\b\ Climate benefits are based on reductions in CO2, CH4 and N2O emissions and are calculated using four different estimates of the social cost of each
  greenhouse gas (SC-GHG model average at 2.5%, 3%, and 5% discount rates; 95th percentile at 3% discount rate), which each increase over time. In this
  table, we show the benefits associated with the average SC-GHGs at a 3% discount rate but the Agency does not have a single central SC-GHG point
  estimate. We emphasize the importance and value of considering the benefits calculated using all four SC-GHG estimates and present them later in this
  preamble. As discussed in Chapter 3.3 of the DRIA, a consideration of climate benefits calculated using discount rates below 3 percent, including 2
  percent and lower, is also warranted when discounting intergenerational impacts.

\c\ The same discount rate used to discount the value of damages from future GHG emissions (SC-GHGs at 5, 3, and 2.5 percent) is used to calculate the
  present and annualized values of climate benefits for internal consistency, while all other costs and benefits are discounted at either 3% or 7%.
\d\ Net benefits reflect the fuel savings plus benefits minus costs.
\e\ Non-GHG impacts associated with the standards presented here do not include the full complement of health and environmental effects that, if
  quantified and monetized, would increase the total monetized benefits. Instead, the non-GHG benefits are based on benefit-per-ton values that reflect
  only human health impacts associated with reductions in PM2.5 exposure.

  Table 16--Annualized Monetized Discounted Costs, Benefits, and Net Benefits of the Proposed Program and Alternatives for Calendar Years Through 2050
                                                          [Billions of 2018 dollars] a b c d e
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                            3% Discount rate                                         7% Discount rate
                                       -----------------------------------------------------------------------------------------------------------------
                                             Proposal        Alternative 1      Alternative 2         Proposal        Alternative 1      Alternative 2
--------------------------------------------------------------------------------------------------------------------------------------------------------
Costs.................................                $12               $9.5                $15                $12               $9.2                $14
Fuel Savings..........................                 13                 10                 15                9.9                7.9                 12
Benefits..............................                6.9                  6                8.8                6.3                5.4                  8
Net Benefits..........................                7.3                6.6                9.1                4.2                4.1                5.7
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes:
\a\ Values rounded to two significant figures; totals may not sum due to rounding. Present and annualized values are based on the stream of annual
  calendar year costs and benefits included in the analysis (2021-2050) and discounted back to year 2021.
\b\ Climate benefits are based on reductions in CO2, CH4 and N2O emissions and are calculated using four different estimates of the social cost of each
  greenhouse gas (SC-GHG model average at 2.5%, 3%, and 5% discount rates; 95th percentile at 3% discount rate), which each increase over time. In this
  table, we show the benefits associated with the average SC-GHGs at a 3% discount rate but the Agency does not have a single central SC-GHG point
  estimate. We emphasize the importance and value of considering the benefits calculated using all four SC-GHG estimates and present them later in this
  preamble. As discussed in Chapter 3.3 of the DRIA, a consideration of climate benefits calculated using discount rates below 3 percent, including 2
  percent and lower, is also warranted when discounting intergenerational impacts.
\c\ The same discount rate used to discount the value of damages from future GHG emissions (SC-GHGs at 5, 3, and 2.5 percent) is used to calculate the
  present and annualized values of climate benefits for internal consistency, while all other costs and benefits are discounted at either 3% or 7%.
\d\ Net benefits reflect the fuel savings plus benefits minus costs.
\e\ Non-GHG impacts associated with the standards presented here do not include the full complement of health and environmental effects that, if
  quantified and monetized, would increase the total monetized benefits. Instead, the non-GHG benefits are based on benefit-per-ton values that reflect
  only human health impacts associated with reductions in PM2.5 exposure.

    A second way to present the net benefits is using a vehicle MY
lifetime basis. Table 17 and Table 18 summarize EPA's estimates of
total discounted costs, fuel savings, and benefits through the full
lifetime of vehicles projected to be sold in MYs 2023-2026. The
estimated results presented here project the monetized environmental
and economic impacts associated with the proposed standards. Note that
standards continue at their MY2026 levels beyond MY2026 in any
scenario. At both a 3% and 7% discount rate all model years show
substantial fuel savings and net benefits.

          Table 17--Present Value GHG Analysis of Lifetime Costs & Benefits for MY 2023-2026 GHG Standards Under the Proposal and Alternatives
                                                     [For vehicles produced in MY 2023-2026] a b c d
                                                                   [Billions of 2018$]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                               3% Discount rate                            7% Discount rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Fuel                  Net                   Fuel                  Net
                               MY                                   Costs     savings    Benefits   benefits    Costs     savings    Benefits   benefits
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                        Proposal
--------------------------------------------------------------------------------------------------------------------------------------------------------
2023............................................................       $4.8       $3.6       $1.9      $0.68       $4.4       $2.6       $1.7     -$0.14
2024............................................................        5.9          7        3.6        4.7        5.5        4.7        3.3        2.4
2025............................................................        6.7        8.6        4.4        6.2        6.1        5.5        3.9        3.4
2026............................................................        8.1         13        7.2         12        7.3        8.2        6.2        7.2
                                                                 ---------------------------------------------------------------------------------------
    Sum.........................................................         26         33         17         24         23         21         15         13
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                      Alternative 1
--------------------------------------------------------------------------------------------------------------------------------------------------------
2023............................................................       $3.9       $3.4         $2       $1.5       $3.7       $2.4       $1.7       $0.4
2024............................................................        4.9        6.5        3.7        5.3        4.7        4.3        3.2        2.8
2025............................................................        5.6        7.7        4.5        6.5        5.1        4.9        3.8        3.6
2026............................................................        6.4         10          6        9.7        5.6        6.2          5        5.6
                                                                 ---------------------------------------------------------------------------------------
    Sum.........................................................         21         28         16         23         19         18         14         12
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                      Alternative 2
--------------------------------------------------------------------------------------------------------------------------------------------------------
2023............................................................       $6.8       $7.7       $4.6       $5.5       $6.3       $5.4         $4       $3.1

2024............................................................        7.7        9.8        5.7        7.8          7        6.5          5        4.4
2025............................................................        8.4         11        6.5        9.1        7.4        7.1        5.5        5.2
2026............................................................        9.2         13        7.8         12        7.9        8.2        6.6        6.9
                                                                 ---------------------------------------------------------------------------------------
    Sum.........................................................         32         42         25         34         29         27         21         20
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes:
\a\ The lifetime costs and benefits of each MY vehicle are discounted back to 2021.
\b\ Climate benefits are based on reductions in CO2, CH4 and N2O emissions and are calculated using four different estimates of the social cost of each
  greenhouse gas (SC-GHG model average at 2.5%, 3%, and 5% discount rates; 95th percentile at 3% discount rate), which each increase over time. In this
  table, we show the benefits associated with the average SC-GHGs at a 3% discount rate, but the Agency does not have a single central SC-GHG point
  estimate. We emphasize the importance and value of considering the benefits calculated using all four SC-GHG estimates and present them later in this
  preamble. As discussed in Chapter 3.3 of the DRIA, a consideration of climate benefits calculated using discount rates below 3 percent, including 2
  percent and lower, is also warranted when discounting intergenerational impacts.
\c\ The same discount rate used to discount the value of damages from future GHG emissions is used to calculate the present and annualized value of SC-
  GHGs for internal consistency, while all other costs and benefits are discounted at 3% in this table.
\d\ Non-GHG impacts associated with the standards presented here do not include the full complement of health and environmental effects that, if
  quantified and monetized, would increase the total monetized benefits. Instead, the non-GHG benefits are based on benefit-per-ton values that reflect
  only human health impacts associated with reductions in PM2.5 exposure.

            Table 18--Annualized GHG Analysis of Lifetime Costs & Benefits for MY 2023-2026 GHG Standards Under the Proposal and Alternatives
                                                     [For vehicles produced in MY 2023-2026] a b c d
                                                                   [Billions of 2018$]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                             3% Discount rate                             7% Discount rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                              Fuel                  Net                   Fuel                   Net
                              MY                                  Costs     savings    Benefits   benefits    Costs     savings    Benefits    benefits
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                        Proposal
--------------------------------------------------------------------------------------------------------------------------------------------------------
2023..........................................................      $0.21      $0.16      $0.08     $0.029      $0.33      $0.19     $0.085      -$0.053
2024..........................................................       0.26        0.3       0.16        0.2       0.41       0.35       0.16          0.1
2025..........................................................       0.29       0.37       0.19       0.27       0.45       0.41       0.19         0.15
2026..........................................................       0.35       0.58       0.31       0.54       0.55       0.62       0.31         0.38
                                                               -----------------------------------------------------------------------------------------
    Sum.......................................................        1.1        1.4       0.74          1        1.7        1.6       0.75         0.58
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                      Alternative 1
--------------------------------------------------------------------------------------------------------------------------------------------------------
2023..........................................................      $0.17      $0.15     $0.085     $0.067      $0.28      $0.18     $0.091     -$0.0084
2024..........................................................       0.21       0.28       0.16       0.23       0.35       0.32       0.17         0.14
2025..........................................................       0.24       0.33       0.19       0.28       0.38       0.37        0.2         0.19
2026..........................................................       0.28       0.44       0.26       0.42       0.42       0.47       0.26         0.31
                                                               -----------------------------------------------------------------------------------------
    Sum.......................................................        0.9        1.2        0.7          1        1.4        1.3       0.72         0.63
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                      Alternative 2
--------------------------------------------------------------------------------------------------------------------------------------------------------
2023..........................................................       $0.3      $0.33       $0.2      $0.24      $0.48       $0.4      $0.21        $0.14
2024..........................................................       0.33       0.42       0.25       0.34       0.53       0.49       0.26         0.22
2025..........................................................       0.37       0.48       0.28       0.39       0.56       0.54       0.29         0.27
2026..........................................................        0.4       0.57       0.34       0.51       0.59       0.61       0.34         0.37
                                                               -----------------------------------------------------------------------------------------
    Sum.......................................................        1.4        1.8        1.1        1.5        2.2          2        1.1            1
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes:
\a\ The lifetime costs and benefits of each MY vehicle are discounted back to 2021.
\b\ Climate benefits are based on reductions in CO2, CH4 and N2O emissions and are calculated using four different estimates of the social cost of each
  greenhouse gas (SC-GHG model average at 2.5%, 3%, and 5% discount rates; 95th percentile at 3% discount rate), which each increase over time. For the
  presentational purposes of this table, we show the benefits associated with the average SC-GHGs at a 3% discount rate, but the Agency does not have a
  single central SC-GHG point estimate. We emphasize the importance and value of considering the benefits calculated using all four SC-GHG estimates and
  present them later in this preamble. As discussed in Chapter 3.3 of the RIA, a consideration of climate benefits calculated using discount rates below
  3 percent, including 2 percent and lower, are also warranted when discounting intergenerational impacts.
\c\ The same discount rate used to discount the value of damages from future GHG emissions is used to calculate the present and annualized value of SC-
  GHGs for internal consistency, while all other costs and benefits are discounted at 3% in this table.

\d\ Non-GHG impacts associated with the standards presented here do not include the full complement of health and environmental effects that, if
  quantified and monetized, would increase the total monetized benefits. Instead, the non-GHG benefits are based on benefit-per-ton values that reflect
  only human health impacts associated with reductions in PM2.5 exposure.

II. EPA Proposal for MY 2023-2026 Light-Duty Vehicle GHG Standards

A. Proposed Model Year 2023-2026 GHG Standards for Light-Duty Vehicles,
Light-Duty Trucks, and Medium Duty Passenger Vehicles

    As noted, the transportation sector is the largest U.S. source of
GHG emissions, making up 29 percent of all emissions.\42\ Within the
transportation sector, light-duty vehicles are the largest contributor,
58 percent, to transportation GHG emissions in the U.S.\43\ EPA has
concluded that more stringent standards are appropriate in light of our
reassessment of the need to reduce GHG emissions, technological
feasibility, costs, lead time, and other factors. The program that EPA
is proposing through MY 2026 in this notice does not represent the
level of GHG reductions that will ultimately be achievable and
appropriate for the light-duty sector, but it does serve as an
important stepping off point for a longer-term program beyond 2026. The
following section provides the details of EPA's proposed standards and
related provisions, followed by a discussion of the alternatives EPA
considered. EPA requests comments on all of the proposed provisions and
alternatives.
---------------------------------------------------------------------------

    \42\ Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990-
2019 (EPA-430-R-21-005, published April 2021).
    \43\ Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990-
2019 (EPA-430-R-21-005, published April 2021).
---------------------------------------------------------------------------

    EPA is proposing revised, more stringent standards to control the
emissions of greenhouse gases (GHGs) from MY 2023 and later light-duty
vehicles.\44\ Carbon dioxide (CO2) is the primary greenhouse
gas resulting from the combustion of vehicular fuels. The standards
regulate CO2 on a gram per mile (g/mile) basis, which EPA
defines by separate footprint curves for a manufacturer's car and truck
fleets.\45\ Based on complying with these proposed standards, the
industry-wide average emissions target for new light-duty vehicles is
projected to be 171 g/mile of CO2 in MY 2026.\46\ Also, as
discussed in Section II.C below, EPA is requesting comment on standards
for MY 2026 that are in the range of 5-10 g/mile lower (i.e., more
stringent) than the levels proposed, resulting in fleet average target
levels that are in the range of 166-161 g/mile. EPA is not proposing to
change existing averaging, banking, and trading program elements,
except for a proposed limited extension of credit carry-forward for one
or two years for credits generated in MYs 2016-2020, as discussed in
Section II.B.4. The proposed standards would apply to passenger cars,
light-duty trucks, and medium-duty passenger vehicles (MDPVs).\47\ As
an overall group, they are referred to in this preamble as light-duty
vehicles or simply as vehicles. In this preamble, passenger cars may be
referred to simply as ``cars,'' and light-duty trucks and MDPVs as
``light trucks'' or ``trucks.''
---------------------------------------------------------------------------

    \44\ See Sections III and VI for a discussion of lead time.
    \45\ Footprint curves are graphical representations of the
algebraic formulae defining the emission standards in the regulatory
text.
    \46\ The reference to CO2 here refers to
CO2 equivalent reductions, as this level includes some
reductions in emissions of greenhouse gases other than
CO2, from refrigerant leakage, as one part of the A/C
related reductions.
    \47\ As with the previous GHG emissions standards, EPA will
continue to use the same vehicle category definitions as in the CAFE
program. MDPVs are grouped with light trucks for fleet average
compliance determinations.
---------------------------------------------------------------------------

    As discussed in section II.B, EPA is proposing several revised
provisions that would allow manufacturers to generate credits or that
provide additional incentives for use of advanced emission reduction
technologies. These include ``off-cycle'' credits for technologies that
reduce CO2 emissions during off-cycle operation that are not
reasonably accounted for by the 2-cycle tests used for compliance
purposes. EPA is proposing to increase the existing credit cap for
menu-based credits from 10 g/mile to 15 g/mile and is proposing a
number of program revisions and clarifications to address issues that
have been identified as EPA has implemented the program. In addition,
EPA is proposing to extend multiplier incentives for EVs, PHEVs, and
FCVs, with a cumulative cap on credits. Multiplier incentives allow
these low-emitting vehicles to count as more than one vehicle in a
manufacturer's compliance calculation. EPA is proposing to eliminate
multiplier incentives for natural gas vehicles adopted in the SAFE rule
after MY 2022. EPA is also proposing to reinstate full size pick-up
truck incentives through MY 2025 for vehicles that meet efficiency
performance criteria or include strong hybrid technology at a minimum
level of production volumes. The SAFE rule removed the full-size pickup
incentives for MYs 2022-2025.
    The current program includes several program elements that will
remain in place, without change. EPA is not proposing to change the
fundamental structure of the standards, which are based on the
footprint attribute with separate footprint curves for cars and trucks.
EPA is not proposing to change the existing CH4 and
N2O emissions standards. EPA is not proposing changes to the
program structure in terms of vehicle certification, compliance, and
enforcement. These aspects of the program continue to function as
intended and EPA does not currently believe changes are needed. EPA is
continuing to use tailpipe-only values to determine vehicle GHG
emissions, without accounting for upstream emissions (EVs and PHEVs
will continue to use 0 g/mile through MY 2026). EPA is also not
proposing changes to current program opportunities to earn credits
toward the fleet-wide average CO2 standards for improvements
to air conditioning systems. The current A/C credits program provides
credits for improvements to address both hydrofluorocarbon (HFC)
refrigerant direct losses (i.e., system ``leakage'') and indirect
CO2 emissions related to the increased load on the engine
(also referred to as ``A/C efficiency'' related emissions).
1. What fleet-wide emissions levels correspond to the CO2
standards?
    EPA is proposing revised more stringent standards for MYs 2023-2026
that are projected to result in an industry-wide average target for the
light-duty fleet of 171 g/mile of CO2 in MY 2026. The
proposed standards are designed to reach the same level of stringency
as the California Framework emission reduction targets in MY 2023, and
then ramp down in a linear fashion with year over year average
stringency increases of 4.7-5.0 percent. For MY 2026, the proposal goes
beyond the 2012 rule level of stringency for MY 2025, by about 3
percent more stringent, making the proposed MY 2026 standard the most
stringent vehicle GHG standard that EPA has proposed to date. EPA
believes that is possible and worthwhile to make additional progress in
MY 2026 by surpassing the level of stringency of the original MY 2025
standards established nine years ago in the 2012 rule. EPA is proposing
an ambitious and reasonable approach that would take the initial steps
towards making needed

reductions in GHG emissions. EPA does not propose any change to the
approach of having separate standards for cars and light trucks under
existing program definitions.
    The industry fleet average and car/truck year-over-year percent
reductions for the proposed standards compared to the existing SAFE
rule standards are provided in Table 19 below. For passenger cars, the
proposed footprint curves call for reducing CO2 by 8.3
percent in MY 2023 followed by year over year reductions of 4.7 to 5.1
percent from the MY 2023 passenger car standard through MY 2026. For
light-duty trucks, the proposed footprint curves standards would
require reducing CO2 by 10.8 percent in MY 2023 followed by
year over year reductions of 4.7 to 5.2 percent on average from the MY
2023 light-duty truck standard through MY 2026.

                                   Table 19--Projected Industry Fleet Average Target Year-Over-Year Percent Reductions
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                             SAFE rule                                       Proposal
                                                         -----------------------------------------------------------------------------------------------
                                                             Cars (%)       Trucks (%)     Combined (%)      Cars (%)       Trucks (%)     Combined (%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
2023....................................................             1.7             1.5             1.6             8.3            10.8             9.8
2024....................................................             1.1             1.2             1.2             4.8             4.7             4.7
2025....................................................             2.3             2.0             2.2             5.1             5.0             4.9
2026....................................................             1.8             1.6             1.7           * 4.7           * 5.2           * 5.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
* The percentages shown do not include EPA's request for comments on MY 2026 standards that are 5-10 g/mile more stringent than proposed.

    For light-trucks, EPA is proposing to change the upper right
cutpoints of the CO2-footprint curves (i.e., the footprint
sizes in sq. ft. at which the CO2 standards level off as
flat CO2 target values for larger vehicle footprints. See
Figure 5 below). The SAFE rule altered these cutpoints and EPA is now
proposing to restore them to the original upper right cutpoints
initially established in the 2012 rule, for MYs 2023-2026, essentially
requiring increasingly more stringent CO2 targets at the
higher footprint range up to the revised cutpoint levels. The shapes of
the curves and the cutpoints are discussed in Section II.A.2.
    The 171 g/mile estimated industry-wide target for MY 2026 noted
above is based on EPA's current fleet mix projections for MY 2026
(approximately 50 percent cars and 50 percent trucks, with only slight
variations from MY 2023-2026). As discussed below, the final fleet
average standards for each manufacturer ultimately will depend on each
manufacturer's actual rather than projected production in each MY from
MY 2023 to MY 2026 under the sales-weighted footprint-based standard
curves for the car and truck regulatory classes. In the 2012 rule, EPA
estimated that the fleet average target would be 163 g/mile in MY 2025
based on the projected fleet mix for MY 2025 (67 percent car and 33
percent trucks) based on information available at the time of the 2012
rulemaking. Primarily due to the historical and ongoing shift in fleet
mix that included more crossover and small and mid-size SUVs and fewer
passenger cars, EPA's projection in the Midterm Evaluation (MTE)
January 2017 Final Determination for the original MY 2025 fleet average
target level increased to 173 g/mile.\48\ EPA has again updated its
fleet mix projections and now projects that the original 2012 rule MY
2025 footprint curves standards would result in an industry-wide fleet
average target level of 177 g/mile. The projected fleet average targets
under the 2012 rule, using the updated fleet mix projections and the
projected fleet average targets for the proposal are provided in Table
20 below. Figure 3 below, based on the values in Table 20, shows the
proposed standards target levels along with estimated targets for the
2012 rule, SAFE rule, and California Framework for comparison.\49\
---------------------------------------------------------------------------

    \48\ ``Final Determination on the Appropriateness of the Model
Year 2022-2025 Light-Duty Vehicle Greenhouse Gas Emissions Standards
under the Midterm Evaluation,'' EPA-420-R-17-001, January 2017.
    \49\ For comparison purposes, the California Framework estimates
are based on a scenario in which all manufacturers meet the
California Framework in MYs 2021-2026 (not only the manufacturers
that agreed to the California Framework).

 Table 20--Fleet Average Target Projections for the Proposed Standards Compared to Updated Fleet Average Target
                        Projections for the 2012 Rule, SAFE Rule and California Framework
                                                [CO2 grams/mile]
----------------------------------------------------------------------------------------------------------------
                                                                     2012 Rule       SAFE rule      California
                                                     Proposal        projected       projected       framework
                       MY                            projected        targets         targets        projected
                                                      targets        (updated)       (updated)        targets
----------------------------------------------------------------------------------------------------------------
2021............................................           * 223             214             223             214
2022............................................           * 220             205             220             206
2023............................................             199             195             216             199
2024............................................             189             186             214             191
2025............................................             180             177             209             184

2026............................................           * 171             177             205             177
----------------------------------------------------------------------------------------------------------------
* Projected targets under the SAFE rule standards.
** EPA is also requesting comment on MY 2026 standards that would result in fleet average levels that are 5-10 g/
  mile more stringent than the level shown.

  [GRAPHIC] [TIFF OMITTED] TP10AU21.002

    EPA's standards are based in part on EPA's projection of average
industry wide CO2-equivalent emission reductions from A/C
improvements, where the footprint curves are made numerically more
stringent by an amount equivalent to this projection of A/C refrigerant
leakage credits.\50\ Including this projection of A/C credits for
purposes of setting GHG standards levels is consistent with the 2012
rule and the SAFE rule.
---------------------------------------------------------------------------

    \50\ The total A/C adjustment is 18.8 g/mile for cars and 24.4
g/mile for trucks.
---------------------------------------------------------------------------

    Table 21 below shows overall fleet average target levels for both
cars and light trucks that are projected over the implementation period
of the proposed standards. A more detailed manufacturer by manufacturer
break down of the projected target and achieved levels is provided in
Section III.B.1 below. The actual fleet-wide average g/mile level that
would be achieved in any year for cars and trucks will depend on the
actual production of vehicles for that year, as well as the use of the
various credit and averaging, banking, and trading provisions. For
example, in any year, manufacturers would be able to generate credits
from cars and use them for compliance with the truck standard, or vice
versa. In Section V, EPA discusses the year-by-year estimate of
emissions reductions that are projected to be achieved by the proposed
standards.
    In general, the schedule of the proposed standards allows an
incremental phase-in to the MY 2026 level and reflects consideration of
the appropriate lead time for manufacturers to take actions necessary
to meet the

proposed standards.\51\ The technical feasibility of the standards is
discussed in Section III below and in the DRIA. Note that MY 2026 is
the final MY in which the proposed standards become more stringent. The
MY 2026 CO2 standards would remain in place for later MYs,
unless and until revised by EPA in a future rulemaking for those MYs.
---------------------------------------------------------------------------

    \51\ As discussed in Section III, EPA has used the Corporate
Average Fuel Economy (CAFE) Compliance and Effects Modeling System
(CCEMS) to support the technical assessment. Among the ways EPA has
considered lead time in the proposal is by using the constraints
built into the CCEMS model which are designed to represent lead-time
constraints, including the use of redesign and refresh cycles. See
CCEMS Model Documentation on web page https://www.nhtsa.gov/corporate-average-fuel-economy/compliance-and-effects-modeling-system and contained in the docket for this rule.
---------------------------------------------------------------------------

    EPA has estimated the overall fleet-wide CO2 emission
levels that correspond with the attribute-based footprint standards,
based on projections of the composition of each manufacturer's fleet in
each year of the program. As noted above, EPA estimates that, on a
combined fleet-wide national basis, the 2026 MY standards would result
in a level of 171 g/mile CO2. The derivation of the 171 g/
mile estimate is described in Section III.A. EPA aggregated the
estimates for individual manufacturers based on projected production
volumes into the fleet-wide averages for cars, trucks, and the entire
fleet, shown in Table 21.\52\ As discussed above, the combined fleet
estimates are based on projected fleet mix of cars and trucks that
varies over the MY 2023-2026 timeframe. This fleet mix distribution can
also be found in Section III.A.
---------------------------------------------------------------------------

    \52\ Due to rounding during calculations, the estimated fleet-
wide CO2 target levels may vary by plus or minus 1 gram.

            Table 21--Estimated Fleet-Wide CO2 Target Levels Corresponding to the Proposed Standards
----------------------------------------------------------------------------------------------------------------
                                                                   Cars CO2 (g/   Trucks CO2 (g/   Fleet CO2 (g/
                           Model year                                  mile)           mile)           mile)
----------------------------------------------------------------------------------------------------------------
2023............................................................             165             232             199
2024............................................................             157             221             189
2025............................................................             149             210             180
2026 and later *................................................             142             199             171
----------------------------------------------------------------------------------------------------------------
** EPA is also requesting comment on MY 2026 standards that would result in fleet average levels that are 5-10 g/
  mile more stringent than the levels shown.

    As shown in Table 21, fleet-wide CO2 emission target
levels for cars under the proposed standards are projected to decrease
from 165 to 142 g/mile between MY 2023 and MY 2026. Similarly, fleet-
wide CO2 target levels for trucks are projected to decrease
from 232 to 199 g/mile. These numbers do not reflect the effects of
flexibilities and credits in the program.\53\ The estimated fleetwide
achieved values can be found in Section V.
---------------------------------------------------------------------------

    \53\ Nor do they reflect flexibilities under the ABT program.
---------------------------------------------------------------------------

    As noted above, EPA is proposing standards that set increasingly
stringent levels of CO2 control from MY 2023 though MY 2026.
Applying the CO2 footprint curves applicable in each MY to
the vehicles (and their footprint distributions) expected to be sold in
each MY produces progressively more stringent estimates of fleet-wide
CO2 emission standards. EPA believes manufacturers can
achieve the proposed standards' important CO2 emissions
reductions through the application of available control technology at
reasonable cost, as well as the use of program flexibilities.
    The existing program includes several provisions that we are not
proposing to change and so would continue during the implementation
timeframe of this proposed rule. Consistent with the requirement of CAA
section 202(a)(1) that standards be applicable to vehicles ``for their
useful life,'' the proposed MY 2023-2026 vehicle standards will apply
for the useful life of the vehicle.\54\ Also, EPA is not proposing any
changes to the test procedures over which emissions are measured and
weighted to determine compliance with the GHG standards. These
procedures are the Federal Test Procedure (FTP or ``city'' test) and
the Highway Fuel Economy Test (HFET or ``highway'' test). While EPA may
consider requiring the use of test procedures other than the 2-cycle
test procedures in a future rulemaking, EPA is not considering any test
procedure changes in this rulemaking.
---------------------------------------------------------------------------

    \54\ The GHG emission standards apply for a useful life of 10
years or 120,000 miles for LDVs and LLDTs and 11 years or 120,000
miles for HLDTs and MDPVs. See 40 CFR 86.1805-17.
---------------------------------------------------------------------------

    EPA has analyzed the feasibility of achieving the proposed
CO2 standards through the application of currently available
technologies, based on projections of the technology and technology
penetration rates to reduce emissions of CO2, during the
normal redesign process for cars and trucks, taking into account the
effectiveness and cost of the technology. The results of the analysis
are discussed in detail in Section III below and in the DRIA. EPA also
presents the overall estimated costs and benefits of the proposed car
and truck CO2 standards in Section VII.I.
2. What are the proposed CO2 attribute-based standards?
    As with the existing GHG standards, EPA is proposing separate car
and truck standards--that is, vehicles defined as cars would have one
set of footprint-based curves, and vehicles defined as trucks would
have a different set.\55\ In general, for a given footprint, the
CO2 g/mile target \56\ for trucks is higher than the target
for a car with the same footprint. The curves are described
mathematically in EPA's regulations by a family of piecewise linear
functions (with respect to vehicle footprint) that gradually and
continually ramp down from the MY 2022 curves established in the SAFE
rule. EPA's proposed minimum and maximum footprint targets and the
corresponding cutpoints are provided below in Table 22 for MYs 2023-
2026 along with the slope and intercept defining the linear function
for footprints falling between the minimum and maximum footprint
values. For footprints falling between the minimum and maximum, the
targets are calculated as follows: Slope x Footprint + Intercept =
Target. Figure 4 and Figure 5 provide the existing MY 2021-2022 and
proposed MY 2023-2026 footprint curves graphically for both car and
light trucks, respectively.
---------------------------------------------------------------------------

    \55\ See 49 CFR part 523. Generally, passenger cars include cars
and smaller cross-overs and SUVs, while the truck category includes
larger cross-overs and SUVs, minivans, and pickup trucks.
    \56\ Because compliance is based on a sales-weighting of the
full range of vehicles in a manufacturer's car and truck fleets, the
foot-print based CO2 emission levels of specific vehicles
within the fleet are referred to as targets, rather than standards.

                                           Table 22--Proposed Footprint-Based CO2 Standard Curve Coefficients
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Car                                        Truck
                                                                 ---------------------------------------------------------------------------------------
                                                                     2023       2024       2025       2026       2023       2024       2025       2026
--------------------------------------------------------------------------------------------------------------------------------------------------------
MIN CO2 (g/mi)..................................................      145.6      138.6      131.9      125.6      181.1      172.1      163.5      155.4
MAX CO2 (g/mi)..................................................      199.1      189.5      180.3      171.6      312.1      296.5      281.8      267.8
Slope (g/mi/ft2)................................................       3.56       3.39       3.23       3.07       3.97       3.77       3.58       3.41
Intercept (g/mi)................................................       -0.4       -0.4       -0.3       -0.3       18.4       17.4       16.6       15.8
MIN footprint (ft2).............................................         41         41         41         41         41         41         41         41
MAX footprint (ft2).............................................         56         56         56         56         74         74         74         74
--------------------------------------------------------------------------------------------------------------------------------------------------------

BILLING CODE 6560-01-P
[GRAPHIC] [TIFF OMITTED] TP10AU21.003

[GRAPHIC] [TIFF OMITTED] TP10AU21.004

BILLING CODE 6560-01-C
    The shapes of the proposed MY 2023-2026 car curves are similar to
the MY 2022 curve. By contrast, the proposed MY 2023-2026 truck curves
return to the cutpoint of 74.0 sq ft originally established in the 2012
rule, but changed in the SAFE rule.\57\ The gap between the 2022 curves
and the 2023 curves is indicative of the design of the proposed
standards as described earlier, where the gap between the MY 2022 and
MY 2023 curves is roughly double the gap between the curves for MYs
2024-2026.
---------------------------------------------------------------------------

    \57\ 77 FR 62781.
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3. EPA's Statutory Authority Under the CAA
i. Standards-Setting Authority Under CAA Section 202(a)
    Title II of the Clean Air Act (CAA) provides for comprehensive
regulation of mobile sources, authorizing EPA to regulate emissions of
air pollutants from all mobile source categories. Pursuant to these
sweeping grants of authority, when setting GHG standards for light-duty
vehicles, EPA considers such issues as technology effectiveness,
technology cost (per vehicle, per manufacturer, and per consumer), the
lead time necessary to implement the technology, and--based on these
considerations--the feasibility and practicability of potential
standards; as weel as the impacts of potential standards on emissions
reductions of both GHGs and non-GHGs; the impacts of standards on oil
conservation and energy security; the impacts of standards on fuel
savings by consumers; the impacts of standards on the auto industry;
other energy impacts; and other relevant factors such as impacts on
safety.
    Pursuant to Title II of the Clean Air Act, EPA has taken a
comprehensive, integrated approach to mobile source emission control
that has produced benefits well in excess of the costs of regulation.
In developing the Title II program, the Agency's historic, initial
focus was on personal vehicles since that category represented the
largest source of mobile source emissions.
    Title II emission standards have stimulated the development of a
broad set of advanced automotive technologies, such as on-board
computers and fuel injection systems, which have been the building
blocks of automotive designs and have yielded not only lower pollutant
emissions, but improved vehicle performance, reliability, and
durability. In response to EPA's adoption of Title II emission
standards for GHGs from light-duty vehicles in 2010 and later,
manufacturers have continued to significantly ramp up their development
and application of a wide range of new and improved technologies,
including more fuel-efficient engine designs, transmissions,
aerodynamics, and tires, air conditioning systems that contribute to
lower GHG emissions, and various levels of electrified vehicle
technologies.
    This proposed rule implements a specific provision from Title II,
section 202(a). Section 202(a)(1) of the CAA, 42 U.S.C. 7521(a)(1),
states that ``the Administrator shall by regulation prescribe (and from
time to time revise) . . . standards applicable to the emission of any
air pollutant from any class or classes of new motor vehicles . . .
which in his judgment cause, or contribute to, air pollution which may
reasonably be anticipated to endanger public health or welfare.'' Once
EPA makes the appropriate endangerment and cause or contribute
findings,\58\ then section 202(a) authorizes EPA to issue standards
applicable to emissions of those pollutants. Indeed, EPA's obligation
to do so is mandatory. See Coalition for Responsible Regulation v.

EPA, 684 F.3d 102, 126-27 (D.C. Cir. 2012); Massachusetts v. EPA, 549
U.S. 497, 533 (2007). Moreover, EPA's mandatory legal duty to
promulgate these emission standards derives from ``a statutory
obligation wholly independent of DOT's mandate to promote energy
efficiency.'' Massachusetts, 549 U.S. at 532. Consequently, EPA has no
discretion to decline to issue greenhouse gas standards under section
202(a), or to defer issuing such standards due to NHTSA's regulatory
authority to establish fuel economy standards. Rather, ``[j]ust as EPA
lacks authority to refuse to regulate on the grounds of NHTSA's
regulatory authority, EPA cannot defer regulation on that basis.''
Coalition for Responsible Regulation, 684 F.3d at 127.
---------------------------------------------------------------------------

    \58\ EPA did so in 2009 for the group of six well-mixed
greenhouse gases--carbon dioxide, methane, nitrous oxide,
hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride--which
taken in combination endanger both the public health and the public
welfare of current and future generations. EPA further found that
the combined emissions of these greenhouse gases from new motor
vehicles and new motor vehicle engines contribute to greenhouse gas
air pollution that endangers public health and welfare. 74 FR 66496
(Dec. 15, 2009).
---------------------------------------------------------------------------

    Any standards under CAA section 202(a)(1) ``shall be applicable to
such vehicles . . . for their useful life.'' Emission standards set by
EPA under CAA section 202(a)(1) are technology-based, as the levels
chosen must be premised on a finding of technological feasibility.
Thus, standards promulgated under CAA section 202(a) are to take effect
only ``after such period as the Administrator finds necessary to permit
the development and application of the requisite technology, giving
appropriate consideration to the cost of compliance within such
period.'' CAA section 202(a)(2); see also NRDC v. EPA, 655 F. 2d 318,
322 (D.C. Cir. 1981). EPA must consider costs to those entities which
are directly subject to the standards. Motor & Equipment Mfrs. Ass'n
Inc. v. EPA, 627 F. 2d 1095, 1118 (D.C. Cir. 1979). Thus, ``the
[s]ection 202(a)(2) reference to compliance costs encompasses only the
cost to the motor-vehicle industry to come into compliance with the new
emission standards, and does not mandate consideration of costs to
other entities not directly subject to the proposed standards.'' See
Coalition for Responsible Regulation, 684 F.3d at 128.
    EPA is afforded considerable discretion under section 202(a) when
assessing issues of technical feasibility and availability of lead time
to implement new technology. Such determinations are ``subject to the
restraints of reasonableness,'' which ``does not open the door to
`crystal ball' inquiry.'' NRDC, 655 F. 2d at 328, quoting International
Harvester Co. v. Ruckelshaus, 478 F. 2d 615, 629 (D.C. Cir. 1973).
However, ``EPA is not obliged to provide detailed solutions to every
engineering problem posed in the perfection of [a particular device].
In the absence of theoretical objections to the technology, the agency
need only identify the major steps necessary for development of the
device, and give plausible reasons for its belief that the industry
will be able to solve those problems in the time remaining. The EPA is
not required to rebut all speculation that unspecified factors may
hinder `real world' emission control.'' NRDC, 655 F. 2d at 333-34. In
developing such technology-based standards, EPA has the discretion to
consider different standards for appropriate groupings of vehicles
(``class or classes of new motor vehicles''), or a single standard for
a larger grouping of motor vehicles. NRDC, 655 F.2d at 338. Finally,
with respect to regulation of vehicular greenhouse gas emissions, EPA
is not ``required to treat NHTSA's . . . regulations as establishing
the baseline for the [section 202(a) standards].'' Coalition for
Responsible Regulation, 684 F.3d at 127 (noting that the section 202(a)
standards provide ``benefits above and beyond those resulting from
NHTSA's fuel-economy standards.'')
    Although standards under CAA section 202(a)(1) are technology-
based, they are not based exclusively on technological capability. EPA
has the discretion to consider and weigh various factors along with
technological feasibility, such as the cost of compliance (section
202(a)(2)), lead time necessary for compliance (section 202(a)(2)),
safety (see NRDC, 655 F. 2d at 336 n. 31) \59\ and other impacts on
consumers, and energy impacts associated with use of the technology.
See George E. Warren Corp. v. EPA, 159 F.3d 616, 623-624 (D.C. Cir.
1998) (ordinarily permissible for EPA to consider factors not
specifically enumerated in the Act).
---------------------------------------------------------------------------

    \59\ Since its earliest Title II regulations, EPA has considered
the safety of pollution control technologies. See 45 FR 14496, 14503
(1980) (``EPA would not require a particulate control technology
that was known to involve serious safety problems. If during the
development of the trap-oxidizer safety problems are discovered, EPA
would reconsider the control requirements implemented by this
rulemaking'').
---------------------------------------------------------------------------

    In addition, EPA has clear authority to set standards under CAA
section 202(a) that are technology-forcing when EPA considers that to
be appropriate, but EPA is not required to do so (as distinguished from
standards under provisions such as section 202(a)(3) and section
213(a)(3)). Section 202(a) of the CAA does not specify the degree of
weight to apply to each factor, and EPA accordingly has discretion in
choosing an appropriate balance among factors. See Sierra Club v. EPA,
325 F.3d 374, 378 (D.C. Cir. 2003) (even where a provision is
technology-forcing, the provision ``does not resolve how the
Administrator should weigh all [the statutory] factors in the process
of finding the `greatest emission reduction achievable' ''); NPRA v.
EPA, 287 F.3d 1130, 1135 (D.C. Cir. 2002) (EPA decisions, under CAA
provision authorizing technology-forcing standards, based on complex
scientific or technical analysis are accorded particularly great
deference); see also Husqvarna AB v. EPA, 254 F. 3d 195, 200 (D.C. Cir.
2001) (great discretion to balance statutory factors in considering
level of technology-based standard, and statutory requirement ``to
[give appropriate] consideration to the cost of applying . . .
technology'' does not mandate a specific method of cost analysis);
Hercules Inc. v. EPA, 598 F. 2d 91, 106 (D.C. Cir. 1978) (``In
reviewing a numerical standard we must ask whether the agency's numbers
are within a zone of reasonableness, not whether its numbers are
precisely right''); Permian Basin Area Rate Cases, 390 U.S. 747, 797
(1968) (same); Federal Power Commission v. Conway Corp., 426 U.S. 271,
278 (1976) (same); Exxon Mobil Gas Marketing Co. v. FERC, 297 F. 3d
1071, 1084 (D.C. Cir. 2002) (same).
ii. Testing Authority
    Under section 203 of the CAA, sales of vehicles are prohibited
unless the vehicle is covered by a certificate of conformity. EPA
issues certificates of conformity pursuant to section 206 of the CAA,
based on (necessarily) pre-sale testing conducted either by EPA or by
the manufacturer. The Federal Test Procedure (FTP or ``city'' test) and
the Highway Fuel Economy Test (HFET or ``highway'' test) are used for
this purpose. Compliance with standards is required not only at
certification but throughout a vehicle's useful life, so that testing
requirements may continue post-certification. Useful life standards may
apply an adjustment factor to account for vehicle emission control
deterioration or variability in use (section 206(a)).
    EPA establishes the test procedures under which compliance with the
CAA GHG standards is measured. EPA's testing authority under the CAA is
broad and flexible. EPA has also developed tests with additional cycles
(the so-called 5-cycle tests) which are used for purposes of fuel
economy labeling and are also used in the EPA program for extending
off-cycle credits under the light-duty vehicle GHG program.

iii. Compliance and Enforcement Authority
    EPA oversees testing, collects and processes test data, and
performs calculations to determine compliance with CAA standards. CAA
standards apply not only at certification but also throughout the
vehicle's useful life. The CAA provides for penalties should
manufacturers fail to comply with their fleet average standards, and
there is no option for manufacturers to pay fines in lieu of compliance
with the standards. Under the CAA, penalties for violation of a fleet
average standard are typically determined on a vehicle-specific basis
by determining the number of a manufacturer's highest emitting vehicles
that cause the fleet average standard violation. Penalties for
reporting requirements under Title II of the CAA apply per day of
violation, and other violations apply on a per vehicle, or a per part
or component basis. See CAA sections 203(a) and 205(a) and 40 CFR 19.4.
    Section 207 of the CAA grants EPA broad authority to require
manufacturers to remedy vehicles if EPA determines there are a
substantial number of noncomplying vehicles. In addition, section 205
of the CAA authorizes EPA to assess penalties of up to $48,762 per
vehicle for violations of various prohibited acts specified in the CAA.
In determining the appropriate penalty, EPA must consider a variety of
factors such as the gravity of the violation, the economic impact of
the violation, the violator's history of compliance, and ``such other
matters as justice may require.'' The CAA does not authorize vehicle
manufacturers to pay fines in lieu of meeting emission standards.
4. Averaging, Banking, and Trading Provisions for CO2
Standards
i. Background
    Averaging, banking, and trading (ABT) is an important compliance
flexibility and ABT has been built into various highway engine and
vehicle programs (and nonroad engines and equipment programs) to
support emissions standards that through the introduction of new
technologies, result in reductions in air pollution. The light-duty ABT
program for GHG standards includes existing provisions initially
established in the 2010 rule for how credits may be generated and used
within the program.\60\ These provisions include credit carry-forward,
credit carry-back (also called deficit carry-forward), credit transfers
(within a manufacturer), and credit trading (across manufacturers).
---------------------------------------------------------------------------

    \60\ 40 CFR 86.1865-12.
---------------------------------------------------------------------------

    Credit carry-forward refers to banking (saving) credits for future
use, after satisfying any needs to offset prior MY debits within a
vehicle category (car fleet or truck fleet). Credit carry-back refers
to using credits to offset any deficit in meeting the fleet average
standards that had accrued in a prior MY. A manufacturer may have a
deficit at the end of a MY (after averaging across its fleet using
credit transfers between cars and trucks)--that is, a manufacturer's
fleet average level may fail to meet the required fleet average
standard for the MY. The CAA does not expressly limit the duration of
such credit provisions, and in the MY 2012-2016 and 2017-2025 programs,
EPA chose to adopt 5-year credit carry-forward (generally, with an
exception noted below) and 3-year credit carry-back provisions as a
reasonable approach that maintained consistency between the EPA GHG and
NHTSA's CAFE provisions.\61\ While some stakeholders had suggested that
light-duty GHG credits should have an unlimited credit life, EPA did
not adopt that suggestion for the light-duty GHG program because it
would pose enforcement challenges and could lead to some manufacturers
accumulating large banks of credits that could interfere with the
program's goal to develop and transition to progressively more advanced
emissions control technologies in the future.
---------------------------------------------------------------------------

    \61\ The EPCA/EISA statutory framework for the CAFE program
limits credit carry-forward to 5 years and credit carry-back to 3
years.
---------------------------------------------------------------------------

    Although the credit carry-forward and carry-back provisions
generally remained in place for MY 2017 and later standards, EPA
finalized provisions allowing all unused (banked) credits generated in
MY 2010-2016 (but not MY 2009 early credits) to be carried forward
through MY 2021. See Sec.  86.1865-12(k)(6)(ii); 77 FR 62788 October
15, 2012. This is the normal 5-year carry-forward for MY 2016 and later
credits but provides additional carry-forward years for credits
generated in MYs 2010-2015. Extending the life of MY 2010-2015 credits
provided greater flexibility for manufacturers in using the credits.
This provision was intended to facilitate the transition to
increasingly stringent standards through MY 2021 by helping
manufacturers resolve lead time issues they might face in the early MYs
of the program. This extension of credit carry-forward also provided
additional incentive for manufacturers to generate credits earlier, for
example in MYs 2014 and 2015, thereby encouraging the earlier use of
additional CO2 reducing technologies.
    Transferring credits in the EPA program refers to exchanging
credits between the two averaging sets--passenger cars and light
trucks--within a manufacturer. For example, credits accrued by
overcompliance with a manufacturer's car fleet average standard can be
used to offset debits accrued due to that manufacturer not meeting the
truck fleet average standard in a given year. (Put another way, a
manufacturer's car and truck fleets are, in essence, a single averaging
set in the EPA program). Finally, accumulated credits may be traded to
another manufacturer. Credit trading has occurred on a regular basis in
EPA's vehicle program.\62\ Manufacturers acquiring credits may offset
credit shortfalls and bank credits for use toward future compliance
within the carry-forward constraints of the program.
---------------------------------------------------------------------------

    \62\ EPA provides general information on credit trades annually
as part of its annual Automotive Trends and GHG Compliance Report.
The latest report is available at: https://www.epa.gov/automotive-trends and the docket for this rulemaking.
---------------------------------------------------------------------------

    The ABT provisions are an integral part of the vehicle GHG program
and the agency expects that manufacturers will continue to utilize
these provisions into the future. EPA's annual Automotive Trends Report
provides details on the use of these provisions in the GHG program.\63\
ABT allows EPA to consider standards more stringent than we would
otherwise consider by giving manufacturers an important tool to resolve
lead time and feasibility issues. EPA believes the targeted extension
of credit carry-forward that we are proposing, discussed below, is
appropriate considering the stringency and implementation timeframe of
the proposed standards.
---------------------------------------------------------------------------

    \63\ ``The 2020 EPA Automotive Trends Report, Greenhouse Gas
Emissions, Fuel Economy, and Technology since 1975,'' EPA-420-R-21-
003 January 2021.
---------------------------------------------------------------------------

ii. Extended Credit Carry-Forward Proposal
    As in the transition to more stringent standards under the 2012
rule, EPA recognizes that auto manufacturers are again facing a
transition to more stringent standards with our MY 2023-2026 standards
proposal. We also recognize that the stringency increase from MY 2022
to MY 2023 is the steepest step in our proposed program with relatively
limited lead time. Therefore, we believe it is again appropriate in the
current context to provide a targeted, limited amount of additional
flexibility to carry-forward

credits into the 2023-2026 MYs, to ease the manufacturers' transition
to these more stringent standards.
    EPA is proposing to temporarily increase the number of years that
MY 2016-2020 vintage credits that may be carried-forward to provide
additional flexibility for manufacturers in the transition to more
stringent standards. EPA proposes to increase credit carry-forward for
MY 2016 credits by two years such that they would not expire until
after MY 2023. For MY 2017-2020 credits, EPA proposes to extend the
credit life by one year, so that those banked credits can be used
through MYs 2023-2026, depending on the MY in which the credits are
banked. For MY 2021 and later credits, EPA is not proposing any
modification to credit carry-forward in this notice. Credit carry-
forward would return to the normal 5 years in the existing ABT
regulations. Table 23 below provides an illustration of the proposed
credit carry-forward provisions.

                                                          Table 23--Proposed Extension of Credit Carry-Forward for MY 2016-2020 Credits
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                MYs credits are valid under EPA's proposed extension
                  MY  credits  are  banked                   -----------------------------------------------------------------------------------------------------------------------------------
                                                                 2016        2017        2018        2019        2020        2021        2022        2023        2024        2025        2026
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2016........................................................  ..........          x           x           x           x           x           +           +   ..........  ..........  ..........
2017........................................................  ..........  ..........          x           x           x           x           x           +   ..........  ..........  ..........
2018........................................................  ..........  ..........  ..........          x           x           x           x           x           +   ..........  ..........
2019........................................................  ..........  ..........  ..........  ..........          x           x           x           x           x           +   ..........
2020........................................................  ..........  ..........  ..........  ..........  ..........          x           x           x           x           x           +
2021........................................................  ..........  ..........  ..........  ..........  ..........  ..........          x           x           x           x           x
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
x = Current program. + = Proposed additional years.

    Extending the life for MY 2016-2020 credits provides greater
flexibility for manufacturers in using the credits they have generated
through overcompliance with the stringent standards in those MYs. These
credits would help manufacturers to ease the transition to the more
stringent proposed standards. Providing the extended credit carry-
forward will help some manufacturers to lower overall costs and address
any potential lead time issues they may face during these MYs,
especially in the first year of the proposed standards (MY 2023).
    EPA is proposing to extend credit life only for credits generated
against standards established in the 2012 rule for MYs 2016-2020. EPA
views these credits as a reflection of manufacturers' having achieved
reductions beyond and earlier than those required by the standards. EPA
is not proposing to extend credit life for credits generated in MYs
2021-2022 against the SAFE standards, as we view these credits as
windfall credits, accumulated by manufacturers mostly because of the
large reduction in the stringency of standards under the SAFE rule, as
compared to the 2012 rule standards previously in effect, rather than
for technology-based actions taken by a manufacturer to reduce fleet
emissions.
    As noted above, there is precedent for extending credit carry-
forward temporarily beyond five years to help manufacturers transition
to more stringent standards. In the 2012 rule, EPA extended carry-
forward for MY 2010-2015 credits to MY 2021 for similar reasons, to
provide more flexibility for a limited time during a transition to more
stringent standards.\64\ ABT is an important compliance flexibility and
has been built into various highway engine and vehicle programs to
support emissions standards programs that through the introduction of
new technologies result in reductions in air pollution. While the
normal five-year credit life in the light-duty GHG program is generally
sufficient to address the need for manufacturer flexibility while
considering the practical challenges of properly tracking credits over
an extended period of time for compliance and enforcement purposes,
there are occasions--such as when the industry is transitioning to
significantly more stringent standards--where more flexibility is
appropriate. As noted above, ABT allows EPA to consider standards more
stringent than we would otherwise consider by giving manufacturers an
important tool to resolve lead time and feasibility issues, and EPA
believes the targeted extension of credit life that we are proposing is
appropriate given the stringency and implementation timeframe of the
proposed standards.
---------------------------------------------------------------------------

    \64\ 77 FR 62788.
---------------------------------------------------------------------------

5. Certification, Compliance, and Enforcement
    EPA established comprehensive vehicle certification, compliance,
and enforcement provisions for the GHG standards as part of the
rulemaking establishing the initial GHG standards for MY 2012-2016
vehicles.\65\ Manufacturers have been using these provisions since MY
2012 and EPA is not proposing or seeking comment on changes in the
areas of certification, compliance, or enforcement.
---------------------------------------------------------------------------

    \65\ See 75 FR 25468-25488 and 77 FR 62884-62887 for a
description of these provisions. See also ``The 2020 EPA Automotive
Trends Report, Greenhouse Gas Emissions, Fuel Economy, and
Technology since 1975,'' EPA-420-R-21-003 January 2021 for
additional information regarding EPA compliance determinations.
---------------------------------------------------------------------------

6. On-Board Diagnostics Program Updates
    EPA regulations state that onboard diagnostics (OBD) systems must
generally detect malfunctions in the emission control system, store
trouble codes corresponding to detected malfunctions, and alert
operators appropriately. EPA adopted (as a requirement for an EPA
certificate) the 2013 California Air Resources Board (CARB) OBD
regulation, with certain additional provisions, clarifications and
exceptions, in the Tier 3 Motor Vehicle Emission and Fuel Standards
final rulemaking (40 CFR 86.1806-17; 79 FR 23414, April 28, 2014).
Since that time, CARB has made several updates to their OBD regulations
and continues to consider changes periodically.\66\ Manufacturers may
find it difficult to meet both the 2013 OBD regulation adopted in the
EPA regulations and the currently applicable CARB OBD regulation on the
same vehicles. This may result in different calibrations being required
for vehicles sold in states subject to Federal OBD (2013 CARB OBD) and
vehicles sold in states subject to current CARB OBD.
---------------------------------------------------------------------------

    \66\ See https://ww2.arb.ca.gov/our-work/programs/obd-board-diagnostic-program/obd-workshops.
---------------------------------------------------------------------------

    To provide clarity and regulatory certainty to manufacturers, EPA
is proposing a limited regulatory change to

streamline OBD requirements. Under the proposed change, EPA could find
that a manufacturer met OBD requirements for purposes of the EPA
certification process if the manufacturer could show that the vehicles
meet newer CARB OBD regulations than the 2013 CARB regulation which
currently establishes the core OBD requirements for EPA certification
and that the OBD system meets the intent of the EPA regulation,
including provisions that are in addition to or different from the
applicable CARB regulation. The intent of the proposed provision is to
allow manufacturers to produce vehicles with one OBD system (software,
calibration, and hardware) for all 50 states.
7. Stakeholder Engagement
    In developing this proposal, EPA conducted outreach with a wide
range of stakeholders, including auto manufacturers, automotive
suppliers, labor groups, state/local governments, environmental and
public interest groups, public health professionals, consumer groups,
and other organizations. We also coordinated extensively with the
California Air Resources Board as we considered this proposal.
Consistent with Executive Order 13990, in developing this proposal EPA
has considered the views from labor unions, states, and industry, as
well as other stakeholders.
    EPA looks forward to hearing from all stakeholders through comments
on this proposal and during the public hearing. Looking ahead, we also
plan to continue engagement with interested stakeholders as we embark
on a future rulemaking to set standards beyond 2026, so diverse views
can continue to be considered in our development of a longer-term
program.
8. How do EPA's proposed standards relate to NHTSA's CAFE proposal and
to California's GHG program?
i. EPA and NHTSA Rulemaking Coordination
    In Executive Order 13990, President Biden directed NHTSA and EPA to
consider whether to propose suspending, revising, or rescinding the
SAFE Rule standards for MYs 2021-2026.\67\ Both agencies have
determined that it is appropriate to propose revisions to their
respective standards; EPA is proposing to revise its GHG standards and,
in a separate rulemaking action, NHTSA will propose to revise its CAFE
standards. Since 2010, EPA and NHTSA have adopted fuel economy and
greenhouse gas standards in joint rulemakings. In the 2010 joint rule,
EPA and NHTSA explained the purpose of the joint rulemaking effort was
to develop a coordinated and harmonized approach to implementing the
two agencies' statutes. The joint rule approach was one appropriate
mechanism for the agencies to coordinate closely, given the common
technical issues both agencies needed to consider and the importance of
avoiding inconsistency between the programs. However, in light of
additional experience as the GHG and CAFE standards have co-existed
since the 2010 rule and the agencies have engaged in several joint
rulemakings, EPA has concluded that, while it remains committed to
ensuring that GHG emissions standards for light duty vehicles are
coordinated with fuel economy standards for those vehicles, it is
unnecessary for EPA to do so specifically through a joint rulemaking.
---------------------------------------------------------------------------

    \67\ 86 FR 7037, January 25, 2021.
---------------------------------------------------------------------------

    In reaching this conclusion, EPA notes that the agencies have
different statutory mandates and their respective programs have always
reflected those differences. As the Supreme Court has noted ``EPA has
been charged with protecting the public's `health' and `welfare,' a
statutory obligation wholly independent of DOT's mandate to promote
energy efficiency.'' \68\ The agencies have recognized these different
mandates, and the fact that they have produced different analytical
approaches and standards. For example, since EPA's responsibility is to
address air pollution, it sets standards not only for carbon dioxide
(measured as grams per mile), but also for methane and nitrous oxide.
Even more significantly, EPA regulates leakage of fluorocarbons from
air conditioning units by providing a credit against the tailpipe
CO2 standard for leakage reduction and adjusting those
standards numerically downwards to reflect the anticipated availability
of those credits. NHTSA, given its responsibility for fuel economy
(measured as miles per gallon), does not have these elements in the
CAFE program. There have always been other differences between the
programs as well, which generally can be traced back to differences in
statutory mandates.
---------------------------------------------------------------------------

    \68\ Massachusetts v. EPA, 549 U.S. at 532.
---------------------------------------------------------------------------

    Finally, EPA notes that EPA may coordinate with NHTSA, and has done
so, regardless of the formality of joint rulemaking. EPA has consulted
significantly with NHTSA in the development of this proposal.
Consultation is the usual approach Congress specifies when it
recognizes that EPA and another agency share expertise and equities in
an area. Indeed, the Clean Air Act does not require joint rulemaking
for its many provisions that require EPA's consultation with other
agencies on topics such as the impacts of ozone-depleting substances on
the atmosphere, renewable fuels, the importance of visibility on public
lands, regulation of aerospace coatings, and federal procurement. For
example, for aircraft emissions standards, where EPA sets the standards
in consultation with the Federal Aviation Administration (FAA), and FAA
implements the standards, the two agencies may undertake, and have
undertaken, separate rulemakings. Likewise, when EPA revises tests
procedures for NHTSA's fuel economy standards, those rules are not done
as joint rulemaking (unless they were included as part of a larger
joint rulemaking on GHG and fuel economy standards). Thus, EPA
concludes that joint rulemaking is unnecessary, particularly to the
extent it was originally intended to ensure that the agencies work
together and coordinate their rules.
ii. California GHG Program
    California has long been a partner in reducing light-duty vehicle
emissions, often leading the nation by setting more stringent standards
before similar standards are adopted by EPA. This historically has been
the case with GHG emissions standards in past federal rulemakings,
where California provided technical support to EPA's nationwide
programs. Prior to EPA's 2010 rule establishing the first nationwide
GHG standards for MY 2012-2016 vehicles, California had adopted GHG
standards for MYs 2009-2016.\69\ After EPA adopted its standards in the
2012 rule for MYs 2017-2025, California also adopted similar standards
for these MYs.\70\ California also assisted and worked with EPA in the
development of the 2016 Draft Technical Assessment Report for the Mid-
term Evaluation,\71\ issued jointly by EPA, CARB and NHTSA, that served
as an important technical basis for EPA's original January 2017 Final
Determination that the standards adopted in the 2012 rule

for MYs 2022-2025 remained appropriate. California also conducted its
own Midterm Review that arrived at a similar conclusion.\72\
---------------------------------------------------------------------------

    \69\ https://ww2.arb.ca.gov/our-work/programs/advanced-clean-cars-program/lev-program/low-emission-vehicle-greenhouse-gas.
    \70\ The California Air Resources Board (CARB) received a waiver
of Clean Air Act preemption on January 9, 2013 (78 FR 2211) for its
Advanced Clean Car (ACC) program. CARB's ACC program includes the
MYs 2017-2025 greenhouse gas (GHG) standards as well as regulations
for zero-emission vehicle (ZEV) sales requirements and California's
low emission vehicle (LEV) III requirements.
    \71\ Draft Technical Assessment Report: Midterm Evaluation of
Light-Duty Vehicle Greenhouse Gas Emission Standards and Corporate
Average Fuel Economy Standards for Model Years 2022-2025, EPA-420-D-
16-900 July 2016.
    \72\ https://ww2.arb.ca.gov/our-work/programs/advanced-clean-cars-program/advanced-clean-cars-midterm-review.
---------------------------------------------------------------------------

    In August 2018, EPA and NHTSA jointly issued the SAFE rule
proposal, which included an EPA proposal to withdraw CARB's Advanced
Clean Car (ACC) waiver as it related to California GHG emission
standards and ZEV sales requirements (that would preclude California
from enforcing its own program) as well as a proposal to sharply reduce
the stringency of the national standards.\73\ In September 2019, EPA
and NHTSA then jointly issued a final SAFE ``Part One'' rule, which
included a final EPA action withdrawing CARB's ACC waiver as it related
to California GHG emission standards and ZEV sales requirements.\74\ In
response to the SAFE rule proposal, California and five auto
manufacturers entered into identical agreements commonly referred to as
the California Framework Agreements. The Framework Agreements included
GHG emission reduction targets for MYs 2021-2026 that in terms of
stringency are about halfway between the original 2012 rule standards
and those adopted in the final SAFE rule. The Framework Agreements also
included additional flexibilities such as additional incentive
multipliers for advanced technologies, off-cycle credits, and full-size
pickup strong hybrid incentives. These flexibilities are discussed
further in Section II.B, below.
---------------------------------------------------------------------------

    \73\ EPA's waiver for CARB's Advanced Clean Car regulations is
at 78 FR 2211 (January 9, 2013). The SAFE NPRM is at 83 FR 42986
(August 24, 2018).
    \74\ 84 FR 51310 (Sept. 27, 2019).
---------------------------------------------------------------------------

    EPA has considered California standards in past vehicle standards
rules as we considered the factors of feasibility, costs of compliance
and lead time. The California Framework Agreement provisions, and the
fact that five automakers representing about a third of U.S. vehicle
sales voluntarily committed to them, at a minimum provide a clear
indication of manufacturers' capabilities to produce cleaner vehicles
than required by the SAFE rule standards in the implementation
timeframe of this proposed rule.\75\ The Framework Agreements'
emissions reduction targets therefore served as one starting point for
EPA's assessment of potential standards and other provisions for the
proposal. EPA conducted extensive outreach with the California Air
Resources Board, Framework manufacturers, and manufacturers that have
not entered into California Framework Agreements, along with numerous
other stakeholders in developing this proposed rule, as further
described in Section II.A.7. As discussed further below, EPA is
proposing standards that are equivalent to the stringency of the
California Framework Agreements emission reduction targets in MY 2023
and increasingly more stringent than the Framework Agreements from MY
2024 through 2026.
---------------------------------------------------------------------------

    \75\ The five California Framework Agreements may be found in
the docket for this rulemaking and at: https://ww2.arb.ca.gov/news/framework-agreements-clean-cars.
---------------------------------------------------------------------------

    In a separate but related action, on April 28, 2021, EPA issued a
Notice of Reconsideration for the previous withdrawal of the California
ACC waiver, requesting comments on whether the withdrawal should be
rescinded, which would reinstate the waiver.\76\ EPA conducted a
virtual public hearing on June 2, 2021 and the comment period closed on
July 6, 2021. EPA is currently reviewing comments, after which EPA
plans to take final action.
---------------------------------------------------------------------------

    \76\ 80 FR 22421 (April 28, 2021).
---------------------------------------------------------------------------

B. Additional Manufacturer Compliance Flexibilities

    As discussed previously in Section II.A.4, the ABT provisions,
including credit carry-forward and carry-back provisions, define how
credits may be used and are an important part of the program. The
program also includes several additional credit and incentive program
elements that allow manufacturer flexibility in deciding how to comply
with the standards laid out in Section II.A. This section provides an
overview of those provisions as well as areas where EPA is proposing
changes or is seeking comment.
    The current GHG program includes temporary incentives through MY
2021 that encourage the use of advanced technologies such as all
electric, plug-in hybrid, and fuel cell vehicles, as well as incentives
for full-size pickups using either strong hybridization or technologies
providing similar emissions reductions. When EPA established these
incentives in the 2012 rule, EPA recognized that temporary regulatory
incentives would reduce the overall emission reductions required by the
standards, but the agency believed that it was worthwhile to have a
limited short-term loss of emission reductions to increase the
potential for far-greater emissions reductions in the longer run.\77\
EPA understood that the temporary regulatory incentives may help bring
some technologies to market more quickly than in the absence of
incentives.\78\ EPA continues to believe that temporary regulatory
incentives will help accomplish those goals, which supported those
incentives in the 2012 rule. As such, EPA is proposing to increase and
extend multiplier incentives though MY 2025 and to reinstate the full-
size pickup incentives that were removed from the program by the SAFE
rule for MYs 2022-2025. Also, EPA is proposing to remove the multiplier
incentives for natural gas vehicles for MYs 2023-2026 established by
the SAFE rule. Multipliers and full-size pickup incentives are
discussed in Sections II.B.1 and II.B.2, respectively.
---------------------------------------------------------------------------

    \77\ See Tables III-2 and III-3, 77 FR 62772, October 15, 2012.
    \78\ 77 FR 62812, October 15, 2012.
---------------------------------------------------------------------------

    The current program also includes credits for real-world emissions
reductions not reflected on the test cycles used for measuring
CO2 emissions for compliance with the fleet average GHG
standards. Credits for using technologies that reduce emissions that
are not captured on EPA tests (``off-cycle'' technologies) and
improvements to air conditioning (A/C) systems that increase efficiency
and reduce refrigerant leakage (``A/C credits'') are discussed below in
sections II.B.3 and II.B.1, respectively. These credit opportunities
currently do not sunset, remaining a part of the program through MY
2026 and beyond unless the program is changed as part of a future
regulatory action. EPA is not proposing any changes for the A/C credits
but is proposing to modify the off-cycle credit program.
    The use of the optional credit and incentive provisions has varied,
and EPA continues to expect it to vary, from manufacturer to
manufacturer. However, most manufacturers are currently using at least
some of the flexibilities.\79\ Although a manufacturer's use of the
credit and incentive provisions is optional, EPA projects that the
proposed standards would be met fleet-wide by using a combination of
reductions in tailpipe CO2 and some use of the optional
credit and incentive provisions. These projections are discussed in
Section III, below and in the Draft RIA.
---------------------------------------------------------------------------

    \79\ See ``The 2020 EPA Automotive Trends Report, Greenhouse Gas
Emissions, Fuel Economy, and Technology since 1975,'' EPA-420-R-21-
003 January 2021 for additional information regarding manufacturer
use of program flexibilities.

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

1. Multiplier Incentives for Advanced Technology Vehicles
i. Background
    In the 2012 rule, EPA included incentives for advanced technologies
to promote the commercialization of technologies that have the
potential to transform the light-duty vehicle sector by achieving zero
or near-zero GHG emissions in the longer term, but which faced major
near-term market barriers. EPA recognized that providing temporary
regulatory incentives for certain advanced technologies would decrease
the overall GHG emissions reductions associated with the program in the
near term, by reducing the effective stringency of the standards in
years in which the incentives were available, to the extent the
incentives were used. However, in setting the 2017-2025 standards, EPA
believed it was worthwhile to forego modest additional emissions
reductions in the near term in order to lay the foundation for much
larger GHG emissions reductions in the longer term. EPA also believed
that the temporary regulatory incentives may help bring some
technologies to market more quickly than in the absence of
incentives.\80\
---------------------------------------------------------------------------

    \80\ See 77 FR 62811 et seq.
---------------------------------------------------------------------------

    EPA established multiplier incentives for MYs 2017-2021 electric
vehicles (EVs), plug-in hybrid electric vehicles (PHEVs), fuel cell
vehicles (FCVs), and natural gas vehicles (NGVs).\81\ The multiplier
allows a vehicle to ``count'' as more than one vehicle in the
manufacturer's compliance calculation. Table 24 provides the
multipliers for the various vehicle technologies included in the 2012
final rule for MY 2017-2021 vehicles.\82\ Since the GHG performance for
these vehicle types is significantly better than that of conventional
vehicles, the multiplier provides a significant benefit to the
manufacturer. EPA chose the magnitude of the multiplier levels to be
large enough to provide a meaningful incentive, but not be so large as
to provide a windfall for vehicles that still would have been produced
even at lower multiplier levels. The multipliers for EVs and FCVs were
larger because these technologies faced greater market barriers.
---------------------------------------------------------------------------

    \81\ 77 FR 62810, October 15, 2012.
    \82\ 77 FR 62813-62816, October 15, 2012.

Table 24--Incentive Multipliers for EV, FCV, PHEVs, and NGVs Established
                              in 2012 Rule
------------------------------------------------------------------------
                                                     EVs and   PHEVs and
                    Model years                        FCVs       NGVs
------------------------------------------------------------------------
2017-2019.........................................        2.0        1.6
2020..............................................       1.75       1.45
2021..............................................        1.5        1.3
------------------------------------------------------------------------

    EPA requested comments in the SAFE rule proposal on increasing and/
or extending CNG multiplier incentives. After considering comments, EPA
adopted a multiplier of 2.0 for MYs 2022-2026 NGVs, noting that no NGVs
were being sold by auto manufacturers at that time. EPA did not extend
multipliers for other vehicle types in the SAFE rule, as the SAFE
standards did not contemplate the extensive use of these technologies
in the future so there was no need to continue the incentives.
ii. Proposed Multiplier Extension and Cap
    EPA is proposing to extend multipliers for EVs, PHEVs, and FCVs for
MYs 2022-2025, but with a cap to limit the magnitude of resulting
emissions reduction losses and to provide a means to more definitively
project the impact of the multipliers on the overall stringency of the
program. Although EPA chose not to include additional multipliers in
the SAFE rule except for natural gas vehicles, EPA is now proposing
standards significantly more stringent than in the SAFE rule and
therefore EPA believes limited additional multiplier incentives are
appropriate for the purposes of encouraging manufacturers to accelerate
the introduction of zero and near-zero emissions vehicles and
maintaining momentum for that market transition. EPA requests comment
on all aspects of the proposed extension of multipliers, including the
proposed multiplier levels, model years when multipliers are available,
and the size and structure of the multiplier credit cap.
    Given that the previously established multipliers only run through
MY 2021, EPA proposes to start the new multipliers in MY 2022 to
provide continuity for the incentives over MYs 2021-2025. The
multipliers would function in the same way as they have in the past,
allowing manufacturers to count eligible vehicles as more than one
vehicle in their fleet average calculations. The levels of the proposed
multipliers, shown in Table 25 below, are the same as those contained
in the California Framework Agreements for MY 2022-2025. EPA is
proposing to sunset the multipliers after MY 2025, rather than
extending them to MY 2026, because EPA has always intended them to be a
temporary part of the program to incentivize technology in the near-
term. Sunsetting the multipliers in MY 2025 helps signal that EPA does
not intend to include multipliers in its proposal for standards for MY
2027 and later MYs, where these technologies are likely to be integral
to the feasibility of the standards, as the goal of a long-term program
would be to quickly transition the light-duty fleet to zero-emission
technology, in which case ``incentives'' would no longer be
appropriate. As zero-emissions technologies become more mainstream, EPA
believes it is appropriate to transition away from multiplier
incentives. EPA also believes sunsetting multipliers would simplify
programmatically a transition to a more stringent program for MY 2027.
The MY 2025 sunset date combined with the cap, discussed below, begins
the process of transitioning away from auto manufacturers' ability to
make use of the incentive multipliers. While EPA is proposing to end
multipliers after MY 2025 for these reasons, EPA requests comments on
whether it would be more appropriate to allow multiplier credits to be
generated in MY 2026 without an increase in the cap. This may provide
an additional incentive for manufacturers who have not yet produced
advanced technology vehicles by MY 2026 to do so but could also
potentially complicate transitioning to MY 2027 standards for some
manufacturers.

                         Table 25--EPA Proposed Multiplier Incentives for MYs 2022-2025
----------------------------------------------------------------------------------------------------------------
             Model years                     EVs and FCVs                             PHEVs
----------------------------------------------------------------------------------------------------------------
2022-2024............................  2.0....................  1.6.
2025.................................  1.75...................  1.45.
2026+................................  1.0 (no multiplier       1.0 (no multiplier credits).
                                        credits).
----------------------------------------------------------------------------------------------------------------

    EPA believes that an important element of this incentive program is
to limit the potential effect of the multipliers on reducing the
effective stringency of the standards. Therefore, EPA proposes to cap
the credits generated by a manufacturer's use of the multipliers to the
Megagram (Mg) equivalent of 2.5 g/mile for their car and light truck
fleets per MY for MYs 2022-2025 or 10.0 g/mile on a cumulative
basis.\83\ Above the cap, the multiplier is effectively a value of
1.0--in other words, after a manufacturer reaches the cap, the
multiplier is no longer available and has no further effect on credit
calculations. A manufacturer would sum the Mg values calculated for
each of its car and light truck fleets at the end of a MY into a single
cap value that would serve as the overall multiplier cap for the
combined car and light truck fleets for that MY. This approach would
limit the effect on stringency of the standards for manufacturers that
use the multipliers to no greater than 2.5 g/mile less stringent each
year on average over MYs 2022-2025. EPA proposes that manufacturers
would be able to choose how to apply the cap within the four-year span
of MYs 2022-2025 to best fit their product plans. Manufacturers may opt
to use values other than 2.5 g/mile in the cap calculation as long as
the sum of those values over MYs 2022-2025 does not exceed 10.0 g/mile
(e.g., 0.0, 2.5, 2.5, 5.0 g/mile in MYs 2022-2025).
---------------------------------------------------------------------------

    \83\ Proposed Multiplier Credit Cap [Mg] = (2.5 g/mile CO2 x VMT
x Actual Annual Production)/1,000,000 calculated annually for each
fleet and summed. Manufacturers may use values higher than 2.5 g/
mile in the calculation as long as the sum of the cumulative values
over MYs 2022-2025 does not exceed 10.0 g/mile. The vehicle miles
traveled (VMT) used in credit calculations in the GHG program, as
specified in the regulations, are 195,264 miles for cars and 225,865
for trucks. See 40 CFR 86.1866-12. See also 40 CFR 86.1866-12(c) for
the calculation of multiplier credits to be compared to the cap.
---------------------------------------------------------------------------

    In the 2012 rule, EPA did not cap the use of multipliers. At that
time, the advanced technologies incentivized by the multipliers were in
their relative infancy and EPA believed it was appropriate to encourage
manufacturers to continue to develop and introduce those vehicles for
the long-term benefits of the program. We are now in a transitional
period where manufacturers are actively increasing their zero-emission
vehicle offerings. In MY 2019, almost all manufacturers made use of
advanced technology credits.\84\ EPA believes extending the multipliers
is important to encourage manufacturers to accelerate bringing these
technologies to the market to help sustain market momentum for the
long-term. However, EPA also believes that if left uncapped, the
multiplier credits have the potential to lead to stagnation or even
backsliding for internal combustion engine vehicles for some
manufacturers in the near-term as sales of advanced technology vehicles
continue to increase. If EPA were to consider a significantly more
generous cap or even uncapped credits, EPA would tighten the standards
beyond the levels EPA is proposing to rebalance the overall stringency
of the program. Therefore, as under the California Framework
Agreements, EPA is proposing to extend multiplier credits but also to
include a multiplier cap to balance these considerations.
---------------------------------------------------------------------------

    \84 \ See ``The 2020 EPA Automotive Trends Report, Greenhouse
Gas Emissions, Fuel Economy, and Technology since 1975,'' EPA-420-R-
21-003 January 2021.
---------------------------------------------------------------------------

    The proposed cap differs from and limits the effective stringency
loss more than the cap contained in the California Framework
Agreements. The cumulative cap in the Framework Agreements is based on
the area between the 2.7 percent and 3.7 percent year over year
reduction in the standards from MY 2021 levels, as shown for an average
fleet in Figure 6 below. This is equivalent to 27 percent (1%/3.7%) of
the total increase in stringency from MY 2021 through MY 2026 in the
Framework Agreements.
BILLING CODE 6560-50-P

[GRAPHIC] [TIFF OMITTED] TP10AU21.005

    EPA is proposing a cap that extends over fewer MYs and is less
generous than the cap in the California Framework Agreements. The EPA
proposed cap would provide additional flexibility in the near term, as
shown in Figure 7. This is equivalent to about 6 percent of the total
increase in stringency relative to the MY 2021 level from MY 2021
through MY 2026.

[GRAPHIC] [TIFF OMITTED] TP10AU21.006

BILLING CODE 6560-50-C
    To estimate the potential impact of multipliers on the tons of
CO2 reduction provided by the proposed program, EPA modeled
scenarios with and without multipliers. As shown, EPA estimates that
the proposed multipliers, if fully utilized by manufacturers, would
result in roughly 46 MMT (596 minus 550 MMT) fewer tons of
CO2 reduced over the lifetimes of MY 2021-2026 vehicles.\85\
We have also analyzed the impact of the advanced technology multipliers
on BEV and PHEV penetration rates and have found that the impact on the
fleet is less than 0.5 percent in any MY 2023 through 2026 (see RIA
Chapter 4.1.3). EPA believes such an approach represents a reasonable
balance of providing an incentive for advanced technology vehicles in
the timeframe of the rulemaking while limiting the impact on effective
stringency of the proposed program. EPA requests comment on the
proposed extension of multipliers, including the proposed multiplier
levels, model years when multipliers are available, size and structure
of the multiplier credit cap. EPA also requests comments on whether the
proposed extension of multipliers is appropriate in light of the
stringency level of the proposed standards or whether there should be
no multipliers beyond those in the current program that are scheduled
to end after MY 2021.
---------------------------------------------------------------------------

    \85\ EPA analyzed the MY 2021-2026 timeframe to allow for a more
direct comparison of the estimated emissions loss in tons of the
proposed multipliers and cap with the impact of the California
Framework multiplier cap.
---------------------------------------------------------------------------

iii. Natural Gas Vehicle Multipliers
    As noted above, the SAFE rule did not extend multipliers for
advanced technology vehicles but did extend and increase multiplier
incentives for dual-fuel and dedicated natural gas vehicles (NGVs). The
current regulations include a multiplier of 2.0, uncapped, for MY 2022-
2026 NGVs. In the SAFE rule, EPA said it was extending the multipliers
for NGVs because ``NGVs could be an important part of the overall
light-duty vehicle fleet mix, and such offerings would enhance the
diversity of potentially cleaner alternative fueled vehicles available
to consumers.'' \86\ After further considering the issue, EPA now
proposes to remove the extended multiplier incentives added by the SAFE
rule from the GHG program after MY 2022. EPA is proposing to end
multipliers for NGVs in this manner because NGVs are not a near-zero
emissions technology and EPA no longer believes it is appropriate to
incentivize these vehicles to encourage manufacturers to introduce them
in the light-duty vehicle market. EPA does not view NGVs as a pathway
for significant vehicle GHG emissions reductions in the future. Any NGV
multiplier credits generated in MY 2022 would be included under the
proposed multiplier cap. There are no NGVs currently offered by
manufacturers in the light-duty market and EPA is unaware of any plans
to introduce NGVs, so EPA does not expect the removal of multipliers
for NGVs to have an impact on manufacturers' ability to meet
standards.\87\ EPA requests comment on its proposed treatment of
multipliers for NGVs including whether they should be eliminated
altogether for MYs 2023-2026 as proposed or retained partially or at a
lower level for MYs 2023-2025.
---------------------------------------------------------------------------

    \86\ 85 FR 25211.
    \87\ The last vehicle to be offered, a CNG Honda Civic, was
discontinued after MY 2015. It had approximately 20 percent lower
CO2 than the gasoline Civic. For more recent advanced
internal combustion engines, the difference may be less than 20% due
to lower emissions of the gasoline-fueled vehicles.
---------------------------------------------------------------------------

2. Advanced Technology Incentives for Full-Size Pickups
    In the 2012 rule, EPA included a per-vehicle credit provision for
manufacturers that hybridize a significant number of their full-size

pickup trucks or use other technologies that comparably reduce
CO2 emissions. EPA's goal was to incentivize the penetration
into the marketplace of low-emissions technologies for these pickups.
The incentives were intended to provide an opportunity in the program's
early years to begin penetration of advanced technologies into this
category of vehicles, which face unique challenges in the costs of
applying advanced technologies due to the need to maintain vehicle
utility and meet consumer expectations. In turn, the introduction of
low-emissions technologies in this market segment creates more
opportunities for achieving the more stringent later year standards.
Under the existing program, full-size pickup trucks using mild hybrid
technology are eligible for a per-truck 10 g/mile CO2 credit
during MYs 2017-2021.\88\ Full-size pickup trucks using strong hybrid
technology are eligible for a per-truck 20 g/mile CO2 credit
during MYs 2017-2021, if certain minimum production thresholds are
met.\89\ EPA established definitions in the 2012 rule for full-size
pickup and mild and strong hybrid for the program.\90\
---------------------------------------------------------------------------

    \88\ As with multiplier credits, full-size pickup credits are in
Megagrams (Mg). Full-size pickup credits are derived by multiplying
the number of full-size pickups produced with the eligible
technology by the incentive credit (either 10 or 20 g/mile) and a
vehicle miles traveled (VMT) value for trucks of 225,865, as
specified in the regulations. The resulting value is divided by
1,000,000 to convert it from grams to Mg. EPA is not proposing a cap
for these credits and they are only available for full-size pickups,
rather than the entire fleet, so the calculation is simpler than
that for multiplier credits.
    \89\ 77 FR 62825, October 15, 2012.
    \90\ 77 FR 62825, October 15, 2012. Mild and strong hybrid
definitions as based on energy flow to the high-voltage battery
during testing. Both types of vehicles must have start/stop and
regenerative braking capability. Mild hybrid is a vehicle where the
recovered energy over the Federal Test Procedure is at least 15
percent but less than 65 percent of the total braking energy. Strong
hybrid means a hybrid vehicle where the recovered energy over the
Federal Test Procedure is at least 65 percent of the total braking
energy.
---------------------------------------------------------------------------

    Alternatively, manufacturers may generate performance-based credits
for full-size pickups. This performance-based credit is 10 g/mile
CO2 or 20 g/mile CO2 for full-size pickups
achieving 15 percent or 20 percent, respectively, better CO2
performance than their footprint-based targets in a given MY.\91\ This
second option incentivizes other, non-hybrid, advanced technologies
that can reduce pickup truck GHG emissions and fuel consumption at
rates comparable to strong and mild hybrid technology. These
performance-based credits have no specific technology or design
requirements; automakers can use any technology or set of technologies
as long as the vehicle's CO2 performance is at least 15 or
20 percent below the vehicle's footprint-based target. However, a
vehicle cannot receive both hybrid and performance-based credits, since
that would be double-counting.
---------------------------------------------------------------------------

    \91\ 77 FR 62826, October 15, 2012. For additional discussion of
the performance requirements, see Section 5.3.4 of the ``Joint
Technical Support Document: Final Rulemaking for 2017-2025 Light-
duty Vehicle Greenhouse Gas Emission Standards and Corporate Average
Fuel Economy Standards'' for the Final Rule,'' EPA-420-R-12-901,
August 2012.
---------------------------------------------------------------------------

    Access to any of these large pickup credits requires that the
technology be used on a minimum percentage of a manufacturer's full-
size pickups. These minimum percentages, established in the 2012 final
rule, are set to encourage significant penetration of these
technologies, leading to long-term market acceptance. Meeting the
penetration threshold in one MY does not ensure credits in subsequent
years; if the production level in a MY drops below the required
threshold, the credit is not earned for that MY. The required
penetration levels are shown in Table 26 below.\92\
---------------------------------------------------------------------------

    \92\ 40 CFR 86.1870-12.

               Table 26--Penetration Rate Requirements by Model Year for Full-Size Pickup Credits
                                                [% of production]
----------------------------------------------------------------------------------------------------------------
                                       2017            2018            2019            2020            2021
----------------------------------------------------------------------------------------------------------------
Strong hybrid...................              10              10              10              10              10
Mild Hybrid.....................              20              30              55              70              80
20% better performance..........              10              10              10              10              10
15% better performance..........              15              20              28              35              40
----------------------------------------------------------------------------------------------------------------

    Under the 2012 rule, the strong hybrid/20% better performance
incentives initially extended out through MY 2025, the same as the 10
percent production threshold. However, the SAFE rule removed these
incentives after MY 2021. The mild hybrid/15% better performance
incentive was not affected by the SAFE rule, as those provisions end
after MY 2021. EPA proposes to reinstate the full-size pickup credits
as they existed before the SAFE rule, for MYs 2022 through 2025. While
no manufacturer has yet claimed these credits, the rationale for
establishing them in the 2012 rule remains valid. At the time of the
SAFE rule, EPA did not envision significantly more stringent standards
in the future and so did not believe the incentives were useful. In the
context of this proposal that includes significantly more stringent
standards for MY 2023-2026, EPA believes these full-size pickup truck
credits are appropriate to further incentivize advanced technologies
penetrating this particularly challenging segment of the market. As
with the original program, EPA is limiting this incentive to full-size
pickups rather than broadening it to other vehicle types. Introducing
advanced technologies with very low CO2 emissions in the
full-size pickup market segment remains a challenge due to the need to
preserve the towing and hauling capabilities of the vehicles. The full-
size pickup credits incentivize advanced technologies into the full-
size pickup truck segment to help address cost, utility, and consumer
acceptance challenges. EPA requests comments on whether or not to
reinstate the previously existing full-size pickup strong hybrid/20%
better performance incentives and the proposed approach for doing so.
EPA notes for this proposal our analysis does not include the impacts
of this incentive on the projected GHG emissions, costs, benefits and
other program effects. EPA requests comment on the potential impacts of
the full-size pickup incentive credit, and whether, and how, EPA should
take the projected effects into account in the final rulemaking.
    In the 2012 rule, EPA included a provision that prevents a
manufacturer from using both the full-size pickup performance-based
credit pathway and the multiplier credits for the same vehicles. This
would prevent, for example, an EV full-size pickup from generating both
credits. EPA did not include the same restriction for vehicles
qualifying for the full-size pickup

hybrid credit pathway. For example, a PHEV could qualify for both the
strong hybrid credit and the multiplier credits under the prior
regulations as they were established in the 2012 rule. With our
proposal to extend the multiplier credits and reinstate the full-size
pickup credit, EPA believes allowing both credits would in a sense be
double-counting and inappropriate. Therefore, EPA proposes to modify
the regulations such that manufacturers may choose between the two
credits in instances where full-size pickups qualify for both but may
not use both credits for the same vehicles. A manufacturer may choose
to use the full-size pickup strong hybrid credit, for example, if the
manufacturer either has reached the multiplier credit cap or intends to
do so with other qualifying vehicles. Or a manufacturer may instead
decide to forego the strong hybrid credit in cases where the
manufacturer does not expect to reach the multiplier cap and the
multiplier provides more credits than the strong hybrid credit. EPA
requests comments on this approach to avoid double-counting of credits,
by restricting the use of the two types of credits for the same
vehicles.
3. Off-Cycle Technology Credits
i. Background
    Starting with MY 2008, EPA started employing a ``five-cycle'' test
methodology to measure fuel economy for purposes of new car window
stickers (labels) to give consumers better information on the fuel
economy they could more reasonably expect under real-world driving
conditions.\93\ However, for GHG compliance, EPA continues to use the
established ``two-cycle'' (city and highway test cycles, also known as
the FTP and HFET) test methodology.\94\ As learned through development
of the ``five-cycle'' methodology and prior rulemakings, there are
technologies that provide real-world GHG emissions improvements, but
whose improvements are not fully reflected on the ``two-cycle'' test.
EPA established the off-cycle credit program to provide an appropriate
level of CO2 credit for technologies that achieve
CO2 reductions, but may not otherwise be chosen as a GHG
control strategy, as their GHG benefits are not measured on the
specified 2-cycle test. For example: High efficiency lighting is not
measured on the EPA 2-cycle tests because lighting is not turned on as
part of the test procedure but reduces CO2 emissions by
decreasing the electrical load on the alternator and engine. The key
difference between the credits discussed below and the incentives
discussed in the previous two sections is that off-cycle credits--as
well as A/C credits, discussed in the next section--represent real-
world emissions reductions if appropriately sized and therefore their
use should not result in deterioration of program benefits, and should
not be viewed as cutting into the effective stringency of the program.
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    \93\ https://www.epa.gov/vehicle-and-fuel-emissions-testing/dynamometer-drive-schedules. See also 75 FR 25439 for a discussion
of 5-cycle testing.
    \94\ The city and highway test cycles, commonly referred to
together as the ``2-cycle tests'' are laboratory compliance tests
are effectively required by law for CAFE, and also used for
determining compliance with the GHG standards. 49 U.S.C. 32904(c).
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    Under EPA's existing regulations, there are three pathways by which
a manufacturer may accrue off-cycle technology credits.\95\ The first
pathway is a predetermined list or ``menu'' of credit values for
specific off-cycle technologies that was effective starting in MY
2014.\96\ This pathway allows manufacturers to use credit values
established by EPA for a wide range of off-cycle technologies, with
minimal or no data submittal or testing requirements. The menu includes
a fleetwide cap on credits of 10 g/mile to address the uncertainty of a
one-size-fits-all credit level for all vehicles and the limitations of
the data and analysis used as the basis of the menu credits. A second
pathway allows manufacturers to use 5-cycle testing to demonstrate and
justify off-cycle CO2 credits.\97\ The additional emissions
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 determines
whether there is sufficient technical basis to approve the off-cycle
credits. The third pathway allows manufacturers to seek EPA approval,
through a notice and comment process, to use an alternative methodology
other than the menu or 5-cycle methodology for determining the off-
cycle technology CO2 credits.\98\ This option is only
available if the benefit of the technology cannot be adequately
demonstrated using the 5-cycle methodology.
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    \95\ See ``The 2020 EPA Automotive Trends Report, Greenhouse Gas
Emissions, Fuel Economy, and Technology since 1975,'' EPA-420-R-21-
003 January 2021 for information regarding the use of each pathway
by manufacturers.
    \96\ See 40 CFR 86.1869-12(b).
    \97\ See 40 CFR 86.1869-12(c).
    \98\ See 40 CFR 86.1869-12(d).
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ii. EPA Proposal To Increase Menu Credit Cap
    EPA has received comments from manufacturers on multiple occasions
requesting that EPA increase the menu credit cap. Previously, EPA has
opted not to increase the cap for several reasons.\99\ First, the cap
is necessary given the uncertainty in the menu values for any given
vehicle. Menu credits are values EPA established to be used across the
fleet rather than vehicle-specific values. When EPA established the
menu credits in the 2012 rule, EPA included a cap because of the
uncertainty inherent in using limited data and modeling as the basis of
a single credit value for either cars or trucks. While off-cycle
technologies should directionally provide an off-cycle emissions
reduction, quantifying the reductions and setting an appropriate credit
values based on limited data was difficult. Manufacturers wanting to
generate credits beyond the cap may do so by bringing in their own test
data as the basis for the credits. Credits established under the second
and third pathways do not count against the menu cap. Also, until
recently most manufacturers still had significant headroom under the
cap allowing them to continue to introduce additional menu
technologies.\100\ Finally, during the implementation of the program,
EPA has expended significantly more effort than anticipated on
scrutinizing menu credits to determine if a manufacturer's technology
approach was eligible under the technology definitions contained in the
regulations. This further added to concerns about whether the
technology could reasonably be expected to provide the real-world
benefits that credits are meant to represent. For these reasons, EPA
has been reluctant to consider increasing the cap.
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    \99\ 85 FR 25237.
    \100\ See ``The 2020 EPA Automotive Trends Report, Greenhouse
Gas Emissions, Fuel Economy, and Technology since 1975,'' EPA-420-R-
21-003 January 2021 for information on the use of menu credits.
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    EPA may make changes to the test procedures for the GHG program in
the future that could change the need for an off-cycle credits program,
but there are no such test procedure changes proposed in this rule.
Off-cycle credits, therefore, will likely remain an important source of
emissions reductions under the program, at least through MY 2026. Off-
cycle technologies are often more cost effective than other available
technologies that reduce vehicle GHG emissions over the 2-cycle tests
and

manufacturer use of the program continues to grow. Off-cycle credits
reduce program costs and provide additional flexibility in terms of
technology choices to manufacturers which has resulted in many
manufacturers using the program. Multiple manufacturers were at or
approaching the 10 g/mile credit cap in MY 2019.\101\ Also, in the SAFE
rule, EPA added menu credits for high efficiency alternators but did
not increase the credit cap for the reasons noted above.\102\ While
adding the technology to the menu has the potential to reduce the
burden associated with the credits for both manufacturers and EPA, it
further exacerbates the credit cap issue for some manufacturers.
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    \101\ In MY 2019, Ford, FCA, and Jaguar Land Rover reached the
10 g/mile cap and three other manufacturers were within 3 g/mile of
the cap. See ``The 2020 EPA Automotive Trends Report, Greenhouse Gas
Emissions, Fuel Economy, and Technology since 1975,'' EPA-420-R-21-
003 January 2021.
    \102\ 85 FR 25236.
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    After considering the above points further in the context of the
proposed standards, EPA is proposing to increase the cap on menu-based
credits from the current 10 g/mile to 15 g/mile beginning as early as
MY 2020. As a companion to increasing the credit cap, though, EPA is
also proposing modifications to some of the off-cycle technology
definitions to improve program implementation and to better accomplish
the goal of the off-cycle credits program: To ensure emissions
reductions occur in the real-world from the use of the off-cycle
technologies. Manufacturers wanting to claim menu credits between 10
and 15 g/mile in MYs 2020-2022 would need to meet all revised
technology definitions across both the car and truck fleets. For MYs
2023 and later, the revised definitions would apply exclusively, and
the current definitions would no longer be used in the program. EPA is
proposing this approach as a reasonable transition to the new
definitions.
    EPA is proposing not to require the use of the revised definitions
prior to MY 2023 for manufacturers not opting into the 15 g/mile credit
cap. Requiring their use for MYs 2020 and earlier for all manufacturers
would potentially affect credits already awarded to manufacturers,
causing significant problems in program implementation and manufacturer
plans to comply with the proposed MY 2023-2026 standards. Similarly, MY
2021 is underway, and some manufacturers are already producing MY 2022
vehicles. EPA believes credits that were generated in a manner
consistent with the applicable regulatory definitions in place at the
time the vehicles were produced should continue to be allowed in
compliance determinations for the proposed MY 2023-2026 standards. The
10 g/mile cap EPA adopted to address uncertainties around the menu
credits, including the definitions, is acting as intended and the
proposed approach of allowing menu credits beyond the 10 g/mile cap
only for manufacturers meeting the revised definitions is the
appropriate approach until the 15 g/mile menu cap and revised
definitions are fully implemented in MY 2023. EPA views the proposed
definition updates as refinements to the ongoing off-cycle program to
improve its implementation and help ensure that the program produces
real-world benefits as intended and believes that it is reasonable to
make these updates in parallel with the proposed cap increase.
Manufacturers that utilized technologies in MY 2020 that meet the
proposed revised definitions, in addition to the unchanged current
definitions, would be able to claim menu credits up to the 15 g/mile
cap.
    EPA requests comment on whether the menu credit cap should be
increased to 15 g/mile, EPA's proposed approach for implementing the