufacturers
have submitted applications for high efficiency alternators and
advanced air conditioning compressors using similar methodologies and
producing similar levels of credits.
    EPA requests comment on revising the regulations to allow all auto
manufacturers to make use of a methodology once it has been approved by
EPA without the subsequent applications from other manufacturers
undergoing the public review process. This would reduce redundancy
present in the current program. Manufacturers would need to provide EPA
with at least the same level of data and detail for the technology and
methodology as the firm that went through the public comment process.
    EPA also requests comment on revising the regulations to allow EPA
to, in effect, add technologies to the pre-approved credit menu without
going through a subsequent rulemaking. For example, if one or more
manufacturers submit applications with sufficient supporting data for
the same or similar technology, the data from that application(s) could
potentially be used by EPA as the basis for adding technologies to the
menu. EPA is requesting comment on revising the regulations to allow
EPA to establish through a decision document a credit value, or
scalable value as appropriate, and technology definitions or other
criteria to be used for determining whether a technology qualifies for
the new menu credit. This streamlined process of adding a technology to
the menu would involve an opportunity for public review but not a
formal rulemaking to revise the regulations, allowing EPA to add
technologies to the menu in a timely manner, where EPA believes that
sufficient data exists to estimate an appropriate credit level for that
technology across the fleet. In this process, EPA could issue a
decision document, after considering public comments, making the new
menu credits available to all manufacturers (effectively adding the
technology to the menu without changing the regulations each time). By
adding technologies to the menu, EPA would eliminate the need for
manufacturers to subsequently submit individual applications for the
technologies after the first application was approved.
    In addition, EPA requests comments on modifying the menu through
this current rulemaking to add technologies. As noted above, EPA has
received data from multiple manufacturers on high efficiency
alternators and advanced air conditioning compressors that could serve
as the basis for new menu credits for these technologies.\894\ EPA
requests comments on adding these technologies to the menu including
comments on credit level and appropriate definitions.\895\ EPA also
requests comments on other off-cycle technologies that EPA could
consider adding to the menu including supporting data that could serve
as the basis for the credit.
---------------------------------------------------------------------------

    \894\ https://www.epa.gov/vehicle-and-engine-certification/compliance-information-light-duty-greenhouse-gas-ghg-standards
    \895\ See EPA Memorandum to Docket EPA-HQ-OAR-2018-0283
``Potential Off-cycle Menu Credit Levels and Definitions for High
Efficiency Alternators and Advanced Air Conditioning Compressors.''
---------------------------------------------------------------------------

    In 2014, EPA approved additional credits for Mercedes-Benz \896\
stop-start system through the off-cycle credit process based on data
submitted by Mercedes on fleet idle time and its system's real-world
effectiveness (i.e., how much of the time the system turns off the
engine when the vehicle is stopped). Multiple auto manufacturers have
requested that EPA revise the table menu value for stop-start
technology based solely on one input value EPA considered, idle time,
in the context of the Mercedes stop-start system, but no firms have
provided additional data on any of the other factors which go into the
consideration of a conservative value for stop-start systems. Systems
vary significantly in hardware, design, and calibration, leading to
wide variations in how much of the idle time the engine is actually
turned off. EPA has learned that some stop-start systems may be less
effective in the real world than the agency estimated in its 2012
rulemaking analysis, for example, due to systems having a disable
switch available to the driver, or stop-start systems be disabled under
certain temperature conditions or auxiliary loads, which would offset
the benefits of the higher idle time estimates. EPA requests additional
data from the OEMs, suppliers, and other stakeholders regarding a
comprehensive update to the stop-start off-cycle credit table value.
---------------------------------------------------------------------------

    \896\ ``EPA Decision Document: Mercedes-Benz Off-cycle Credits
for MY 2012-2016,'' EPA-420-R-14-025, September 2014.
---------------------------------------------------------------------------

    The menu currently includes a fleetwide cap on credits of 10 g/mile
\897\ to address the uncertainty surrounding the data and analysis used
as the basis of the menu credits. Some stakeholders have expressed
concern that the current

cap may constrain manufacturers ability in the future to fully utilize
the menu especially if the menu is expanded to include additional
technologies, as described above. For example, Global Automakers
suggested that the cap be raised from 10 g/mi to 15 g/mi. EPA requests
comments on increasing the current cap, for example from the current 10
g/mile to 15 g/mile to accommodate increased use of the menu. EPA also
requests comment on a concept that would replace the current menu cap
with an individual manufacturer cap that scales with the manufacturer's
average fleetwide target levels. The cap would be based on a percentage
of the manufacturer's fleetwide 2-cycle emissions performance, for
example at 5-10% of CO2 a manufacturer's emissions fleet
wide target. With a cap of five for a manufacturer with a 2-cycle
fleetwide average CO2 level of 200 g/mile, for example, the
cap would be 10 g/mile. EPA believes this may be a reasonable and more
technically correct approach for the caps, recognizing that in many
cases the emissions benefits of off-cycle technologies correlate with
the CO2 levels of the vehicles, providing more or less
emissions reductions depending on the CO2 levels of the
vehicles in the fleet. For example, applying stop-start to vehicles
with higher vehicle idle CO2 levels provide more emissions
reductions than when applied to vehicles with lower idle emissions.
This approach also would help account for the uncertainty associated
with the menu credits and help ensure that off-cycle menu credits do
not become an overwhelming portion of the manufacturers overall
emissions reduction strategy.
---------------------------------------------------------------------------

    \897\ 40 CFR 86.1869-12(b)(2).
---------------------------------------------------------------------------

    The current GHG rule contains a CO2 credit program for
improvements to the efficiency of the air conditioning system on light-
duty vehicles (see Sec.  86.1868-12). The total of A/C efficiency
credits is calculated by summing the individual credit values for each
efficiency improving technology used on a vehicle as specified in the
air conditioning credit menu. The total credit sum for each vehicle is
capped at 5.0 grams/mile for cars and 7.2 grams/mile for trucks.
Additionally, the off-cycle credit program (see Sec.  86.1869-12)
contains credit earning opportunities for technologies that reduce the
thermal loads on the vehicle from environmental conditions (solar
loads, parked interior ambient air temperature). These menu-based
thermal control credits have separate cap limits under the off-cycle
program of 3.0 grams/mile for cars and 4.3 grams/mile for trucks. The
AC efficiency technologies and the thermal control technologies
directly interact with each other because improved thermal control
results in reduced air conditioning loads of the more efficient air
conditioning technologies. Because of this interaction, an approach
that would remove the thermal control credit program from the off-cycle
credit program and combine them with the AC efficiency program would
seem appropriate to quantify the combined impact. Additionally, a cap
that reflects this combination of these two related programs may also
be appropriate. For example, if combined, the credit cap for thermal
controls and air conditioning efficiency could be the combined value of
the current individual program caps of 8.0 grams/mile for cars and 11.5
grams/mile for trucks. This combined A/C efficiency and thermal
controls cap would also apply to any additional thermal control or air
conditioning efficiency technology credit generated through other off-
cycle credit pathways. Also, by removing the thermal credits from the
off-cycle menu, they would no longer be counted against the menu cap
discussed above, representing a way to provide more room under the menu
cap for other off-cycle technologies. Comment is sought on this
approach and the appropriateness of the described per vehicle cap
limits above.
    As mentioned above, EPA has heard from many suppliers and their
trade associations an interest in allowing suppliers to have a role in
seeking off-cycle credits for their technologies. EPA requests comment
on providing a pathway for suppliers, along with at least one auto OEM
partner, to submit off-cycle applications for EPA approval. Auto
manufacturers would remain entirely responsible for the full useful
life emissions performance of the off-cycle technology as is currently
the case, including, for example, existing responsibilities for defect
reporting and the prohibition on defeat devices. Under such an
approach, an application submitted by a supplier and vehicle
manufacturer would establish a credit and/or methodology for
demonstrating credits that all auto manufacturers could then use in
their subsequent applications. This process could include full-vehicle
simulation modeling that is compatible with EPA's ALPHA simulation
tool. EPA requests comment on requiring that the supplier be partnered
in a substantive way with one or more auto manufacturers to ensure that
there is a practical interest in the technology prior to investing
resources in the approval process. The supplier application would be
subject to public review and comment prior to an EPA decision. However,
once approved, the subsequent auto manufacturer applications requesting
credits based on the supplier methodology would not be subject to
public review. EPA also requests comments on a concept where supplier
(with at least one auto manufacturer partner) demonstrated credits
would be available provisionally for a limited period of time, allowing
manufacturers to implement the technology and collect data on their
vehicles in order to support a continuation of credits for the
technology in the longer term. Also, the provisional credits could be
included under the menu credit cap since they would be based on a
general analysis of the technology rather than manufacturer-specific
data. EPA requests comments on all aspects of this approach.
    Incentives for Connected or Autonomous Vehicles: Connected and
autonomous vehicles have the potential to significantly impact vehicle
emissions in the future, with their aggregate impact being either
positive or negative, depending on a large number of vehicle-specific
and system-wide factors. Currently, connected or autonomous vehicles
would be eligible for credits under the off-cycle program if a
manufacturer provides data sufficient to demonstrate the real-world
emissions benefits of such technology. However, demonstrating the
incremental real-world benefits of these emerging technologies will be
challenging. Stakeholders have suggested that EPA should consider an
incentive for these technologies without requiring individual
manufacturers to demonstrate real world emissions benefits of the
technologies. EPA believes that any near-term incentive program should
include some demonstration that the technologies will be both truly new
and have some connection to overall environmental benefits. EPA
requests comment on such incentives as a way to facilitate increased
use of these technologies, including some level of assurance that they
will lead to future additional emissions reductions.
    Among the possible approaches, the most basic credits could be
awarded to manufacturers that produce vehicles with connected or
automated technologies. For connected vehicles, a set amount of credit
could be provided for each vehicle capable of Vehicle-to-Vehicle (V2V)
or Vehicle-to-Infrastructure (V2I) communications. One possible example
is to provide a set amount of credit, using the off-cycle menu, for any
vehicle that can

communicate basic safety messages (as outlined in SAE J2735) to other
vehicles. The credits provided would be an incentive to enable future
transportation system efficiencies, as these technologies on an
individual vehicle are unlikely to impact emissions in any meaningful
way. However, if these technologies are dispersed widely across the
fleet they could, under some circumstances, lead to future emission
reductions, and an incentive available to manufacturers now could help
facilitate that transformation.
    The rationale for providing credits for vehicle automation is
similar to that for connected vehicles. EPA could provide a set credit
for vehicles that achieve some specific threshold of automation,
perhaps based on the industry standard SAE definitions (SAE J3016).
Individual autonomous vehicles might achieve some emissions reductions,
but the impact may increase as larger numbers of autonomous vehicles
are on the road and can coordinate and provide system efficiencies.
Providing credits for autonomous vehicles, again through a set credit,
would provide manufacturers a clear incentive to bring these
technologies to market. It would be important for any such program to
incentivize only those approaches that could reasonably be expected to
provide additional contributions to overall emission reductions, taking
system effects into account. As above, EPA believes that any near-term
incentive program should include some demonstration that the
technologies are truly new and have some connection to environmental
benefits overall.
    A number of stakeholders have also requested that EPA consider
credits for automated and connected vehicles that are placed in
ridesharing or other high mileage applications, where any potential
environmental benefits could be multiplied due to the high utilization
of these vehicles. That is, credits could take into account that the
per-mile emission reduction benefits would accrue across a larger
number of miles for shared-use vehicles. There are likely many possible
approaches that could accomplish this objective. As one example, a
manufacturer who owns or partners with a shared-use mobility entity
could receive credit for ensuring that their autonomous vehicles are
used throughout the life of the vehicle in shared-use fleets rather
than as personally owned vehicles. Such credits would be based off of
the assumption that total vehicle miles travelled would be higher and,
therefore, generate more emission reduction benefits, under the former
case. Credits could be based off of the CO2 emissions
reduction of the autonomous fleet, taking into account the higher VMT
of the shared-use fleet, relative to the average.
    As suggested by this partial list of examples, a variety of
approaches would be possible to incentivize the use of these
technologies. EPA seeks comment on these and related approaches to
incentivize autonomous and connected vehicle technologies where they
would have the most beneficial effect on future emissions.
    Credit Carry-forward: Currently, CO2 credits may be
carried forward, or banked, for five years, with the exception that MY
2010-2015 credits may be carried forward and used through MY 2021.
Automakers have suggested a variety of ways in which GHG credit life
could be extended under the Clean Air Act, including the ability for
automakers to carry-forward MY 2010 and later banked credits out to MY
2025, extending the life of credits beyond five years, or even
unlimited credit life where credits would not expire. EPA believes
longer credit life would provide manufacturers with additional
flexibility to further integrate banked credits into their product
plans, potentially reducing costs. EPA requests comments on extending
credit carry-forward beyond the current five years, including unlimited
credit life.
    Natural Gas Vehicle Credits: Vehicles that are able to run on
compressed natural gas (CNG) currently are eligible for an advanced
technology multiplier credit for MYs 2017-2021. Dual-fueled natural gas
vehicles, which can run either on natural gas or on gasoline, are also
eligible for an advanced technology multiplier credit if the vehicles
meet minimum CNG range requirements. EPA received input from several
industry stakeholders who supported expanding these incentives to
further incentivize vehicles capable of operating on natural gas,
including treating incentives for natural gas vehicles on par with
those for electric vehicles and other advanced technologies, and
adjusting or removing the minimum range requirements for dual-fueled
CNG vehicles. EPA requests comments on these potential additional
incentives for natural gas fueled vehicles.
    High Octane Blends: EPA received input from renewable fuel industry
stakeholders and from the automotive industry supporting high octane
blends as a way to enable GHG reducing technologies such as higher
compression ratio engines. Stakeholders suggested that mid-level (e.g.,
E30) high octane ethanol blends should be considered and that EPA
should consider requiring that mid-level blends be made available at
service stations. Higher octane gasoline could provide manufacturers
with more flexibility to meet more stringent standards by enabling
opportunities for use of lower CO2 emitting technologies
(e.g., higher compression ratio engines, improved turbocharging,
optimized engine combustion). EPA requests comment on if and how EPA
could support the production and use of higher octane gasoline
consistent with Title II of the Clean Air Act.
    To illustrate how additional flexibilities would translate to a
reduction in the stringency of the standards, EPA analyzed several
examples as described below.\898\ The example flexibilities EPA
selected for this analysis are (1) removing the requirement to account
for upstream emissions associated with electricity use (i.e., extending
the 0 g/mile emissions factor), (2) a range of higher multipliers for
electric vehicles, and (3) additional credits for hybrids sold in the
light-truck fleet. EPA estimated what each additional flexibility could
contribute to estimate an equivalent percent per year CO2
standard reduction it would represent on a fleetwide basis. The
examples and results are provided in the table below for several
example technology sales penetration values (three and six percent for
battery electric vehicles, 10 and 20% for mild hybrid light-trucks,
five and 10% for strong hybrid light-trucks). These examples were
chosen to provide a sense of the relationship between the additional
flexibility and program stringency. For each example scenario, EPA made
a number of assumptions regarding the fleet penetration of the
technology, car/truck mix, and others, which are documented in the
docket. Additional flexibilities could be structured to provide a level
of overall stringency equivalent to the full range of the Alternatives
EPA is requesting comment on in this proposal, from the proposed
standards through more stringent alternatives described above in this
section, including the ``No Action'' alternative.
---------------------------------------------------------------------------

    \898\ Memorandum, ``Spreadsheet tool for the comparative
analysis of program stringencies for various light-duty vehicle GHG
footprint curves and compliance flexibilities combinations,'' July
2018, Kevin Bolon, EPA Office of Air and Radiation. Docket No. EPA-
HQ-OAR-2018-0283.

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

[GRAPHIC] [TIFF OMITTED] TP24AU18.301

    Table X-6 shows three examples of scenarios for how enhanced
flexibilities could impact overall program stringency. Example A
reduces the stringency of the EPA CO2 standard from 4.7% per
year to 4.0% per year. Example C, which includes the maximum incentive
flexibilities shown in Table X-5, significantly reduces the EPA
CO2 program stringency from 4.7% per year to 0.8% per year.
Increasing the BEV multipliers or hybrid credits beyond those listed in
Table XX by EPA would have the effect of further reducing the
stringency of the standards. EPA requests comment on the potential use
of enhanced program flexibilities as an alternative approach to
establishing the appropriate CO2 standards for MY 2021-2025.
    EPA solicits comment on the individual options for flexibilities
and on the potential for combining them as described in these example
scenarios. For example, EPA solicits comments on how to take these
flexibilities into account in considering the level of the standards
and whether, for a given level of overall stringency, the factors
discussed in Section V above, regarding EPA Justification for the
Proposed GHG Standards, would support a relatively less stringent
standard with fewer flexibilities or a relatively more stringent
standard with more flexibilities. EPA also solicits comment on whether
any flexibilities or combinations of flexibilities in particular are
more or less consistent with the Administrator's rationale for
proposing Alternative 1.

[GRAPHIC] [TIFF OMITTED] TP24AU18.302

D. Should NHTSA and EPA continue to account for air conditioning
efficiency and off-cycle improvements?

    As stated in the 2012 NPRM and final rules for MYs 2017 and beyond,
the purpose of the off-cycle improvement incentive is to encourage the
introduction and market penetration of off-cycle technologies that
achieve real-world benefits.\899\ In the 2012 NPRM, NHTSA stated,
---------------------------------------------------------------------------

    \899\ 77 FR 63134 (Oct. 15, 2012).

. . . because we and EPA do not believe that we can yet reasonably
predict an average amount by which manufacturers will take advantage
of [the off-cycle FCIV] opportunity, it did not seem reasonable for
the proposed standards to include it in our stringency determination
at this time. We expect to re-evaluate whether and how to include
off-cycle credits in determining maximum feasible standards as the
off-cycle technologies and how manufacturers may be expected to
employ them become better defined in the future.\900\
---------------------------------------------------------------------------

    \900\ 76 FR 75226 (Dec. 1, 2011).

    By the 2012 final rule, NHTSA and EPA had determined that it was
appropriate, under EPA's EPCA authority for testing and calculation
procedures, for the agencies to provide a fuel economy adjustment
factor for off-cycle technologies.\901\ NHTSA assessed some amount of
off-cycle credits in the determination of the maximum feasible
standards for the MYs covered by that rulemaking.\902\
---------------------------------------------------------------------------

    \901\ 77 FR 62628, 62649-50 (Oct. 15, 2012).
    \902\ 77 FR 62727, 63018 (Oct. 15, 2012).
---------------------------------------------------------------------------

    The Draft TAR included an extended discussion of the history and
technological underpinnings of the A/C efficiency and off-cycle FCIV
measurement procedures; \903\ however, there is a belief that it is
also appropriate to now revisit the basic question of, and accordingly
comment is sought on, how A/C efficiency and off-cycle credits and
FCIVs fit in setting maximum feasible CAFE standards under EPCA/EISA,
and GHG standards consistent with EPA's authority under the CAA. It is
believed that it would be prudent to revisit factors that EPA
identified in their first 2009 NPRM to establish GHG emissions
standards,\904\ such as how to best ensure that any off-cycle credits
(and associated FCIVs) applied for using manufacturer proposed and
agency approved test procedures are verifiable, reflect real-world
reductions, are based on repeatable test procedures, and are developed
through a transparent process along with appropriate opportunities for
public comment. Whether the program is still serving its originally
intended purpose is also a determination to be made.
---------------------------------------------------------------------------

    \903\ See Draft TAR at 5-207 et seq.
    \904\ See 74 FR 49482 (Sept. 28, 2009).
---------------------------------------------------------------------------

1. Why were alternatives that phased out the A/C efficiency and off-
cycle programs considered?
    As part of this rulemaking, alternatives were considered that phase
out the A/C efficiency and off-cycle compliance flexibilities to
reassess the benefits and costs of including these flexibilities in the
agencies' respective programs. The A/C efficiency and off-cycle
programs have been the subject of discussion and debate since the MYs
2017 and beyond final rule. The Alliance of Automobile Manufacturers
and Global Automakers petitioned the agencies to streamline aspects of
both agencies' A/C efficiency and off-cycle programs as part of a 2016
request to more broadly harmonize the CAFE and GHG programs (further
discussion of the Alliance/Global petition is located above). On the
other hand, other stakeholders have questioned the purpose and efficacy
of the off-cycle credit program, specifically, whether the agencies are
accurately capturing technology benefits and whether the programs are
unrealistically inflating manufacturers' compliance values. There are
two factors that may be important to consider at this time, (1)
manufacturer's increasing use of A/C efficiency and off-cycle
technologies to achieve compliance in light of the program's increasing
complexity; and (2) the questions of whether the agencies are
accurately accounting for

A/C efficiency and off-cycle benefits. In response to comments that the
programs in their current form were actually impeding innovative
technology growth, in particular from manufacturers, the concept was
considered to, instead of continuing to grow the A/C efficiency and
off-cycle flexibilities, assess two alternatives that would set
standards without the availability of A/C efficiency and off-cycle
credits for compliance. Each of these issues will be expanded upon, in
turn.
(a) Manufacturers' Increasing Reliance on the A/C Efficiency and Off-
cycle Programs To Achieve Compliance
    Since the 2012 final rule for MYs 2017 and beyond and the Draft
TAR, manufacturers have increasingly utilized A/C efficiency and off-
cycle technology to achieve either credits under the GHG program, or
fuel consumption improvement values (FCIVs) under the CAFE program. A/C
efficiency and off-cycle technology use ranges among manufacturers,
from some manufacturers claiming zero grams/mile (or the equivalent
under the CAFE program), to some manufacturers claiming 7 grams/mile in
MY 2016.\905\ Accordingly, with some manufacturers' potentially
reaching the credit cap (10 grams/mile) during the timeframe
contemplated by this rulemaking, if not before, considerations relating
to manufacturers' increasing reliance on the A/C efficiency and off-
cycle programs for compliance, and the agencies' administration of the
programs, are presented for discussion.
---------------------------------------------------------------------------

    \905\ See Greenhouse Gas Emission Standards for Light-Duty
Vehicles: Manufacturer Performance Report for the 2016 Model Year
(EPA Report 420-R18-002), U.S. EPA (Jan. 2018), available at https://nepis.epa.gov/Exe/ZyPDF.cgi?Dockey=P100TGIA.pdf.
---------------------------------------------------------------------------

    These issues have not been raised sua sponte; rather,
manufacturers' comments on the A/C efficiency and off-cycle programs
have been increasing recently in volume. Specifically, manufacturers
asserted in their 2016 comments to the Draft TAR that ``[s]ignificant
volumes of off-cycle credits will be essential for the industry in
order to comply with the GHG and CAFE standards through 2025.'' \906\
Similarly, in its request for the agencies to more fully incorporate
estimated costs for A/C efficiency and off-cycle technologies in their
analysis, ICCT noted that ``companies are clearly prioritizing [off-
cycle] technologies over more advanced test-cycle efficiency
technologies.'' \907\
---------------------------------------------------------------------------

    \906\ Comment by Alliance of Automobile Manufacturers, Docket ID
NHTSA-2016-0068-0095, at 162. It is important to note the Alliance
submitted this statement in context of the CAFE and GHG levels set
in the 2012 final rule for MYs 2017 and beyond. Specifically, the
Alliance asserted ``[t]he Agencies included off-cycle credits from
only two technologies in their analyses for setting the stringency
of the standards (engine stop start and active aerodynamic
features). However, because the fuel consumption benefits of many
other technologies were overestimated in the Agencies' analyses, and
the standards were therefore set at very challenging levels, off-
cycle technologies and the associated GHG and fuel economy benefits
are viewed by the industry as a critical area that must become a
major source of credits.''
    \907\ Comment by ICCT, Docket ID EPA-HQ-OAR-2015-0827-4017, at
10.
---------------------------------------------------------------------------

    Concurrent with the Alliance/Global's petition for the agencies to
take action on various aspects of the A/C efficiency and off-cycle
programs, other stakeholders raised issues about the programs that
could be discussed at this time. For example, ACEEE commented on the
Draft TAR that ``an off-cycle technology that is common in current
vehicles and is not reflected in the stringency of the standards has no
place in the off-cycle credit program. The purpose of the program is to
incentivize adoption of fuel saving technology, not to provide
loopholes for manufacturers to achieve the standards on paper.'' \908\
---------------------------------------------------------------------------

    \908\ Comment by ACEEE, Docket ID NHTSA-2016-0068-0078, at 14.
---------------------------------------------------------------------------

    Compare these comments with EPA's 2017 Light-Duty Automotive
Technology, Carbon Dioxide Emissions, and Fuel Economy Trends: 1975
Through 2017 report, which estimated that A/C efficiency and off-cycle
credits could, at most, ``reduce adjusted MY 2016 CO2
tailpipe emission values by about 7 g/mi, which would translate to an
adjusted fuel economy increase of approximately 0.5 mpg.'' \909\ A/C
and off-cycle flexibilities allow manufacturers to optionally apply a
wide array of technologies to improve fuel economy. While the agencies
do not require or incentivize the adoption of any particular
technologies, the industry is in fact expanding its use of more cost-
effective A/C efficiency and off-cycle technologies rather than other
technology pathways. Accordingly comment is sought on how large of a
role A/C efficiency and off-cycle technology should play in
manufacturer compliance. Is an adjusted fuel economy increase of
approximately 0.5 mpg noteworthy?
---------------------------------------------------------------------------

    \909\ Light-Duty Automotive Technology, Carbon Dioxide
Emissions, and Fuel Economy Trends: 1975 Through 2017, U.S. EPA at
141 (Jan. 2018), available at https://nepis.epa.gov/Exe/ZyPDF.cgi?Dockey=P100TGDW.pdf.
---------------------------------------------------------------------------

    Next, when manufacturers are increasingly reliant on A/C efficiency
and off-cycle technology to achieve compliance, agency administration
of the flexibility becomes more significant. The Alliance commented
that the industry ``needs the off-cycle credit program to function
effectively to fulfill the significant role that will be needed for
generating large quantities of credits from [off-cycle] emission
reduction.'' \910\ Moreover, the Alliance pointed out that ``[l]imited
Agency resources have delayed the processing of [petitions for off-
cycle credits], and the delay impedes manufacturers' ability to plan
for compliance or make investment decisions.'' \911\ More specifically,
the Alliance commented that:
---------------------------------------------------------------------------

    \910\ Comment by Alliance of Automobile Manufacturers, Docket ID
NHTSA-2016-0068-0095, at 166.
    \911\ Id. at 167.

    [c]ase-by-case approvals for off-cycle credit applications is
excessively burdensome due to slow agency response and unnecessary
testing. The procedures for granting off-cycle GHG credits are not
being implemented per the provisions of the regulation and are not
functioning to the level necessary for industry for long-term
compliance. Without timely processing, EPA works against its stated
intent of `provid[ing] an incentive for CO2 and fuel
consumption reducing off-cycle technologies that would otherwise not
be developed because they do not offer a significant 2-cycle
benefit.' \912\
---------------------------------------------------------------------------

    \912\ Comment by Alliance of Automobile Manufacturers, Docket ID
EPA-HQ-OA-2017-0190.

    Notably, the agencies' implementation of the off-cycle credit
provisions has been described as ``underperforming.'' \913\
---------------------------------------------------------------------------

    \913\ Comment by Alliance of Automobile Manufacturers, Docket ID
NHTSA-2016-0068-0095, at 166.
---------------------------------------------------------------------------

    The Alliance's ``primarily regulatory need'' as of the 2016 Draft
TAR was ``a renewed focus on removing all obstacles that are having the
unintended result of slowing investment and implementation of [credit]
technologies.'' \914\ The Alliance stated generally that ``[w]ith the
pre-approved credit list properly administered, the off-cycle program
can be expected to grow toward the credit caps that were established in
the regulation, and these credit caps will become binding constraints
for many or most automobile manufacturers. At that point, the credit
caps will be counterproductive since they will impede greater
implementation of the beneficial off-cycle technologies.'' \915\
Similarly in regards to the agencies' refusal to grant off-cycle
credits for technologies like driver assistance systems, the Alliance
stated that ``[t]he unintended consequence of this is that automakers
may not be able to continue to pursue technologies that do not

provide certainty in supporting vehicle compliance.'' \916\
---------------------------------------------------------------------------

    \914\ Id. at xiv.
    \915\ Id. at 164.
    \916\ Id. at 126.
---------------------------------------------------------------------------

    These comments highlight the challenges to assure improvement
values from A/C efficiency and off-cycle technologies reflect
verifiable, real-world fuel economy improvements, are attributable to
specific vehicle models, are based on repeatable test procedures and
are developed through a transparent process with appropriate
opportunities for public comment. There is a belief this process and
these considerations are important to assure the integrity and fairness
of the A/C and off-cycle procedures. The menu and 5-cycle test
methodologies are predefined and are not subject to the in-depth review
that proposed new test procedures are subject to. Comment is sought on
whether and how menu-based A/C and off-cycle credits should be
implemented.
(b) Potential for Benefits To Be Double Counted
    Next, the potential for technology benefits to be over-counted is
worth mention, but it is noted that aspects of this issue are being
addressed in this rulemaking. As stated in the 2012 final rule for MYs
2017 and beyond, fuel saving technologies integral to basic vehicle
design (e.g., camless engines, variable compression ratio engines,
micro air/hydraulic launch assist devices, advanced transmissions)
should not be eligible for off-cycle credits. Specifically, ``[b]eing
integral, there is no need to provide an incentive for their use, and
(more important), these technologies would be incorporated regardless.
Granting credits would be a windfall.'' \917\ Assumedly, because these
technologies are integral to basic vehicle design, their benefit would
be appropriately captured on the 2-cycle tests and 5-cycle tests.
Similarly, ICCT commented that, ``[i]n theory, off-cycle credits are a
good idea, as they encourage real-world fuel consumption reduction for
technologies that are not fully included on the official test cycles.
However, real-world benefits only accrue if double-counting is avoided
and the amount of the real-world fuel consumption reduction is
accurately measured.'' \918\
---------------------------------------------------------------------------

    \917\ 77 FR 62732 (Oct. 15, 2012).
    \918\ Comment by ICCT, Docket EPA-HQ-OAR-2015-0827-4017, at 10.
---------------------------------------------------------------------------

    Broadly, there is agreement with the concept that capturing real-
world driving behavior is essential to accurately measure the true
benefits of A/C efficiency and off-cycle technologies. One example
where this holds true is in particular component testing as measured
with the federal standardized testing procedure. For example, the
federal test procedures provide specific guidance on how a vehicle
should be installed on the dynamometer, if the vehicle's windows should
be open or closed, and the vehicle's tire pressure. On the other hand,
the regulations provide no specific guidance on how other components
should be tested so the agencies and manufacturers can most accurately
quantify benefits.
    For example, to more accurately capture the benefit of a high
efficiency alternator on the 2-cycle or 5-cycle test, the vehicle would
need to run more systems that draw power from the alternator, like the
infotainment system or temperature controlled seats. There is not
guidance for these additional components in the tests as they are
currently performed due to the complexity of systems available in the
light duty vehicle market. Essentially, it is uncertain how to define
in regulations what component systems need to be on or off during
testing to accurately capture the benefit of component synergies.
Developing guidance on specific systems would also likely require a
significant amount of time and resources. Comment is sought on specific
technologies that may be receiving more benefit based on the current
test procedures, or more generally, any other issues related to
integrated component testing.
    It is noted, however, that the optional 5-cycle test procedure for
determining A/C and off-cycle improvement values over-counts benefits.
The 5-cycle test procedure weighs the 2-cycle tests used for compliance
with three additional test cycles to better represent real-world
factors impacting fuel economy and GHG emissions, including higher
speeds and more aggressive driving, colder temperature operation, and
the use of air conditioning. However, the current regulations
erroneously do not require that the 2-cycle benefit be subtracted from
the 5-cycle benefit, resulting in a credit calculation that is
artificially too high and not reflecting actual real-world emission
reductions that were intended. Since the 5-cycle test procedures
include the 2-cycle tests used for compliance, it is believed the 2-
cycle benefit should be subtracted from the 5-cycle benefit to avoid
over-counting of benefits. Manufacturers interested in generating
credits under the 5-cycle pathway identified this issue to the
agencies, and have asked EPA to clarify the regulations. This issue is
discussed in Section X.C, above, and comment is sought on how to
implement this correction.
2. Why was the phase-out as modeled (e.g., year over year reductions in
available FCIVs) for certain alternatives proposed?
    The CAFE model was used to assess the economic, technical, and
environmental impacts of alternatives that kept the A/C efficiency and
off-cycle programs as is and alternatives that phased those programs
out. As described fully in Section II.B, the CAFE model is a software
simulation that begins with a recently produced fleet of vehicles and
applies cost effective technologies to each manufacturers' fleet year-
by-year, taking into consideration vehicle refresh and redesign
schedules and common parts among vehicles. The CAFE model outputs
technology pathways that manufacturers could use to comply with the
proposed policy alternatives.
    For this NPRM, the modeling analysis uses the off-cycle credits
submitted by each manufacturer for MY 2017 compliance and carries these
forward to future years with a few exceptions. Several technologies
described in Section II.D are associated with off-cycle credits. In
particular, stop-start systems, integrated starter generators, and full
hybrids are assumed to generate off-cycle credits when applied to
improve fuel economy. Similarly, higher levels of aerodynamic
improvements are assumed to require active grille shutters on the
vehicle, which also qualify for off-cycle credits. The analysis assumes
that any off-cycle credits that are associated with actions outside of
technologies discussed in Section II.D (either chosen from the pre-
approved menu or petitioned for separately) remain at levels identified
by manufacturers in MY 2017. Any additional off-cycle credits that
accrue as the result of explicit technology application are calculated
dynamically in each year, for each alternative. This method allows for
the capture of benefits and costs from A/C efficiency and off-cycle
technologies as compared to an alternative where those technologies are
not used for compliance purposes.
    In considering potential future actions regarding the A/C
efficiency and off-cycle flexibilities, it was recognized that removing
the programs immediately would present a considerable challenge for
manufacturers. Based on compliance and mid-model year data for MY 2017,
the first model year that NHTSA accepted FCIVs for CAFE compliance,
manufacturers have reported A/C efficiency and off-cycle FCIVs at

noteworthy levels. EPA's MY 2016 Performance Report reported wide
penetration of FCIVs from menu technologies and noted some technologies
widely employed by OEMs included active grill shutters, glass or
glazing, and stop-start systems. Additional details of individual
manufacturers' MY 2016 performance and individual A/C and off-cycle
technology penetration can be found on EPA's website.\919\ Accordingly,
a phase-out was identified as a reasonable option for manufacturers to
come into compliance with GHG or fuel economy standards without using
A/C efficiency and off-cycle improvements for compliance.
---------------------------------------------------------------------------

    \919\ See Greenhouse Gas Emission Standards for Light-Duty
Vehicles: Manufacturer Performance Report for the 2016 Model Year
(EPA Report 420-R18-002), U.S. EPA (Jan. 2018), available at https://nepis.epa.gov/Exe/ZyPDF.cgi?Dockey=P100TGIA.pdf.
---------------------------------------------------------------------------

    Throughout the joint CAFE and GHG programs, the agencies have
phased out flexibility and incentive programs rather than ending those
programs abruptly, such as with the alternative fuel vehicle program
(as mandated by EISA) \920\ and the credit program for advanced
technologies in pickup trucks.\921\ Accordingly, an incremental
decrease in the maximum A/C efficiency and off-cycle FCIVs a
manufacturer can receive starting in MY 2022 and ending in MY 2026 was
modeled. Table X-7 below shows the incremental cap total starting in MY
2021 and reducing by the recommended value until MY 2026.
---------------------------------------------------------------------------

    \920\ 49 U.S.C. 32906.
    \921\ For further discussion of the advanced technology pickup
truck program, see Section X.B.1.e.4, above.
[GRAPHIC] [TIFF OMITTED] TP24AU18.303

    The MY 2016 fleet final compliance data to identify the starting
point for the FCIV phase-out was reviewed.\922\ For A/C efficiency
technologies, 6 grams/mile was used as the starting point, which was
the highest FCIV a single manufacturer had received in MY 2016. For
off-cycle technologies, the maximum allowable cap of 10 gram/mile set
in the 2012 final rule for MYs 2017 and beyond was used. Although no
manufacturer had reached the 10 gram/mile cap as of MY 2016, there is a
belief that it is still feasible for some manufacturers to reach the
cap in MYs prior to 2021. Comment is invited on this methodology.
---------------------------------------------------------------------------

    \922\ See Greenhouse Gas Emission Standards for Light-Duty
Vehicles: Manufacturer Performance Report for the 2016 Model Year
(EPA Report 420-R18-002), U.S. EPA (Jan. 2018), available at https://nepis.epa.gov/Exe/ZyPDF.cgi?Dockey=P100TGIA.pdf.
---------------------------------------------------------------------------

3. What do the modeled alternatives show?
    A lower \923\ and higher \924\ stringency alternative with and
without the A/C efficiency and off-cycle flexibilities were modeled to
see the impact on regulatory costs, average vehicle prices, societal
costs and benefits, average achieved fuel economy, and fuel
consumption, among other attributes. The alternatives and associated
impacts presented below are compared to a baseline where EPA's GHG
emissions standards for MYs 2022-2025 remain in effect and NHTSA's
augural CAFE standards would be in place (for further discussion of the
interpretation of what baseline is appropriate, see preamble Section
II.B and PRIA Chapter 6).
---------------------------------------------------------------------------

    \923\ Existing standards through MY 2020, then 0.5%/year
increases for both passenger cars and light trucks for MYs 2021-
2026.
    \924\ Existing standards through MY 2020, then 2%/year increases
for passenger cars and 3%/year increases for light trucks, for MYs
2021-2026.
---------------------------------------------------------------------------

    The modeling results indicated no significant change in the fleet
average achieved fuel economy, which is expected because the model only
applies technologies to a manufacturers' fleet until the standard is
met. However, the change in regulatory costs, average vehicle prices,
societal costs, and societal net benefits is noteworthy. Without A/C
efficiency and off-cycle technologies available, the CAFE model applied
more costly technologies to the fleet. This trend was less noticeable
with the low stringency alternative; however, the advanced technology
required to meet the high stringency alternative without A/C efficiency
or off-cycle technology was more expensive. Similarly, although the
CAFE model only applied technology to the fleet until the fleet met the
standards, alternatives that did not employ A/C efficiency and off-
cycle technologies saved more fuel and reduced GHG emissions more than
alternatives that did employ the A/C efficiency and off-cycle
technologies, and in significantly higher amounts for the higher
stringency alternative. On average, the modeling shows that phasing out
the A/C efficiency and off-cycle programs decreases fuel consumption
over the ``no change'' scenario but confirms that manufacturers will
have to apply costlier technology to meet the standards.
    The slight difference in fleet performance under the different
alternatives confirms how the CAFE model considers the universe of
applicable technologies and

dynamically identifies the most cost-effective combination of
technologies for each manufacturer's vehicle fleet based on the
assumptions about each technology's effectiveness, cost, and
interaction with all other technologies. For further discussion of the
technology pathways employed in the CAFE model, please refer to Section
II.D above.

XI. Public Participation

    NHTSA and EPA request comment on all aspects of this NPRM. This
section describes how you can participate in this process.

A. How do I prepare and submit comments?

    In this NPRM, there are many issues common to both NHTSA's and
EPA's proposals. For the convenience of all parties, comments submitted
to the NHTSA docket will be considered comments to the EPA docket and
vice versa. An exception is that comments submitted to the NHTSA docket
on NHTSA's Draft Environmental Impact Statement (EIS) will not be
considered submitted to the EPA docket. Therefore, commenters only need
to submit comments to either one of the two agency dockets, although
they may submit comments to both if they so choose. Comments that are
submitted for consideration by only one agency should be identified as
such, and comments that are submitted for consideration by both
agencies should also be identified as such. Absent such identification,
each agency will exercise its best judgment to determine whether a
comment is submitted on its proposal.
    Further instructions for submitting comments to either the NHTSA or
the EPA docket are described below.
    NHTSA: Your comments must be written and in English. To ensure that
your comments are correctly filed in the docket, please include the
docket number NHTSA-2018-0067 in your comments. Your comments must not
be more than 15 pages long.\925\ NHTSA established this limit to
encourage you to write your primary comments in a concise fashion.
However, you may attach necessary additional documents to your
comments, and there is no limit on the length of attachments. If you
are submitting comments electronically as a PDF (Adobe) file, we ask
that the documents please be scanned using the Optical Character
Recognition (OCR) process, thus allowing the agencies to search and
copy certain portions of your submissions.\926\ Please note that
pursuant to the Data Quality Act, in order for substantive data to be
relied upon and used by the agency, it must meet the information
quality standards set forth in the OMB and DOT Data Quality Act
guidelines. Accordingly, we encourage you to consult the guidelines in
preparing your comments. OMB's guidelines may be accessed at https://www.gpo.gov/fdsys/pkg/FR-2002-02-22/pdf/R2-59.pdf. DOT's guidelines may
be accessed at https://www.transportation.gov/regulations/dot-information-dissemination-quality-guidelines.
---------------------------------------------------------------------------

    \925\ 49 CFR 553.21.
    \926\ Optical character recognition (OCR) is the process of
converting an image of text, such as a scanned paper document or
electronic fax file, into computer-editable text.
---------------------------------------------------------------------------

    EPA: Direct your comments to Docket ID No. EPA-HQ-OAR-2018-0283.
EPA's policy is that all comments received will be included in the
public docket without change and may be made available online at http://www.regulations.gov, including any personal information provided,
unless the comment includes information claimed to be Confidential
Business Information (CBI) or other information whose disclosure is
restricted by statute. Do not submit information that you consider to
be CBI or otherwise protected through http://www.regulations.gov or
email. The http://www.regulations.gov website is an ``anonymous
access'' system, which means EPA will not know your identity or contact
information unless you provide it in the body of your comment. If you
send an email comment directly to EPA without going through http://www.regulations.gov, your email address will be automatically captured
and included as part of the comment that is placed in the public docket
and made available on the internet. If you submit an electronic
comment, EPA recommends that you include your name and other contact
information in the body of your comment and with any disk or CD-ROM you
submit. If EPA cannot read your comment due to technical difficulties
and cannot contact you for clarification, EPA may not be able to
consider your comment. Electronic files should avoid the use of special
characters, any form of encryption, and be free of any defects or
viruses. For additional information about EPA's public docket visit the
EPA Docket Center homepage at https://www.epa.gov/dockets.

B. Tips for Preparing Your Comments

    When submitting comments, please remember to:

     Identify the rulemaking by docket number and other
identifying information (subject heading, Federal Register date and
page number).
     Explain why you agree or disagree, suggest
alternatives, and substitute language for your requested changes.
     Describe any assumptions and provide any technical
information and/or data that you used.
     If you estimate potential costs or burdens, explain how
you arrived at your estimate in sufficient detail to allow for it to
be reproduced.
     Provide specific examples to illustrate your concerns
and suggest alternatives.
     Explain your views as clearly as possible, avoiding the
use of profanity or personal threats.
     Make sure to submit your comments by the comment period
deadline identified in the DATES section above.

C. How can I be sure that my comments were received?

    NHTSA: If you submit your comments to NHTSA's docket by mail and
wish DOT Docket Management to notify you upon its receipt of your
comments, please enclose a self-addressed, stamped postcard in the
envelope containing your comments. Upon receiving your comments, Docket
Management will return the postcard by mail.

D. How do I submit confidential business information?

    Any confidential business information (CBI) submitted to one of the
agencies will also be available to the other agency. However, as with
all public comments, any CBI information only needs to be submitted to
either one of the agencies' dockets and it will be available to the
other. Following are specific instructions for submitting CBI to either
agency:
    EPA: Do not submit CBI to EPA through http://www.regulations.gov or
email. Clearly mark the part or all of the information that you claim
to be CBI. For CBI information in a disk or CD-ROM that you mail to
EPA, mark the outside of the disk or CD-ROM as CBI and then identify
electronically within the disk or CD-ROM the specific information that
is claimed as CBI. In addition to one complete version of the comment
that includes information claimed as CBI, a copy of the comment that
does not contain CBI must be submitted for inclusion in the public
docket. Information so marked will not be disclosed except in
accordance with the procedures set forth in 40 CFR part 2.
    NHTSA: If you wish to submit any information under a claim of
confidentiality, you should submit three copies of your complete
submission, including the information you claim to be confidential
business information, to the Chief Counsel, NHTSA, at the

address given above under FOR FURTHER INFORMATION CONTACT. When you
send a comment containing confidential business information, you should
include a cover letter setting forth the information specified in 49
CFR part 512.
    In addition, you should submit a copy from which you have deleted
the claimed confidential business information to the Docket by one of
the methods set forth above.

E. Will the agencies consider late comments?

    NHTSA and EPA will consider all comments received before the close
of business on the comment closing date indicated above under DATES. To
the extent practicable, we will also consider comments received after
that date. If interested persons believe that any information that the
agencies place in the docket after the issuance of the NPRM affects
their comments, they may submit comments after the closing date
concerning how the agencies should consider that information for the
final rule. However, the agencies' ability to consider any such late
comments in this rulemaking will be limited due to the time frame for
issuing a final rule.
    If a comment is received too late for us to practicably consider in
developing a final rule, we will consider that comment as an informal
suggestion for future rulemaking action.

F. How can I read the comments submitted by other people?

    You may read the materials placed in the dockets for this document
(e.g., the comments submitted in response to this document by other
interested persons) at any time by going to http://www.regulations.gov.
Follow the online instructions for accessing the dockets. You may also
read the materials at the EPA Docket Center or the DOT Docket
Management Facility by going to the street addresses given above under
ADDRESSES.

G. How do I participate in the public hearings?

    NHTSA and EPA will jointly host two public hearings on the dates
and locations to be announced in a separate notice. At all hearings,
both agencies will accept comments on the rulemaking, and NHTSA will
also accept comments on the EIS.
    NHTSA and EPA will conduct the hearings informally, and technical
rules of evidence will not apply. We will arrange for a written
transcript of each hearing, to be posted in the dockets as soon as it
is available, and keep the official record of each hearing open for 30
days following that hearing to allow you to submit supplementary
information.

XII. Regulatory Notices and Analyses

A. Executive Order 12866, Executive Order 13563

    Executive Order 12866, ``Regulatory Planning and Review'' (58 FR
51735, Oct. 4, 1993), as amended by Executive Order 13563, ``Improving
Regulation and Regulatory Review'' (76 FR 3821, Jan. 21, 2011),
provides for making determinations whether a regulatory action is
``significant'' and therefore subject to the Office of Management and
Budget (OMB) review and to the requirements of the Executive Order.
Under section 3(f)(1) of Executive Order 12866, this action is an
``economically significant regulatory action'' because if adopted, it
is likely to have an annual effect on the economy of $100 million or
more. Accordingly, EPA and NHTSA submitted this action to the OMB for
review and any changes made in response to OMB recommendations have
been documented in the docket for this action. The benefits and costs
of this proposal are described above and in the Preliminary Regulatory
Impact Analysis (PRIA), which is located in the docket and on the
agencies' websites.

B. DOT Regulatory Policies and Procedures

    The rule, if adopted, would also be significant within the meaning
of the Department of Transportation's Regulatory Policies and
Procedures. The benefits and costs of this proposal are described above
and in the PRIA, which is located in the docket and on NHTSA's website.

C. Executive Order 13771 (Reducing Regulation and Controlling
Regulatory Costs)

    This proposed rule is expected to be an E.O. 13771 deregulatory
action. Details on the estimated cost savings of this proposed rule can
be found in PRIA, which is located in the docket and on the agencies'
websites.

D. Executive Order 13211 (Energy Effects)

    Executive Order 13211 applies to any rule that: (1) Is determined
to be economically significant as defined under E.O. 12866, and is
likely to have a significant adverse effect on the supply,
distribution, or use of energy; or (2) that is designated by the
Administrator of the Office of Information and Regulatory Affairs as a
significant energy action. If the regulatory action meets either
criterion, the agencies must evaluate the adverse energy effects of the
proposed rule and explain why the proposed regulation is preferable to
other potentially effective and reasonably feasible alternatives
considered.
    The proposed rule seeks to establish passenger car and light truck
fuel economy standards and greenhouse gas emissions standards. An
evaluation of energy effects of the proposed action and reasonably
feasible alternatives considered is provided in NHTSA's Draft EIS and
in the PRIA. To the extent that EPA's CO2 standards are
substantially related to fuel economy and accordingly, petroleum
consumption, the Draft EIS and PRIA analyses also provide an estimate
of impacts of EPA's proposed rule.

E. Environmental Considerations

1. National Environmental Policy Act (NEPA)
    Concurrently with this NPRM, NHTSA is releasing a Draft
Environmental Impact Statement (Draft EIS), pursuant to the National
Environmental Policy Act, 42 U.S.C. 4321-4347, and implementing
regulations issued by the Council on Environmental Quality (CEQ), 40
CFR part 1500, and NHTSA, 49 CFR part 520. NHTSA prepared the Draft EIS
to analyze and disclose the potential environmental impacts of the
proposed CAFE standards and a range of alternatives. The Draft EIS
analyzes direct, indirect, and cumulative impacts and analyzes impacts
in proportion to their significance.
    The Draft EIS describes potential environmental impacts to a
variety of resources. Resources that may be affected by the proposed
action and alternatives include fuel and energy use, air quality,
climate, land use and development, hazardous materials and regulated
wastes, historical and cultural resources, noise, and environmental
justice. The Draft EIS also describes how climate change resulting from
global GHG emissions (including the U.S. light duty transportation
sector under the Proposed Action and alternatives) could affect certain
key natural and human resources. Resource areas are assessed
qualitatively and quantitatively, as appropriate, in the Draft EIS.
    NHTSA has considered the information contained in the Draft EIS as
part of developing its proposal. The Draft EIS is available for public
comment; instructions for the submission of comments are included
inside the document. NHTSA will simultaneously issue the Final
Environmental Impact Statement and Record of Decision, pursuant to 49

U.S.C. 304a(b), and U.S. Department of Transportation Final Guidance on
MAP-21 Section 1319 Accelerated Decisionmaking in Environmental Reviews
(http://www.dot.gov/sites/dot.gov/files/docs/MAP-21_1319_Final_Guidance.pdf) unless it is determined that statutory
criteria or practicability considerations preclude simultaneous
issuance. For additional information on NHTSA's NEPA analysis, please
see the Draft EIS.
2. Clean Air Act (CAA) as Applied to NHTSA's Action
    The CAA (42 U.S.C. 7401 et seq.) is the primary Federal legislation
that addresses air quality. Under the authority of the CAA and
subsequent amendments, EPA has established National Ambient Air Quality
Standards (NAAQS) for six criteria pollutants, which are relatively
commonplace pollutants that can accumulate in the atmosphere as a
result of human activity. EPA is required to review each NAAQS every
five years and to revise those standards as may be appropriate
considering new scientific information.
    The air quality of a geographic region is usually assessed by
comparing the levels of criteria air pollutants found in the ambient
air to the levels established by the NAAQS (taking into account, as
well, the other elements of a NAAQS: Averaging time, form, and
indicator). Concentrations of criteria pollutants within the air mass
of a region are measured in parts of a pollutant per million parts
(ppm) of air or in micrograms of a pollutant per cubic meter ([mu]g/
m\3\) of air present in repeated air samples taken at designated
monitoring locations using specified types of monitors. These ambient
concentrations of each criteria pollutant are compared to the levels,
averaging time, and form specified by the NAAQS in order to assess
whether the region's air quality is in attainment with the NAAQS.
    When the measured concentrations of a criteria pollutant within a
geographic region are below those permitted by the NAAQS, EPA
designates the region as an attainment area for that pollutant, while
regions where concentrations of criteria pollutants exceed Federal
standards are called nonattainment areas. Former nonattainment areas
that are now in compliance with the NAAQS are designated as maintenance
areas. Each State with a nonattainment area is required to develop and
implement a State Implementation Plan (SIP) documenting how the region
will reach attainment levels within time periods specified in the CAA.
For maintenance areas, the SIP must document how the State intends to
maintain compliance with the NAAQS. When EPA revises a NAAQS, each
State must revise its SIP to address how it plans to attain the new
standard.
    No Federal agency may ``engage in, support in any way or provide
financial assistance for, license or permit, or approve'' any activity
that does not ``conform'' to a SIP or Federal Implementation Plan after
EPA has approved or promulgated it.\927\ Further, no Federal agency may
``approve, accept, or fund'' any transportation plan, program, or
project developed pursuant to title 23 or chapter 53 of title 49,
U.S.C., unless the plan, program, or project has been found to
``conform'' to any applicable implementation plan in effect.\928\ The
purpose of these conformity requirements is to ensure that Federally
sponsored or conducted activities do not interfere with meeting the
emissions targets in SIPs, do not cause or contribute to new violations
of the NAAQS, and do not impede the ability of a State to attain or
maintain the NAAQS or delay any interim milestones. EPA has issued two
sets of regulations to implement the conformity requirements:
---------------------------------------------------------------------------

    \927\ 42 U.S.C. 7506(c)(1).
    \928\ 42 U.S.C. 7506(c)(2).
---------------------------------------------------------------------------

    (1) The Transportation Conformity Rule \929\ applies to
transportation plans, programs, and projects that are developed,
funded, or approved under title 23 or chapter 53 of title 49, U.S.C.
---------------------------------------------------------------------------

    \929\ 40 CFR part 51, subpart T, and part 93, subpart A.
---------------------------------------------------------------------------

    (2) The General Conformity Rule \930\ applies to all other federal
actions not covered under transportation conformity. The General
Conformity Rule establishes emissions thresholds, or de minimis levels,
for use in evaluating the conformity of an action that results in
emissions increases.\931\ If the net increases of direct and indirect
emissions are lower than these thresholds, then the project is presumed
to conform and no further conformity evaluation is required. If the net
increases of direct and indirect emissions exceed any of these
thresholds, and the action is not otherwise exempt, then a conformity
determination is required. The conformity determination can entail air
quality modeling studies, consultation with EPA and state air quality
agencies, and commitments to revise the SIP or to implement measures to
mitigate air quality impacts.
---------------------------------------------------------------------------

    \930\ 40 CFR part 51, subpart W, and part 93, subpart B.
    \931\ 40 CFR 93.153(b).
---------------------------------------------------------------------------

    The proposed CAFE standards and associated program activities are
not developed, funded, or approved under title 23 or chapter 53 of
title 49, U.S.C. Accordingly, this action and associated program
activities are not subject to transportation conformity. Under the
General Conformity Rule, a conformity determination is required where a
Federal action would result in total direct and indirect emissions of a
criteria pollutant or precursor originating in nonattainment or
maintenance areas equaling or exceeding the rates specified in 40 CFR
93.153(b)(1) and (2). As explained below, NHTSA's proposed action
results in neither direct nor indirect emissions as defined in 40 CFR
93.152.
    The General Conformity Rule defines direct emissions as ``those
emissions of a criteria pollutant or its precursors that are caused or
initiated by the Federal action and originate in a nonattainment or
maintenance area and occur at the same time and place as the action and
are reasonably foreseeable.'' \932\ Because NHTSA's action would set
fuel economy standards for light duty vehicles, it would cause no
direct emissions consistent with the meaning of the General Conformity
Rule.\933\
---------------------------------------------------------------------------

    \932\ 40 CFR 93.152.
    \933\ Department of Transportation v. Public Citizen, 541 U.S.
752, 772 (2004) (``[T]he emissions from the Mexican trucks are not
`direct' because they will not occur at the same time or at the same
place as the promulgation of the regulations.''). NHTSA's action is
to establish fuel economy standards for MY 2021-2026 passenger car
and light trucks; any emissions increases would occur well after
promulgation of the final rule.
---------------------------------------------------------------------------

    Indirect emissions under the General Conformity Rule are ``those
emissions of a criteria pollutant or its precursors (1) That are caused
or initiated by the federal action and originate in the same
nonattainment or maintenance area but occur at a different time or
place as the action; (2) That are reasonably foreseeable; (3) That the
agency can practically control; and (4) For which the agency has
continuing program responsibility.'' \934\ Each element of the
definition must be met to qualify as indirect emissions. NHTSA has
determined that, for purposes of general conformity, emissions that may
result from the proposed fuel economy standards would not be caused by
NHTSA's action, but rather would occur because of subsequent activities
the agency cannot practically control. ``[E]ven if a Federal licensing,
rulemaking, or other approving action is a required initial step for a
subsequent activity that causes emissions, such initial steps do not
mean that a Federal agency can practically control any resulting
emissions.'' \935\
---------------------------------------------------------------------------

    \934\ 40 CFR 93.152.
    \935\ 40 CFR 93.152.

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

    As the CAFE program uses performance-based standards, NHTSA cannot
control the technologies vehicle manufacturers use to improve the fuel
economy of passenger cars and light trucks. Furthermore, NHTSA cannot
control consumer purchasing (which affects average achieved fleetwide
fuel economy) and driving behavior (i.e., operation of motor vehicles,
as measured by VMT). It is the combination of fuel economy
technologies, consumer purchasing, and driving behavior that results in
criteria pollutant or precursor emissions. For purposes of analyzing
the environmental impacts of the proposal and alternatives under NEPA,
NHTSA has made assumptions regarding all of these factors. The agency's
Draft EIS predicts that increases in air toxic and criteria pollutants
would occur in some nonattainment areas under certain alternatives.
However, the proposed standards and alternatives do not mandate
specific manufacturer decisions, consumer purchasing, or driver
behavior, and NHTSA cannot practically control any of them.\936\
---------------------------------------------------------------------------

    \936\ See, e.g., Department of Transportation v. Public Citizen,
541 U.S. 752, 772-73 (2004); South Coast Air Quality Management
District v. Federal Energy Regulatory Commission, 621 F.3d 1085,
1101 (9th Cir. 2010).
---------------------------------------------------------------------------

    In addition, NHTSA does not have the statutory authority to control
the actual VMT by drivers. As the extent of emissions is directly
dependent on the operation of motor vehicles, changes in any emissions
that result from NHTSA's proposed standards are not changes the agency
can practically control or for which the agency has continuing program
responsibility. Therefore, the proposed CAFE standards and alternative
standards considered by NHTSA would not cause indirect emissions under
the General Conformity Rule, and a general conformity determination is
not required.
3. National Historic Preservation Act (NHPA)
    The NHPA (54 U.S.C. 300101 et seq.) sets forth government policy
and procedures regarding ``historic properties''--that is, districts,
sites, buildings, structures, and objects included on or eligible for
the National Register of Historic Places. Section 106 of the NHPA
requires federal agencies to ``take into account'' the effects of their
actions on historic properties.\937\ The agencies conclude that the
NHPA is not applicable to this proposal because the promulgation of
CAFE and GHG emissions standards for light duty vehicles is not the
type of activity that has the potential to cause effects on historic
properties. However, NHTSA includes a brief, qualitative discussion of
the impacts of the alternatives on historical and cultural resources in
Section 7.3 of the Draft EIS.
---------------------------------------------------------------------------

    \937\ Section 106 is now codified at 54 U.S.C. 306108.
Implementing regulations for the Section 106 process are located at
36 CFR part 800.
---------------------------------------------------------------------------

4. Fish and Wildlife Conservation Act (FWCA)
    The FWCA (16 U.S.C. 2901 et seq.) provides financial and technical
assistance to States for the development, revision, and implementation
of conservation plans and programs for nongame fish and wildlife. In
addition, the Act encourages all Federal departments and agencies to
utilize their statutory and administrative authorities to conserve and
to promote conservation of nongame fish and wildlife and their
habitats. The agencies conclude that the FWCA is not applicable to this
proposal because it does not involve the conservation of nongame fish
and wildlife and their habitats.
5. Coastal Zone Management Act (CZMA)
    The Coastal Zone Management Act (16 U.S.C. 1451 et seq.) provides
for the preservation, protection, development, and (where possible)
restoration and enhancement of the nation's coastal zone resources.
Under the statute, States are provided with funds and technical
assistance in developing coastal zone management programs. Each
participating State must submit its program to the Secretary of
Commerce for approval. Once the program has been approved, any activity
of a Federal agency, either within or outside of the coastal zone, that
affects any land or water use or natural resource of the coastal zone
must be carried out in a manner that is consistent, to the maximum
extent practicable, with the enforceable policies of the State's
program.\938\
---------------------------------------------------------------------------

    \938\ 16 U.S.C. 1456(c)(1)(A).
---------------------------------------------------------------------------

    The agencies conclude that the CZMA is not applicable to this
proposal because it does not involve an activity within, or outside of,
the nation's coastal zones that affects any land or water use or
natural resource of the coastal zone. NHTSA has, however, conducted a
qualitative review in its Draft EIS of the related direct, indirect,
and cumulative impacts, positive or negative, of the alternatives on
potentially affected resources, including coastal zones.
6. Endangered Species Act (ESA)
    Under Section 7(a)(2) of the ESA federal agencies must ensure that
actions they authorize, fund, or carry out are ``not likely to
jeopardize the continued existence'' of any federally listed threatened
or endangered species or result in the destruction or adverse
modification of the designated critical habitat of these species. 16
U.S.C. 1536(a)(2). If a federal agency determines that an agency action
may affect a listed species or designated critical habitat, it must
initiate consultation with the appropriate Service--the U.S. Fish and
Wildlife Service of the Department of the Interior and/or the National
Oceanic and Atmospheric Administration's National Marine Fisheries
Service of the Department of Commerce, depending on the species
involved--in order to ensure that the action is not likely to
jeopardize the species or destroy or adversely modify designated
critical habitat. See 50 CFR 402.14. Under this standard, the federal
agency taking action evaluates the possible effects of its action and
determines whether to initiate consultation. See 51 FR 19926, 19949
(June 3, 1986).
    Pursuant to Section 7(a)(2) of the ESA, the agencies have
considered the effects of the proposed standards and have reviewed
applicable ESA regulations, case law, and guidance to determine what,
if any, impact there might be to listed species or designated critical
habitat. The agencies have considered issues related to emissions of
CO2 and other GHGs and issues related to non-GHG emissions.
Based on this assessment, the agencies have determined that the actions
of setting CAFE and GHG emissions standards does not require
consultation under Section 7(a)(2) of the ESA. Accordingly, NHTSA and
EPA have concluded its review of this action under Section 7 of the
ESA.
7. Floodplain Management (Executive Order 11988 and DOT Order 5650.2)
    These Orders require Federal agencies to avoid the long- and short-
term adverse impacts associated with the occupancy and modification of
floodplains, and to restore and preserve the natural and beneficial
values served by floodplains. Executive Order 11988 also directs
agencies to minimize the impact of floods on human safety, health and
welfare, and to restore and preserve the natural and beneficial values
served by floodplains through evaluating the potential effects of any
actions the agency may take in a floodplain and ensuring that its
program

planning and budget requests reflect consideration of flood hazards and
floodplain management. DOT Order 5650.2 sets forth DOT policies and
procedures for implementing Executive Order 11988. The DOT Order
requires that the agency determine if a proposed action is within the
limits of a base floodplain, meaning it is encroaching on the
floodplain, and whether this encroachment is significant. If
significant, the agency is required to conduct further analysis of the
proposed action and any practicable alternatives. If a practicable
alternative avoids floodplain encroachment, then the agency is required
to implement it.
    In this proposal, the agencies are not occupying, modifying and/or
encroaching on floodplains. The agencies, therefore, conclude that the
Orders are not applicable to this action. NHTSA has, however, conducted
a review of the alternatives on potentially affected resources,
including floodplains, in its Draft EIS.
8. Preservation of the Nation's Wetlands (Executive Order 11990 and DOT
Order 5660.1a)
    These Orders require Federal agencies to avoid, to the extent
possible, undertaking or providing assistance for new construction
located in wetlands unless the agency head finds that there is no
practicable alternative to such construction and that the proposed
action includes all practicable measures to minimize harms to wetlands
that may result from such use. Executive Order 11990 also directs
agencies to take action to minimize the destruction, loss or
degradation of wetlands in ``conducting Federal activities and programs
affecting land use, including but not limited to water and related land
resources planning, regulating, and licensing activities.'' DOT Order
5660.1a sets forth DOT policy for interpreting Executive Order 11990
and requires that transportation projects ``located in or having an
impact on wetlands'' should be conducted to assure protection of the
Nation's wetlands. If a project does have a significant impact on
wetlands, an EIS must be prepared.
    The agencies are not undertaking or providing assistance for new
construction located in wetlands. The agencies, therefore, conclude
that these Orders do not apply to this proposal. NHTSA has, however,
conducted a review of the alternatives on potentially affected